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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 July 4, 2004
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 August
16, 2004: 7,196,163 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
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
BTU INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
(Unaudited)
July 4, December 31,
2004 2003
- --------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $ 1,418 $ 6,659
Accounts receivable, less reserves of $172 11,872 6,073
Inventories (Note 2) 11,611 7,795
Other current assets 786 469
- --------------------------------------------------------------------------------
Total current assets 25,687 20,996
- --------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 210 210
Buildings and improvements 8,000 7,983
Machinery and equipment 7,698 7,597
Furniture and fixtures 878 866
- --------------------------------------------------------------------------------
16,786 16,656
Less-Accumulated depreciation 13,807 13,366
- --------------------------------------------------------------------------------
Net property, plant and equipment 2,979 3,290
Other assets, net of accumulated amortization
of $319 at July 4, 2004 and $250 at
December 31, 2003 1,316 1,368
- --------------------------------------------------------------------------------
$29,982 $25,654
================================================================================
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)
July 4, December 31,
2004 2003
- --------------------------------------------------------------------------------
Current liabilities
Current maturities of long-term debt and
capital lease obligations (Note 3) $ 169 $ 160
Borrowings under line of credit 2,418 --
Current portion of long-term deferred
compensation 200 200
Accounts payable 5,996 2,560
Accrued expenses 2,482 2,016
- --------------------------------------------------------------------------------
Total current liabilities 11,265 4,936
- --------------------------------------------------------------------------------
Long-term debt and capital lease obligations,
less current maturities (Note 3) 5,377 5,440
Long-term deferred compensation, less current
maturities 366 458
- --------------------------------------------------------------------------------
17,008 10,834
- --------------------------------------------------------------------------------
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 - 8,344,423, outstanding 7,195,413
at July 4, 2004 and
Issued - 8,293,958, outstanding 7,144,948
at December 31, 2003 83 83
Additional paid-in capital 22,495 22,349
Deferred compensation -- (18)
Accumulated earnings (losses) (5,666) (3,794)
Treasury stock- at cost, 1,149,010 shares at
July 4, 2004 and December 31, 2003 (4,177) (4,177)
Accumulated other comprehensive income 239 377
- --------------------------------------------------------------------------------
Total stockholders' equity 12,974 14,820
- --------------------------------------------------------------------------------
$ 29,982 $ 25,654
================================================================================
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 SIX MONTHS ENDED JULY 4, 2004 AND JUNE 29, 2003
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended Six Months Ended
---------------------------- ---------------------------
July 4, June 29, July 4, June 29,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------
Net revenue $ 14,303 $ 7,125 $ 25,595 $ 13,961
Cost of goods sold 11,035 5,579 19,678 10,562
- ---------------------------------------------------------------------------------------------------------
Gross profit 3,268 1,546 5,917 3,399
Operating expenses:
Selling, general and administrative 3,098 2,554 5,738 5,304
Research, development and engineering 981 826 1,898 1,648
Restructuring charges (note 7) -- 190 -- 190
- ---------------------------------------------------------------------------------------------------------
Loss from operations (811) (2,024) (1,719) (3,743)
- ---------------------------------------------------------------------------------------------------------
Interest income 0 21 0 53
Interest expense (84) (86) (161) (173)
Other income (expense), net 3 4 8 5
- ---------------------------------------------------------------------------------------------------------
Loss before income tax benefit (892) (2,085) (1,872) (3,858)
Income tax benefit -- (222) -- (222)
- ---------------------------------------------------------------------------------------------------------
Net loss $ (892) $ (1,863) $ (1,872) $ (3,636)
=========================================================================================================
Loss Per Share:
Basic and Diluted $ (0.12) $ (0.27) $ (0.26) $ (0.52)
=========================================================================================================
Weighted Average Number of
Shares Outstanding:
Basic and Diluted Shares 7,186,849 7,002,578 7,174,229 7,002,578
=========================================================================================================
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 SIX MONTHS ENDED JULY 4, 2004
(in thousands)
(Unaudited)
ACCUMULATED
ADDITIONAL ACCUMULATED OTHER TOTAL
COMMON PAID-IN DEFERRED EARNINGS TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL COMP. (LOSSES) STOCK INCOME EQUITY
- --------------------------------------------------------------------------------------------------------------------------
Balance at
Dec. 31, 2003 $ 83 $ 22,349 $ (18) $ (3,794) $ (4,177) $ 377 $ 14,820
