<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 June 29, 1997
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 August 7,
1997: 7,290,944 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 8-10
PART II. OTHER INFORMATION
Signatures 11
Exhibits and Reports on Form 8-K 12
Calculation of Net Income per Common and Common
Equivalent Share 13
<PAGE> 3
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
June 29, December 31,
1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $10,831 $10,218
Accounts receivable, less reserves of
$160 in 1997 and $160 in 1996 11,975 10,630
Inventories (Note 2) 9,405 9,760
Other current assets 674 1,661
- --------------------------------------------------------------------------------------
Total current assets 32,885 32,269
- --------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 210 210
Buildings and improvements 5,764 5,591
Machinery and equipment 5,198 5,021
Furniture and fixtures 737 731
- --------------------------------------------------------------------------------------
11,909 11,553
- --------------------------------------------------------------------------------------
Less-Accumulated depreciation 7,714 7,288
- --------------------------------------------------------------------------------------
Net property, plant and equipment 4,195 4,265
Other assets, net of accumulated amortization
of $427 in 1997 and $421 in 1996 227 229
- --------------------------------------------------------------------------------------
$37,307 $36,763
======================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
<PAGE> 4
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
(Unaudited)
June 29, December 31,
1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities
Current maturities of long-term debt and
capital lease obligations (Note 3) $ 363 $ 363
Accounts payable 4,759 4,124
Other current liabilities 2,598 2,514
- --------------------------------------------------------------------------------------
Total current liabilities 7,720 7,001
- --------------------------------------------------------------------------------------
Long-term debt and capital lease obligations, less
current maturities (Note 3) 5,174 5,352
Deferred income taxes 2,203 2,203
- --------------------------------------------------------------------------------------
15,097 14,556
- --------------------------------------------------------------------------------------
Stockholders' investment (Note 4)
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 - 7,637,327 and 7,635,167 shares
at 1997 and 1996 respectively 76 76
Additional paid-in capital 20,120 20,115
Accumulated earnings 2,838 2,811
Treasury stock - 355,281 shares at cost,
at June 29, 1997 and December 31, 1996 (1,183) (1,183)
- --------------------------------------------------------------------------------------
21,851 21,819
Cumulative foreign currency translation adjustment 359 388
- --------------------------------------------------------------------------------------
Total stockholders' investment 22,210 22,207
- --------------------------------------------------------------------------------------
$ 37,307 $ 36,763
======================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 5
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
FOR THE THREE AND SIX MONTHS ENDED JUNE 29, 1997 AND JUNE 30, 1996
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- --------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 12,799 $ 11,746 $ 23,825 $ 23,494
Cost of goods sold 7,631 6,985 13,866 13,485
- -----------------------------------------------------------------------------------------------------
Gross profit 5,168 4,761 9,959 10,009
Operating expenses:
Selling, general and administrative 3,639 3,453 7,276 7,157
Research, development and engineering 904 904 1,933 1,941
Restructuring Charge -- -- 530 --
- -----------------------------------------------------------------------------------------------------
Income from operations 625 404 220 911
- -----------------------------------------------------------------------------------------------------
Interest income 90 42 195 97
Interest expense (102) (134) (229) (273)
Net gain on sale of investment -- 3,400 -- 3,400
Other income (expense), net (262) 20 (253) 49
- -----------------------------------------------------------------------------------------------------
Income before taxes 351 3,732 (67) 4,184
Income tax provision 48 639 (94) 734
- -----------------------------------------------------------------------------------------------------
Net income $ 303 $ 3,093 $ 27 $ 3,450
=====================================================================================================
Net income per share $ 0.04 $ 0.42 $ 0.00 $ 0.47
=====================================================================================================
Weighted average number of shares
and share equivalents outstanding 7,328,542 7,338,702 7,320,660 7,336,686
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 6
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
FOR THE SIX MONTHS ENDED JUNE 29, 1997
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE TOTAL
COMMON PAID-IN ACCUMULATED TREASURY TRANSLATION STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK ADJUSTMENT INVESTMENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
