<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

       For the quarterly period ended April 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 May
17, 2004: 7,188,627 shares.

<PAGE>

                             BTU INTERNATIONAL, INC.

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                         <C>
                          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
</TABLE>

<PAGE>

                             BTU INTERNATIONAL, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                            (Unaudited)
                                                              April 4,      December 31,
                                                                2004           2003
                                                                ----           ----
<S>                                                         <C>             <C>
Current assets
      Cash and cash equivalents                               $ 3,538         $ 6,659
      Accounts receivable, less reserves of $172                8,776           6,073
      Inventories (Note 2)                                      9,591           7,795
      Other current assets                                      1,003             469
                                                              -------         -------
           Total current assets                                22,908          20,996
                                                              -------         -------

Property, plant and equipment, at cost
      Land                                                        210             210
      Buildings and improvements                                7,983           7,983
      Machinery and equipment                                   7,657           7,597
      Furniture and fixtures                                      877             866
                                                              -------         -------
                                                               16,727          16,656
      Less-Accumulated depreciation                            13,557          13,366
                                                              -------         -------

           Net property, plant and equipment                    3,170           3,290

Other assets, net of accumulated amortization of $285 at
   April 4, 2004 and $250 at December 31, 2003                  1,364           1,368
                                                              -------         -------

                                                              $27,442         $25,654
                                                              =======         =======
</TABLE>

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

                                        1

<PAGE>

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

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                (Unaudited)
                                                                                 April 4,       December 31,
                                                                                   2004            2003
                                                                                   ----            ----
<S>                                                                             <C>             <C>
Current liabilities
      Current maturities of long-term debt and
           capital lease obligations (Note 3)                                    $    164        $    160
      Current portion of long-term deferred
           compensation                                                               200             200
      Accounts payable                                                              4,964           2,560
      Accrued expenses                                                              2,387           2,016
                                                                                 --------        --------
           Total current liabilities                                                7,715           4,936
                                                                                 --------        --------

Long-term debt and capital lease obligations, less
      current maturities (Note 3)                                                   5,423           5,440
Long-term deferred compensation                                                       412             458
                                                                                 --------        --------

                                                                                   13,550          10,834
                                                                                 --------        --------

Stockholders' Equity (Note 4)
      Series preferred stock, $1.00 par value-
           Authorized - 5,000,000 shares-
           Issued and outstanding - none                                                -               -
           Authorized - 25,000,000 shares; Issued - 8,328,162, outstanding
           7,179,152 at April 4, 2004 and Issued - 8,293,958,
           outstanding 7,144,948 December 31, 2003                                     83              83
      Additional paid-in capital                                                   22,451          22,349
      Deferred compensation                                                            (9)            (18)
      Accumulated earnings                                                         (4,774)         (3,794)
      Treasury stock- at cost,  1,149,010 shares at
      April 4, 2004 and December 31, 2003                                          (4,177)         (4,177)
      Accumulated other comprehensive income                                          318             377
                                                                                 --------        --------

           Total stockholders' equity                                              13,892          14,820
                                                                                 --------        --------

                                                                                 $ 27,442        $ 25,654
                                                                                 ========        ========
</TABLE>

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

                                        2

<PAGE>

                             BTU INTERNATIONAL, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR THE THREE MONTHS ENDED APRIL 4, 2004 AND MARCH 30, 2003
                 (in thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                 ------------------
                                                             April 4,          March 30,
                                                              2004               2003
                                                              ----               ----
<S>                                                        <C>                <C>
Net sales                                                  $    11,293        $     6,836
Cost of goods sold                                               8,643              4,983
                                                           -----------        -----------

           Gross profit                                          2,650              1,853

Operating expenses:
      Selling, general and administrative                        2,640              2,750
      Research, development and engineering                        917                822
                                                           -----------        -----------

           Loss from operations                                   (907)            (1,719)
                                                           -----------        -----------

      Interest income                                                5                 32
      Interest expense                                             (77)               (87)
      Other income (loss), net                                      (1)                 1
                                                           -----------        -----------

           Loss before income tax benefit                         (980)            (1,773)
           Income tax benefit                                        -                  -
                                                           -----------        -----------

           Net loss                                        $      (980)       $    (1,773)
                                                           ===========        ===========
      Loss Per Share:
           Basic                                           $     (0.14)       $     (0.25)
           Diluted                                         $     (0.14)       $     (0.25)
                                                           ===========        ===========
      Weighted average number of Shares Outstanding:
           Basic Shares                                      7,162,126          7,002,578
           Effect of Dilutive Options                                -                  -
                                                           -----------        -----------
           Diluted Shares                                    7,162,126          7,002,578
                                                           ===========        ===========
</TABLE>