Net loss -- -- -- (1,872) -- -- (1,872)
Exercise of Stock
options -- 146 -- -- -- -- 146
Translation
Adjustment -- -- -- -- -- (138) (138)
Deferred
Compensation -- -- 18 -- -- -- 18
- --------------------------------------------------------------------------------------------------------------------------
Balance at
July 4, 2004 $ 83 $ 22,495 $ -- $ (5,666) $ (4,177) $ 239 $ 12,974
- --------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE THREE AND SIX MONTHS ENDED JULY 4, 2004 AND JULY 29, 2003
(in thousands)
(Unaudited)
Three Months Ended Six Months Ended
---------------------- -----------------------
July 4, June 29, July 4, June 29,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------
Net Loss $ (892) $ (1,863) $ (1,872) $ (3,636)
Other comprehensive income (loss)
Foreign currency translation adjustment (79) 31 (138) (43)
- ---------------------------------------------------------------------------------------------------------
Comprehensive Loss $ (971) $ (1,832) $ (2,010) $ (3,679)
=========================================================================================================
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 SIX MONTHS ENDED JULY 4, 2004 AND JUNE 29, 2003
(in thousands)
(Unaudited)
July 4, June 29,
2004 2003
- -----------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (1,872) $ (3,636)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 548 580
Stock based compensation 18 34
Net changes in operating assets and liabilities-
Accounts receivable (5,799) (1,365)
Inventories (3,816) (1,081)
Other current assets (317) (354)
Other assets 51 --
Accounts payable 3,436 343
Accrued expenses 466 383
Deferred compensation (92) (100)
- -----------------------------------------------------------------------------------------
Net cash used in operating activities (7,377) (5,196)
- -----------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment, net (236) (177)
Cash paid for acquisition -- (380)
- -----------------------------------------------------------------------------------------
Net cash used in investing activities (236) (557)
- -----------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments under long-term debt and
capital lease obligations (54) (177)
Borrowings against line of credit 2,418 --
Proceeds from issuance of Common Stock
and Exercise of stock options 146 26
- -----------------------------------------------------------------------------------------
Net cash used in financing activities 2,510 (151)
- -----------------------------------------------------------------------------------------
Effect of exchange rates on cash (138) (43)
- -----------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (5,241) (5,947)
Cash and cash equivalents, at beginning of the period 6,659 13,847
- -----------------------------------------------------------------------------------------
Cash and cash equivalents, at end of the period $ 1,418 $ 7,900
=========================================================================================
Supplemental disclosures of cash flow information
Cash paid during the periods for -
Interest $ 161 $ 173
Income taxes -- --
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 July 4, 2004 and December
31, 2003, the related condensed consolidated statements of operations for the
three and six months ended July 4, 2004 and June 29, 2003, the condensed
consolidated statement of stockholders' equity for the six months ended July 4,
2004, the condensed consolidated statements of cash flows for the six months
ended July 4, 2004 and June 29, 2003, and the consolidated statements of
comprehensive loss for the three and six months ended July 4, 2004 and June 29,
2003 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, 2003, 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 July 4, 2004 and December 31, 2003 consisted of:
(in thousands)
----------------------------------
July 4, December 31,
2004 2003
- --------------------------------------------------------------------------------
Raw materials and manufactured components $ 5,752 $ 3,881
Work-in-process 3,914 2,358
Finished goods 1,945 1,556
- --------------------------------------------------------------------------------
$11,611 $ 7,795
================================================================================
(3) Debt
Long-Term Debt at July 4, 2004 and December 31, 2003 consisted of:
(in thousands)
----------------------------------
July 4, December 31,
2004 2003
- --------------------------------------------------------------------------------
Mortgage note payable $ 5,521 $ 5,600
Capital Lease obligations, interest
rate of 6.75% 25 -
- --------------------------------------------------------------------------------
5,546 5,600
Less-current maturities 169 160
- --------------------------------------------------------------------------------
$ 5,377 $ 5,440
================================================================================
The mortgage note payable is secured by the Company's land and building in
Billerica, MA and requires monthly payments of $38,269, including interest at
5.42%. This mortgage note payable has a balloon payment of $5,100,000 due and
payable at maturity on December 26, 2006.
The Company has a secured revolving line of credit with a US bank that
allows for aggregate borrowings, including letters of credit, up to a maximum of
$14 million against a borrowing base of secured accounts receivable and
inventory. 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, 2007 and is subject to maintaining certain
financial covenants with which the Company is in compliance at July 4, 2004.