beginning of
the period $76 $20,115 $2,811 $(1,183) $388 $22,207
Net income -- -- 27 -- -- 27
Sales of
common
stock -- 5 -- -- -- 5
Translation
adjustment -- -- -- -- (29) (29)
- ----------------------------------------------------------------------------------------------------------
Balance,
end of
the period $76 $20,120 $2,838 $(1,183) $359 $22,210
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 7
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 29, 1997 AND JUNE 30, 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 27 $ 3,450
Adjustments to reconcile net income to net cash
provided by (used in) operating activities -
Depreciation and amortization 428 414
Net changes in operating assets and liabilities-
Accounts receivable (1,345) 1,915
Inventories 355 (353)
Other current assets 987 (62)
Accounts payable 635 (1,305)
Other current liabilities 84 (705)
Other assets 2 (3)
Net gain on sale of investment -- (3,400)
- -----------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 1,173 (49)
- -----------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment, net (358) (486)
Net proceeds from sale of investment -- 6,876
- -----------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (358) 6,390
- -----------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments under long-term debt and capital lease
obligations (178) (165)
Proceeds from issuance of common stock 5 47
Purchase of treasury stock (55)
- -----------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (173) (173)
- -----------------------------------------------------------------------------------------
Effect of exchange rates on cash (29) 27
- -----------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 613 6,195
Cash and cash equivalents, at beginning of the period 10,218 6.145
- -----------------------------------------------------------------------------------------
Cash and cash equivalents, at end of the period $ 10,831 $ 12,340
=========================================================================================
Supplemental disclosures of cash flow information
Cash paid (received/refunded) during the periods for -
Interest $ 229 $ 273
Income taxes $ (642) $ 381
</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 June 29, 1997, the condensed
consolidated statement of stockholders' investment for the six months ended June
29, 1997, the condensed consolidated statement of cash flows for the six months
ended June 29, 1997 and June 30, 1996, and the related condensed consolidated
statements of operations for the three and six months ended June 29, 1997, and
June 30, 1996, 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, 1996, together with the auditors' report, included in
the Company's "1996 Annual Report," and filed in conjunction with Form 10K.
(2) Inventories
Inventories at June 29, 1997 and December 31, 1996 consisted of:
<TABLE>
<CAPTION>
($000)
-----------------------
June 29, December 31,
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and manufactured components $4,955 $5,660
Work-in-process 2,703 2,527
Finished goods 1,747 1,573
================================================================================
$9,405 $9,760
================================================================================
</TABLE>
(3) Debt
Debt at June 29, 1997 and December 31,1996 consisted of:
<TABLE>
<CAPTION>
($000)
-----------------------
June 29, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
9.0% Mortgage note payable $5,505 $5,664
Capital lease obligations, interest rates ranging from 5.9% to 15.6%,
net of interest of $5,000 and $6,000 in 1997 and 1996, respectively 32 51
- -------------------------------------------------------------------------------------------------------
5,537 5,715
Less-current maturities 363 363
- -------------------------------------------------------------------------------------------------------
$5,174 $5,352
=======================================================================================================
</TABLE>
6
<PAGE> 9
BTU INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
The mortgage note payable is secured by the Company's land and building
and required monthly payments of $68,500, including interest at 9.0%.
The Company refinanced the mortgage note payable with the same
institution on June 30, 1997, extending the maturity date to July 1, 2004. The
new agreement requires monthly payments of $53,922, including interest at
8.125%. A final balloon payment of $ 3,797,000 is due at maturity.
(4) Earning Per Share
On March 3, 1997, the FASB issued SFAS No. 128, "Earnings Per Share."
This Statement superseded APB Opinion No.15 regarding the presentation of
earnings per share ("EPS") on the face of the income statement. SFAS No. 128
replaces the presentation of Primary EPS with a Basic EPS calculation that
excludes the dilutive effect of common stock equivalents. The statement requires
a dual presentation of Basic and Diluted EPS, which is computed similarly to
Fully Diluted EPS pursuant to APB Opinion No. 15, for all entities with complex
capital structures. This Statement is effective for fiscal years ending after
December 15, 1997 and requires restatement of all prior-period EPS data
presented. This Statement is not expected to have a material impact on the
Company's earnings per share presentation.
