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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 September 28, 2003
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 by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes_ No X
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
November 11, 2003: 7,127,819 shares. shares.
BTU INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 1-2
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Statement of Stockholders' Equity
and Consolidated Statements of Comprehensive Loss 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-11
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
Signatures 12
Exhibits and Reports on Form 8-K 13
Calculation of Net Loss per Common and Common
Equivalent Share 14
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
(Unaudited)
September 28, December 31,
2003 2002
- --------------------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $ 7,660 $13,847
Accounts receivable, less reserves of $172 5,873 4,532
Inventories (Note 2) 7,320 6,668
Refundable income taxes -- 1,700
Other current assets 687 417
- --------------------------------------------------------------------------------------------------
Total current assets 21,540 27,164
- --------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 210 210
Buildings and improvements 7,929 7,894
Machinery and equipment 7,650 7,645
Furniture and fixtures 866 856
- --------------------------------------------------------------------------------------------------
16,655 16,605
Less-Accumulated depreciation 13,180 12,568
- --------------------------------------------------------------------------------------------------
Net property, plant and equipment 3,475 4,037
Other assets, net of accumulated amortization of $398 at
Sept. 28, 2003 and $362 at December 31, 2002 793 313
- --------------------------------------------------------------------------------------------------
$25,808 $31,514
==================================================================================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
September 28, December 31,
2003 2002
- --------------------------------------------------------------------------------------------------
Current liabilities
Current maturities of long-term debt and
capital lease obligations (Note 3) $ 4,085 $ 329
Current portion of long-term deferred
compensation 200 200
Accounts payable 2,128 2,601
Accrued expenses 2,690 2,623
- --------------------------------------------------------------------------------------------------
Total current liabilities 9,103 5,753
- --------------------------------------------------------------------------------------------------
Long-term debt and capital lease obligations, less
current maturities (Note 3) -- 4,010
Long-term deferred compensation, less current maturities 501 650
- --------------------------------------------------------------------------------------------------
9,604 10,413
- --------------------------------------------------------------------------------------------------
Stockholders' Equity (Note 4)
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 - 8,275,027, outstanding 7,126,017
at September 28, 2003 and
Issued - 8,151,588, outstanding 7,002,578
at December 31, 2002 82 81
Additional paid-in capital 22,313 21,976
Deferred compensation (28) (71)
Accumulated earnings (losses) (2,218) 3,035
Treasury stock- at cost, 1,149,010 shares at
Sept. 28, 2003 and December 31, 2002 (4,177) (4,177)
Accumulated other comprehensive income 232 257
- --------------------------------------------------------------------------------------------------
Total stockholders' equity 16,204 21,101
- --------------------------------------------------------------------------------------------------
$25,808 $31,514
==================================================================================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 28, 2003 AND SEPTEMBER 29, 2002
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------- ------------------------
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------------
Net sales $ 6,738 $ 7,100 $ 20,698 $ 24,968
Cost of goods sold 5,370 4,601 15,932 16,780
- -------------------------------------------------------------------------------------------------------------
Gross profit 1,368 2,499 4,766 8,188
Operating expenses:
Selling, general and administrative 2,165 3,409 7,468 10,828
Research, development and engineering 745 903 2,393 2,761
Restructuring charges -- 360 190 360
- -------------------------------------------------------------------------------------------------------------
Loss from operations (1,542) (2,173) (5,285) (5,761)
- -------------------------------------------------------------------------------------------------------------
Interest income 7 53 60 163
Interest expense (84) (91) (257) (278)
Other income, net 2 11 7 13
- -------------------------------------------------------------------------------------------------------------
Loss before income tax benefit (1,617) (2,200) (5,475) (5,863)
Income tax benefit -- (539) (222) (1,436)
- -------------------------------------------------------------------------------------------------------------
Net loss $ (1,617) $ (1,661) $ (5,253) $ (4,427)
=============================================================================================================
Loss Per Share:
Basic $ (0.23) $ (0.24) $ (0.75) $ (0.64)
Diluted $ (0.23) $ (0.24) $ (0.75) $ (0.64)
=============================================================================================================
Weighted Average Number of
Shares Outstanding:
Basic 7,030,140 6,910,226 7,011,834 6,873,843
Effect of Dilutive Options -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Diluted Shares 7,030,140 6,910,226 7,011,834 6,873,843
=============================================================================================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 2003
(in thousands)
