<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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
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 the number of shares outstanding of the Registrant's Common Stock,
par value $.01 per share, as of the latest practicable date: As of May 10, 1996:
7,235,406 shares.
<PAGE> 2
BTU INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets 1-2
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Statement of Stockholders' Investment 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-9
PART II. OTHER INFORMATION
Signatures 10
Exhibits and Reports on Form 8-K 11
Calculation of Net Income per Common and Common
Equivalent Share 12
<PAGE> 3
BTU INTERNATIONAL, INC.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<CAPTION>
(Unaudited)
March 31, December 31,
1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 5,317 $ 6,145
Accounts receivable, less reserves of
$110 in 1996 and $191 in 1995 10,787 11,508
Inventories (Note 2) 11,207 9,899
Other current assets 273 429
- --------------------------------------------------------------------------------------
Total current assets 27,584 27,981
- --------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 210 210
Buildings and improvements 5,526 5,526
Machinery and equipment 4,710 4,473
Furniture and fixtures 734 734
- --------------------------------------------------------------------------------------
11,180 10,943
Less-Accumulated depreciation 7,005 6,804
- --------------------------------------------------------------------------------------
Net property, plant and equipment 4,175 4,139
Investment in joint venture (Note 5) 3,476 3,476
Other assets, net of accumulated amortization of $411
in 1996 and $409 in 1995 236 238
- --------------------------------------------------------------------------------------
$35,471 $35,834
======================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
<PAGE> 4
BTU INTERNATIONAL, INC.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
(Unaudited)
March 31, December 31,
1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities
Current maturities of long-term debt and
capital lease obligations (Note 3) $ 341 $ 336
Accounts payable 5,983 6,157
Other current liabilities 3,077 3,483
- -------------------------------------------------------------------------------------
Total current liabilities 9,401 9,976
- -------------------------------------------------------------------------------------
Long-term debt and capital lease obligations, less
current maturities (Note 3) 5,627 5,715
Deferred income taxes 1,447 1,447
- -------------------------------------------------------------------------------------
16,475 17,138
- -------------------------------------------------------------------------------------
Redeemable Class A and Class AA preferred stock - -
- -------------------------------------------------------------------------------------
Stockholders' investment (Note 4)
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 shares at 1996 and
at 1995 76 76
Additional paid-in capital 19,972 19,972
Accumulated deficit (392) (749)
Treasury stock - 334,281 shares in 1996
and 279,281 shares in 1995, at cost (990) (935)
- -------------------------------------------------------------------------------------
18,666 18,364
Cumulative foreign currency translation adjustment 330 332
- -------------------------------------------------------------------------------------
Total stockholders' investment 18,996 18,696
- -------------------------------------------------------------------------------------
$35,471 $35,834
=====================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 5
BTU INTERNATIONAL, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND APRIL 2, 1995
(Dollars in thousands, except share and per share data)
(Unaudited)
<CAPTION>
Three Months Ended
------------------------
March 31, April 2,
1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 11,748 $ 12,973
Cost of goods sold 6,500 6,772
- ------------------------------------------------------------------------------------
Gross profit 5,248 6,201
Operating expenses:
Selling, general and administrative 3,704 3,697
Research, development and engineering 1,037 959
- ------------------------------------------------------------------------------------
Income from operations 507 1,545
- ------------------------------------------------------------------------------------
Interest income 55 96
Interest expense (139) (150)
Other income, net 29 15
- ------------------------------------------------------------------------------------
Income before provision for income taxes 452 1,506
Income tax provision 95 350
- ------------------------------------------------------------------------------------
Net income 357 1,156
Dividends accrued - Class A and Class AA
redeemable preferred stock - 44
- ------------------------------------------------------------------------------------
Net income applicable to common stockholders $357 $1,112
====================================================================================
Net income per share $0.05 $0.15
====================================================================================
Weighted average number of shares and share
equivalents outstanding 7,356,898 7,314,146
====================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 6
BTU INTERNATIONAL, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Dollars in thousands)
(Unaudited)
<CAPTION>
ADDITIONAL CUMULATIVE TOTAL
COMMON PAID-IN ACCUMULATED TREASURY TRANSLATION STOCKHOLDERS'
