<PAGE>   1

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended June 27, 1999

                                       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 August 3,
1999: 6,809,216 shares.



<PAGE>   2
                             BTU INTERNATIONAL, INC.

                                TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Condensed Consolidated Balance Sheets                                       1-2
Condensed Consolidated Statements of Operations                               3
Condensed Consolidated Statement of Stockholders' Investment
   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                                               8-11

PART II. OTHER INFORMATION

Signatures                                                                   12
Exhibits and Reports on Form 8-K                                             13
Calculation of Net Income per Common and Common
   Equivalent Share                                                          14





<PAGE>   3
                             BTU INTERNATIONAL, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                              (Unaudited)
                                                                June 27,    December 31,
                                                                 1999          1998
                                                                -------     -----------
<S>                                                             <C>           <C>

Current assets
     Cash and cash equivalents                                  $11,335       $10,594
     Accounts receivable, less reserves of
         $160 in 1999 and $160 in 1998                           13,520        12,427
     Inventories (Note 2)                                         9,269        10,084
     Other current assets                                           430           411
                                                                -------       -------
         Total current assets                                    34,554        33,516
                                                                -------       -------
Property, plant and equipment, at cost
     Land                                                           210           210
     Buildings and improvements                                   7,186         7,186
     Machinery and equipment                                      5,954         5,675
     Furniture and fixtures                                         824           828
                                                                -------       -------
                                                                 14,174        13,899
     Less-Accumulated depreciation                                9,627         9,159
                                                                -------       -------
         Net property, plant and equipment                        4,547         4,740
Other assets, net of accumulated amortization of $438
     in 1999 and $434 in 1998                                       335           359
                                                                -------       -------
                                                                $39,436       $38,615
                                                                =======       =======

</TABLE>



The accompanying notes are an integral part of these condensed consolidated
financial statements.


                                        1



<PAGE>   4
                             BTU INTERNATIONAL, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in thousands except share data)

                    LIABILITIES AND STOCKHOLDERS' INVESTMENT

<TABLE>
<CAPTION>
                                                                   (Unaudited)
                                                                     June 27,    December 31,
                                                                      1999          1998
                                                                     -------     -----------
<S>                                                                  <C>           <C>
Current liabilities
     Current maturities of long-term debt and
         capital lease obligations (Note 3)                             $227          $226
     Accounts payable                                                  5.357         5,382
     Other current liabilities                                         2,783         2,947
                                                                     -------       -------
         Total current liabilities                                     8,367         8,555
                                                                     -------       -------
Long-term debt and capital lease obligations, less
     current maturities (Note 3)                                       5,047         5,167
Deferred income taxes                                                  1,756         1,756
                                                                     -------       -------
                                                                      15,170        15,478
                                                                     -------       -------
Stockholders' investment (Note 4)
     Series preferred stock, $1 par value-
         Authorized - 5,000,000 shares;
         Issued and outstanding - none                                    --            --
     Common stock, $.01 par value-
         Authorized - 25,000,000 shares;
         Issued - 7,728,144 and 7,695,924 shares
         at June 27, 1999 and
            December 31, 1998, respectively                               77            77
     Additional paid-in capital                                       20,384        20,322
     Accumulated earnings                                              6,746         5,594
     Treasury stock- 928,472 and 889,161 shares
      at cost, at June 27, 1999 and
     December 31, 1998, respectively                                  (3,311)       (3,166)
     Accumulated other comprehensive income                              370           310
                                                                     -------       -------
         Total stockholders' investment                               24,266        23,137
                                                                     -------       -------
                                                                     $39,436       $38,615
                                                                     =======       =======

</TABLE>



The accompanying notes are an integral part of these condensed consolidated
financial statements.