(Unaudited)
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN DEFERRED ACCUMULATED TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL COMP. EARNINGS(LOSSES) STOCK INCOME EQUITY
=============================================================================================================================
Balance at
Dec. 31, 2002 $ 81 $ 21,976 $ (71) $ 3,035 $ (4,177) $ 257 $ 21,101
Net loss -- -- -- (5,253) -- -- (5,253)
Sale of Common
Stock 1 337 -- -- -- -- 338
Translation
Adjustment -- -- -- -- -- (25) (25)
Deferred
Compensation -- -- 43 -- -- -- 43
- -----------------------------------------------------------------------------------------------------------------------------
Balance at
Sept. 28,2003 $ 82 $ 22,313 $ (28) $ (2,218) $ (4,177) $ 232 $ 16,204
=============================================================================================================================
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 28, 2003 AND SEPTEMBER 29, 2002
(in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------- ---------------------
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------
Net Loss $ (1,617) $ (1,661) $ (5,253) $ (4,427)
Other comprehensive income (loss):
Foreign currency translation adjustment 18 25 (25) 73
- ----------------------------------------------------------------------------------------------------------
Comprehensive Loss $ (1,599) $ (1,636) $ (5,278) $ (4.354)
==========================================================================================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 2003 AND SEPTEMBER 29, 2002
(in thousands)
(Unaudited)
September 28, September 29,
2003 2002
- ----------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (5,253) $ (4,427)
Adjustments to reconcile net income to net cash
used in operating activities -
Depreciation and amortization 863 1,001
Stock based compensation 43 54
Net changes in operating assets and liabilities-
Accounts receivable (1,341) (912)
Inventories (632) 2,828
Other current assets (270) 274
Refundable income taxes 1,700 --
Other assets (6) 27
Accounts payable (473) (576)
Accrued expenses (93) (299)
Deferred compensation (149) --
- ----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (5,611) (2,030)
- ----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment (255) (116)
Cash paid for acquisition (380) --
- ----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (635) (116)
- ----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments under long-term debt and capital lease
obligations (254) (226)
Payments for debt refinancing -- (59)
Proceeds from issuance of Common Stock
and Exercise of stock options 338 200
Purchase of treasury stock -- (27)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 84 (112)
- ----------------------------------------------------------------------------------------------------------
Effect of exchange rates on cash (25) 73
- ----------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (6,187) (2,185)
Cash and cash equivalents, at beginning of the period 13,847 15,716
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, at end of the period $ 7,660 $ 13,531
==========================================================================================================
Supplemental disclosures of cash flow information
Cash paid (received) during the periods for -
Interest $257 $278
Income taxes (1,700) 41
Non-cash disclosure:
Fair value of assets acquired 540 --
Less fair value of liabilities assumed (160) --
--------
Cash paid 380 --
===
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
BTU INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis for presentation
The condensed consolidated balance sheets as of September 28, 2003 and
December 31, 2002, the related condensed consolidated statements of operations
for the three and nine months ended September 28, 2003 and September 29, 2002,
the condensed consolidated statement of stockholders' equity for the nine months
ended September 28, 2003, the condensed consolidated statements of cash flows
for the nine months ended September 28, 2003 and September 29, 2002, and the
consolidated statements of comprehensive loss for the three and nine months
ended September 28, 2003 and September 29, 2002 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 as of, and for the period ended December 31,
2002, together with the auditors' report, included in the Company's Annual
Report on Form 10-K, as filed with the Securities and Exchange Commission.
(2) Inventories
Inventories at September 28, 2003 and December 31, 2002 consisted of:
(in thousands)
-------------------------------
September 28, December 31,
2003 2002
- ---------------------------------------------------------------------------------
Raw materials and manufactured components $ 4,020 $ 4,548
Work-in-process 2,189 2,066
Finished goods 1,726 816
Less:
Reserves (615) (762)
- ---------------------------------------------------------------------------------
$7,320 $ 6,668
=================================================================================
(3) Debt
Debt at September 28, 2003 and December 31,2002 consisted of:
(in thousands)
-------------------------------
September 28, December 31,
2003 2002
- --------------------------------------------------------------------------------------------
Mortgage note payable $ 4,069 $ 4,298
Capital lease obligations, interest rates ranging
from 10.2% to 10.3%, net of interest of $2 and
$4 in 2003 and 2002, respectively 16 41
- --------------------------------------------------------------------------------------------
4,085 4,339
Less-current maturities 4,085 329
- --------------------------------------------------------------------------------------------
$ 0 $ 4,010
============================================================================================
The mortgage note payable is secured by the Company's land and building
and requires 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.