STOCK CAPITAL DEFICIT STOCK ADJUSTMENT INVESTMENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
beginning of
the period $76 $19,972 $(749) $(935) $332 $18,696
Net income - - 357 - - 357
Translation
Adjustment - - - - (2) (2)
Purchases of
Treasury
Stock - - - (55) - (55)
- ----------------------------------------------------------------------------------------------------------
Balance,
end of
the period $76 $19,972 $(392) $(990) $330 $18,996
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 7
BTU INTERNATIONAL, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND APRIL 2, 1995
(Dollars in thousands)
(Unaudited)
<CAPTION>
MARCH 31, APRIL 2,
1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 357 $ 1,156
Adjustments to reconcile net income to net cash from
operating activities -
Depreciation and amortization 203 167
Accounts receivable 721 (1,164)
Inventories (1,308) (947)
Other current assets 156 1
Accounts payable (174) 789
Other current liabilities (406) 44
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in )operating activities (451) 46
- -----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment, net (237) (219)
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities (237) (219)
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments under long-term debt and capital lease
obligations (83) (76)
Proceeds from issuance of common stock - 21
Purchase of treasury stock (55) -
Payments of preferred stock dividends - (30)
- -----------------------------------------------------------------------------------------------------
Net cash used in financing activities (138) (85)
- -----------------------------------------------------------------------------------------------------
Effect of exchange rates on cash (2) 15
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (828) (243)
Cash and cash equivalents, at beginning of the period 6,145 6,896
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents, at end of the period $ 5,317 $ 6,653
=====================================================================================================
Supplemental disclosures of cash flow information
Cash paid (received/refunded) during the periods for -
Interest $ 139 $ 150
Income taxes 218 (211)
Supplemental schedule of noncash investing and financing activities
Accrual of preferred stock dividend $ - $ 44
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 8
BTU INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis for presentation
The condensed consolidated balance sheet as of March 31, 1996, the
condensed consolidated statement of stockholders' investment for the three
months ended March 31, 1996, the condensed consolidated statement of cash flows
for the three months ended March 31, 1996 and April 2, 1995, and the related
condensed consolidated statements of operations for the quarters ended March 31,
1996 and April 2, 1995 are unaudited. In the opinion of management, all
adjustments necessary for the fair presentation of such financial statements
have been included. Such adjustments consisted only of normal recurring items.
Interim results are not necessarily indicative of results for the full year.
These financial statements do not include all disclosures associated with annual
financial statements, and accordingly, should be read in conjunction with the
footnotes contained in the Company's consolidated financial statements for the
period ended December 31, 1995, together with the auditors' report, included in
the Company's "1995 Annual Report," and filed in conjunction with Form 10K.
(2) Inventories
<TABLE>
Inventories at March 31, 1996 and December 31, 1995 consisted of:
<CAPTION>
($000)
----------------------------
March 31, December 31,
1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and manufactured components $ 5,300 $5,445
Work-in-process 4,447 3,712
Finished goods 1,460 742
- ------------------------------------------------------------------------------------
$11,207 $9,899
====================================================================================
</TABLE>
(3) Debt
<TABLE>
Debt at March 31, 1996 and December 31,1995 consisted of:
<CAPTION>
($000)
---------------------------
March 31, December 31,
1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
9.0% Mortgage note payable $5,889 $5,962
Capital lease obligations, interest rates ranging from 6.9% to 15.6%,
net of interest of $9,000 and $10,000 in 1996 and 1995, respectively 79 89
- ------------------------------------------------------------------------------------------------------
5,968 6,051
Less-current maturities 341 336
- ------------------------------------------------------------------------------------------------------
$5,627 $5,715
======================================================================================================
</TABLE>
6
<PAGE> 9
BTU INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(4) Stock Option and Purchase Plans
The Company's 1993 Equity Incentive Plan provides for stock options for
selected key employees. Under the plan, options have been granted at prices 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. 102,900 options have been granted under
this plan, since its inception in 1993.
Prior to 1993, the Company had a stock option plan for selected key
employees. Under the terms of the plan, options are exercisable at a price not
less than fair market value at the date of grant. All options currently expire
over four to seven years. As of March 31, 1996, 31,100 options were outstanding
under this plan. No additional options can be granted under this plan.