                                        2


<PAGE>   5
                             BTU INTERNATIONAL, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
       FOR THE THREE AND SIX MONTHS ENDED JUNE 27, 1999 AND JUNE 28, 1998
             (Dollars in thousands, except share and per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                   Three Months Ended            Six Months Ended
                                               ------------------------      ------------------------
                                                 June 27,      June 28,       June 27,      June 28,
                                                  1999          1998            1999          1998
                                               ----------    ----------      ----------    ----------
<S>                                            <C>           <C>             <C>           <C>

Net sales                                      $   16,199    $   14,314      $   32,075    $   26,415
Cost of goods sold                                  9,683         8,533          19,456        15,695
                                               ----------    ----------      ----------    ----------
         Gross profit                               6,516         5,781          12,619        10,720
Operating expenses:
     Selling, general and administrative            4,371         3,974           8,701         7,647
     Research, development and engineering          1,247         1,235           2,300         2,407
                                               ----------    ----------      ----------    ----------
         Income from operations                       898           572           1,618           666
                                               ----------    ----------      ----------    ----------
     Interest income                                   69            94             201           212
     Interest expense                                (108)         (116)           (218)         (228)
     Other income (expense), net                        6            40              45            44
                                               ----------    ----------      ----------    ----------
         Income before taxes                          865           590           1,646           694
         Income tax provision                         257           110             494            88
                                               ----------    ----------      ----------    ----------
         Net income                            $      608    $      480      $    1,152    $      606
                                               ==========    ==========      ==========    ==========
     Earnings Per Share:
         Basic                                 $     0.09    $     0.07      $     0.17    $     0.08
         Diluted                               $     0.09    $     0.07      $     0.17    $     0.08
                                               ==========    ==========      ==========    ==========
     Weighted Average Number of
      Shares Outstanding:
         Basic                                  6,795,272     7,153,569       6,799,744     7,214,396
         Effect of Dilutive Options               129,512        57,945         111,768        71,644
                                               ----------    ----------      ----------    ----------
         Diluted Shares                         6,924,784     7,211,514       6,911,512     7,286,040
                                               ==========    ==========      ==========    ==========
</TABLE>



The accompanying notes are an integral part of these condensed consolidated
financial statements.


                                        3

<PAGE>   6
                             BTU INTERNATIONAL, INC.
          CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
                     FOR THE SIX MONTHS ENDED JUNE 27, 1999
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   ACCUMULATED
                                    ADDITIONAL                                        OTHER           TOTAL
                        COMMON       PAID-IN        ACCUMULATED      TREASURY     COMPREHENSIVE    STOCKHOLDERS'
                        STOCK        CAPITAL         EARNINGS          STOCK          INCOME        INVESTMENT
                        ------      ----------      -----------      --------     -------------    ------------
<S>                    <C>           <C>              <C>            <C>               <C>           <C>
Balance,
 beginning of
 the period             $ 77         $20,322          $5,594         $(3,166)          $310          $23,137

Net income                --              --           1,152              --             --            1,152

Exercise of stock
Options                   --              62              --              --             --               62

Purchase of
Treasury Stock            --              --              --            (145)            --             (145)

Translation
Adjustment                --              --              --              --             60               60
                        ----         -------          ------         -------           ----          -------
Balance,
end of
the period              $ 77         $20,384          $6,746         $(3,311)          $370          $24,266
                        ====         =======          ======         =======           ====          =======

</TABLE>




                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
       FOR THE THREE AND SIX MONTHS ENDED JUNE 27, 1999 AND JUNE 28, 1998
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        Three Months Ended       Six Months Ended
                                                        ------------------      ------------------
                                                        June 27,   June 28,     June 27,   June 28,
                                                         1999        1998        1999       1998
                                                        -------    -------      -------    -------
<S>                                                      <C>           <C>      <C>          <C>

Net Income                                               $608          $480     $1,152       $606

Other comprehensive income
   Foreign currency translation adjustment                 59           (42)        60        (45)
                                                         ----          ----     ------       ----
Comprehensive Income                                     $667          $438     $1,212       $561
                                                         ====          ====     ======       ====
</TABLE>



The accompanying notes are an integral part of these condensed consolidated
financial statements.