The Company has an unsecured revolving line of credit with a US bank,
which allows for aggregate borrowings, including letters of credit, up to a
maximum of $14 million against a borrowing base of all assets except real
estate. The Company may elect to borrow at interest rates pegged to either the
bank's base rate or the LIBOR rate in effect from time to time. This loan
agreement extends to May 31, 2006 and is subject to maintaining certain
financial covenants. As of September 28, 2003 and December 31, 2002, no amounts
were outstanding under this unsecured revolving line of credit and at September
28, 2003, $8.1 million was available to borrow under the borrowing base.
6
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 for the three months and nine months ended
September 28, 2003 and September 29, 2002 because they were antidilutive, were
1,110,986 and 1,119,300 respectively.
The Company applies Accounting Principles Board Opinion No. 25 and
related Interpretations in accounting for its stock option and purchase plans.
Accordingly, no compensation cost has been recognized related to the plans. Had
compensation cost for the plans been determined based on the fair value at the
grant dates for the awards under these plans consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's net loss and net loss
per share would be the pro forma amounts indicated below:
Three Months Ended Nine Months Ended
------------------------------ -----------------------------
September 28, September 29, September 28, September 29,
2003 2002 2003 2002
Net Income (loss):
As reported..................... $ (1,617) $ (1,661) $ (5,253) $ (4,427)
Pro forma....................... (1,689) (1,754) (5,469) (4,705)
Income per basic share:
As reported..................... $ (0.23) $ (0.24) $ (0.75) $ (0.64)
Pro forma....................... (0.24) (0.25) (0.78) (0.68)
Income per diluted share:
As reported..................... $ (0.23) $ (0.24) $(0.75) $ (0.64)
Pro forma....................... (0.24) (0.25) (0.78) (0.68)
(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 processing 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 electronic manufacturing service providers.
7
BTU INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(6) Revenue Recognition
The Company recognizes revenue in accordance with the Securities and
Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition in Financial Statements." Under SAB No. 101, when the terms of sale
include customer acceptance provisions, and compliance with those provisions can
not be demonstrated until customer use, revenues are recognized upon acceptance.
Furthermore, revenues for products that require installation for which the
installation is essential to functionality or is not deemed inconsequential or
perfunctory are recognized upon completion of installation. Revenues for
products sold where installation is not essential to functionality and is deemed
inconsequential or perfunctory are recognized upon shipment with estimated
installation and warranty costs accrued.
The Company also has certain sales transactions for projects that are
not completed within the normal operating cycle of the business. These contracts
are accounted for on a percentage of completion basis. Under the percentage
completion method, revenues are recognized based upon the ratio of costs
incurred to the total estimated costs. Revisions in costs and profit estimates
are reflected in the period in which the facts causing the revision become
known. Provisions for total estimated losses on uncompleted contracts, if any,
are made in the period in which such losses are determined.
For the nine months ended September 28, 2003 there was no revenue
recognized using the percentage of completion method. For the nine months ended
September 29, 2002, $252,717 of revenue was recognized using the percentage of
completion method.
The Company accounts for shipping and handling costs billed to
customers in accordance with Emerging Issues Task Force (EITF) Issue 00-10
"Accounting for Shipping and Handling Fees and Cost". Amounts billed to
customers for shipping and handling costs are reclassified as revenues with the
associated costs reported as cost of goods sold.
(7) Restructuring Charges
The Company recorded a $190,000 restructuring charge in the second
quarter 2003. This charge was solely related to severance costs associated with
the reduction of 15 non-production employees. Approximately $151,000 in
severance payments were made during the second and third quarter. The remaining
balance is included in other current liabilities and is expected to be paid
during the fourth quarter of 2003.