Borrowings outstanding under this agreement at July 4, 2004 were $2.4 million;
at which time the available funds on the borrowing base formula were $10.7
million.
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 six months ended July 4, 2004 and June 29,
2003 because they were antidilutive, were 1,156,894 and 1,292,706 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," as amended, the Company's net loss
and net loss per share would be the pro forma amounts indicated below:
Three Months Ended Six Months Ended
--------------------- ----------------------
July 4, June 29, July 4, June 29,
2004 2003 2004 2003
- --------------------------------------------------------------------------------
Net Income (loss):
As reported $ (892) $ (1,863) $ (1,872) $ (3,636)
Pro forma (993) (2,206) (2,073) (3,799)
Income per basic share:
As reported $ (0.12) $ (0.27) $ (0.26) $ (0.52)
Pro forma (0.14) (0.29) (0.29) (0.54)
Income per diluted share:
As reported $ (0.12) $ (0.27) $ (0.26) $ (0.52)
Pro forma (0.14) (0.29) (0.29) (0.54)
(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 in 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 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" as amended by SEC Staff Accounting Bulletin
No. 104, "Revenue Recognition". Under these guidelines, when the terms of sale
include customer acceptance provisions, and compliance with those provisions
cannot 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 revenue 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 of
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 six months ended July 4, 2004 there was $1,256,342 of revenue was
recognized using the percentage of completion method. For the six months ended
June 29, 2003, there was no revenue recognized using the percentage of
completion method.
The Company accounts for shipping and handling costs billed to customers
in accordance with the 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 recorded 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
of 2003. This charge was solely related to severance costs associated with the
reduction of 15 non-production employees.
(8) Product Warranty Costs
The Company provides standard warranty coverage for parts and labor for 12
months and special extended material only coverage on certain other products.
The Company sets aside a reserve, charged to cost of sales, based on anticipated
warranty claims at the time product revenue is recognized. The reserve for
warranty covers the estimated costs of material, labor and travel. Actual
warranty claims incurred are charged against the accrual. Factors that affect
the Company's product warranty liability include the number of installed units,
the anticipated cost of warranty repairs and historical and anticipated rates of
warranty claims.
8
BTU INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
The following table reflects changes in the Company's accrued warranty account
during the first six months ended July 4, 2004:
2004
----
(in thousands)
Beginning Balance, December 31, 2003 $ 635
Plus accruals related to new sales 455
Less: warranty claims incurred (277)
Less: amortization of prior period accruals (178)
------
Ending Balance, July 4, 2004 $ 635
======
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Net sales increased 100.7% from $7.1 million in the second
quarter of 2003 to $14.3 million in the second quarter of 2004. For the first
six months net sales increased 83.3% from $14.0 million in 2003 to $25.6 million
in 2004. The increase in 2004 represents the continuing recovery in demand for
capital equipment for our Surface Mount Technology and Semi Packaging products.
When comparing the second quarter of 2004 to the second quarter of 2003,
the percentage of net sales attributable to our customers in the United States
decreased by 5.9%, net sales attributable to our customers in Europe increased
by 3.2%, net sales attributable to our Asia Pacific customers increased by 7.4%,
and net sales attributable to our customer in the Other Americas decreased by
4.7%. Comparing the first six months of 2004 to the first six months of 2003,
the percentage of net sales attributable to our customers in the United States
decreased by 14.9%, net sales attributable to our customers in Europe increased
by 1.6%, net sales attributable to our Asia Pacific customers increased by
14.5%, and net sales attributable to our customer in the Other Americas
decreased by 1.2%.
Gross Profit. Gross profit increased 111.4% from $1.5 million in the
second quarter of 2003 to $3.3 million in the second quarter of 2004, and as a
percentage of net sales, increased from 21.7% to 22.8%. For the first six months
of 2004, gross profit increased 74.1% from $3.4 million in 2003 to $5.9 million
in 2004, and as a percentage of net sales, decreased from 24.3% to 23.1%. The
increase in gross profit is directly related to the increase in net sales. The
percentage of gross profit remains low in 2004 due to a shift in product mix and
the start up of the Company's manufacturing operations in China.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Selling, General and Administrative. Selling, general and administrative
increased 21.3% from $2.6 million in the second quarter of 2003 to $3.1 million
in the second quarter of 2004. As a percentage of net sales, selling, general,
and administrative decreased from 35.8% in second quarter 2003 to 21.7% in the
second quarter of 2004. For the first six months of 2004, selling, general and
administrative increased 8.2% from $5.3 million in 2003 to $5.7 million, and
decreased as a percentage of net sales from 38.0% in the first six months of
2003 to 22.4% for the same period in 2004. The increases in costs in 2004 were
primarily the result of higher commission expenditures to support the Company's
increased sales.
