<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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 NUMBER 0-17297
BTU INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-2781248
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
23 ESQUIRE ROAD, NORTH BILLERICA, MASSACHUSETTS 01862-2596
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 667-4111
--------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None Registered
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Title of Each Class
--------------------------
Common Stock, $.01 Par Value
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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K [X].
The aggregate market value of the shares of Common Stock, $.01 par value, of
the Company held by non-affiliates of the Company was $32,065,502 on February
28, 1996.
Indicate number of shares outstanding of the Registrant's Common Stock, par
value $.01 per share, as of the latest practicable date: As of February 28,
1996: 7,290,406 shares.
DOCUMENTS INCORPORATED HEREIN BY REFERENCE
The following documents are incorporated herein by reference: Part II -
Portions of the Annual Report to Stockholders, for the year ended December 31,
1995; and Part III - Portions of the Proxy Statement for the 1996 Annual
Meeting of Stockholders , both of which are to be filed with the Securities and
Exchange Commission.
- --------------------------------------------------------------------------------
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<TABLE>
BTU INTERNATIONAL, INC.
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<CAPTION>
PART I Page
------
<S> <C> <C>
Item 1 Business 1-4
Item 2 Properties 4
Item 3 Legal Proceedings 4
Item 4 Submission of Matters to a Vote of Security Holders 5
Item 4A Executive Officers of the Registrant 5
PART II
-------
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters 5
Item 6 Selected Financial Data 5
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 8 Financial Statements and Supplementary Data 6
Item 9 Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 6
PART III
--------
Item 10 Directors and Executive Officers of the Registrant 6
Item 11 Executive Compensation 6
Item 12 Security Ownership of Certain Beneficial Owners
and Management 6
Item 13 Certain Relationships and Related Transactions 6
PART IV
-------
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 7-13
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
General:
The Company designs, manufactures, sells and services thermal processing
equipment and related process controls for use in the electronics, the power
generation and other industries. The Company is a major supplier of solder
reflow systems used in printed circuit board surface mount applications. The
Company is a principal worldwide supplier of systems used in: low temperature
curing/encapsulation; hybrid integrated circuit manufacturing; integrated
circuit packaging, sealing and mounting; and processing multi-chip modules.
The Company is a leading supplier of systems for sintering nuclear fuel for
commercial power generation. In addition, its products are used in other
specialty applications such as brazing and the sintering of ceramics and
powdered metals, and the deposition of precise thin film coatings.
THE COMPANY HAS FOCUSED ON THREE KEY STRATEGIC AREAS:
TECHNOLOGICAL LEADERSHIP - As process parameters change, with higher speed
and higher density components and printed circuit boards, the Company has
responded by developing and introducing systems which advance the state of
the art in processing for many applications and industries.
PRODUCT DIVERSIFICATION - The Company utilizes it's core technologies to
satisfy our customers' changing needs by offering a variety of systems, in a
range of price levels, for surface mount device solder reflow, integrated
circuit packaging, refractory and nuclear fuel sintering, and other
applications.
CUSTOMER SUPPORT - As thermal processing systems become more complex and
require greater support, many customers, especially those in high-volume
production, prefer dealing with a limited number of large capital equipment
suppliers. The Company's reputation for system performance and
technological innovation, together with its established worldwide service
organization, is an important strength in selling to manufacturers for
high-volume production applications.
PRODUCTS:
THE THERMAL PROCESSING APPLICATIONS PERFORMED BY THE COMPANY'S PRODUCTS ARE
USED IN THE MANUFACTURE OF:
Surface Mount Device Solder Reflow
Low Temperature Curing/Encapsulation
PC Board Multi Chip Modules (MCM-L)
Polymer Thick Film Curing
Hybrid Microelectronics
Integrated Circuit Packaging
Ceramic Multilayer Package & Multi Chip Module Firing (MCM-C)
Nuclear Fuel Sintering
Photovoltaics & Optoelectronics Thin Film Deposition
Refractory & Powdered Metal Sintering
Technical Ceramic Sintering
Brazing of Electronic, Electrical, Automotive and Medical Components
THESE PRODUCTS PERFORM THERMAL PROCESSES EITHER IN A CONTINUOUS OR IN A
BATCH MODE:
Solder Reflow Systems
Vertical Curing Systems
Continuous Belt Conveyor Processing Systems
High Temperature Systems (continuous and batch)
Atmospheric Pressure Chemical Vapor Deposition (APCVD) Systems
Each system has precise microprocessor controlled functions, such as process
gas measurement, temperature control and profiling, and time sequencing.
The technological change in processing is driven by the trends toward
miniaturization, higher circuit densities, and the resulting need for a clean
process environment. The trend toward automation to support highly reproducible
processes is a
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requirement for most applications. Customer needs for a high level of service
and spare parts support leads to a preference for the large capital equipment
supplier with a broad technological base and an established reputation for
quality.
Solder Reflow Systems
Convection solder reflow systems, with or without controlled atmosphere,
have become the preferred method of attaching surface mount devices to high
density printed circuit boards. Solder, in the form of a paste, is applied to
the printed circuit board and surface mount devices are placed on the solder
paste. The assembly is then heated in a continuous recirculated convection
process to the melting temperature of the solder, after which the product is
rapidly cooled by convection to solidify the solder. Uniform heating and
cooling of the product is required to prevent stresses and component
overheating. Moreover, solder reflow systems with atmospheric control allow
the process to run in such a way that no additional cleaning step is required
in most applications. This allows the elimination of environmentally damaging
CFC's.
Surface mount technology is contributing to the miniaturization of high-
density printed circuit boards and allows board designs with components on both
top and bottom. Surface mount technology is now the standard for high density
printed circuit board assembly. Prices for the Company's solder reflow systems
range from $25,000 to $200,000.
Vertical Curing Systems
BTU's vertical curing systems have process applications in several stages of
PCB manufacturing to cure/encapsulate epoxy at temperatures up to 225 degrees
centigrade. The system's unique vertical moving wall transport system allows
stable curing/encapsulation over an extended time and distance in a small
footprint at a controlled temperature. Prices for the Company's curing/
encapsulation systems range from $125,000 to $250,000.
Continuous Belt Processing Systems
BTU's continuous belt processing systems are used in a variety of
applications (such as integrated circuit packaging, hybrid circuit
manufacturing, brazing of automotive components, etc.). These systems operate
between 300 degrees and 1200 degrees centigrade and may measure up to 60 feet
long. They are equipped with one or more gas barriers and atmospheric zones
and may vary in length of heating zones from four to forty-eight feet.
Depending upon load capacity requirements, conveyor belt widths vary from four
to forty-eight inches. Prices for these systems range from $30,000 to $800,000.
High Temperature Systems
BTU offers walking beam, special batch systems and pusher systems for high
temperature processing with heavy loads. The Company's walking beam system
employs a proprietary conveyance mechanism that can process loads of up to 800
pounds per square foot at temperatures up to 1800 degrees Centigrade.
A major application for this high-temperature product is sintering multilayer
integrated circuit packages. In addition, these systems are used in sintering
technical ceramics, nuclear fuels and refractory and powdered metals. These
systems are usually customized and vary in price from $250,000 to $2,500,000.
Atmospheric Pressure Chemical Vapor Deposition Systems
Atmospheric pressure chemical vapor deposition ("APCVD") is a thin film
deposition process in which the vapors of two or more chemicals are mixed in a
controlled environment at elevated temperatures at atmospheric pressure. A
chemical reaction occurs at elevated temperatures causing a thin film to be
deposited on the desired substrate. The process is typically carried out in a
continuous belt processing system at throughput rates of one to four square
feet per minute.
The Company's APCVD systems, which sell for between $250,000 and $1,000,000,
are used in the manufacture of silicon devices, photovoltaics and
optoelectronic devices.
Marketing, Sales and Customers:
The Company's worldwide customer base consists primarily of independent
manufacturers of electronic devices, computers, telecommunications, printed
circuit board assembly houses, and other companies in the electronics industry.
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Other customers include nuclear fuel manufacturers and technical ceramics
manufacturers and producers using specialty brazing applications. Repeat sales
to existing customers represent a significant portion of the Company's revenue.
The Company markets its products through the combined efforts of a direct
sales force and independent sales/service representatives. Direct sales/
service offices are maintained in the United States, England, Scotland,
Germany, Singapore and China. Independent sales/service representatives are
located in all major industrialized countries worldwide.
<TABLE>
Foreign revenues are important to the Company. The following table shows
the percentages of the Company's revenues in the United States, Europe and the
Far East, for the last three years:
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
United States 52% 48% 52%
Europe 19 28 29
Far East 24 18 14
Other 5 6 5
</TABLE>
For further information on export sales and foreign operations, see Note 4
of the Company's Consolidated Financial Statements.
Reliability, performance, uptime and meantime-to-repair (MTR), together with
technological leadership, are important factors by which customers evaluate
potential suppliers of sophisticated processing systems. The Company supports
its customers with field service, training programs, parts sales, and operating
manuals. Technical support is also available through either direct telephone
links or on-site Company personnel to provide assistance in the service and
maintenance of equipment.
Worldwide sales to Motorola were approximately 9% of 1995 net sales and 21%
of 1994 net sales. Two other customers each represented approximately 9% and
8%, respectively, of 1995 net sales. The Company does not believe that the
loss of all business to any one of these customers would have a material
adverse effect on the Company's long term profitability.
The Company does not consider its business to be seasonal in nature, but it
is cyclical dependent on the capital equipment procurement pattern of its
customers.
Backlog:
Backlog was $8.7 million at December 31, 1995 versus $11.1 million at
December 31, 1994. The primary reason for the decrease is the inclusion in
1994's backlog of a non recurring OEM contract. Most of the Company's backlog
is expected to be shipped within 3 to 6 months. The Company includes in
backlog only those orders for which a purchase order has been assigned by the
customer and a delivery schedule has been specified. Because of possible
changes in delivery schedules and order cancellations, the Company's backlog
at any particular date is not necessarily representative of sales for any
succeeding period.
Manufacturing and Raw Materials:
The Company manufactures a portion of its equipment to custom
specifications. On the custom equipment orders raw material inventory is
typically purchased only after an order is received. In the case of standard
equipment, certain raw materials may be purchased based upon forecast.
Manufacturing costs are financed in part through progress payments, especially
in the case of deliveries with long lead times.
The Company maintains a vertically integrated manufacturing operation in the
United States, and purchases certain standard components and designs and
manufactures others. Although the Company relies upon single sources for
certain parts, it believes that alternative sources of supply are available in
each case. The Company has not experienced any disruption in its business due
to an inadequate supply of materials.
Research, Development and Engineering:
The Company's research, development and engineering programs are devoted to
the enhancement of existing systems and the development of new systems for new
applications. As the complexity of producing miniaturized circuitry increases,
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the electronics and other industries are working more closely with larger,
capital equipment suppliers to determine and develop future product and process
needs. The Company's current internally financed efforts include development
of enhanced convection heat transfer systems for solder reflow, new deposition
processes in APCVD, and related software systems.
Competition:
There are numerous suppliers of thermal processing systems for the
electronic and other industrial thermal processing applications. Although
buying decisions have traditionally focused on price, the Company believes that
technological leadership, process capability, throughput, environmental
safeguards, uptime, meantime-to-repair, and after sale support have become
increasingly important factors. It is on the basis of these criteria, rather
than primarily on price, that the Company competes in its markets.
The Company's principal competitors for integrated circuit packaging and
hybrid circuit manufacturing systems vary by product application. In conveyor
belt systems, Lindberg (a division of General Signal) and SierraTherm are the
Company's principal competitors. In high temperature systems, the principal
competitors are Lindberg, Cremar and De Gussa. In solder reflow systems, the
principal competitors are Vitronics, Electrovert (a division of Cookson Group
PLC) and Heller.
The electronics industry is characterized by rapid technological change. The
Company must continue its development efforts to compete effectively.
Introduction of improved systems or techniques by others without a similar
advance by the Company could adversely affect the Company's prospects.
Patents and Trademarks:
The Company holds many US and foreign patents, and it will continue to seek
patents on inventions that result from its research and development activities.
Although it believes its patents are of value, the Company depends primarily on
its technological creativity and know-how, rather than on its patents, to
maintain its competitive position. The Company also owns certain trademarks
and proprietary information that it considers important to its business and
that it seeks to protect through appropriate means.
Environmental:
Compliance with laws and regulations regarding the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, has not had any material effects on the capital expenditures,
earnings or competitive position of the Company. The Company does not
anticipate any material capital expenditures for environmental control
facilities in 1996.
Employees:
As of December 31, 1995, the Company had a total of 406 employees of which
391 were domestic and 15 were foreign based. None of the Company's employees
are represented by a union or other collective bargaining agent, and the
Company considers its relations with its employees to be good.
ITEM 2. PROPERTIES
The Company maintains its headquarters in North Billerica, Massachusetts,
where it owns a 150,000 square foot manufacturing facility and leases an
additional 17,000 square feet of manufacturing space. The Company operates its
manufacturing facility on a full first shift and partial second shift basis.
The Company believes that its plants and capital equipment operated at
approximately 75% of productive capacity during the fourth quarter of 1995 and
that such plants and capital equipment provide sufficient manufacturing
capacity through 1996.
ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings pending as of the time of this
filing.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of 1995.
<TABLE>
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Paul J. van der Wansem 56 Chairman of the Board of Directors,
President and Chief Executive Officer
Thomas P. Kealy 53 Vice President, Corporate Controller
and Chief Accounting Officer
David H. Barry 60 Vice President and General Manager
</TABLE>
Paul J. van der Wansem has been President, Chief Executive Officer and a
Director of the Company since 1979. From December 1977 to 1981, he served as
Vice President of Holec, N.V., a Dutch electronics company, and from 1978
through 1981 was President of Holec (USA), Inc. From 1970 through 1973, Mr.
van der Wansem worked as an adjunct director of First National City Bank in
Amsterdam and from 1973 to 1977 as a management consultant for the Boston
Consulting Group, Inc.
Thomas P. Kealy has been Vice President, Corporate Controller and Chief
Accounting Officer of the Company since February 1991. He has been the
Corporate Controller since joining the company in July 1985. Prior to that,
Mr. Kealy served for 14 years in various financial management positions,
including Division Controller, for Polaroid Corporation. Earlier he was the
Corporate Controller for Coro, Inc. and Lebanon, Inc.
David H. Barry has been Vice President and General Manager of the Company
since February, 1992. He has been a vice president since 1965 and has held a
variety of sales, marketing and engineering positions since joining the Company
in 1961.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
The following in the BTU International, Inc. 1995 Annual Report is
incorporated herein by reference:
"Common stock and market prices" set forth on page 27.
The Company's common stock is traded in the Nasdaq National Market System
under the symbol BTUI. As of February 28, 1996 there were approximately 484
stockholders of record.
To date, the Company has paid no cash dividends to its common shareholders.
The Company has no plans to pay cash dividends in the near future on its common
stock. During 1995, the Company declared and paid $64,000 in dividends on its
Class AA Preferred Stock. During 1995, all of the shares of Class AA Preferred
Stock were voluntarily converted to common shares on a 1-for-1 basis, and as
such no dividends remain accrued on the Class AA Preferred Stock as of December
31, 1995.
Accrued dividends on Class A Preferred stock of $269,000 were included in
accrued liabilities at December 31,1994. The Company declared $14,000 in
dividends on its Class A Preferred stock during 1995. The Company paid
$283,000 in dividends related to the final 30% redemption on the Class A
Preferred Stock in May 1995. At December 31,1995 there was no accrued
dividends on the Class A Preferred Stock, as all outstanding shares of the
stock have been fully redeemed.
ITEM 6. SELECTED FINANCIAL DATA
"Selected consolidated financial data" on page 6 of the BTU International,
Inc. 1995 Annual Report is incorporated herein by reference.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's discussion and analysis of financial condition and results
of operations" on pages 7-9 of the BTU International, Inc. 1995 Annual Report is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, and the notes relating thereto,
together with the report thereon of Arthur Andersen LLP, independent public
accountants, dated February 12, 1996, appearing on pages 10-25 of the BTU
International, Inc. 1995 Annual Report are incorporated herein by reference. In
addition the financial information by quarter appearing on pages 26-27 of the
BTU International, Inc. 1995 Annual Report is incorporated herein by reference.
With the exception of the aforementioned information and the information
incorporated by reference in items 5, 6 and 7, the 1995 Annual Report, is not
deemed to be filed as part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the executive officers of the Company is included in
Item 4A of Part I.
Information relating to the directors of the Company is included under the
caption "Election of Directors" in the 1995 Proxy Statement for BTU
International, Inc. and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is included under the caption
"Executive Compensation" in the 1995 Proxy Statement for BTU International,
Inc. and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to the security ownership of certain beneficial owners
and management is included under the caption "Beneficial Ownership of Shares"
in the 1995 Proxy Statement for BTU International, Inc. and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
Financial Statements (see Item 8)
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Stockholders' Investment for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules
Report of Independent Public Accountants
Schedule II - Valuation and Qualifying Accounts, for the years ended
December 31, 1995, 1994 and 1993
All other schedules are omitted as the required information is not
applicable or is included in the financial statements or related notes.
Exhibits
The exhibits which are filed with this Form 10-K or which are
incorporated herein by reference are set forth in the Exhibit Index which
appears in Part IV of this report beginning at page 11.
Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of 1995.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BTU International, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in BTU International, Inc.'s
annual report to stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 12, 1996. Our audit was made for
the purpose of forming an opinion on those consolidated statements taken as a
whole. The schedule listed in the preceding index is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
BOSTON, MASSACHUSETTS,
FEBRUARY 12, 1996
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BTU INTERNATIONAL, INC.
Date: March 28, 1996 By: PAUL J. VAN DER WANSEM
Paul J. van der Wansem
President, Chief Executive
Officer (principal executive
officer) and Director
Date: March 28, 1996 By: THOMAS P. KEALY
Thomas P. Kealy
Vice President Corporate
Controller and Chief
Accounting Officer (principal
financial and accounting officer)
Date: March 28, 1996 By: DR. JEFFREY CHUAN CHU
Dr. Jeffrey Chuan Chu
Director
Date: March 28, 1996 By: DAVID A.B. BROWN
David A.B. Brown
Director
9
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EXHIBIT INDEX
<TABLE>
The following designated exhibits are, as indicated below, either filed
herewith or have heretofore been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Securities Exchange Act of
1934 and are referred to and incorporated herein by reference to the BTU
International, Inc. Registration Statement Filing on Form S-1 ("33-24882"), the
annual report as reported on the 1989 Form 10-K ("1989 10-K"), the annual
report as reported on the 1991 Form 10-K ("1991 10-K"), the annual report as
reported on the 1992 Form 10-K ("1992 10-K"), the annual report as reported on
the 1993 Form 10K ("1993 10-K"), or the annual report as reported on the 1994
Form 10K ("1994 10-K").
<CAPTION>
SEC
Exhibit Docket
------- ------
<S> <C> <C>
EXHIBIT 3. ARTICLES OF INCORPORATION AND BY-LAWS
Incorporated herein by reference:
3.1 Certificate of Incorporation, as amended. 3.1 33-24882
3.2 By-Laws. 3.2 33-24882
EXHIBIT 4. INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS, INCLUDING DEBENTURES
Incorporated herein by reference:
4.0 Specimen Common Stock Certificate. 4.0 33-24882
EXHIBIT 10. MATERIAL CONTRACTS
Incorporated herein by reference:
10.5 Agreement to Purchase Preferred Stock 10.5 33-24882
dated December 18, 1984 among the
Registrant and certain stockholders.
10.6 Agreement in Connection with Purchase 10.6 33-24882
of Class AA PreferredStock of B&B
International Holdings, Inc. dated
August 5, 1988 among the Registrant
and certain stockholders.
10.13 1988 Employee Stock Purchase Plan. * 10.13 33-24882
10.14 1982 Key Employees Stock Option Plan. * 10.14 33-24882
10.15 1989 Stock Option Plan for Directors. * 10.15 1989 10-K
10.22 Assets Purchase Agreement, dated as 10.22 1991 10-K
of March 4, 1992, between Bruce
Technologies International, Inc. and
BTU International, Inc.
10.23 Joint Venture Agreement, dated as 0.23 1991 10-K
of March 4, 1992, among Kokusai Electric
Co., Ltd., BTU International, Inc. and
Bruce Technologies International, Inc.
10.33 Promissory Note, dated March 3, 1992, 10.33 1991 10-K
between BTU Engineering Corporation
and John Hancock Mutual Life Insurance
Company.
</TABLE>
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<TABLE>
<S> <C> <C>
10.34 Amendment to Mortgage Deed, dated 10.34 1991 10-K
March 3, 1992, between BTU Engineering
Corporation and John Hancock Mutual
Life Insurance Company.
10.37 BTU International, Inc. 1993 Equity 10.37 1992 10-K
Incentive Plan *
10.38 Credit agreement between BTU 10.38 1994 10-K
International, Inc. and Shawmut
Bank, N.A., dated November 16, 1994.
10.39 BTU(UK) Limited and RD International 10.39 1994 10-K
(UK) Limited underlease, relating to
Unit B15 Southwood Summit Centre
Filed herewith:
10.40 First Modification to Credit Agreement between International, Inc.
and Shawmut Bank, N.A., dated October 20, 1995.
10.41 Second Modification to Credit Agreement between International, Inc.
and Shawmut Bank, N.A., dated November 27, 1995.
EXHIBIT 11. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Filed herewith:
11.0 Calculation of net income per common share
EXHIBIT 13. ANNUAL REPORT TO STOCKHOLDERS
Filed herewith:
13.0 BTU International, Inc. 1995 Annual Report, except for the
specific portions incorporated by reference herein, the Annual
Report is being furnished for information purposes only and is
not deemed to be filed.
EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT
Filed herewith:
21.0 Subsidiaries of the Registrant.
EXHIBIT 23. CONSENTS OF EXPERTS AND COUNSEL
Filed herewith:
23.1 Consent of Arthur Andersen & Co.
<FN>
* - Indicates management contract or compensatory plan or arrangement.
</TABLE>
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Schedule II
<TABLE>
BTU INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
For the Year Ended December 31, 1995
------------------------------------
<CAPTION>
Additions
-------------------
Balance Charged Charged
at to costs to other Balance
beginning and accounts- Deductions- at end
Description of period expenses describe describe of period
- ---------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $114 $77 $ $ $191
</TABLE>
<TABLE>
For the Year Ended December 31, 1994
------------------------------------
<CAPTION>
Additions
-----------------
Balance Charged Charged
at to costs to other Balance
beginning and accounts- Deductions- at end
Description of period expenses describe describe of period
- ----------- --------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $49 $65 $- $- $114
</TABLE>
<TABLE>
For the Year Ended December 31, 1993
------------------------------------
<CAPTION>
Additions
------------------
Balance Charged Charged
at to costs to other Balance
beginning and accounts- Deductions- at end
Description of period expenses describe describe of period
- ----------- --------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for
</TABLE>
Amounts indicated as deductions are for amounts charged against these
reserves in the ordinary course of business.
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Exhibit 10.40
FIRST MODIFICATION TO CREDIT AGREEMENT
This first modification to the Credit Agreement dated as of
November 16, 1994, (the "Credit Agreement"), among Shawmut Bank, N.A. (the
"Lender") and BTU International, Inc., a Delaware corporation (the "Borrower"),
is made as of October 20, 1995. All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement.
RECITALS
WHEREAS, the Credit Agreement provides Borrower with a Revolving Line
of Credit and an Equipment Line of Credit each of which terminate as of
July 1, 1997;
WHEREAS, the Lender is willing to extend the termination date on the
terms and conditions contained herein provided that the Borrower enters into
this First Modification to Credit Agreement ("Modification"); and
WHEREAS, the Lender and the Borrower desire to make certain other
changes to the Credit Agreement.
NOW, THEREFORE, in furtherance of the foregoing, and in consideration
of mutual promises and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. MODIFICATIONS TO CREDIT AGREEMENT.
---------------------------------
(a) Section 2.2 of the Credit Agreement is amended by deleting the
words "Eurodollar Rate" throughout this Section and by inserting the words
"Eurodollar Revolving Credit Rate" in place thereof.
(b) Section 2.3(a) of the Credit Agreement is amended by deleting
the words "Eurodollar Rate" and by inserting the words "Eurodollar Revolving
Credit Rate" in place thereof.
(c) Sections 2.3(b) and (c) of the Credit Agreement is amended by
deleting the words "Eurodollar Loan" and inserting the words "Eurodollar
Revolving Credit Loan" in place thereof and by deleting the words "Eurodollar
Rate" and by inserting the words "Eurodollar Revolving Credit Rate".
(d) Section 2.4 of the Credit Agreement is deleted and the
following inserted in place thereof:
2.4 Prepayment of Eurodollar Loans.
------------------------------
(a) MAKE-WHOLE PAYMENTS. The Borrower shall pay to
Lender on demand such amount or amounts as shall, in the
conclusive judgment of Lender
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(in the absence of manifest error), compensate Lender
for any loss, cost or expense sustained or incurred by the
Lender as a result of (i) any payment or prepayment of any
Eurodollar Loan required or permitted under this Agreement, if
such Eurodollar Loan is prepaid other than on the last day of
the Interest Period for such Eurodollar Loan, (ii) the
conversion, for any reason whatsoever, whether voluntary or
involuntary, of any Eurodollar Loan to a Base Rate Loan on a
date other than the last day of the applicable Interest Period,
or (iii) in the event that after the Borrower delivers an
Eurodollar Loan Notice in respect of an Eurodollar Loan, such
Eurodollar Loan is not made on the first day of the Interest
Period specified in such notice of borrowing for any reason
other than a breach by the Lender of its obligations hereunder.
Such amounts payable by Borrower shall be equal to any
administrative costs incurred by lender, plus any amounts
required to compensate Lender for any loss or expense incurred
or sustained by Lender including, without limitation, any
interest or other amounts payable by the Lender to other
financial institutions in order to make or maintain such
Eurodollar Loan. In the event any such amount is payable by
Borrower, the Lender shall deliver to the Borrower from time to
time one or more certificates setting forth the amount due as
determined by the Lender, which certificate shall be conclusive
and binding on Borrower, absent manifest error.