                                        4

<PAGE>   7

                             BTU INTERNATIONAL, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE SIX MONTHS ENDED JUNE 27, 1999 AND JUNE 28, 1998
                                 (in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                       JUNE 27,     JUNE 28,
                                                                         1999        1998
                                                                       -------      -------
<S>                                                                    <C>          <C>
Cash flows from operating activities:
         Net income                                                    $ 1,152      $   606
         Adjustments to reconcile net income to net cash
           provided by (used in) operating activities -
           Depreciation and amortization                                   586          533
           Net changes in operating assets and liabilities -
              Accounts receivable                                       (1,093)        (356)
              Inventories                                                  815          (50)
              Other current assets                                         (19)         151
              Accounts payable                                             (25)      (1,262)
              Other current liabilities                                   (164)        (298)
              Other assets                                                  24          (26)
                                                                       -------      -------
         Net cash provided by (used in) operating activities             1,276         (702)
                                                                       -------      -------
Cash flows from investing activities:
         Purchases of property, plant and equipment, net                  (393)        (888)
                                                                       -------      -------
         Net cash provided by (used in) investing activities              (393)        (888)
                                                                       -------      -------
Cash flows from financing activities:
         Principal payments under long-term debt and capital lease
           obligations                                                    (119)         (61)
         Proceeds from issuance of Common stock
             and Exercise of stock options                                  62           16
         Purchase of treasury stock                                       (145)      (1,012)
                                                                       -------      -------
         Net cash provided by (used in) financing activities              (202)      (1,057)
                                                                       -------      -------
Effect of exchange rates on cash                                            60          (45)
                                                                       -------      -------
Net increase (decrease) in cash and cash equivalents                       741       (2,692)
Cash and cash equivalents, at beginning of the period                   10,594       11,873
                                                                       -------      -------
Cash and cash equivalents, at end of the period                        $11,335      $ 9,181
                                                                       =======      =======
Supplemental disclosures of cash flow information
         Cash paid during the periods for -
         Interest                                                      $   218      $   228
         Income taxes                                                      973           12

</TABLE>


The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                        5


<PAGE>   8
                             BTU INTERNATIONAL, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(1)      Basis for presentation

         The condensed consolidated balance sheet as of June 27, 1999, the
condensed consolidated statement of stockholders' investment for the six months
ended June 27, 1999, the condensed consolidated statements of cash flows for the
six months ended June 27, 1999 and June 28, 1998, the consolidated statements of
comprehensive income for the three and six months ended June 27, 1999 and June
28, 1998 and the related condensed consolidated statements of operations for the
three and six months ended June 27, 1999 and June 28, 1998 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, 1998,
together with the auditors' report, included in the Company's "1998 Annual
Report," and filed as an exhibit to the Company's Form 10-K.

(2)      Inventories

         Inventories at June 27, 1999 and December 31, 1998 consisted of:

<TABLE>
<CAPTION>
                                                                                 ($000)
                                                                         ----------------------
                                                                         June 27,   December 31,
                                                                          1999         1998
                                                                         ------     -----------
<S>                                                                      <C>          <C>

Raw materials and manufactured components                                $4,330       $ 4,970
Work-in-process                                                           3,392         3,395
Finished goods                                                            1,547         1,719
                                                                         ------       -------
                                                                         $9,269       $10,084
                                                                         ======       =======
</TABLE>



(3) Debt

     Debt at June 27, 1999 and December 31,1998 consisted of:

<TABLE>
<CAPTION>
                                                                                 ($000)
                                                                         ----------------------
                                                                         June 27,   December 31,
                                                                          1999         1998
                                                                         ------     -----------
<S>                                                                     <C>            <C>

Mortgage note payable                                                   $5,203         $5,312
Capital lease obligations, interest rates ranging from
  10.2% to 12.0%, net of interest of $22,000 and $ 26,000
  in 1999 and 1998, respectively                                            71             81
                                                                        ------         ------
                                                                         5,274          5,393
Less-current maturities                                                    227            226
                                                                        ------         ------
                                                                        $5,047         $5,167
                                                                        ======         ======
</TABLE>

         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.




                                        6

<PAGE>   9
                             BTU INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)


(4)      Earnings Per Share

         Earnings Per Share (EPS) is presented under two calculations, Basic and
Diluted. 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 44,141 and
27,800 as of June 27, 1999 and December 31, 1998 respectively.

(5)      Segment Reporting

         In June 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 131 "Disclosures about Segments of Enterprise and Related Information"
which the Company has adopted for the year ended December 31, 1998. Segments are
defined as components of an enterprise for which separate financial information
is available and 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 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
manufacturing companies.

         The accounting policies of segment reporting are the same as those
described in Note 1 "Summary of Significant Accounting Policies" of the
Company's " 1998 Annual Report" The Company evaluates the performance of
operating results taken as a whole. Summarized financial information concerning
the thermal processing business segment is shown in the following table.