(8) Acquisition
In the second quarter of 2003, the Company acquired the assets of
Sagarus Robotics Corporation of Tempe, Arizona. The Sagarus operations have been
moved to Billerica, Massachusetts and the Sagarus products are now integrated
with the BTU worldwide product offerings. The pro-forma results, to disclose the
effects on the Company's results of operations as if the acquisition had been
completed as of the beginning of the period were not presented herein as they
are immaterial to the Company's operations.
(9) Product Warranty Costs
The Company provides standard warranty coverage for parts and labor for
12 months and special extended coverage on certain other parts. The reserve for
warranty covers the estimated costs of material, labor, overhead and travel.
The Company is currently evaluating the warranty accrual activity and
the adequacy of the ending balance. In the opinion of Management, such accruals
are adequate to cover all outstanding warranty obligations.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Net sales decreased 5.1% from $7.1 million in the third
quarter of 2002 to $6.7 million in the third quarter of 2003. For the first nine
months net sales decreased 17.1% from $25.0 million in 2002 to $20.7 million in
2003. The decrease in both the third quarter and first nine months of 2003 was
primarily a result of decreases in product shipments of the Company's advanced
materials systems, whose markets have not yet rebounded.
When comparing the third quarter of 2003 to the third quarter of 2002
the percentage of total net sales attributable to our customers in the United
States decreased by 8.4%, the percentage of total net sales attributable to our
customers in Europe decreased by 6.5%, the percentage of total net sales
attributable to our Asia Pacific customers increased by 22.3%, and the
percentage of total net sales attributable to our customer in the Other Americas
decreased by 7.4%. Comparing the first nine months of 2003 to the first nine
months of 2002 the percentage of total net sales attributable to our customers
in the United States decreased by 14.0%, the percentage of total net sales
attributable to our customers in Europe decreased by 1.6%, the percentage of
total net sales attributable to our Asia Pacific customers increased by 17.7%,
and the percentage of total net sales attributable to our customer in the Other
Americas decreased by 2.2%.
Gross Profit. Gross profit decreased 45.3% from $2.5 million in the
third quarter of 2002 to $1.4 million in the third quarter of 2003 and, as a
percentage of net sales, decreased from 35.2% to 20.3%. For the first nine
months of 2003 gross profit decreased 41.8% from $8.2 million in 2002 to $4.8
million in 2003 and, as a percentage of net sales, decreased from 32.8% to
23.0%. The decrease in gross profit is a direct result of decreased demand for
products in the advanced materials market. The decreased demand resulted in a
product mix which has experienced significant price pressure and
under-absorption of costs in 2003.
Selling, General and Administrative. Selling, general and
administrative expense decreased 36.5% from $3.4 million in the third quarter of
2002 to $2.2 million in the third quarter of 2003. As a percentage of net sales,
selling, general and administrative decreased from 48.0% in the third quarter of
2002 to 32.1% in the third quarter of 2003. For the first nine months of 2003,
selling, general and administrative decreased 31.0% from $10.8 million in 2002
to $7.5 million in 2003, and decreased as a percentage of net sales, from 43.4%
in the first nine months of 2002 to 36.1% for the same period in 2003. The
decreases in costs in 2003 were the result of lower expenditures for sales,
service, marketing and administrative functions, as the Company reduced its
workforce to the realities of the marketplace.
Research, Development and Engineering. Research, development and
engineering expense decreased 17.5% from $0.9 million in the third quarter of
2002 to $0.7 million in the third quarter of 2003. As a percentage of net sales,
it decreased from 12.7% to 11.1% for the same periods. For the first nine months
of 2003 research, development and engineering expense decreased 13.3% from $2.8
million in 2002 to $2.4 million in 2003, and as a percentage of net sales
increased from 11.1% in 2002 to 11.6% in 2003. In both the third quarter and
first nine months of 2003, the Company continued support of product development,
but at reduced levels given the current economic climate.
Restructuring Charges. In the second quarter of 2003, the Company
reduced its overhead personnel to better align its spending with the current
economic market for its products. The $190,000 restructuring charge represents
severance costs for the laid- off employees.