(b) LIMITATIONS ON EURODOLLAR LOANS. (i) In the
event the Lender determines that by reason of circumstances
affecting the inter-bank Eurodollar market, adequate and
reasonable means do not exist for determining the LIBOR Rate on
Eurodollar deposits in the relevant amount and for the relevant
maturity are not available to Lender in the inter-bank
Eurodollar market, with respect to a proposed Eurodollar Loan,
Lender shall give the Borrower prompt notice of such
determination. If such notice is given, then (A) any requested
Eurodollar Loan shall be made as a Base Rate Loan, unless the
Borrower gives Lender one Business Day's prior written notice
that its request for such borrowing is cancelled; (B) any Loan
which was to have been converted to a Eurodollar Loan shall be
continued as a Base Rate Loan; and (C) any outstanding
Eurodollar Loan shall, upon the expiration of the applicable
Interest Period, be converted to a Base Rate Loan. Until such
notice has been withdrawn, Lender shall have no obligation to
make Eurodollar Loans or maintain outstanding Eurodollar Loans
and the Borrower shall not have the right to convert Base Rate
Loans to Eurodollar Loans.
(ii) Notwithstanding any other provisions of this
Agreement, if, after the date of this Agreement, any applicable
law, treaty, regulation or directive, or any change therein or
in the interpretation or application thereof, shall make it
unlawful for Lender to make or maintain any Eurodollar Loans,
the obligation of Lender hereunder to make or maintain such
Eurodollar Loans shall forthwith be suspended for the duration
of such illegality and the Borrower shall, if any Eurodollar
Loan is outstanding promptly, upon request from Lender, prepay
such advance or convert such Eurodollar Loan to a Base Rate
Loan. If any such payment is made on a day that is not the
last Business Day of the then current
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<PAGE> 3
Interest Period applicable to such Eurodollar Loan, the
Borrower shall pay Lender, upon Lender's request, the amounts
required under Section 2.4(a).
(e) Section 2.9 of the Credit Agreement is amended by deleting the
Section in its entirety and by inserting the following in place thereof:
2.9 Interest on Equipment Loans.
---------------------------
(a) INTEREST RATE. The Borrower shall pay interest
on the unpaid principal amount of each Equipment Loan
outstanding at any time, and from time to time, for the period
from the Borrowing Date at one of the following rates per annum
elected by Borrower two Business Days prior to the date such
Equipment Loan is made: (i) the Base Rate, or (ii) the
Eurodollar Equipment Rate.
(b) EURODOLLAR LOAN NOTICE. To borrow at the
Eurodollar Equipment Rate, the Borrower must submit a
Eurodollar Loan Notice to Lender prior to 11:00 a.m. (Eastern
Time) on a Business Day at least two (2) Business Days prior to
the commencement of the Interest Period for such Eurodollar
Equipment Rate borrowing. Each Eurodollar Equipment Loan shall
be for an Interest Period of twelve (12) months and shall, upon
expiration of the Interest Period applicable to each Eurodollar
Equipment Loan, be continued as a Base Rate Equipment Loan
unless Borrower shall have timely provided a Eurodollar Loan
Notice prior to the expiration of such Interest Period. For
any Equipment Loan for which the Borrower elects the Eurodollar
Equipment Rate, the Eurodollar Equipment Rate shall apply only
to the portion of the Equipment Loan equal to the principal
amount that will remain outstanding at the end of the
applicable Interest Period given the amortization required by
Section 2.10 and the Base Rate shall apply to all principal
amounts to be amortized pursuant to Section 2.10 during the
applicable Interest Period. All Eurodollar Equipment Loans
shall be subject to prepayment only as provided in Section 2.4.
(c) CONVERSION OF EQUIPMENT LOANS. Provided that
no Event of Default has occurred and is continuing the Borrower
may, on any Business Day, convert any outstanding Base Rate
Equipment Loan to a Eurodollar Equipment Loan and convert a
Eurodollar Equipment Loan to a Base Rate Equipment Loan only on
the last Business Day of the then current Interest Period
applicable to such Eurodollar Equipment Loan. If the Borrower
desires to convert an Equipment Loan, it shall give the Lender
not less than two (2) Business Days' prior written notice,
specifying the date of such conversion, the amount to be
converted, and if conversion is from a Base Rate Equipment Loan
to a Eurodollar Equipment Loan, the duration of the first
Interest Period therefor.
(f) Section 2.10 of the Credit Agreement is amended by deleting the
words "(b) if such Equipment Loan is a Cost of Funds Rate Equipment Loan, of
principal and interest, with each such installment equal in amount, payable on
the First Business Day of each month,
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<PAGE> 4
commencing, in each such case, on the first such day to occur after the
Equipment Loan is made" and inserting the following words in place thereof:
(b) if such Equipment Loan is a Eurodollar Equipment Loan, of
principal each in an amount equal to one-eighty-fourth (1/84th)
of the aggregate principal balance on the Borrowing Date for
such Equipment Loan, together with all interest accrued thereon
payable on the First Business Day of each month.
(g) Section 2.11 of the Credit Agreement is amended by deleting the
section in its entirety and by inserting the following in place thereof:
2.11 PREPAYMENT OF EQUIPMENT LOANS. Borrower may prepay
Base Rate Equipment Loans in whole or in part at any time
without penalty or premium. All Eurodollar Equipment Loans
shall be subject to prepayment only as provided in Section 2.4.
(h) Section 2.14(b) of the Credit Agreement is amended by deleting
the section in its entirety and by inserting the following in place thereof:
(b) For the first Standby Letter of Credit issued
by Lender and on the second and all subsequent Standby Letters
of Credit issued by Lender that are secured by cash pledged to
Lender in a manner satisfactory to Lender, the Borrower shall
pay to Lender a fee equal to the greater (i) one-quarter of one
percent (1/4 of 1.0%) per annum on the face amount of such
Standby Letters of Credit or (ii) the Letter of Credit Fee for
each such Standby Letter of Credit, which fee shall be paid in
full issuance of such Letters of Credit and on the anniversary
of each such issuance. For all unsecured Standby Letters of
Credit issued by Lender, Borrower shall pay to Lender a fee
equal to the greater of (i) five-eights of one percent (5/8 of
1.0%) per annum on the face amount of such unsecured Letters of
Credit or (ii) the Letter of Credit Fee for each such
unsecured Standby Letter of Credit, which fee shall be paid in
full upon issuance of each such Standby Letter of Credit and on
the anniversary of each such issuance. The "Letter of Credit
Fee" is currently $275.00 per annum but is subject to change at
the Lender's discretion. Borrower shall pay to Lender a fee
equal to one-quarter of one percent (1/4 of 1.0%) per annum on
the face amount of all Commercial Letters of Credit, which fee
shall be paid in full upon issuance of each such Commercial
Letter of Credit and on the anniversary of each such issuance.
Borrower shall also pay to Lender on demand all opening,
amendment, drawing and other administrative fees charged by
Lender from time to time on Letters of Credit.
(i) Paragraph 5.5(b) of the Credit Agreement is amended by deleting
the words "and (iv) on" and inserting the words "(iv) on" in place thereof and
by inserting the following words at the end of the paragraph:
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<PAGE> 5
and (v) on December 31, 1997 and thereafter - the Tangible
Net Worth of Borrower at December 31, 1996 plus the net
increase in retained earnings of Borrower during its fiscal
year ended December 31, 1997.
(j) Section 8.10 of the Credit Agreement is amended by deleting the
section in its entirety and by inserting the following in place thereof:
8.10 CHANGE IN LAWS. If while any Loan is outstanding, any
law, executive order or regulation is enforced, adopted or
interpreted which is applicable generally to national bank
associations in the United States of America so as to affect
any of Borrower's obligations or the compensation to Lender in
respect of any Eurodollar Loan or the cost to Lender of making
any Eurodollar Loan, Lender shall notify Borrower thereof in
writing and Borrower shall, promptly upon Lender's request,
reimburse or indemnify Lender, with respect thereto so that
Lender shall be in the same position as if there had been no
such enforcement, adoption or interpretation. The foregoing
agreement of Borrower to reimburse or indemnify Lender shall
apply in (but shall not be limited to) the case of an
imposition of or change in reserve, capital maintenance or
other similar requirements or in United States interest
equalization taxes or other excise or similar taxes or monetary
restraints, except a change in tax on the net income of Lender.
(k) The definition of "INTEREST PERIOD" contained in Schedule 1 of
the Credit Agreement is hereby amended by deleting the words "July 1, 1997"
wherever they appear within such definition and by inserting the words
"July 1, 1998" in place thereof.
(l) Schedule 1 of the Credit Agreement is hereby amended by
deleting the definitions of "BUSINESS DAY", "EURODOLLAR LOAN NOTICE",
"EURODOLLAR LOANS" and "TERMINATION DATE" therefrom and inserting the
following definitions in lieu therof:
"BUSINESS DAY" - any day on which commercial banks are open for
domestic and international business, including dealing in
dollar deposits in New York, New York, Boston, Massachusetts
and Hartford, Connecticut and if the applicable Business Day
relates to a Eurodollar Loan or Eurodollar Equipment Loan, any
London Banking Day.
"EURODOLLAR LOAN NOTICE" - Borrower's notive given pursuant to
either Section 2.3 or 2.9 that Borrower elects (i) to borrow a
Revolving Credit Loan and pay interest at the applicable
Eurodollar Revolving Credit Rate or (ii) to borrow an Equipment
Loan and pay interest at the applicable Eurodollar Equipment
Rate or (iii) convert an outstanding Revolving Credit Loan or
Equipment Loan to a Eurodollar Loan and specifying the
applicable Interest Period therefor.
"EURODOLLAR LOAN" - an Eurodollar Equipment Loan or an
Eurodollar Revolving Credit Loan.
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<PAGE> 6
"TERMINATION DATE" - the earlier of (a) July 1, 1998, and
(b) the date the Lender's commitment to Loans is
terminated pursuant to Section 7.2 of Article 7.
(m) Schedule 1 of the Credit Agreement is hereby amended by
inserting the following definitions:
"BASE RATE LOAN" - a Base Rate Equipment Loan or a Base Rate
Revolving Credit Loan.
"EURODOLLAR EQUIPMENT LOANS" - Equipment Loans bearing interest
at the Eurodollar Equipment Rate.
"EURODOLLAR EQUIPMENT RATE" - the LIBOR Rate plus 150 basis
points.
"EURODOLLAR REVOLVING CREDIT LOANS" - Revolving Credit Loans
bearing interest at the Eurodollar Revolving Credit Rate.
"EURODOLLAR REVOLVING CREDIT RATE" - the LIBOR Rate plus 125
basis points.
(n) Schedule 1 of the Credit Agreement is hereby amended by
deleting the definitions of "COST OF FUNDS RATE", "COST OF FUNDS RATE EQUIPMENT
LOAN" and "EURODOLLAR RATE" therefrom.
(o) Exhibit B to the Credit Agreement is hereby amended by deleting
it in its entirety and replacing it with EXHIBIT B attached hereto.
SECTION 2. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender to
enter into this Modification, The Borrower makes the following representations
and warranties, all of which shall survive the execution and delivery of this
Modification:
(a) The Borrower has adequate corporate power and authority to
execute and deliver this Modification and the other agreements, documents and
instruments executed in connection herewith or contemplated hereby, and to
perform its obligations hereunder and thereunder and under the Credit Agreement
as amended hereby.
(b) This Modification and each of the other agreements, documents
and instruments executed by the Borrower in connection herewith or contemplated
hereby, has been duly authorized, executed and delivered by the Borrower, and
does not contravene any law, rule or regulation applicable to the Borrower or
any of the terms of its Certificate of Incorporation or by-laws or any other
indenture, agreement or undertaking to which the Borrower is a party.
(c) This Modification effectively amends the Credit Agreement in
accordance with the terms hereof. The obligations, of the Borrower hereunder
and under the other agreements, documents and instruments executed in
connection herewith or contemplated hereby, and under the Credit Agreement as
amended hereby constitute the legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms.
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<PAGE> 7
(d) Upon the execution and delivery of this Modification and the
other agreements, documents and instruments executed in connection herewith or
contemplated hereby, and the satisfaction of each of the conditions precedent
set forth in Section 3 of this Modification, no Event of Default shall exist
and be continuing.
SECTION 3. CONDITIONS PRECEDENT. The agreements contained herein and
the amendments contemplated hereby shall become effective on the date (the
"Effective Date") when each of the parties hereto shall have executed a copy
hereof and shall have delivered the same to the Lender and when each of the
following conditions shall have been fulfilled:
(a) EXECUTIONS OF DOCUMENTS, ETC. Each of this Modification, and
any other agreements, documents and instruments to be executed and/or delivered
in connection herewith and therewith, including but not limited to a First
Amendment to the Revolving Credit Note in the form attached hereto as Exhibit A
(collectively the "Transaction Documents") shall have been duly and properly
authorized, executed and delivered by the respective party or parties thereto
and shall be in full force and effect on and as of the Effective Date of this
Modification. Executed original counterparts of each of the aforementioned
documents shall have been furnished to the Lender.