Segment Specific Information

<TABLE>
<CAPTION>
                                       Three Months Ended       Six Months Ended
                                       ------------------      -------------------
                                       June 27,   June 28,     June 27,    June 28,
                                         1999       1998        1999        1998
                                       -------    -------      -------     -------
<S>                                    <C>        <C>          <C>         <C>

Net sale                               $16,199    $14,314      $32,075     $26,415
Gross Profit                             6,516      5,781       12,619      10,720
Operating Income                           898        572        1,618         666
Capital Expenditures                       158        433          393         888
Depreciation & Amortization                293        279          586         533

</TABLE>



                                        7



<PAGE>   10
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

         In the second quarter of 1999, net sales increased by $1.9 million to
$16.2 million, an increase of 13.2% when compared to the second quarter of 1998.
For the first six months of 1999, net sales increased by $5.7 million to $32.1
million, an increase of 21.4% over the comparable 1998 period. The increase in
sales in 1999 for both the second quarter and first six months as compared to
the same periods in 1998 reflects higher demand for our products, primarily by
our large multinational customers, in the electronics assembly industry. The
effect of price changes for specific products has not materially impacted the
change in net sales for the periods presented.

         In the second quarter and first six months of 1999 as compared to the
same periods in 1998, net sales to all geographic regions increased. When
comparing the second quarter and first six months of 1999 to the same periods in
1998 the geographic dispersion of net sales saw no significant change in
regional sales as a percentage of total sales.

         Gross profit increased by $0.7 million, or 12.7%, in the second quarter
of 1999, compared to the second quarter of 1998. Gross profit as a percent of
sales decreased for the second quarter of 1999 from 40.4% to 40.2% as compared
to the second quarter of 1998. For the first six months of 1999, gross profit
increased by $1.9 million or 17.7%, compared to the first half of 1998 but
decreased as a percentage of sales from 40.6% to 39.3%. The increase in gross
profit dollars for both the second quarter and first six months of 1999 was due
to the increase in revenues. The decrease in gross margin percentage for the
second quarter and year to date period was primarily the result of product mix.

         Selling, general and administrative (SG&A) expenses increased in the
second quarter of 1999 by $0.4 million, or 10.0%, but decreased as a percentage
of net sales to 27.0% compared to 27.8% the second quarter of 1998. For the
first six months of 1999 SG&A expense increased by $1.1 million, or 13.8%, as
compared to the same period in 1998. As a percentage of net sales (SG&A)
expenses decreased for the first six months of 1999 to 27.1% from 28.9% for the
same period in 1998. The higher costs in 1999 are primarily the result of $1.9
million and $5.7 million increase in net sales for the second quarter and first
six months respectively. These increased net sales resulted in increased
customer support costs, for sales, marketing and service expenses to support our
expanding world wide customer base. These increases in costs were offset
partially by a lower overall commission percentage as the Company has increased
its direct sales in certain Asian territories.

         Research, development and engineering expenses in the second quarter of
1999 increased by $12,000 or 1.0%, as compared to the second quarter of 1998.
For the first six months of 1999, research, development and engineering expenses
decreased by $107,000, or 4.4%, as compared to the first six months of 1998. The
primary reason for the increase in the second quarter of 1999 and the decrease
for the first six months of 1999 were the timing of expenditure on new product
development. The Company is committed to continue investing in new technologies
and new product developments in order to support growing customer requirements

         Interest income in the second quarter and first six months of 1999
decreased by $25,000 or 26.6%, and $11,000 or 5.2% respectively, as compared to
the same periods in 1998.

         Interest expense decreased by $8,000, or 6.9%, for the second quarter
of 1999, and decreased by $10,000 or 4.4% for the first six months of 1999 as
compared to the same periods in 1998. The decreases were primarily due to the
decreasing principal balance of the mortgage note payable.







