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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 April 2, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
------------------------------
Commission File 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: (978) 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, 2000:
6,868,808 shares.
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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' Equity
and Consolidated Statements of Comprehensive Income 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
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BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
(Unaudited)
April 2, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $10,294 $12,431
Accounts receivable, less reserves of
$160 in 2000 and $160 in 1999 18,430 14,563
Inventories (Note 2) 10,204 9,617
Other current assets 734 678
- -------------------------------------------------------------------------------------------------------------------
Total current assets 39,662 37,289
- -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 210 210
Buildings and improvements 7,512 7,329
Machinery and equipment 6,735 6,513
Furniture and fixtures 827 830
- -------------------------------------------------------------------------------------------------------------------
15,284 14,882
Less-Accumulated depreciation 9,610 9,341
- -------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 5,674 5,541
Other assets, net of accumulated amortization of $443
in 2000 and $441 in 1999 316 319
- -------------------------------------------------------------------------------------------------------------------
$45,652 $43,149
===================================================================================================================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
April 2, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------
Current liabilities
Current maturities of long-term debt and
capital lease obligations (Note 3) $ 266 $ 267
Accounts payable 7,033 6,665
Other current liabilities 4,539 3.664
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 11,838 10,596
- -------------------------------------------------------------------------------------------------------------------
Long-term debt and capital lease obligations, less
current maturities (Note 3) 4,888 4,953
Deferred income taxes 1,797 1,797
- -------------------------------------------------------------------------------------------------------------------
18,523 17,346
- -------------------------------------------------------------------------------------------------------------------
Stockholders' Equity (Note 4)
Class A preferred stock, $1.00 par value-
Authorized - 2,000,000 shares-
Issued and outstanding - none
Series preferred stock, $1.00 par value-
Authorized - 5,000,000 shares-
Issued and outstanding - none -- --
Common stock, $.01 par value-
Authorized - 25,000,000 shares;
Issued - 7,842,648, outstanding 6,866,738
at April 2, 2000 and
Issued - 7,770,446, outstanding 6,794,536
December 31, 1999 78 78
Additional paid-in capital 20,768 20,543
Accumulated earnings 9,588 8,432
Treasury stock- 975,910 and 975,910 shares
at cost, at April 2, 2000 and
December 31, 1999, respectively (3,538) (3,538)
Accumulated other comprehensive income 233 288
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 27,129 25,803
- -------------------------------------------------------------------------------------------------------------------
$45,652 $43,149
===================================================================================================================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 2, 2000 AND MARCH 28, 1999
(in thousands, except share and per share data)
(Unaudited)
THREE MONTHS ENDED
---------------------------
April 2, March 28,
2000 1999
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 21,361 $ 15,876
Cost of goods sold 12,677 9,773
- -------------------------------------------------------------------------------------------------------------------
Gross profit 8,684 6,103
Operating expenses:
Selling, general and administrative 5,577 4,330
Research, development and engineering 1,330 1,053
- -------------------------------------------------------------------------------------------------------------------
Income from operations 1,777 720
- -------------------------------------------------------------------------------------------------------------------
Interest income 119 132
Interest expense (106) (110)
Other income, net 4 39
- -------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 1,794 781
Income tax provision 638 237
- -------------------------------------------------------------------------------------------------------------------
Net income $1,156 $544
===================================================================================================================
Earnings Per Share:
Basic $0.17 $0.08
Diluted $0.16 $0.08
===================================================================================================================
Weighted average number of Shares Outstanding:
Basic Shares 6,829,542 6,803,581
Effect of Dilutive Options 454,642 106,749
- -------------------------------------------------------------------------------------------------------------------
Diluted Shares 7,284,184 6,910,330
===================================================================================================================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED APRIL 2, 2000