Operating Loss. Operating loss decreased 29.0% from $2.2 million in the
third quarter of 2002 to $1.5 million in the third quarter of 2003 and, as a
percentage of net sales, decreased from 30.6% to 22.9%. For the first nine
months of 2003, operating loss decreased 8.3% from $5.8 million in 2002 versus
$5.3 million in 2003 and, as a percentage of net sales, increased from 23.1% to
25.5%. The decrease in operating losses in the third quarter of 2003 was
primarily the result of lower expenditures for all functions within the Company.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Income Taxes. The Company has recorded a full valuation allowance
to offset its deferred tax asset arising as a result of the Company's net
operating loss carryforward due to the uncertainty surrounding realization.
The income tax benefit reflected in the statement of operations for the nine
months ended September 28, 2003 represents an additional carryback allowance
calculated in the Company's 2002 federal income tax return. This one-time
carryback claim represents a refund of taxes paid in prior periods which the
Company received in the third quarter. Our statutory federal income tax rate
is 34.0%.
LIQUIDITY AND CAPITAL RESOURCES
As of September 28, 2003, we had $7.7 million in cash and cash
equivalents.
The Company has an unsecured revolving line of credit with a US bank,
which allows for aggregate borrowings, including letters of credit, up to a
maximum of $14 million against a borrowing base of all assets except real
estate. The Company may elect to borrow at interest rates pegged to either the
bank's base rate or the LIBOR rate in effect from time to time. This loan
agreement extends to May 31, 2006 and is subject to maintaining certain
financial covenants. As of September 28, 2003, no amounts were outstanding under
this unsecured revolving line of credit.
We have a mortgage note that is secured by our real property. The
mortgage note had an outstanding balance at September 28, 2003 of approximately
$4.1 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.
During the nine months ended September 28, 2003, the Company used cash
resources of $6.2 million. This use of cash was primarily the result of net
losses of $5.3 million and an increase in accounts receivable of $1.3 million.
We expect that our current cash position, our ability to borrow
necessary funds and a new mortgage note, currently being negotiated, will be
sufficient to meet our corporate, operating and capital requirements into 2004.
OTHER MATTERS
The impact of inflation and the effect of foreign exchange rate changes
during 2003 have had no material impact on our business and financial results.
RECENT ACCOUNTING DEVELOPMENTS
See 2002 Annual Report on Form 10-K, on file with the SEC.
10
FORWARD LOOKING STATEMENTS
This Report, other than historical financial information, includes
forward-looking statements that involve known and unknown risks and
uncertainties, including quarterly fluctuations in results. Such statements are
made pursuant to the "safe harbor" provisions under the securities laws, and are
based on the assumptions and expectations of the Company's management at the
time such statements are made. Important factors that could cause actual results
to differ include the timely availability and acceptance of new products,
general market conditions governing supply and demand, the impact of competitive
products and pricing and other risks detailed in the Company's filings with the
Securities and Exchange Commission. Actual results may vary materially.
Accordingly, you should not place undue reliance on any forward-looking
statements. Unless otherwise required by law, the Company disclaims any
obligation to revise or update such forward-looking statements in order to
reflect future events or developments.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not believe that we have any material market risk exposure with
respect to derivative or other financial instruments.
Item 4. CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer and Chief
Financial Officer, conducted an evaluation as of the end of the period covered
by this Report, of the effectiveness of our disclosure controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective as
of the end of the period covered by this Report. Our management, including our
Chief Executive Officer and Chief Financial Officer, also conducted an
evaluation of our internal control over financial reporting to determine whether
any changes occurred during the quarter covered by this Report that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. Based on that evaluation, there has been no
such change during the period covered by this Report.
11
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: November 12, 2003 BY: /s/ Mark R. Rosenzweig
------------------------------------------
Mark R. Rosenzweig
President, Chief Executive Officer
(principal executive officer) and Director
DATE: November 12, 2003 BY: /s/ Thomas P. Kealy
------------------------------------------
Thomas P. Kealy
Vice President, Corporate Controller and
Chief Accounting Officer (principal
financial and accounting officer)
12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11.0 - Calculation of net loss per common and common
equivalent share.
Exhibit 31.1 - Section 302 Certification
Exhibit 31.2 - Section 302 Certification
Exhibit 32.1 - Section 906 Certification
Exhibit 32.2 - Section 906 Certification
(b) Reports on Form 8-K
On July 23, 2003, the Company furnished a Current Report on Form 8-K to
notify shareholders of the Company's release of its financial results for
quarter ended June 29, 2003.
13