                                       8



<PAGE>   11
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (continued)


         Income taxes increased in the second quarter of 1999 by $147,000 to
$257,000 when compared to the first quarter of 1998. For the first six months of
1999 income taxes increased by $406,000 to $494,000 when compared to the same
period in 1998. For both 1999 and 1998 the effective tax rate reflects the use
of net operating loss carryforwards available to the Company's U.K. subsidiary,
which was profitable in 1999 and 1998. During 1999 and 1998 the Company recorded
the benefit of these net operating losses utilized, resulting in the lower
effective tax rates. The Company has recorded an effective tax rate of 29.7% and
30.0% for the second quarter and first six months of 1999 respectively. These
compare to the Company's statutory Federal rate of 34%.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has an unsecured revolving line of credit with a bank,
which allows for the aggregate of borrowings and/or letters of credit of up to
$14,000,000. Borrowings are available to the Company at either the Bank's base
rate or a Eurodollar rate, as elected by the Company. This loan agreement is
available to the Company until April 30, 2002, and is subject to certain
financial covenants. No amounts were outstanding under this agreement as of June
27, 1999 or at any time in 1999 or 1998.

         The Company has a mortgage note, which is secured by its land and
building. The Mortgage note payable had an outstanding balance at June 27, 1999
of $5,203,000. The mortgage requires monthly payments of $53,922, including
interest at 8.125%. A final balloon payment of $3,825,000 is due at maturity on
July 1, 2004

         The Company expects its current cash position, ability to borrow
necessary funds, as well as cash flows from operations will be sufficient to
meet its corporate, operating and capital requirements into 2000.

Other matters

         The impact of inflation and the effect of foreign exchange rate changes
during 1999 has had an immaterial impact on the Company's business and financial
results.

RECENT ACCOUNTING DEVELOPMENTS

         In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1). SOP 98-1
requires computer software costs associated with internal use software to be
expensed as incurred until certain capitalization criteria are met. The Company
adopted this SOP on January 1, 1999; the adoption did not have a material impact
on the Company's financial statements.

         In April 1998, the AICPA issued Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities" (SOP 98-5). SOP 98-5 requires all costs
associated with pre-opening, pre-operating and organization activities to be
expensed as incurred. The Company adopted SOP 98-5 beginning January 1, 1999.
The adoption of SOP 98-5 did not have a material impact on the Company's
financial statements.





                                        9

<PAGE>   12
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (continued)

Year 2000:
--------------------------------------------------------------------------------

The Year 2000 (Y2K) issues are a result of some existing software and embedded
computer technology which use only two-digits vs. four-digits to identify the
year. Therefore, beginning in the year 2000, errors and failures may occur on
date sensitive systems because the computer devices will assume the year 1900.

The Company is actively pursuing Y2K compliance through a focused cross
functional Y2K implementation team, with a Y2K coordinator, working worldwide
with regular management reviews in three major fronts (see Customers, Internal,
Suppliers):

1.       CUSTOMERS

All products (software and controls) presently being sold by the Company are Y2K
compliant. The Company warrants products sold since 1998 to be Y2K compliant.
Costs associated with this warranty are expected to be small. For products sold
prior to 1998 on which there is no Y2K warranty, the Company has tested and
identified which of its software and controls products are not Y2K compliant.
These tests were performed using the industry standard SEMATECH YEAR 2000 Common
Testing Scenarios V2.0. Our testing indicates that our older equipment will
perform its basic functions beyond the 01/01/00 date, certain minor workarounds
may be required to reboot the furnace systems computer and certain functions
could be impaired due to date related software. The summary results of the tests
have been compiled in matrix form and published on the Company's worldwide web
site. This matrix and customer checklists provide our customers with the Y2K
tested status of all of BTU's software configurations; known Y2K issues and
workarounds; minimum hardware & software configurations to be Y2K compliant; and
Y2K upgrade kits availability. The Company believes it is well positioned to
satisfy its customers Y2K needs on BTU products.

Although the Company is addressing all known Y2K problems on its products before
the year 2000 and expects its efforts to be successful, given the uniqueness of
the risks and uncertainties related to the Y2K issue, there is no certainty that
the Company will be successful. Addressing these uncertainties, the Company has
identified and provided our customers with contingency plans and instructions on
"what to do" should a Y2K problem arise after the turn of the century. In many
instances a Y2K problem simply requires a shutdown and restart of the BTU
equipment or a rollback of the year on the date code. Beyond these approaches,
BTU is prepared to aid our customers in solving Y2K problems as they arise. We
will do this through BTU's experienced knowledge base, available through our 24
hour worldwide telephone hot line team and our extensive group of responsive
service engineers located in all geographical areas of the world.