(in thousands)
(Unaudited)
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN ACCUMULATED TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK INCOME EQUITY
- -------------------------------------------------------------------------------------------------------------------
Balance,
beginning of
the period $78 $20,543 $8,432 $(3,538) $288 $25,803
Net income -- -- 1,156 -- -- 1,156
Exercise of stock
Options -- 225 -- -- -- 225
Translation
Adjustment -- -- -- -- (55) (55)
- -------------------------------------------------------------------------------------------------------------------
Balance,
end of
the period $78 $20,768 $9,588 $(3,538) $233 $27,129
===================================================================================================================
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED APRIL 2, 2000 AND MARCH 28, 1999
(in thousands)
(Unaudited)
THREE MONTHS ENDED
---------------------------
April 2, March 28,
2000 1999
Net Income $ 1,156 $ 544
Other comprehensive income
Foreign currency translation adjustment (55) 1
---------------------------------
Comprehensive Income $ 1,101 $ 545
=================================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 2, 2000 AND MARCH 28, 1999
(in thousands)
(Unaudited)
April 2, March 28,
2000 1999
- -------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 1,156 $ 544
Adjustments to reconcile net income to net cash
provided by(used in) operating activities -
Depreciation and amortization 271 293
Net changes in operating assets and liabilities-
Accounts receivable (3,867) (1,916)
Inventories (587) 793
Other current assets (56) (41)
Accounts payable 368 (229)
Other current liabilities 875 (355)
Other assets 1 2
- -------------------------------------------------------------------------------------------------------------------
Net cash operating activities (1,839) (909)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment, net (402) (235)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (402) (235)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments under long-term debt and capital lease
obligations (66) (61)
Exercise of stock options 225 3
Purchase of treasury stock -- (67)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 159 (125)
- -------------------------------------------------------------------------------------------------------------------
Effect of exchange rates on cash (55) 1
- -------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (2,137) (1,268)
Cash and cash equivalents, at beginning of the period 12,431 10,594
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, at end of the period $ 10,294 $ 9,326
===================================================================================================================
Supplemental disclosures of cash flow information
Cash paid during the periods for -
Interest $ 106 $ 110
Income taxes 115 660
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BTU INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis for presentation
The condensed consolidated balance sheet as of April 2, 2000, the condensed
consolidated statement of stockholders' equity for the three months ended April
2, 2000, the condensed consolidated statements of cash flows for the three
months ended April 2, 2000 and March 28, 1999, the consolidated statements of
comprehensive income for the three months ended April 2, 2000 and March 28, 1999
and the related condensed consolidated statements of operations for the quarters
ended April 2, 2000 and March 28, 1999 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, 1999,
together with the auditors' report, included in the Company's Annual Report
contained in Form 10-K filed with the Securities and Exchange Commission.
(2) Inventories
Inventories at April 2, 2000 and December 31, 1999 consisted of:
(IN THOUSANDS)
---------------------------------------------------------
April 2, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------
Raw materials and manufactured components $ 4,583 $ 4,431
Work-in-process 4,036 3,532
Finished goods 1,585 1,654
- -------------------------------------------------------------------------------------------------------------------
$10,204 $ 9,617
===================================================================================================================
(3) Debt
Debt at April 2, 2000 and December 31,1999 consisted of:
(IN THOUSANDS)
-----------------------------------------------------
April 2, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------
Mortgage note payable $ 5,030 $ 5,089
Capital lease obligations, interest rates ranging from 10.2% to 11.1%,
net of interest of $36,000 and $ 38,000 in 2000 and 1999, respectively 124 131
- -------------------------------------------------------------------------------------------------------------------
5,154 5,220
Less-current maturities 266 267
- -------------------------------------------------------------------------------------------------------------------
$ 4,888 $ 4,953
===================================================================================================================
The mortgage note payable is secured by the Company's land and building
and required monthly payments of $53,922, including interest at 8.125%. This
mortgage note payable has a balloon payment of $3,825,000 due and payable at
maturity on July 1, 2004.