(b) PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite corporate
action and proceedings in connection with the execution and delivery of this
Modification and the other Transaction Documents shall be satisfactory in form
and substance to the Lender and its counsel, and the Lender and its counsel
shall have received all information and copies of all documents, including
without limitation, records of requisite corporate action and proceedings which
the Lender or its counsel may have requested in connection therewith, such
documents where requested by the Lender or its counsel to be certified by
appropriate persons or governmental authorities. All conditions to the
effectiveness of this Section 3, including, without limitation, the delivery of
documents required in connection therewith, shall be completed to the
satisfaction of the Lender at or prior to such execution and delivery.
(c) MATERIAL LITIGATION. There shall be no pending or, to the best
knowledge of the Borrower, threatened litigation with respect to the Borrower
before any court, arbitrator or governmental or administrative body or agency
which challenges or related to (i) the transactions contemplated hereby or (ii)
the Loan Documents, as amended hereby and by the other Transaction Documents,
or which might have a material adverse effect on the business, operations,
properties, assets, liabilities or condition, financial or otherwise, of the
Borrower.
(d) NO MATERIAL ADVERSE CHANGE. In the judgment of the Lender (a)
no material adverse change shall have occurred in the financial condition of
the Borrower from that reflected in the financial statements of the Borrower as
of March 31, 1995 delivered to Lender and (b) no other material adverse change
shall have occured in the assets, liabilities, properties, business, operations
or condition (financial or otherwise) of the Borrower since that date.
SECTION 4. REAFFIRMATION AND RATIFICATION OF EXISTING AGREEMENTS, ETC.
The Borrower: (i) reaffirms and ratifies all the obligations to the Lender
under or in respect of the
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<PAGE> 8
Credit Agreement and the other Loan Documents, (ii) certifies that there are no
defenses, offsets or counterclaims thereto as of the date hereof to said
obligations, (iii) expressly acknowledges its continuing liability pursuant
thereto, and (iv) agrees that each of the Credit Agreement and the other Loan
Documents, shall remain in full force and effect, enforceable against the
Borrower in accordance with its terms, and (v) hereby confirms that such
obligations shall survive and continue in accordance with said terms as said
documents are amended by this Modification. Further, the Borrower understands
that the Lender is relying on these representations as a basis for entering
into this Modification.
SECTION 5. MISCELLANEOUS.
(a) This Modification may be executed on separate counterparts by
the parties hereto, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same agreement.
(b) This Modification and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the laws of
the Commonwealth of Massachusetts (without giving effect to the conflict of law
principles thereof).
(c) The headings of the several sections of this Modification are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Modification.
(d) This Modification, together with the other Transaction
Documents, and the Loan Documents, as modified by this Modification and the
other Transaction Documents, embodies the entire agreement and understanding
among the parties relating to the subject matter hereof and supersedes all
prior proposals, negotiation, agreements and understandings relating to such
subject matter.
(e) Each of this Modification and the other Transaction Documents
shall be considered a "Loan Document" under and as defined in the Credit
Agreement.
(f) No provision of this Modification, the Transaction Documents,
or the Loan Documents shall require the payment, or permit the collection, of
interest in excess of the highest rate permitted by applicable law. To the
extent that any interest received by Lender exceeds the maximum amount
permitted, such payment shall be credited to unpaid principal, PROVIDED,
however, that any excess amount remaining after full payment of principal shall
be refunded to Borrower.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Modification to be duly executed by its duly authorized officer as an
instrument under seal in the Commonwealth of Massachusetts as of the day and
year first above written.
WITNESS: SHAWMUT BANK, N.A.
/s/ Paula C. McManimon By: /s/ Paula C. McManimon
- --------------------------- --------------------------
Name: Paula C. McManimon
Title: VP
BTU INTERNATIONAL, INC.
By: /s/ Paul Van der Warsen
--------------------------
Name: Paul Van der Warsen
Title: President
<PAGE> 10
FIRST AMENDMENT TO
REVOLVING CREDIT NOTE
---------------------
This is a First Amendment to Revolving Credit Note dated as of
October 20, 1995, amending a certain Revolving Credit Note (the "Note") in
the original principal amount of Five Million Dollars ($5,000,000.00) dated
November 16, 1994, made by BTU International, Inc., a Delaware corporation
(the "Maker"), payable to the order of Shawmut Bank, N.A., a national banking
association (the "Lender").
WHEREAS, the Maker and Lender have agreed to change the "Eurodollar
Rate" of interest payable under the Note;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Note is hereby amended, (i)
to change the term "Eurodollar Rate" to "Eurodollar Revolving Credit Rate"
which shall be a rate per annum equal to the sum of the LIBOR Rate (as defined
in the Agreement) plus 125 basis points and (ii) the entire balance of
principal, accrued interest and other fees and charges shall be due and payable
on July 1, 1998 except as otherwise provided for in the Agreement (as defined
in the Note) as amended.
Except as so amended, the Note shall remain in full force and effect in
accordance with its original terms.
Executed as an instrument under seal as of the date first above
written.
WITNESS: BTU INTERNATIONAL, INC.
/s/ Paula C. McManimon By: /s/ Paul Van der Warsen
- ------------------------ -------------------------
Name: Paul Van der Warsen
Title: President
SHAWMUT BANK, N.A.
By: /s/ Paula C. McManimon
-------------------------
Name: Paula C. McManimon
Title: VP
<PAGE> 11
EXHIBIT B
---------
EQUIPMENT NOTE
--------------
$ Boston, Massachusetts
------------------- , 199
-------------------- --
FOR VALUE RECEIVED, the undersigned, BTU International, Inc., a Delaware
corporation, with a principal place of business at 23 Esquire Road, North
Billerica, Massachusetts 01863 ("Maker"), hereby promises to pay to the order
of Shawmut Bank, N.A. with an address at One Federal Street, Boston, MA 02211
(the "Lender"), the sum of ___________________________ DOLLARS ($____________
_________________________), or so much as may have been advanced to Maker, as
provided under that certain Credit Agreement dated as of November 16, 1994, by
and between Maker and Lender, as the same may be amended from time to time (the
"Agreement") together with interest on the unpaid principal amount from time to
time outstanding as set forth below.
Principal shall be payable in eighty-four (84) consecutive equal monthly
installments of $_____________________ on the first Business Day of each month
commencing on the first such date to occur after the date hereof. Pursuant to
the terms of the Agreement, unpaid principal outstanding hereunder shall bear
interest at a fluctuating rate per annum equal to either (i) the Base Rate or
(ii) the Eurodollar Equipment Rate, as the Borrower may elect pursuant to the
terms of the Agreement, and shall be payable in arrears on the first Business
Day of each month commencing on the first such day to occur after the date
hereof.
The entire balance of principal, accrued interest, and other fees and charges
shall be due and payable on the earlier of an Event of Default or ___________,
19___.
After maturity (whether by acceleration after default or otherwise), interest
shall be payable on the unpaid principal balance from time to time outstanding
at a rate that is three percent (3%) in excess of the rate otherwise payable,
until fully paid. Any payment hereunder not paid within fifteen (15) days after
the date such payment is due shall be subject to a late fee equal to five
percent (5%) of the amount overdue.
"Base Rate" means for any day the rate on such day as announced by Lender as
its Base Rate. Any change in rate resulting from a change in the Base Rate
shall become effective as of the day on which such change in the Base Rate
become effective. "Eurodollar Equipment Rate" means the LIBOR Rate (as defined
in the Agreement) plus 150 basis points. "Business Day" means any day on which
commercial banks are open for domestic and international business, including
dealing on dollar deposits in New York, New York, Boston, Massachusetts and
Hartford, Connecticut and, if the applicable Business Day relates to a
Eurodollar Equipment Loan, any London Banking Day.
Interest and fees shall be calculated on the basis of a 360-day year for the
actual number of days elapsed, from and including the date of each Equipment
Loan to but excluding the date of repayment. If this Note bears interest at the
Base Rate, the principal balance of this Note may be prepaid in whole or in
part, without premium or penalty, at any time. If this Note bears interest
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<PAGE> 12
at the Eurodollar Equipment Rate, the principal balance of this Note may be
prepaid only upon payment of any amount due under Section 2.4 of the
Agreement.
This Note evidences a borrowing under the Agreement and is secured by and
entitled to the benefits of the provisions of the Agreement, and other Loan
Documents, as defined therein. All capitalized terms not specifically defined
herein shall have the same meanings as in the Agreement.
If an Event of Default shall occur, the entire unpaid balance of principal,
accrued interest and any and all other fees and charges may become due and
payable in the manner and with the effect provided in the Agreement.
Maker agrees to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses incurred, or which may be incurred, by
Lender in connection with the negotiation, documentation, administration,
enforcement and collection of this note and any other agreements, instruments
and documents executed in connection herewith.
Maker and all guarantors and endorsers hereby waive presentment, demand, notice,
protest, and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note, and assent to extensions
of the time of payment or forbearance or other indulgence without notice.
This instrument shall be governed by Massachusetts law. For purposes of any
action or proceeding involving this note, Maker hereby expressly submits to
the jurisdiction of all federal and state courts located in the Commonwealth of
Massachusetts and consents that any order, process, notice of motion or other
application to or by any of said courts or a judge thereof may be served within
or without such court's jurisdiction by registered mail or by personal
service, PROVIDED a reasonable time for appearance is allowed (but not less
than the time otherwise afforded by any law or rule), and waives any right to
contest the appropriateness of any action brought in any such court based upon
lack of personal jurisdiction, improper venue or FORUM NON CONVENIENS. MAKER
AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE
EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF
ANY DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND AGREES THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
Execute as an instrument under seal as of the date first above written.
WITNESS: BTU INTERNATIONAL, INC.
_____________________________ By:_________________________________
Name:
Title:
<PAGE> 1
Exhibit 10.41
[LOGO] SHAWMUT BANK
- ------------------------------------------------------------------------------
Metro North Commercial Fiske House, Billerica Road, ME 6004, Chelmsford, MA
01824
November 27, 1995
Thomas P. Kealy, VP
BTU International, Inc.
23 Esquire Road
No. Billerica, MA 01862
Re: Loan Arrangement with Shawmut Bank, N.A.
Reference is hereby made to a certain Credit Agreement (the "Agreement") dated
November 16, 1994, by and between, among others, BTU International, Inc. (the
"Borrower") and Shawmut Bank, N.A. (the "Bank"). Capitalized terms not
otherwise defined herein shall have the meanings given to such terms in the
Agreement.
Pursuant to Section 5.4(e) of the Agreement, the Borrower has covenanted and
agreed with the Bank that it will not "make any Investment in or loan or other
advances of money to any Person" except as described further in Section 5.4(e).
The Borrower has advised the Bank that the Borrower will be unable to comply
with Section 5.4(e) of the Agreement, which failure to comply constitutes an
event of default under the Agreement Section 7.1(c). Accordingly, the Borrower
has requested that the Bank waive the provisions of Section 5.4(e) of the
Agreement as it relates to a proposed Investment in Bruce Technologies
International (BTI) in the amount of $2,328,000.
The Bank is willing to so waive the requirements of Section 5.4(e) of the
Agreeement as it relates to the above described transaction provided that the
Borrower agrees and acknowledges that said covenant shall remain in full force
and effect throughout the remainder of the term of the Agreement. Further, the
Borrower hereby acknowledges and agrees that each and every of the terms and
conditions of the Agreement, all documents, instruments and agreements executed
and delivered in connection therewith and all obligations of the Borrower to
the Bank thereunder are hereby ratified and confirmed and shall remain in full
force and effect, without waiver or modification, except as expressly provided
herein. Moreover, nothing in this letter shall be deemed or construed to
require the Bank to grant additional waivers of said covenant or any other
terms of the Agreement or loan arrangement in the future, each of which is
hereby expressly reserved by the Bank.
<PAGE> 2
[SHAWMUT LOGO]
November 27, 1995
Page Two
If the foregoing is acceptable to the Borrower, kindly indicate the Borrower's
assent and acceptance by signing the enclosed copy of this letter and returning
same to the undersigned forthwith.
This letter agreement shall be executed as a sealed instrument and governed by
the Laws of the Commonwealth of Massachusetts.
Very truly yours,
SHAWMUT BANK, N.A.
By: /s/ Paula C. McManimon
----------------------
Paula C. McManimon
Vice President
AGREED AND ACCEPTED:
BTU INTERNATIONAL, INC.
By: /s/ Paul van der Wansem
-----------------------
Paul van der Wansem
President
<PAGE> 1
Exhibit 11.0
<TABLE>
BTU INTERNATIONAL, INC.
CALCULATION OF NET INCOME (LOSS) PER COMMON SHARE
(Dollars in Thousands, except per share data)
<CAPTION>
For the Year Ended December 31,
-------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net income $5,073 $2,680 $1,010
Dividends accrued - Class A and Class
AA redeemable preferred stock (93) (160) (181)
------ ------ ----
Net income applicable to
common stockholders $4,980 $2,520 $829
====== ====== ====
Weighted average shares outstanding
Common stock 7,230,346 6,857,184 6,818,953
Class AA convertible preferred stock - 240,000 240,000
Stock options 70,298 141,893 64,930
------ ------- ------
Weighted average shares outstanding 7,300,644 7,239,077 7,123,883
========= ========= =========
Net income per common share $0.68 $0.35 $0.12
===== ===== =====
</TABLE>
13
<PAGE> 1
Exhibit 13
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
(Thousands, except per share amounts)
1995 1994 1993
<S> <C> <C> <C>
Net sales $58,274 $43,342 $36,980
Net income $ 5,073 $ 2,680 $ 1,010
Net income per share $ 0.68 $ 0.35 $ 0.12
Weighted average number of common and
common equivalent shares outstanding 7,301 7,239 7,124
Cash $ 6,145 $ 6,896 $ 4,754
Working capital $18,005 $13,433 $10,923
Total assets $35,834 $30,965 $25,845
Stockholders' investment $18,696 $11,950 $ 9,331
</TABLE>
CORPORATE PROFILE
BTU International is a leading
supplier of thermal processing
systems. The Company's growth over
the past years is in part due to the
rapid expansion of the market for
solder reflow systems for PC board
surface mount applications, for
which BTU is the leading supplier.