The Company also has a stock option plan for certain directors of the
Company. The options are exercisable at a price not less than fair market value
at the date of grant. The options expire over seven years. As of March 31, 1996,
8,975 options were outstanding and 7,500 were available for future grants.
There was no stock option activity for the three months ended March 31,
1996. As of March 31, 1996, there were 52,782 options exercisable, at prices
ranging from $1.38 to $5.88.
Net income per share has been calculated based on the weighted average
number of common and common equivalent shares outstanding during the periods
using the treasury stock method. Common equivalent shares include the assumed
exercise of stock options when the effect of such options is dilutive. The
proceeds from the exercise of options are deemed to be used to repurchase
outstanding common stock at fair market value.
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 have been reserved for issuance under this
plan, of which 90,549 remain available at March 31, 1996. Through December 31,
1995, 209,541 shares have been purchased at prices ranging from $0.85 to $4.83
per share.
(5) Investments in Joint Venture
The Company has a 19.4% ownership interest in Bruce Technologies
International, Inc. (BTI). This investment is being accounted for using the cost
method.
7
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales - In the first quarter of 1996, net sales decreased by
$1,225,000, a decrease of 9% when compared to the first quarter of 1995. The
decrease in sales between the two periods was not specific to any one product,
but the largest decrease was experienced in the number of units sold in our
surface mount technology product lines. There have been no material variations
in the geographic dispersion of sales in the first quarter of 1996, as compared
to the same quarter in 1995.
Gross Profit - Gross profit decreased by $953,000, or 15%, versus the first
quarter of 1995. Gross profit as a percent of sales decreased 3.1%, from 47.8%
to 44.7%, for the first quarter of 1996 versus the same quarter in 1995. The
decrease in margin dollars was due to the overall decrease in revenues versus
the first quarter of 1995, which was as a result of a decrease in the number of
units sold as well as a change in the product mix.
Selling, General and Administrative - In the first quarter of 1996,
selling, general and administrative expense increased by $7,000, or 0.2%, to
$3,704,000, as compared to the same period in 1995. Though the overall dollar
increase was minimal, the increases or decreases in certain components of this
expense was as follows: $77,000 represents the increased cost associated with an
increase in people which were added to the business during 1995 to support the
expanding revenue during 1995; a $209,000 decrease in profit sharing bonuses
earned by employees, as no amounts were earned in the first quarter of 1996 as
the Company did not reach the profitability target for these bonuses; $132,000
in lower sales commissions were incurred related to the lower sales volume; a
$93,000 increase in advertising and trade show costs, and; an increase of
$46,000 in travel for service and installation to support our increasing
international presence.
Research, Development and Engineering - Expenses in this area for the first
quarter of 1996 increased by $78,000, or 8%, as compared to the first quarter of
1995. This increase in expense is a reflection of the Company's ongoing
investment in the development of new products for many of our product lines.
Interest Income - In the first quarter of 1996 interest income decreased by
$41,000, or 43%, as compared to the first quarter of 1995. The decrease is the
result of lower average invested cash balances during the period, as compared to
last year.
Interest Expense - Interest expense decreased by $11,000, or 7%, for the
first quarter of 1996, as compared to the first quarter of 1995. The slight
decrease in expense is due to the lower level of interest due on the mortgage as
its principal balance decreases.
Income Taxes - Income tax expense decreased by $255,000, or 73%, for the
first quarter of 1996, as compared to the same period in 1995. The decrease is
the direct result of the decrease in overall profitability in 1996 versus 1995.
The effective tax rate for the first quarter of 1996 was 21%, as compared to an
effective tax rate for the first quarter of 1995 of 23%. This compares to the
statutory rate of 34%. During the first quarter of 1996 and 1995, the Company
has recorded the benefit of net operating losses (NOL) utilized, resulting in
the lower effective tax rates.
8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Since the Company has generated income over the past few years, the ability
to utilize a portion of the NOL carryforward in the future continues to be
demonstrated. During the three months ended March 31, 1996 and April 2, 1995,
the Company reduced its valuation reserve related to the net operating loss
based on this factor. However, since the tax credit carryforwards begin to
expire this year, the Company believes that it is more likely than not that
these credits may expire prior to utilization, and thus a valuation allowance
has been established against this asset and the NOL. The Company will continue
to monitor the realizability of this asset in the future.