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BTU INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(4) Earnings Per Share
Basic EPS is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding during the period.
Diluted EPS is computed using the weighted average number of common and dilutive
potential common shares outstanding during the period, using the treasury stock
method. Options outstanding which were not included in the determination of
diluted EPS because they were antidilutive, were 0 as of April 2, 2000 and
289,778 as of December 31, 1999.
(5) Segment Reporting
Segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision-maker in deciding how to allocate resources and in assessing
performance. The Company operates as a single business segment called thermal
processing capital equipment.
The thermal processing capital equipment segment consists of the designing,
manufacturing, selling and servicing of thermal processing equipment and related
process controls for use in the electronics, power generation, automotive and
other industries. This business segment includes the supply of solder reflow
systems used for surface mount applications in printed circuit board assembly.
Thermal processing equipment is used in: low temperature curing/encapsulation;
hybrid integrated circuit manufacturing; integrated circuit packaging and
sealing; and processing multi-chip modules. In addition, the thermal process
equipment is used for sintering nuclear fuel for commercial power generation, as
well as brazing and the sintering of ceramics and powdered metals, and the
deposition of precise thin film coatings. The business segment's customers are
multinational original equipment manufacturers and contract electronics
manufacturers.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Net sales increased 34.5% from $15.9 million in the first
quarter of 1999 to $21.4 million in the first quarter of 2000. The increase was
primarily a result of increases in product shipments of the Company's solder
reflow systems, compared to the first quarter of 1999.
When comparing the first quarter of 2000 to the first quarter of 1999
the percentage of net sales attributable to our customers in the United States
increased by 0.4%, nets sales attributable to our customers in Europe increased
by 19.2%, nets sales attributable to our Asia Pacific customers decreased by
7.6%, and net sales attributable to our customer in the Other Americas decreased
by 12.0%. The effect of price changes for specific products has not materially
impacted the change in net sales for the periods presented.
Gross Profit. Gross profit increased 42.3% from 6.1 million in the first
quarter of 1999 to $8.7 million in the first quarter of 2000, and as a
percentage of net sales, increased from 38.4% to 40.6%. The increase in gross
profit and gross profit percentage is a result of increased operational
efficiencies.
Selling, General and Administrative. Selling, general and administrative
increased 28.8% from $ 4.3 million in the first quarter of 1999 to $ 5.6 million
in the first quarter of 2000. However as a percentage of net sales, decreased
from 27.3% in first quarter 1999 to 26.1% in the first quarter of 2000. The
higher costs in the first quarter of 2000 were primarily the result of a $5.5
million increase in our net sales. The higher sales levels result in an increase
in customer service support for our worldwide customer base and higher selling
expenses.
Research, Development and Engineering. Research, development and
engineering increased 26.3% from $1.1 million in the first quarter of 1999 to
$1.3 million in the first quarter of 2000, and as a percentage of net sales,
decreased from 6.6% to 6.2% for the same periods. In the first quarter of 2000
we increased our expenses in new product development.
Operating Income. Operating income increase 146.8% from $0.7 million in
the first quarter of 1999 to $1.8 million in the first quarter of 2000, and as a
percentage of net sales, increased from 4.5% to 8.3%. This increase was a result
of the growth in net sales, higher gross margins and a decrease in operating
costs as a percentage of sales.
Income Taxes. Income taxes increased from $237,000 in the first quarter of
1999 to $638,000 in the first quarter of 2000. Our effective tax rates were
30.3% and 35.6% in the first quarters of 1999 and 2000 respectively. The 1999
effective tax rates reflect the benefit of net operating loss carryforwards
available to our UK subsidiary, resulting in the lower effective tax rates. Our
statutory federal income tax rate is 34.0%.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
As of April 2, 2000, we had $10.3 million in cash and cash equivalents.