In addition, BTU supplies furnace
systems used to package and seal
integrated circuits, and process
multi-chip modules. Our products
are also used in other specialty
applications, such as brazing;
sintering of ceramics, powdered
metals and nuclear fuels; and
deposition of precise thin film
coatings.
For additional product information,
please contact our Public Relations
Department at (508) 667-4111,
extension 265, and for additional
investor information, please contact
our Investor Relations Department at
(508) 667-4111, extension 107.
<PAGE> 2
To our Shareholders:
BTU proudly presents the results of a record year.
We increased our efficiencies in most areas through
dedicated efforts by many of our employees as
witnessed by the continued increase in the output per
employee and other measurements, such as the
increased operating profits, return on assets, and
return on equity. We also successfully launched
several new products during 1995, the sales of which
already significantly contributed to our overall
growth.
Our net sales increased by 34% and EPS nearly doubled
versus 1994. The Company's success over the past
several years was driven externally by the rapid
expansion of its key customers, especially in the
electronics industry, and internally by the efforts
of all our employees, in achieving the goals we
defined as individuals or as teams. The continued
focus on pioneering technical breakthroughs and the
expansion of our product lines have allowed us to
penetrate rapidly growing geographical markets and
new customers.
We also made significant improvement in our capital
structure, as we were able to retire all of our Class
A Preferred Stock and convert all of our AA Preferred
Stock. In addition, we funded our significant 34%
sales growth through internally generated cash flow.
During 1995, BTU entered several new market segments
with the introduction of new and advanced products.
The new line of VIP solder reflow systems, targeted
for the mid price range SMT customer, while offering
the latest technology, has allowed the Company to
significantly expand its customer base. Among the
other products introduced in 1995 that allowed the
Company to expand its reach for additional markets
was a newly designed pusher furnace system geared for
high temperature (above 1200[degree]C) processing
applications. These new pusher systems, introduced
in the latter part of 1995, offer advanced high
temperature processing at a competitive selling price
allowing the Company to expand into new customers
with high temperature processing applications.
<TABLE>
NET INCOME
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
IN MILLIONS $1.010 $2.680 $5.073
</TABLE>
[SALES GRAPH]
<TABLE>
SALES
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
IN MILLIONS $37.00 $43.30 $58.30
</TABLE>
<TABLE>
EARNINGS PER SHARE
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
($) DOLLARS $0.12 $0.35 $0.68
</TABLE>
[REVENUE GRAPH]
Page 1
<PAGE> 3
In February of 1996, we introduced a new solder
reflow system, the PARAGON, which offers our high end
customers a wider choice in precision solder reflow
systems with the latest features. High up time and
low maintenance are two of the principal features.
We are expecting the PARAGON to have a significant
impact on our presence in the SMT marketplace in 1996
and beyond.
The VIP, pusher, and PARAGON product lines are just
three examples of the Company's dedicated efforts in
new product development to bring technical innovation
coupled with lower cost of ownership that fit the
requirements of our worldwide customer base.
Another key thrust in 1995 was the expansion of the
Company's support structure in the rapidly expanding
worldwide markets. Beyond our network of independent
representatives and distributors located in and
servicing all key market areas (see pages 4 and 5),
BTU opened four new international offices staffed by
BTU employees. These offices are located in
Singapore, China, Scotland, and Germany. The impact
of expanding our presence, especially in Asia, is
reflected in our nearly doubling 1995 shipments to
this region versus 1994. The Far East now
contributes 24% of our total revenue.
Looking at our design, manufacturing, and materials
operations, significant improvements were achieved in
1995. The Company reduced its overall cycle time
through a combination of steps including:
Implementing advanced solid product modeling
using Pro/ENGINEER, the industry's leading
computer aided design software. Although the
change to the new CAD environment was time
consuming, we expect to increase efficiency in
design time, enhance overall product quality and
provide detail documentation from component level
to final product assemblies.
Continuing to increase the outsourcing of
components and subassemblies to enhance our
flexibility in manufacturing and reduce overall
costs.
Expanding our final product assembly and quality
test square footage. This added space, along with
implementing new techniques for
<TABLE>
BOOKINGS
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
$ MILLIONS $34.420 $49.312 $55.916
</TABLE>
<TABLE>
R, D & E
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
$ MILLIONS $2.512 $3.634 $4.266
</TABLE>
<TABLE>
SALES PER EMPLOYEE
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
REV/EMPLOYEE 111 136 160
</TABLE>
Page 2
<PAGE> 4
material flow and shortened dwell time, reduced costs
and improved quality.
In 1996 and beyond, we will continue to focus on our
key strategies: offering the most up-to-date
technology through an expanded product range; and
increasing our customer support worldwide through the
expansion of our on-the-spot direct BTU sales and
service assistance, together with the backing of a
well-trained representative network. Through the
achievement of these objectives, we aim to
continually increase the level of our customers'
satisfaction.
Furthermore, in 1996 we will continue to focus on
reducing our design, development, and manufacturing
cycle times; improve quality; and reduce costs. To
attain these goals, the key method of change for
improvement is represented in a philosophy of "back
to basics" through a very practical commitment to
process management by all our employees. This effort
is now well underway. The approach is depicted by
the process management pyramid shown on page 4 of
this report. This method uses process management as a
key building block for all employees to improve their
daily work and to aid in achieving our long-term goal
of Best in Class.
I would like to thank all of our shareholders, as
well as our customers, employees, and other
stakeholders, for their continued confidence in BTU
and we are looking forward to sharing the
opportunities represented by the growing worldwide
customer base we serve.
Paul J. van der Wansem
President and Chief Executive Officer
March 11, 1996
<TABLE>
RETURN ON TOTAL ASSETS
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
RETURN ON ASSETS % 3.91% 8.65% 14.18%
</TABLE>
<TABLE>
VALUE OF STOCKHOLDERS' INVESTMENT
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
$ MILLIONS 9.331 11.95 18.696
</TABLE>
Page 3
<PAGE> 5
EDGAR NARRATIVE FOR PAGE 4 OF ANNUAL REPORT EXHIBIT TO THE FORM 10K FILING
- --------------------------------------------------------------------------
This page contains the first page of a two-page spread titled "Customer Support
Worldwide." The two-page spread displays a map of the world, and indicates the
locations of BTU facilities, sales and service locations and the location of
BTU's representatives offices, using three different shaped dots. On this page
the western half of the world map is shown with 32 locations in North America,
1 location in South America and 4 locations in the United Kingdom and Spain.
Additionally, in the lower left hand corner of this page, our "Process
Management" philosophy pyramid is shown. A caption is shown under the pyramid
which states "Dedicated to World Class Excellence."
Page 4
<PAGE> 6
EDGAR NARRATIVE FOR PAGE 5 OF ANNUAL REPORT EXHIBIT TO THE FORM 10K FILING
- --------------------------------------------------------------------------
<TABLE>
This page contains the second page of a two-page spread titled "Customer
Support Worldwide." The two-page spread displays a map of the world, and
indicates the locations of BTU facilities, sales and service locations and the
location of BTU's representatives offices, using three different shaped dots.
On this page the eastern half of the world map is shown with 10 locations in
Europe, 1 location in the Middle East and 18 locations in the Far East and
Asia. Additionally, in the lower left hand corner of this page, is displayed
the legend for these dotted locations. Also, in the lower center of this page
is displayed using a "pie chart" the following data for our Sales By Region.
SALES BY REGION
<CAPTION>
1995
----
<S> <C>
UNITED STATES 52%
EUROPE 19%
FAR EAST 24%
OTHER 5%
</TABLE>
Page 5
<PAGE> 7
<TABLE>
FINANCIAL REVIEW
SELECTED CONSOLIDATED FINANCIAL DATA:
<CAPTION>
(Thousands, except per share amounts)
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 58,274 $ 43,342 $ 36,980 $ 30,311 $ 22,112
Cost of goods sold 32,022 23,297 21,759 19,091 13,505
Gross profit 26,252 20,045 15,221 11,220 8,607
Selling, general and
administrative 15,583 12,697 10,948 7,913 8,851
Research, development
and engineering 4,266 3,634 2,612 2,811 1,713
Restructuring charge -- -- -- 1,555 --
--------------------------------------------------
Operating income (loss) 6,403 3,714 1,661 (1,059) (1,957)
Interest income 273 188 100 303 142
Interest expense (563) (609) (611) (863) (805)
Other income (expense), net 90 49 (33) 111 21
--------------------------------------------------
Income (loss) before income
taxes, from continuing
operations 6,203 3,342 1,117 (1,508) (2,599)
Provision (benefit) for
income taxes 1,130 662 107 -- (1,040)
--------------------------------------------------
Income (loss) from
continuing operations 5,073 2,680 1,010 (1,508) (1,559)
Income (loss) on disposition
of discontinued operations -- -- -- 2,007 (7,835)
Loss from discontinued
operations (1) -- -- -- -- (4,981)
---------------------------------------------------
Net income (loss) 5,073 2,680 1,010 499 (14,375)
Dividends - preferred stock (93) (160) (181) (202) (215)
Net income (loss) applicable
--------------------------------------------------
to common stockholders 4,980 $ 2,520 $ 829 $ 297 $(14,590)
--------------------------------------------------
Net income (loss) per share:
From continuing operation $ 0.68 $ 0.35 $ 0.12 $(0.24) $ (0.26)
From disposition of
discontinued operations -- -- -- 0.28 (1.17)
From discontinued
operations -- -- -- -- (0.74)
--------------------------------------------------
Net income (loss) per share $ 0.68 $ 0.35 $ 0.12 $ 0.04 $ (2.17)
--------------------------------------------------
Weighted average number of
shares and share
equivalents outstanding 7,301 7,239 7,124 7,029 6,707
-------------------------------------------------
<FN>
(1) Net of tax benefit of
$490 in 1991.
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $6,145 $6,896 $4,754 $3,781 $ 709
Working capital 18,005 13,433 10,923 9,974 13,740
Total assets 35,834 30,965 25,845 27,246 25,181
Total short-term debt 336 311 283 290 263
Total long-term debt 5,715 6,050 6,315 6,612 6,718
Redeemable preferred stock - 1,200 1,767 2,240 2,617
Stockholders' investment 18,696 11,950 9,331 8,484 7,986
-------------------------------------------------
</TABLE>
As disclosed in Note 10 to the Consolidated Financial Statements, the Company
sold its semiconductor equipment business (Bruce Systems) into a joint
venture on March 6, 1992, and has accounted for it as a discontinued business.
The effect on the financial statements is the removal of all operating and
balance sheet elements relative to the semiconductor equipment business except
for the summary disclosure of the results from discontinued operations in 1991
and 1992.
Page 6
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
RESULTS OF OPERATIONS
The following table shows the percentage of net sales that certain elements of
the Consolidated Statements of Operations represent:
<CAPTION>
Years ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 55.0% 53.7% 58.8%
------------------------------
Gross profit 45.0% 46.3% 41.2%
Operating expenses:
Selling, general and administrative 26.7% 29.3% 29.6%
Research, development and engineering 7.3% 8.4% 7.1%
------------------------------
Operating income 11.0% 8.6% 4.5%
Interest income 0.4% 0.4% 0.3%
Interest expense (1.0%) (1.4%) (1.7%)
Other income (expense), net 0.2% 0.1% (0.1%)
------------------------------
Income before income taxes 10.6% 7.7% 3.0%
Income tax provision 1.9% 1.5% 0.3%
Net income 8.7% 6.2% 2.7%
------------------------------
</TABLE>
1995 COMPARED TO 1994
During 1995, sales increased to $58.3 million, representing an
increase of $15.0 million, or 34.5%, over 1994. Although the Company saw
increases in sales for most products, the more significant gains were
realized in its solder reflow systems used to mount components on PC boards
using Surface Mount Technology (SMT), which account for most of the overall
increase. The product with the most significant sales increase was thE
VIP system, sold primarily to the mid price range SMT customer base.
Geographically, sales in all regions have increased in 1995. While European
sales have increased, their proportionate share has declined, as sales to
the expanding economies in the Far East have increased substantially.
Expectations are that the expansion in Asian markets will continue and
the Company is organizing its operations to meet the increased demand.
The effect of price changes has had an immaterial impact on the changes in
revenues for the periods presented.
Gross profit increased by $6.2 million, or 31.0% in 1995, as compared to
1994. Gross profit as a percent of sales decreased slightly during 1995 to
45.0% versus 46.3% in 1994. The primary reason for this decrease was a shift
in our product mix during 1995, with the introduction of the VIP system.