7
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales - In the second quarter of 1997, net sales increased by
$1,053,000, a increase of 9% when compared to the second quarter of 1996. For
the first six months of 1997 sales increased by $331,000, or 1.4%, when compared
to the same period in 1996. The increase in sales between the two periods
reflected a continuation in improved business activity in the electronics
industry in 1997 versus 1996. During the second quarter and first six months of
1997 sales to the Far East and Europe, increased as a percentage of total sales,
when compared to the same periods in 1996.
Gross Profit - Gross profit increased by $407,000, or 9%, in the second
quarter of 1997 compared to the second quarter of 1996. Gross profit for the
second quarter as a percentage of sales was similar, with a 40.4% margin in 1997
as compared to 40.5% in 1996. For the first six months of 1997 gross profit
decreased by $50,000, or 0.5% as compared to the first half of 1996. The
increase in gross profit in the second quarter was a result of the upturn in
sales versus the second quarter of 1996 as the gross margin percentage was
basically unchanged. The decrease in the year to date gross profit was due to
product mix, as sales on a year to date basis were 1.4% higher in 1997 versus
1996.
Selling, General and Administrative - In the second quarter of 1997,
selling, general and administrative expense increased by $186,000, or 5.4%, to
$3,639,000, as compared to the second quarter in 1996. For the first six months
of 1997, selling, general and administrative expense increased by $119,000, or
1.7%, as compared to the year to date number in 1996. The increase in both the
second quarter and year to date number related to the cost to expand sales and
service operations in the Far East
Research, Development and Engineering - Expenses in this area for the
second quarter of 1997 were the same, at $904,000 as for the same period in
1996. For the first six months of 1997 research, development and engineering
expenses decreased by $8,000, or 0.4%, as compared to the first six months of
1996. The Company continues to fund ongoing investment in the development on new
products for many of its product lines at a similar level in 1997 as it did in
1996.
Restructuring Charge - During the first quarter of 1997, the Company
incurred a restructuring charge of $530,000, and thus this charge is reflected
in the six months ended June 29, 1997. This charge represented a one-time cost
regarding actions taken in response to a shift in the amount of out-sourced
materials and a change to a direct approach to sales and service support in
certain Far East territories.
Interest Income - In the second quarter and first six months of 1997
interest income increased by $48,000, or 114%, and $ 98,000 or 101%
respectively, as compared to the same periods in 1996. The increase in interest
income is due to the higher investment balances in 1997 versus 1996.
Interest Expense - Interest expense decreased by $32,000, or 24%, for the
second quarter of 1997, and by $44,000, or 16%, for the first six months, as
compared to the same periods in 1996. The decrease is partially due to the lower
level of interest due on the mortgage as its principal balance decreases.
8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Net Gain on Sale of Investment - During the second quarter of 1996 the
Company sold its 19.4% interest in Bruce Technologies International (BTI) for
$7,000,000. The resulting $3,400,000 net gain on this transaction represents a
significant change in net income for the Company in 1996. The after tax effect
of the transaction accounted for $0.38 per share in the net income during the
second quarter 1996.
Other Income(Expense) - During the second quarter 1997 the Company incurred
a one-time charge to Other Expense of $271,000 for the adverse jury
determination regarding a California service representative.
Income Taxes - In the second quarter of 1997 the Company recorded a tax
provision of $48,000 versus a tax provision of $639,000 for the second quarter
1996. For the first six months of 1997 the Company recorded a tax benefit of
$94,000 versus a tax provision of $734,000 for the first six months of 1996. The
1997 benefit recorded reflects the use of certain NOL carryforwards available to
the Company's U.K. subsidiary, which was profitable in 1997. The effective tax
rate for the second quarter of 1997 was 14%, as compared to an effective tax
rate for the second quarter of 1996 of 17%. This compares to the statutory rate
of 34%.