We have an unsecured revolving line of credit that allows for aggregate
borrowings, including letters of credit, up to $14.0 million. We may elect to
borrow at either the bank's base rate or the Eurodollar rate in effect from time
to time. This loan agreement was extended in 1999 until April 30, 2004 and is
subject to certain financial covenants. No amounts were outstanding under this
agreement as of April 2, 2000 or at any time in 1999 and 2000.
We have a mortgage note that is secured by our real property. The mortgage
note had an outstanding balance at April 2, 2000 of approximately $5.0 million.
The mortgage requires monthly payments of $53,922, which includes interest
calculated at the rate of 8.125% per annum. A final balloon payment of
approximately $3.8 million is due on July 1, 2004 upon maturity of the mortgage
note.
We expect that our current cash position, ability to borrow necessary
funds, as well as cash flows from operations will be sufficient to meet our
corporate, operating and capital requirements into 2001.
Other matters
The impact of inflation and the effect of foreign exchange rate changes
during 2000 has had an immaterial impact on our business and financial results.
RECENT ACCOUNTING DEVELOPMENTS
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which provides additional
guidance in applying generally accepted accounting principles for revenue
recognition to a company's consolidated financial statements. SAB No. 101
addresses several issues, including the timing for recognizing revenue derived
from arrangements that provide for customer acceptance or product installation
after shipment and transfer of title.
Our existing revenue recognition policy is to recognize revenue at the time
the customer takes title of the product, generally at the time of shipment,
because we have routinely met our installation obligations and obtained customer
acceptance. Applying the requirements of SAB No. 101 to the present arrangements
used in our thermal processing systems sales may result in a change in our
accounting policy for revenue recognition and the deferral of the revenue for
some equipment sales until installation is complete and accepted by the
customer. We are currently evaluating the impact that SAB No. 101 might have on
our revenue recognition policies. However, there will be no impact on our cash
flows from operations as a result of this change.
We are required to report the impact of SAB No. 101, as amended by SAB No.
101A, no later than the second fiscal quarter of the fiscal year 2000. The
effect of the change will be recognized as a cumulative effect of a change in
accounting principle as of January 1, 2000. Accordingly, the first quarter of
year 2000 financial results may be restated to the extent that SAB No. 101 is
relevant and material. Prior year financial statements will not be restated.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
In June 1998, the Financial Standards Accounting Board issued Statement
of Financial Accounting Standard (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in income unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the statement of income and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 133, as
amended by SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities Deferral of the Effective Date of FASB Statement No. 133," shall be
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. SFAS No. 133 cannot be applied retroactively. SFAS No. 133, as amended,
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at our election, before
January 1, 1998). We have not yet quantified the impact of adopting SFAS No. 133
on our consolidated financial statements and have not determined the timing nor
method of its adoption of the statement. However, we do not expect that the
adoption of this statement will have a material impact on our financial position
or results of operations.
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
filings with the Securities and Exchange Commission.
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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 16, 2000 BY: /s/ Paul J. van Der Wansem
--------------------------
Paul J. van der Wansem
President, Chief Executive Officer
(principal executive officer) and Director
DATE: May 16, 2000 BY: /s/ Thomas P. Kealy
-------------------
Thomas P. Kealy
Vice President, Corporate Controller and
Chief Accounting Officer (principal
financial and accounting officer)
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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.
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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)
FOR THE THREE MONTHS ENDED
--------------------------
April 2, March 28,
2000 1999
- -------------------------------------------------------------------------------------------------------------------
Net income $ 1,156 $ 544
Net income applicable to
common stockholders $ 1,156 $ 544
========== ==========
Weighted average number of shares outstanding
Basic Shares 6,829,542 6,803,581
Effect of Dilutive Options 454,642 106,749
---------- ----------
Diluted Shares 7,284,184 6,910,330
========== ==========
Earnings Per Share
Basic $ 0.17 $ 0.08
---------- ----------
Diluted $ 0.16 $ 0.08
---------- ----------
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