Research, Development and Engineering. Research, development and
engineering increased 18.8% from $826,000 in the second quarter of 2003 to
$981,000 in the second quarter of 2004 and as a percentage of net sales,
decreased from 11.6% to 6.9% for the same period. For the first six months of
2004, research, development and engineering increased 15.2% from $1.6 million in
2003 to $1.9 million in 2004, and as a percentage of net sales decreased from
11.8% in 2003 to 7.4% in 2004. The increased spending by the Company is in
support of product development on existing and future products.
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 60.0% from $2.0 million in the
second quarter of 2003 to $0.8 million in the second quarter of 2004, and as a
percentage of net sales, decreased from 28.4% to 5.7%. For the first six months
of 2004, operating loss decreased 54.1% from $3.7 million in 2003 versus $1.7
million in 2004, and as a percentage of net sales, decreased from 26.8% to 6.7%.
The decrease in operating losses in 2004 was primarily the result of higher net
sales.
Income Taxes. The Company has recorded a full valuation allowance to
offset the deferred tax asset arising as a result of the Company's net operating
loss carryforward due to the uncertainty surrounding realization. Accordingly,
no income tax benefit is reflected in the statement of operations at July 4,
2004. Our statutory federal income tax rate is 34.0%.
LIQUIDITY AND CAPITAL RESOURCES
As of July 4, 2004, we had $1.4 million in cash and cash equivalents.
The Company has a secured revolving line of credit with a US bank that
allows for aggregate borrowings, including letters of credit, up to a maximum of
$14 million against a borrowing base of secured accounts receivable and
inventory. 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, 2007 and is subject to maintaining certain
financial covenants with which the Company is in compliance at July 4, 2004.
Borrowings outstanding under this agreement at July 4, 2004 were $2.4 million;
at which time the available funds on the borrowing base formula were $10.7
million.
We have a mortgage note that is secured by our real property in Billerica,
MA. The mortgage note had an outstanding balance at July 4, 2004 of
approximately $5.5 million. The mortgage requires monthly payments of $38,269,
which includes interest calculated at the rate of 5.42% per annum. A final
balloon payment of approximately $5.1 million is due on December 26, 2006 upon
maturity of the mortgage note.
10
During the six months ended July 4, 2004, the Company used cash resources
of $5.2 million. This use of cash was primarily the result of net losses of $1.9
million, an increase in accounts receivable of $5.8 million and an increase in
inventory of $3.8 million, offset by an increase in accounts payable of $3.4
million, borrowings against line of credit of $2.4 million and a decrease in
accrued expenses of $0.5 million.
We expect that our current cash position and ability to borrow necessary
funds will be sufficient to meet our corporate, operating and capital
requirements through 2004. Given the expected growth in the Company's markets,
we expect to continue to utilize our line of credit to fund the increases in
working capital needs throughout the year.
OTHER MATTERS
The impact of inflation and the effect of foreign exchange rate changes
during 2004 have had no material impact on our business and financial results.
RECENT ACCOUNTING DEVELOPMENTS
See 2003 Annual Report on Form 10-K, on file with the SEC.
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.
There were no changes to our internal control over financial reporting during
the quarter covered by this Report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote Security Holders
(a) The annual meeting of stockholders was held on May 27, 2004.
(b) All directors of the Company nominated were elected at the annual
meeting. The actual vote is set forth in paragraph (c) below.
(c) The voting for the directors was as follows:
For Withheld
--------- --------
Paul J. van der Wansem 6,347,171 203,573
Mark R. Rosenzweig 6,361,414 189,330
G. Mead Wyman 6,538,008 12,736
J. Chuan Chu 6,365,440 185,304
John E. Beard 6,492,358 58,386
Joseph F. Wrinn 6,379,384 171,360
J. Samuel Parkhill 6,534,508 16,236
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 April 21, 2004, 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 April 4, 2004.
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: August 18, 2004 BY: /s/ Mark R. Rosenzweig
----------------------
Mark R. Rosenzweig
President, Chief Executive Officer
(principal executive officer) and Director
DATE August 18, 2004 BY: /s/ Thomas P. Kealy
-------------------
Thomas P. Kealy
Vice President, Corporate Controller and
Chief Accounting Officer (principal
financial and accounting officer)
13