The primary market for the VIP system is the price sensitive mid-range
customer. This, along with the higher initial cost of manufacturing the new
SMT product, have reduced the Company's gross profit percentage.
Selling, general and administrative expenses increased in 1995 by $2.9
million, or 22.7%, but decreased significantly as a percent of net sales to
26.7% compared to 29.3% in 1994. The higher costs in 1995 are primarily the
result of: $0.9 million in increased commissions related to the higher sales
level and the overall shift in geographic sales to the Far East, for which
Page 7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
the company generally pays a higher commission rate; $0.3 million in
higher travel costs, which are the result of an increase in installation and
service activities, as well as higher air fares; and a $0.4 million increase
in employee profit sharing costs and executive bonuses, commensurate with
the Company's higher overall profit levels.
Research, development and engineering expenses in 1995 increased by $0.6
million, or 17.4%, but decreased slightly as a percent of net sales by
1.1% to 7.3%, compared to 1994. The increase in overall spending was
related to development efforts at the Company for the SMT products and other
conveyor and high temperature systems, software control systems, and for
the development of new processes for existing furnaces. Additionally,
product engineering costs were higher in 1995, in support of the higher volume
of sales. The Company is aggressively pursuing new developments in order to
support a growing customer base.
Interest income increased by $85,000 in 1995 compared to 1994. This
increase in interest income is a direct result of the higher earned interest
rates available during 1995, compared to 1994.
Interest expense decreased by $46,000 in 1995 compared to 1994, due to the
lower level of interest due on the mortgage as its principal balance
decreases towards maturity.
Income taxes increased in 1995 by $468,000, when compared to 1994 levels.
This increase is directly related to the increase in operating profits
generated by our higher sales levels in 1995. The Company has recorded an
effective tax rate during 1995 of 18.2%, as compared to an effective tax
rate of 19.8% during 1994. This compares to the statutory rate of 34%.
During 1995 and 1994, the Company has recorded the benefit of net
operating losses utilized, resulting in the lower effective tax rates.
The valuation allowance relates to uncertainty surrounding the realization
of certain tax loss and credit carryforwards. At December 31, 1995, the
Company had a deferred tax asset related to federal net operating losses
(NOL's) of $1,262,000 and tax credit carryforwards of $3,711,000. The NOL
expires beginning in 2006, while the credit carryforwards begin to
expire in 1997. Realization of these assets is dependent on generating
sufficient taxable income prior to the expiration of the NOL carryforwards.
Since the Company has generated income over the past few years, the
ability to utilize a portion of the NOL carryforward in the future
has begun to be demonstrated. During the years ended December 31,
1995 and 1994, the Company reduced its valuation reserve related to the
net operating loss based on this factor. The Company will continue to
monitor the realizability of this asset in the future.
1994 COMPARED TO 1993
In 1994, the Company's sales were $43.3 million, representing an increase of
$6.4 million, or 17.2%, compared to 1993. This increase is due to the
improved business climate for almost all of the Company's product lines;
specifically for the high temperature process equipment. Net sales in 1994
increased in all geographic areas.
Gross profit was 46.3% in 1994 versus 41.2% in 1993. The primary reasons for
this increase are a change in the Company's product mix, influenced by
certain high margin customized products, and the continuing success of the
Company's cost-reduction program.
Selling, general and administrative expenses in 1994 increased by $1.7 million,
or 16.0%, but declined slightly as a percent of net sales to 29.3% compared
to 29.6% in 1993. As in 1995, the higher costs in 1994 are primarily
the result of increased commissions related to the higher revenue level,
higher travel costs to support the increase in installation and service
requirements, and employee profit sharing costs.
Research, development and engineering expenses in 1994 increased by $1.0
million, or 39.1%, and increased as a percent of net sales by 1.3% to 8.4%
compared to 1993. The increases are the result of a concentrated effort by the
Company in 1994 towards the development and introduction of several new and
enhanced products.
Page 8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Interest income increased by $88,000 in 1994 compared to 1993. This increase in
interest income is due both to an increase in cash investment levels throughout
1994, as compared to 1993, as well as the higher interest rates available on
investments during 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company has an unsecured revolving line of credit with a bank, which allows
for the aggregate of borrowings and/or letters of credit of up to $5,000,000.
Borrowings are available to the Company at either the Bank's base rate or the
Eurodollar Revolving Credit rate, as elected by the Company. This loan
agreement is available to the Company until July 1, 1998, subject to certain
financial covenants. In addition, the Company established a secured equipment
loan facility with the same bank, with the ability to borrow up to $1,000,000
for purchases of equipment. The proceeds of these equipment loans can fund up
to 75% of the cost of qualifying equipment purchases, collateralized by a first
security interest on the purchased equipment. These equipment loans are subject
to interest at either the Bank's prime rate or the Eurodollar rate, and must be
repaid in monthly principal and interest payments over a period not to exceed
84 months. No amounts were outstanding under either of these loan agreements as
of December 31, 1995.
The Company has a mortgage note, which is secured by its land and building. This
mortgage had an outstanding balance at December 31, 1995 of $5,962,000, an
annual interest rate of 9%, and a balloon payment of $5,585,000 due at maturity
on April 1, 1997. Because this obligation will become short term as of April 1,
1996, the company is currently exploring alternatives to refinance this note
when it becomes due in 1997.
During 1995, the Company has invested over $4.3 million to fund an increase in
inventories necessary to meet the increase in sales volume. The accounts
receivable balance has increased by over $1.8 million during 1995, directly
related to the higher sales volumes, and the consistent trend that the majority
of sales generated in any given quarter are shipped within the last six weeks
of that quarter. In addition, our accounts payable balance has risen by over
$1.6 million during 1995. This increase is directly attributable to the
increase in inventories and supplies purchased within the period.
Approximately $0.9 million of cash was paid in the second quarter of 1995 for
the redemption of Class A Preferred Stock and the payment of the preferred stock
dividend obligations related with this redemption. During 1995, the Company has
invested approximately $1.1 million in capital equipment, primarily in the
areas of computer hardware, computer software and machinery and equipment.
The Company does not presently have any outstanding commitments for capital
expenditures that would have a material impact on the Company's liquidity and
future capital resources.
The Company expects that its current cash position, ability to borrow necessary
funds, as well as cash flows from operations will be sufficient to meet its
corporate, operating and capital requirements through 1997.
OTHER MATTERS
The impact of inflation and the effect of foreign exchange rate changes during
1995 has had an immaterial impact on the Company's business and financial
results.
Page 9
<PAGE> 11
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Thousands, except share amounts)
<CAPTION>
As of December 31, 1995 1994
<S> <C> <C> <C>
ASSETS CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 6,145 $ 6,896
Trade accounts receivable, less reserves
of $191 and $114 in 1995 and 1994,
respectively (Note 1) 11,508 9,692
Inventories (Note 1) 9,899 5,518
Other current assets 429 1,378
-------------------
TOTAL CURRENT ASSETS 27,981 23,484
-------------------
PROPERTY, PLANT AND EQUIPMENT,
AT COST (NOTES 1 AND 3)
Land 210 210
Buildings and improvements 5,526 5,211
Machinery and equipment 4,473 3,884
Furniture and fixtures 734 629
-------------------
10,943 9,934
Less-accumulated depreciation 6,804 6,167
-------------------
NET PROPERTY, PLANT AND EQUIPMENT 4,139 3,767
INVESTMENT IN BRUCE TECHNOLOGIES
INTERNATIONAL, INC. (NOTE 10) 3,476 3,476
OTHER ASSETS, NET OF ACCUMULATED
AMORTIZATION OF $409 IN 1995
AND $396 IN 1994. 238 238
-------------------
$35,834 $30,965
===================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 10
<PAGE> 12
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Thousands, except share amounts)
<CAPTION>
As of December 31, 1995 1994
<S> <C> <C> <C>
LIABILITIES CURRENT LIABILITIES
AND Current maturities of long-term debt
STOCKHOLDERS' and capital lease obligations (Note 3) $ 336 $ 311
INVESTMENT Trade accounts payable (Note 11) 6,157 4,556
Progress payments 396 1,807
Accrued expenses (Notes 2, 7, 8, and 10) 3,087 3,377
-------------------
TOTAL CURRENT LIABILITIES 9,976 10,051
-------------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
LESS CURRENT MATURITIES (NOTE 3) 5,715 6,050
DEFERRED INCOME TAXES (NOTES 1 AND 6) 1,447 1,714
-------------------
17,138 17,815
REDEEMABLE CLASS A AND CLASS AA -------------------
PREFERRED STOCK (NOTE 8) - 1,200
-------------------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
STOCKHOLDERS' INVESTMENT (NOTES 8 AND 9)
Series preferred stock, $1 par value-
Authorized-5,000,000 shares;
Issued and outstanding-none - -
Common stock, $.01 par value-
Authorized-25,000,000 shares;
Issued-7,569,687 and 7,185,954 shares
shares at December 31, 1995 and 1994,
respectively 76 72
Additional paid-in capital 19,972 18,226
Accumulated deficit (749) (5,729)
Less treasury stock-279,281 shares, at cost (935) (935)
-------------------
18,364 11,634
Cumulative translation adjustment (Note 1) 332 316
TOTAL STOCKHOLDERS' INVESTMENT 18,696 11,950
-------------------
$35,834 $30,965
===================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 11
<PAGE> 13
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands, except per share amounts)
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
<S> <C> <C> <C>
NET SALES (NOTES 1, 4, 5 AND 11) $58,274 $43,342 $36,980
Cost of goods sold 32,022 23,297 21,759
-----------------------------
GROSS PROFIT 26,252 20,045 15,221
Selling, general and administrative 15,583 12,697 10,948
Research, development and
engineering (Note 1) 4,266 3,634 2,612
-----------------------------
OPERATING INCOME 6,403 3,714 1,661
Interest income 273 188 100
Interest expense (Note 3) (563) (609) (611)
Other income (expense) 90 49 (33)
-----------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES, 6,203 3,342 1,117
Provision for income taxes (Notes 1 and 6) 1,130 662 107
-----------------------------
NET INCOME 5,073 2,680 1,010
Dividends accrued-Class A and AA
redeemable preferred stock (Note 8) (93) (160) (181)
-----------------------------
NET INCOME APPLICABLE TO COMMON
STOCKHOLDERS $ 4,980 $ 2,520 $ 829
=============================
NET INCOME PER SHARE (NOTE 1) $ 0.68 $ 0.35 $ 0.12
=============================
WEIGHTED AVERAGE NUMBER OF SHARES AND
SHARE EQUIVALENTS OUTSTANDING 7,301 7,239 7,124
=============================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 12
<PAGE> 14
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(Thousands)
<CAPTION>
CUMULA- TOTAL
TIVE TRANS- STOCK-
ADDITIONAL RETAINED TREAS- ATION HOLDERS'
COMMON PAID-IN EARNINGS URY ADJUST- INVEST-
STOCK CAPITAL (DEFICIT) STOCK MENT MENT
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ 71 $ 18,070 $(9,078) $ 935) $ 356 $ 8,484
Net income -- -- 1,010 -- -- 1,010
Translation adjustment -- -- -- -- (44) (44)
Sales of common stock
(Note 9) -- 62 -- -- -- 62
Dividends declared
(Note 8) -- -- (181) -- -- (181)
----------------------------------------------------
BALANCE AT DECEMBER 31, 1993 71 18,132 (8,249) (935) 312 9,331
----------------------------------------------------
Net income -- -- 2,680 -- -- 2,680
Translation adjustment -- -- -- -- 4 4
Sales of common stock
(Note 9) 1 94 -- -- -- 95
Dividends declared
(Note 8) -- -- (160) -- -- (160)
----------------------------------------------------
BALANCE AT DECEMBER 31, 1994 72 18,226 (5,729) (935) 316 11,950
----------------------------------------------------
NET INCOME -- -- 5,073 -- -- 5,073
TRANSLATION ADJUSTMENT -- -- -- -- 16 16
SALES OF COMMON STOCK
(NOTE 9) 2 230 -- -- -- 232
TAX BENEFIT OF STOCK OPTION
EXERCISES -- 318 -- -- -- 318
CONVERSION OF PREFERRED
AA SHARES (NOTE 8) 2 1,198 -- -- -- 1,200
DIVIDENDS DECLARED
(NOTE 8) -- -- (93) -- -- (93)
----------------------------------------------------
BALANCE AT DECEMBER 31, 1995 $ 76 $ 19,972 $ (749) $(935) $ 332 $ 18,696
----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 13
<PAGE> 15
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES-
Net income $ 5,073 $ 2,680 $ 1,010
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities-
Depreciation and amortization 740 689 764
Accounts receivable (1,816) (1,877) 1,844
Inventories (4,381) (12) (242)
Other current assets 949 (1,061) 108
Accounts payable 1,601 841 453
Progress payments (1,411) 1,528 (671)
Accrued expenses (125) 357 (1,471)
Accrued income taxes 672 (93) 5
Other assets (13) (15) (15)
Deferred income taxes (267) 751 208
-----------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,022 3,788 1,993
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES-
Purchases of property, plant and
equipment, net (1,099) (649) (85)
-----------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,099) (649) (85)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES-
Principal payments under long-term
debt and capital lease obligations (310) (290) (304)
Issuance of common stock 550 95 62
Payments of preferred stock dividends (363) (333) (271)
Redemption of Class A preferred stock (567) (473) (378)
-----------------------------
NET CASH USED IN FINANCING ACTIVITIES (690) (1,001) (891)
-----------------------------
EFFECT OF EXCHANGE RATES ON CASH 16 4 (44)
-----------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (751) 2,142 973
CASH AND CASH EQUIVALENTS, AT
BEGINNING OF YEAR 6,896 4,754 3,781
-----------------------------
CASH AND CASH EQUIVALENTS, AT
END OF YEAR $ 6,145 $ 6,896 $ 4,754
-----------------------------
</TABLE>
Supplemental disclosures of cash flow information are included in Note 12.