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, 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, and is subject to certain financial covenants. In addition,
the Company has a secured equipment loan facility with the same bank, with the
ability to borrow up to $1,000,000 for purchases of equipment. This facility is
available to fund up to 75% of the cost of qualifying equipment purchases, with
a collateralized first security interest on the equipment, at either the Bank's
prime rate or the Eurodollar rate, and must be repaid over a period not to
exceed 84 months. At March 31, 1996, no amounts were outstanding under either of
these loan agreements.
The current mortgage had an outstanding balance of $5,889,000 at March 31,
1996. This mortgage has an annual interest rate of 9% with a balloon payment of
$5,664,000 due at maturity on April 1, 1997. Because this obligation will become
short term as of April 1, 1996, the Company will be looking to refinance this
note before it becomes due in 1997.
During the first quarter of 1996, the Company has expanded its product line
by introducing a new high end SMT system. Additionally, the Company's operating
plan prepared for a greater level of revenue than actually occurred. The
combination of these two factors resulted in an increase of over $1.3 million to
fund an increase in inventories which have been determined to be necessary to
meet the short term order fulfillment requirements of our customers. The
accounts receivable balance has decreased by $0.7 million as a result of the
decrease in sales volume during the first quarter of 1996. In addition, our
accounts payable balance has decreased by $0.2 million dollars during the first
quarter of 1996, which is the result of efforts at the Company to control costs
in light of the lower sales volume. Accrued expenses decreased by $0.4 million
dollars in the first quarter as a result of payments made during the quarter on
certain December 31, 1995 obligations related to income taxes and bonuses
payments for the year 1995. The Company does not presently have any outstanding
commitments for capital expenditures which would have a material impact on the
Company's liquidity and future capital resources.
The Company expects 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 1996.
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BTU INTERNATIONAL, INC.
DATE: May 15, 1996 BY: /s/ Paul J. van der Wansem
--------------------------
Paul J. van der Wansem
President, Chief Executive Officer
(principal executive officer) and Director
DATE: May 15, 1996 BY: /s/ Thomas P. Kealy
-------------------
Thomas P. Kealy
Vice President, Corporate Controller and
Chief Accounting Officer (principal
financial and accounting officer)
10
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
Exhibit 11.0 - Calculation of net income per common and
common equivalent share.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
period covered by this report.
\
11
<PAGE> 1
Exhibit 11.0
BTU INTERNATIONAL , INC.
<TABLE>
CALCULATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(Dollars in thousands, except share and per share data)
<CAPTION>
For the Three Months Ended
--------------------------
March 31, April 2,
1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 357 $ 1,156
Dividends accrued - Class A and Class AA preferred stock - (44)
- ---------------------------------------------------------------------------------------------------
Net income applicable to common stockholders $357 $1,112
===================================================================================================
Weighted average shares and share equivalents outstanding:
Common stock 7,288,835 6,916,480
Class AA convertible preferred stock - 240,000
Stock options 68,063 157,666
- ---------------------------------------------------------------------------------------------------
Weighted average shares and share equivalents outstanding 7,356,898 7,314,146
===================================================================================================
Net income per common and common equivalent share $0.05 $0.15
===================================================================================================
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 5,317
<SECURITIES> 0
<RECEIVABLES> 10,897
<ALLOWANCES> 110
<INVENTORY> 11,207
<CURRENT-ASSETS> 27,584
<PP&E> 11,180
<DEPRECIATION> 7,005
<TOTAL-ASSETS> 35,471
<CURRENT-LIABILITIES> 9,401
<BONDS> 5,627
<COMMON> 76
0
0
<OTHER-SE> 18,920
<TOTAL-LIABILITY-AND-EQUITY> 35,471
<SALES> 11,748
<TOTAL-REVENUES> 11,748
<CGS> 6,500
<TOTAL-COSTS> 6,500
<OTHER-EXPENSES> 1,037
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139
<INCOME-PRETAX> 452
<INCOME-TAX> 95
<INCOME-CONTINUING> 357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 357
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