2.       INTERNAL

The efficient operation of the Company's business is dependent in part on its
computer software, computer hardware and internal control systems. These systems
are used, to varying degrees, in all areas of the Company's business. The
Company's management and Y2K team have investigated and identified potential Y2K
compliance problems in all its internal systems, including computer software and
hardware; security, telephone and energy management systems; and manufacturing
and distribution equipment. To address certain Y2K issues, the Company has hired
expert consultants and relied on knowledgeable suppliers to solve certain
problems that are beyond the scope or capabilities of our internal resources.

The present status for internal Y2K compliance is that the assessment is
complete. The extent of the Y2K effort and incremental out of pocket costs have
been estimated to be approximately $350,000. The Y2K implementation plan is
ongoing with a completion date of September 30, 1999 for critical business
functions and November 30, 1999 for non-critical functions. Of the Y2K problem
areas identified, 100% have a definable solution; of these 72% are now in
compliance and the remaining 28% are at varying stages of working towards the
defined Y2K solution. The Company believes that all internal Y2K identified
problems are solvable and that the impact of Y2K compliance on the efficient
operation of the business will be minimal.



                                       10

<PAGE>   13
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (continued)


Even with the extensive effort and commitment to identify and solve our internal
Y2K problems prior to the beginning of the new century, there is no certainty
that the Company will be totally free of Y2K problems next year. If an
unforeseen internal Y2K problem arises in the year 2000, the Company has
contingency plans, as part of its disaster recovery management system, to insure
the continued operation of the business with minimal disruption.

3.       SUPPLIERS

An important factor of BTU's success in addressing Y2K compliance problems is
the ability of our key suppliers to solve their Y2K issues. The Company's Y2K
team and the materials management group have communicated with all our suppliers
regarding their Y2K program status. To date 100% of our key suppliers have
responded with their Y2K implementation plans. 90% of the key suppliers are
presently Y2K compliant with the remainder scheduled to be Y2K compliant by
September 30, 1999. The Company's purchasing management is working with the
non-key suppliers to ensure Y2K compliance before December 31, 1999.

In reviewing the significant supplier Y2K problems, the Company's Y2K
coordinator believes that all Y2K supplier problems have known solutions that
are solvable within the required time frame. However given the uncertainties of
an event never before experienced, the Company's Material management group is
developing contingency plans to address the occurrence of Y2K related
disruptions to material receipts from key suppliers. An important element of the
solution to the failure of a key supplier to deliver product is our strategy to
quickly shift to an alternative supplier and thereby minimize the impact to the
Company and our customers.

In each of the three significant fronts outlined above, the Company is leading
and managing its readiness for Y2K compliance. We expect to address our Y2K
problems within the fixed time frame and at costs that will not materially
impact the financial results of the Company. However given the risks and
uncertainties associated with the uniqueness of the Y2K issues that are outside
the Company's control, the Company is unable to guarantee that there will not be
Y2K problems. Therefore, Y2K costs and delays beyond the scope detailed above
could materially impact our ability to service our customers and the Company's
financial performance.

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.




                                       11


<PAGE>   14
                                   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 9, 1999              BY: /s/ Paul J. Van Der Wansem
                                      ------------------------------------------
                                      Paul J. van der Wansem
                                      President, Chief Executive Officer
                                      (principal executive officer) and Director


DATE: August 9, 1999              BY: /s/ Thomas P. Kealy
                                      ------------------------------------------
                                      Thomas P. Kealy
                                      Vice President, Corporate Controller and
                                      Chief Accounting Officer (principal
                                      financial and accounting officer)




































                                       12



<PAGE>   15

PART II. OTHER INFORMATION


ITEM 4.  SUBMISSION OF MATTERS TO VOTE SECURITY HOLDERS

         (a)      The annual meeting of stockholders was held on May 21, 1999.

         (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:

<TABLE>
<CAPTION>
                                                          For         Withheld
                                                        ---------     --------
<S>                                                     <C>           <C>

         Paul J. van der Wansem                         5,701,770     523,860
         David A.B. Brown                               5,703,168     522,462
         J. Chuan Chu                                   5,693,870     531,760
         Joseph F. Wrinn                                5,696,970     528,660

</TABLE>


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                  Exhibit 11.0 - Calculation of net income per common and common
                  equivalent share.

                  Exhibit 27.0 - Financial Data Schedule.


         (b)      Reports on Form 8-K

                  No reports on Form 8-K were filed by the Company during the
                  period covered by this report.























                                       13