The accompanying notes are an integral part of these consolidated financial
statements.
Page 14
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Operations
The Company is primarily engaged in the manufacture, sale, installation
and service of thermal processing systems, which are used as capital
equipment in various manufacturing processes, primarily in the electronics
industry.
b. Principles of Consolidation and the Use of Estimates
The accompanying consolidated financial statements include the accounts of
BTU International, Inc.(the Company) and its wholly owned subsidiaries.
All material intercompany balances and transactions have been eliminated in
consolidation. The preparation of these financial statements required the
use of certain estimates by management in determining the entity's assets,
liabilities, revenue and expenses. Actual results may vary from these
estimates.
c. Inventories
Inventories consist of material, labor and overhead and are valued at the
lower of cost or market. Cost is determined by the first-in, first-out
(FIFO) method for all inventories.
Inventories consist of:
(Thousands)
DECEMBER 31, 1995 1994
Raw materials and manufactured components $5,445 $2,731
Work-in-process 3,712 2,065
Finished goods 742 722
---------------
$9,899 $5,518
---------------
d. Property, Plant and Equipment
The Company provides for depreciation using the straight-line method over
a period sufficient to amortize the cost of the asset over its useful
life. The estimated useful lives for depreciation purposes are as follows:
Buildings and improvements 8-25 years
Machinery and equipment 2-8 years
Furniture and fixtures 5-8 years
Maintenance and repairs are charged to operations as incurred. When
equipment and improvements are sold or otherwise disposed of, the asset
cost and accumulated depreciation are removed from the accounts, and the
resulting gain or loss, if any, is included in the results of operations.
e. Income Taxes
The Company complies with the requirements of Statement of Financial
Accounting Standards (SFAS) No.109, "Accounting for Income Taxes." Under
SFAS 109, deferred tax assets and liabilities are recognized for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. The amounts of deferred tax assets
or liabilities are based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse.
Page 15
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
f. Translation of Foreign Currencies
Foreign currencies are translated in accordance with Statement of Financial
Accounting Standards No.52, "Foreign Currency Translation." Under this
standard, assets and liabilities of the Company's foreign operations are
translated into United States dollars at current exchange rates. Income
and expense items are translated at average rates of exchange prevailing
during the year. Gains and losses arising from translation are
accumulated as a separate component of stockholders' investment.
Exchange gains and losses (if any)arising from transactions denominated
in foreign currencies are included in income as incurred. No such
exchange gains or losses were incurred in the periods presented.
g. Patents
The Company has patents for certain of its products and processes. No
value has been assigned to these patents in the accompanying consolidated
financial statements.
h. Revenue Recognition
Revenue is recognized based upon shipment of product to the customer,
except for large contracts that are not completed within the normal
operating cycle of the business. The Company recognizes revenues on these
contracts as costs are incurred in the proportion that costs incurred bear
to total estimated costs. Amounts related to such contracts included in
net sales are $1,102,000 and $1,117,000 for the years ended December 31,
1995 and 1994, respectively.
i. Research, Development and Engineering
Research, development and engineering costs are charged to expense as
incurred.
j. Per Share Information
Net income per share in 1995, 1994 and 1993 was calculated based on the
weighted average number of common and common equivalent shares outstanding
during the year, using the treasury stock method of accounting.
k. Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company has classified
certain liquid financial instruments, with original maturities of less than
three months, as cash equivalents.
Page 16
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Note 2: ACCRUED EXPENSES
Accrued expenses at December 31, 1995 and 1994 consisted of the following:
(Thousands)
1995 1994
Accrued commissions $1,563 $ 897
Restructuring and discontinued operations reserves
(Notes 3 and 10) 508 860
Accrued dividends on Class A preferred stock (Note 8) -- 269
Redeemable Class A preferred stock (Note 8) -- 567
Accrued income taxes 672 --
Other 344 784
----------------
$3,087 $3,377
----------------
Note 3: DEBT AND COMMITMENTS
Debt at December 31, 1995 and 1994 consisted of the following:
(Thousands)
1995 1994
9% mortgage note payable $5,962 $6,233
Capital lease obligations, interest rates ranging
from 6.9% to 15.6%, net of interest of $10
and $20 in 1995 and 1994, respectively 89 128
---------------
6,051 6,361
Less-current maturities 336 311
---------------
$5,715 $6,050
---------------
The mortgage note payable is secured by the Company's land and building
and requires monthly payments of $68,500, including interest at 9.0%,
with a balloon payment due and payable on April 1, 1997.
Page 17
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
As of December 31, 1995, the minimum repayments of long-term debt and
capital lease obligations by year are as follows:
<CAPTION>
(Thousands)
9% CAPITAL
MORTGAGE LEASES TOTAL
<S> <C> <C> <C>
1996 $ 298 $ 38 $ 336
1997 5,664 34 5,698
1998 - 10 10
1999 - 7 7
2000 - - -
2001 and thereafter - - -
------------------------------
$5,962 $ 89 $6,051
------------------------------
</TABLE>
The Company has an unsecured revolving line of credit, with a US bank,
which allows for the aggregate of borrowings and/or letters of credit of
up to $5,000,000 at either the Bank's base rate or the Eurodollar
Revolving Credit rate. This loan agreement, which was amended on October
20, 1995, is available to the Company until July 1, 1998, subject to the
maintenance of certain inancial covenants. In addition, the Company has
a secured equipment loan facility with the same bank, for purchases of up
to $1,000,000 of equipment, with interest at either the Bank's prime or at
Eurodollar rates. The equipment loans can fund up to 75% of the cost of
qualifying equipment purchases, collateralized by a first security
interest on the purchased equipment, and must be repaid in monthly
principal and interest payments over a period not to exceed 84 months. As
of December 31, 1995 no amounts were outstanding under either the
unsecured revolving line of credit or the equipment loan facility.
The Company conducts its UK operations in a facility that is under a long-
term operating lease expiring in 2010. Rent expense under this lease was
approximately $205,000 in 1995, $249,000 in 1994 and $253,000 in 1993.
During the later part of 1994, the Company sublet a portion of this
leased space. The initial term of the sublease is five years. Under the
terms of the sublease the Company will receive 90% of the lease costs
pertaining to the sublet property, which will represent approximately
$125,000 per year. At the end of the initial five year sublet period,
the sublease can be extended at market rates for two subsequent and
concurrent five year periods. The loss anticipated as a result of the
Company's financial obligation on the leased properties is included as a
part of the restructuring reserve discussed in Notes 2 and 13. The
Company's aggregate minimum lease commitment, net of the sublease
payments, for this facility at December 31, 1995 was $3,261,000, payable
as follows: $137,000 for each of the years 1996 through 1998, $199,000
for 1999, $230,000 for 2000, and $2,421,000 thereafter.
The Company is a party to various claims arising in the normal course of
business. Management believes the resolution of these matters will not
have a material impact on the Company's results of operations.
Page 18
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 4: FOREIGN OPERATIONS
Export sales were $27,767,000 in 1995, $22,395,000 in 1994, and
$17,584,000 in 1993.
<TABLE>
The following table shows the percentages of the Company's revenues in the
United States, Europe and the Far East, for the last three years:
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
United States 52% 48% 52%
Far East 24 18 14
Europe 19 28 29
Other 5 6 5
-----------------------------
</TABLE>
<TABLE>
The accompanying consolidated financial statements include the following
amounts for the Company's United Kingdom operations (BTU Europe):
<CAPTION>
(Thousands)
1995 1994 1993
<S> <C> <C> <C>
Total assets $1,095 $1,011 $1,265
Total liabilities 398 353 651
Net sales 2,214 1,701 3,523
Net income 441 36 -
------------------------------
</TABLE>
Note 5: SIGNIFICANT CUSTOMERS
One customer individually represented approximately 21% and 23%,
respectively, of revenues in 1994 and 1993.
Note 6: INCOME TAXES
<TABLE>
As discussed in Note 1, the Company adopted SFAS 109 in 1992. The
components of income before provision for income taxes are as follows:
<CAPTION>
(Thousands)
FOR THE YEAR 1995 1994 1993
<S> <C> <C> <C>
Domestic $5,762 $3,306 $1,117
Foreign 441 36 -
-------------------------------
Total $6,203 $3,342 $1,117
-------------------------------
</TABLE>
Page 19
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
For the years ended December 31, 1995, 1994 and 1993, the Company's
provision for income taxes are as shown below.
<CAPTION>
(Thousands)
FEDERAL STATE TOTAL
<S> <C> <C> <C>
DECEMBER 31, 1995
CURRENT $1,163 $ 234 $1,397
DEFERRED (441) 174 (267)
------------------------------
$ 722 $ 408 $1,130
------------------------------
DECEMBER 31, 1994
Current $ - $ 21 $ 21
Deferred 495 146 641
------------------------------
$ 495 $ 167 $ 662
------------------------------
DECEMBER 31, 1993
Current $ - $ 107 $ 107
Deferred - - -
------------------------------
$ - $ 107 $ 107
------------------------------
</TABLE>
<TABLE>
The differences between the statutory United States federal income tax
rate of 34% versus the Company's effective tax rate are as follows:
<CAPTION>
(Thousands)
FOR THE YEAR 1995 1994 1993
<S> <C> <C> <C>
Tax provision at United
States statutory rate $ 1,959 $1,124 380
State income taxes, net
of federal benefit 269 155 107
Utilization of net operating
loss carryforwards and
reduction of valuation reserves (1,122) (622) (380)
Non-deductible and other 24 5 -
-------------------------------
Total provision $ 1,130 $ 662 $ 107
-------------------------------
</TABLE>
Page 20
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
Deferred income taxes and prepaid income taxes are comprised of the
following at December 31, 1995 and 1994:
<CAPTION>
(Thousands)
1995 1994
<S> <C> <C>
Revenues recognized for books, not tax $(4,409) $(3,103)
Accelerated tax depreciation (313) (305)
Joint venture (116) (116)
-------------------
Total deferred liabilities (4,838) (3,524)
-------------------
Reserve for discontinued operations 125 218
Inventory reserves 201 139
Inventory capitalization 160 107
Other 891 227
Federal tax net operating loss carryforward 1,262 2,087
Federal tax credit carryforwards 1,649 1,226
-------------------
Total deferred assets 4,288 4,004
-------------------
Total net deferred (liability)/asset (550) 480
Valuation allowance (897) (2,194)
-------------------
Net deferred income taxes $(1,447) $ (1,714)
-------------------
</TABLE>
The valuation allowance relates to uncertainty surrounding the realization
of the deferred tax assets, principally certain tax loss and credit
carryforwards. The net change in the valuation allowance between 1995 and
1994 is due primarily to the recognition of net operating loss
carryforwards as they were earned in 1995. Realization is dependent on
generating sufficient taxable income prior to expiration of the loss
carryforwards. As of December 31, 1995, the Company had federal tax net
operating loss carryforwards of $3,711,000, which expire beginning in
2006. In addition, the Company has research and development and AMT
credit carryforwards of $1,649,000, which expire beginning in 1997. The
tax carryforwards are subject to review and possible adjustment by the
Internal Revenue Service. Additionally, changes in ownership may limit
the utilization of US net operating losses for tax purposes in any one
year, deferring the use of these losses to future years.
Note 7: EMPLOYEE BENEFITS
The Company has management incentive and profit sharing plans for its
executives and all of its employees. These plans provide for bonuses upon
the attainment of stipulated operating income targets. Under these plans,
$801,000 in expense was recorded for 1995 and $372,000 was recorded for
1994. No amounts were expensed in 1993.
The Company has a deferred 401(k) contribution plan that is available to
cover all domestic employees of the Company who have met certain length of
service requirements. Subject to non-discriminatory restrictions on highly
compensated employees, participants can voluntarily contribute up to 13% of
their compensation to the plan, and the Company, at its discretion, may
match this contribution up to a stipulated percentage. The Company's
expense under the plan was $172,000, $136,000 and $146,000 for the years
ended December 31, 1995, 1994 and 1993, respectively.
Page 21
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 8: PREFERRED STOCK
The Company has two classes of preferred stock. Its Class A cumulative
redeemable preferred stock has a par value of $1 per share and has
2,000,000 shares authorized. As of December 31, 1995 and 1994, 0 and
567,150 shares are outstanding, respectively. These shares were
redeemable at $1 per share, plus accrued dividends of $0.05 per year.