9
<PAGE> 12
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 Comapny at either the Bank's base
rate or a Eurodollar 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. The proceeds of these equipment loans to fund up to 75% of the cost
of qualifying equipment purchases, with a collateralized first security interest
on the purchased equipment. These equipment loans are subject to interest at
either the Bank's base rate or a Eurodollar rate, and must be repaid in monthly
principal and interest payments over a period not to exceed seven years. No
amounts were outstanding under either of these loan agreements as of June 29,
1997.
The current mortgage had an outstanding balance of $5,505,000 at June 29,
1997. This mortgage has an annual interest rate of 9%. The Company refinanced
the mortgage note payable with the same institution on June 30, 1997, extending
the maturity date to July 1, 2004. The new agreement requires monthly payments
of $53,922, including interest at 8.125%. A final balloon payment of $3,797,000
is due a maturity.
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 into 1998.
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are based on
the Company's current plans and expectations and involve risks and uncertainties
that could cause actual future activities and results of operations to be
materially different from those set forth in the forward-looking statements.
Important factors that could cause actual results to differ include, among
others, general market conditions governing supply and demand, the timely
availability and acceptance of new products, and the impact of competitive
products and pricing and other risks detailed in the Company's SEC reports.
10
<PAGE> 13
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: August 11, 1997 BY: /s/ Paul J. van der Wansem
--------------------------
Paul J. van der Wansem
President, Chief Executive Officer
(principal executive officer) and Director
DATE: August 11, 1997 BY: /s/ Thomas P. Kealy
-------------------
Thomas P. Kealy
Vice President, Corporate Controller and
Chief Accounting Officer (principal
financial and accounting officer)
11
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE SECURITY HOLDERS
(a) The annual meeting of stockholders was held on May 30, 1997.
(b) All directors of the Company were re-elected at the annual meeting.
The actual vote is set forth in paragraph (c) below.
(c) The voting for the directors was as follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Paul J. van der Wansem 6,379,945 170,514
Alexander V. d'Aebeloff 6,265,454 285,005
David A.B. Brown 6,380,245 170,214
J. Chuan Chu 6,147,954 402,505
</TABLE>
(d) The Stockholders approved an amendment to the Company's 1993
Equity Incentive Plan.
The voting for the amendment was as follows:
<TABLE>
<S> <C>
For 5,413,418
Against 616,391
Abstain 134,477
Broker Non-Votes 386,173
</TABLE>
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.
12
<PAGE> 1
Exhibit 11.0
BTU INTERNATIONAL , INC.
CALCULATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- --------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 303 $ 3,093 $ 27 $ 3,450
- ----------------------------------------------------------------------------------------------
Net income applicable to
common stockholders $ 303 $ 3,093 $ 27 $ 3,450
==============================================================================================
Weighted average shares and share
equivalents outstanding:
Common stock 7,280,739 7,296,690 7,280,336 7,292,762
Stock options 47,803 42,012 40,324 43,924
- ----------------------------------------------------------------------------------------------
Weighted average shares and share
equivalents outstanding 7,328,542 7,338,702 7,320,660 7,336,686
==============================================================================================
Net income per common and common
equivalent share $ 0.04 $ 0.42 $ 0.00 $ 0.47
==============================================================================================
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-29-1997
<EXCHANGE-RATE> 1
<CASH> 10,831
<SECURITIES> 0
<RECEIVABLES> 12,135
<ALLOWANCES> 160
<INVENTORY> 9,405
<CURRENT-ASSETS> 32,885
<PP&E> 11,909
<DEPRECIATION> 7,714
<TOTAL-ASSETS> 37,307
<CURRENT-LIABILITIES> 7,720
<BONDS> 5,174
0
0
<COMMON> 76
<OTHER-SE> 22,134
<TOTAL-LIABILITY-AND-EQUITY> 37,307
<SALES> 23,825
<TOTAL-REVENUES> 23,825
<CGS> 13,866
<TOTAL-COSTS> 13,866
<OTHER-EXPENSES> 1,933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 229
<INCOME-PRETAX> (67)
<INCOME-TAX> (94)
<INCOME-CONTINUING> 27
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