During 1995, the Company redeemed the final 567,150 shares of Class A
Redeemable Preferred Stock for $567,150, plus the dividends due of
$283,575 related to these shares. Its Class AA redeemable convertible
preferred stock has a par value of $0.01 per share, and has 0 and
240,000 shares authorized and outstanding at December 31, 1995 and 1994.
These shares were redeemable at $5 per share, plus accrued dividends of
$0.50 per year. During 1995, all the holders of Class AA stock converted
their shares to common shares on a one-share-for-one-share basis.
<TABLE>
The following table depicts the status of preferred stock at December 31,
1995 and 1994:
(Thousands)
<CAPTION>
CLASS A CLASS AA TOTAL
<S> <C> <C> <C>
DECEMBER 31, 1994
Total redemption value $ 567 $ 1,200 $ 1,767
Accrued dividends 269 -- 269
-----------------------------
Total redemption value plus
accrued dividends 836 1,200 2,036
Less-amounts recorded in accrued expenses
(Note 2) (836) -- (836)
-----------------------------
$ -- $ 1,200 $ 1,200
-----------------------------
DECEMBER 31, 1995
REDEMPTIONS $ -- $(1,200) $(1,200)
-----------------------------
TOTAL REDEMPTION VALUE $ -- $ -- $ --
-----------------------------
</TABLE>
NOTE 9: STOCK OPTION AND PURCHASE PLANS
During 1993, the Company adopted the 1993 Equity Incentive Plan, which
provides for stock options for selected key employees and the Company's
non-employee directors. Under the terms of the plan, options are granted
at a price not less than fair market value at the date of the grant. A
total of 441,823 shares are eligible for future stock option grants,
pursuant to the plan. Options granted under the plan will expire over
periods not to exceed ten years. Also under the terms of the plan, other
stock awards can be granted at the discretion of the Company's Board of
Directors. No options were granted under this plan during 1995.
Prior to 1993, the Company had a stock option plan for selected key
employees. All options granted under this plan were issued and
exercisable at a price not less than the fair market value at the date of
the grant. All options currently outstanding expire over five years. As
of December 31, 1995, 31,100 options were outstanding under this plan.
No additional options can be granted under this plan.
The Company adopted a stock option plan for certain directors of the
Company during 1989. The options are exercisable at a price not less than
fair market value at the date of grant. The options expire over seven
years. During 1995, 1,500 and 500 options, at exercise prices of $5.00
and $2.00, respectively, were granted under this plan. These options vest
over a period of four years beginning on the date of grant and expire no
later than April 30, 2002. As of
Page 22
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1995, 8,975 options were outstanding. Pursuant to the terms
of the 1989 plan, 7,500 additional options can be granted under this plan.
<TABLE>
A summary of all stock option activity for the years ended December 31,
1995, 1994 and 1993 is as follows:
<CAPTION>
1995 1994 1993
NUMBER OPTION Number Option Number Option
OF PRICE of Price of Price
SHARES PER SHARE Shares Per Share Shares Per Share
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 257,612 $1.38-5.88 199,169 $1.38-5.88 229,615 $1.38-5.88
Granted 2,000 2.00-5.00 107,400 2.00 - -
Exercised (136,027) 1.38-2.00 (47,565) 1.38-1.50 (27,846) 1.38-1.50
Forfeited (3,540) 2.00 (1,392) 1.38-1.50 (2,600) 1.38-1.50
-------- ---------- ------- ---------- ------- ----------
Outstanding at
end of year 120,045 $1.38-5.88 257,612 $1.38-5.88 199,169 $1.38-5.88
-------- ---------- ------- ---------- ------- ----------
Options exercisable
at end of year 52,782 $1.38-5.88 151,787 $1.38-5.88 149,786 $1.38-5.88
-------- ---------- ------- ---------- ------- ----------
</TABLE>
The Company has an Employee Stock Purchase Plan. Under the terms of the
plan, employees are entitled to purchase shares of common stock at the
lower of 85% of fair market value at the beginning or the end of each
six-month option period. A total of 300,000 shares has been reserved for
issuance under this plan, of which 90,549 remain available at December 31,
1995. During 1995, a total of 7,706 shares were purchased at prices
ranging from $3.98 to $4.04 per share.
NOTE 10: DISCONTINUED OPERATIONS
On March 6, 1992, the Company concluded the sale of its Bruce Systems
business into a joint venture with Kokusai Electric Co., Ltd., whereby the
Company has retained a 19.4% ownership interest in Bruce Technologies
International, Inc. (BTI). The Company's investment in BTI at December 31,
1995 and 1994 iS $3,476,000, and the Company accounts for this investment
under the cost method.
NOTE 11: RELATED PARTY TRANSACTIONS
During 1995 and 1994, certain transactions were made between the Company
and certain related parties, all of which were at arms length. These
transactions included payments to one of the Company's Directors for
consulting services of $14,000 and $15,000 in 1995 and 1994, respectively.
These consulting services were provided to aid the Company in developing
its Far East customer market expansion. The Company also had related
party transactions with respect to the purchase of certain software
development and components from a company which is partially owned by one
of the Company's key employees. The amount of contract software and
inventories purchased from this party in the ordinary course of doing
business was $818,000 and $647,000 in 1995 and 1994, respectively; as
well, $73,000 and $48,000 is included in trade accounts payable on the
Consolidated Balance Sheet at December 31, 1995 and 1994, respectively.
Page 23
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
In addition, the Company has had certain dealings with Bruce Technologies
International, Inc. (BTI). During 1995 and 1994, respectively, the Company
sold $32,000 and $60,000 in parts to BTI, and purchased $24,000 and $93,000
in materials from BTI, at Original Equipment Manufacturer discount terms.
At December 31, 1995 and 1994, $7,000 is included in trade accounts
receivable and $12,000 and $1,000, respectively, is included in trade
accounts payable related to transactions with BTI.
<TABLE>
NOTE 12: SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<CAPTION>
(Thousands)
1995 1994 1993
<S> <C> <C> <C>
Cash paid during the year for-
Interest $ 563 $609 $611
Income taxes 85 474 34
Supplemental schedule of noncash financing
activities-
Class AA Preferred Stock Conversion 1,200 - -
Accrual of preferred stock dividends 93 160 181
------ ---- ----
</TABLE>
NOTE 13: DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to
estimate that value:
a. Cash and Cash Equivalents - The carrying amount of these assets on
the Company's Consolidated Balance Sheet approximates their fair value
because of the short maturity of these instruments.
b. Investment in Bruce Technologies International, Inc. - Management
has determined that it is not practicable to estimate the fair value of
this asset as of December 31, 1995.
c. Long-term Debt and Capital Lease Obligations - The fair value of
this long-term indebtedness as of December 31, 1995 was approximately
$5,494,000, based on a discounted cash flow analysis, using the prevailing
cost of capital for the Company as of that date.
Page 24
<PAGE> 26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To BTU International, Inc.:
We have audited the accompanying consolidated balance sheets of BTU
International, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BTU International, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
February 12, 1996
Page 25
<PAGE> 27
- --------------------------------------------------------------------------------
<TABLE>
FINANCIAL INFORMATION BY QUARTER
(Unaudited)
<CAPTION>
(Thousands, except per share amounts)
APRIL 2, JULY 2, OCT. 1, DEC. 31,
<S> <C> <C> <C> <C> <C>
1995 NET SALES $12,973 $14,951 $16,100 $14,250
------- ------- ------- -------
GROSS PROFIT 6,201 6,747 7,131 6,173
------- ------- ------- -------
OPERATING INCOME 1,545 1,713 1,843 1,302
------- ------- ------- -------
NET INCOME 1,156 1,359 1,482 1,076
------- ------- ------- -------
DIVIDENDS ACCRUED-PREFERRED STOCK 44 44 5 -
------- ------- ------- -------
NET INCOME APPLICABLE TO
COMMON STOCKHOLDERS $ 1,112 $ 1,315 $ 1,477 $ 1,076
------- ------- ------- -------
NET INCOME PER SHARE $ 0.15 $ 0.18 $ 0.20 $ 0.15
------- ------- ------- -------
WEIGHTED AVERAGE SHARES
OUTSTANDING 7,314 7,238 7,382 7,378
------- ------- ------- -------
APRIL 3, JULY 3, OCT. 2, DEC. 31,
1994 Net sales $ 9,827 $ 9,505 $11,717 $12,293
------- ------- ------- -------
Gross profit 4,497 4,211 5,371 5,966
------- ------- ------- -------
Operating income 593 530 1,188 1,403
------- ------- ------- -------
Net income 406 384 826 1,064
------- ------- ------- -------
Dividends accrued-preferred stock 56 44 30 30
------- ------- ------- -------
Net income applicable to
common stockholders $ 350 $ 340 $ 796 $ 1,034
------- ------- ------- -------
Net income per share $ 0.05 $ 0.05 $ 0.11 $ 0.14
------- ------- ------- -------
Weighted average shares
outstanding 7,144 7,135 7,216 7,294
------- ------- ------- -------
</TABLE>
Page 26
<PAGE> 28
- -------------------------------------------------------------------------------
<TABLE>
FINANCIAL INFORMATION BY QUARTER (CONTINUED)
(UNAUDITED)
<CAPTION>
COMMON STOCK MARKET PRICES FOR THE QUARTERS ENDED HIGH LOW
<S> <C> <C>
APRIL 2, 1995 $ 5 3/4 $3 7/8
JULY 2, 1995 9 1/4 4 1/4
OCTOBER 1, 1995 13 7/8 8 1/4
DECEMBER 31, 1995 12 1/2 4 1/2
------- -----
April 3, 1994 $ 2 1/2 $1 3/4
July 3, 1994 2 5/16 1 3/4
October 2, 1994 4 1/8 1 3/4
December 31, 1994 5 1/4 3 1/2
-------- ------
</TABLE>
The Company's common stock is traded in the Nasdaq national market system under
the symbol BTUI. There were approximately 484 stockholders of record, as of
February 28, 1996.
Page 27
<PAGE> 29
<TABLE>
CORPORATE INFORMATION
<CAPTION>
<S> <C>
TRANSFER AGENT HEADQUARTERS
Boston EquiServe BTU International, Inc.
Mail Stop 45-02-09 23 Esquire Road
PO Box 1865 North Billerica, Massachusetts 01862
Boston, Massachusetts 02105-1865
OFFICERS
STOCK LISTING Paul J. van der Wansem
BTU International, Inc. common stock Chairman, President and Chief Executive Officer
is traded on the NASDAQ
National Market System under the David H. Barry
symbol "BTUI." Vice President and General Manager
Thomas P. Kealy
SEC FORM 10-K Vice President, Corporate Controller and
A copy of the company's Form 10-K, Chief Accounting Officer
filed with the Securities and Exchange
Commission (SEC), is available
without charge upon written request to: DIRECTORS
Paul J. van der Wansem
Vice President, Corporate Controller Chairman, President and Chief Executive Officer
BTU International, Inc.
23 Esquire Road Alex V. d'Arbeloff
North Billerica, Massachusetts 01862 Chairman, President and Chief Executive Officer
(508) 667-4111, extension 106 Teradyne, Inc.
David A.B. Brown
GENERAL COUNSEL President
Ropes & Gray The Windsor Group, Inc.
One International Place
Boston, Massachusetts 02110 Dr. Jeffrey Chuan Chu
Chairman
Columbia International Corporation
INDEPENDENT PUBLIC
ACCOUNTANTS
Arthur Andersen LLP AUDIT COMMITTEE
One International Place Alex V. d'Arbeloff
Boston, Massachusetts 02110 David A.B. Brown
Dr. Jeffrey Chuan Chu
ANNUAL MEETING
The annual meeting of stockholders COMPENSATION COMMITTEE
will be held on May 17, 1996 Alex V. d'Arbeloff
at 10:00 AM EST at BTU International, David A.B. Brown
23 Esquire Road, North Billerica, Dr. Jeffrey Chuan Chu
Massachusetts 01862
</TABLE>
Page 28
<PAGE> 1
Exhibit 21.0
SUBSIDIARIES OF THE REGISTRANT
------------------------------
BTU Overseas, Limited (Fed. I.D. # 04-2757966)
BTU Engineering FSC, Inc. (Fed. I.D. # 04-2736403)
BTU Europe LTD
BTU GmbH
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in and incorporated by reference in this Form 10-K, into
the Company's previously filed Registration Statements on Form S-8 File No.
33-28344, File No. 33-29113, File No. 33-59045 and File No. 33-59081.
Arthur Andersen LLP
Boston, Massachusetts,
March 28, 1996
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.00
<CASH> 6145
<SECURITIES> 0
<RECEIVABLES> 11699
<ALLOWANCES> 191
<INVENTORY> 9899
<CURRENT-ASSETS> 27981
<PP&E> 10943
<DEPRECIATION> 6804
<TOTAL-ASSETS> 35834
<CURRENT-LIABILITIES> 9976
<BONDS> 5715
<COMMON> 76
0
0
<OTHER-SE> 18620
<TOTAL-LIABILITY-AND-EQUITY> 35834
<SALES> 58274
<TOTAL-REVENUES> 58274
<CGS> 32022
<TOTAL-COSTS> 32022
<OTHER-EXPENSES> 4266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 563
<INCOME-PRETAX> 6203
<INCOME-TAX> 1130
<INCOME-CONTINUING> 5073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5073
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
</TABLE>