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

                                        3

<PAGE>

                             BTU INTERNATIONAL, INC.
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE THREE MONTHS ENDED APRIL 4, 2004
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                 ACCUMULATED
                                  ADDITIONAL                                                        OTHER           TOTAL
                     COMMON         PAID-IN       DEFERRED       ACCUMULATED      TREASURY      COMPREHENSIVE   STOCKHOLDERS'
                      STOCK         CAPITAL         COMP.         EARNINGS         STOCK           INCOME          EQUITY
                      -----         -------         -----         --------         -----           ------          ------
<S>                 <C>           <C>             <C>            <C>              <C>           <C>             <C>
Balance at
Dec. 31, 2003       $     83       $ 22,349       $    (18)       $ (3,794)       $ (4,177)       $    377        $ 14,820

Net loss                   -              -              -            (980)              -               -            (980)

Exercise of
Stock options              -            102              -               -               -               -             102

Translation
Adjustment                 -              -              -               -               -             (59)            (59)

Deferred
Compensation               -              -              9               -               -               -               9
                    --------       --------       --------        --------        --------        --------        --------

Balance at
April 4, 2004       $     83       $ 22,451       $     (9)       $ (4,774)       $ (4,177)       $    318        $ 13,892
                    ========       ========       ========        ========        ========        ========        ========
</TABLE>

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
           FOR THE THREE MONTHS ENDED APRIL 4, 2004 AND MARCH 30, 2003
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                    Three Months Ended
                                                    ------------------
                                                  April 4,      March 30,
                                                    2004          2003
                                                    ----          ----
<S>                                               <C>            <C>
Net loss                                          $  (980)       $(1,773)
Other comprehensive loss:
    Foreign currency translation adjustment           (59)           (74)
                                                  -------        -------
Comprehensive loss                                $(1,039)       $(1,847)
                                                  =======        =======
</TABLE>

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

                                        4

<PAGE>

                             BTU INTERNATIONAL, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR THE THREE MONTHS ENDED APRIL 4, 2004 AND MARCH 30, 2003
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                           April 4,        March 30,
                                                                             2004            2003
                                                                             ----            ----
<S>                                                                        <C>             <C>
Cash flows from operating activities:
           Net loss                                                        $   (980)       $ (1,773)
           Adjustments to reconcile net loss to net cash
             used in by operating activities -
             Depreciation and amortization                                      294             294
             Stock based compensation                                             9              25
             Net changes in operating assets and liabilities-
                Accounts receivable                                          (2,703)           (801)
                Inventories                                                  (1,796)           (341)
                Other current assets                                           (534)             81
                Other assets                                                    (30)             (3)
                Accounts payable                                              2,404             199
                Accrued expenses                                                371            (111)
                Deferred compensation                                           (46)           (100)
                                                                           --------        --------

           Net cash used in operating activities                             (3,011)          (2530)
                                                                           --------        --------

Cash flows from investing activities:
           Purchases of property, plant and equipment, net                     (140)           (135)
                                                                           --------        --------

           Net cash used in investing activities                               (140)           (135)
                                                                           --------        --------

Cash flows from financing activities:
           Principal payments under long-term debt and capital lease
             obligations                                                        (13)            (81)
           Exercise of stock options                                            102               -
                                                                           --------        --------

           Net cash provided by (used in) financing activities                   89             (81)
                                                                           --------        --------
Effect of exchange rates on cash                                                (59)            (74)
                                                                           --------        --------

Net decrease in cash and cash equivalents                                    (3,121)         (2,820)
Cash and cash equivalents, at beginning of the period                         6,659          13,847
                                                                           --------        --------

Cash and cash equivalents, at end of the period                            $  3,538        $ 11,027
                                                                           ========        ========

Supplemental disclosures of cash flow information
           Cash paid during the periods for -
           Interest                                                        $     77        $     87
           Income taxes                                                          22              17
</TABLE>

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

                                        5

<PAGE>

                             BTU INTERNATIONAL, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1) Basis for presentation

      The condensed consolidated balance sheets as of April 4, 2004 and December
31, 2003, the related condensed consolidated statements of operations for the
three months ended April 4, 2004 and March 30, 2003, the condensed consolidated
statement of stockholders' equity for the three months ended April 4, 2004, the
condensed consolidated statements of cash flows for the three months ended April
4, 2004 and March 30, 2003, the consolidated statements of comprehensive loss
for the three months ended April 4, 2004 and March 30, 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 April 4, 2004 and December 31, 2003 consisted of:

<TABLE>
<CAPTION>
                                                  (in thousands)
                                                  --------------
                                               April 4,   December 31,
                                                 2004         2003
                                                 ----         ----
<S>                                            <C>        <C>
Raw materials and manufactured components       $4,627       $3,881
Work-in-process                                  3,245        2,358
Finished goods                                   1,719        1,556
                                                ------       ------
                                                $9,591       $7,795
                                                ======       ======
</TABLE>

(3) Debt

      Debt at April 4, 2004 and December 31, 2003 consisted of:

<TABLE>
<CAPTION>
                                                           (in thousands)
                                                           --------------
                                                       April 4,   December 31,
                                                         2004         2003
                                                         ----         ----
<S>                                                    <C>        <C>
Mortgage note payable                                   $5,562       $5,600
Capital lease obligations, interest rate of 6.75%           25            -
                                                        ------       ------
                                                         5,587        5,600
Less-current maturities                                    164          160
                                                        ------       ------
                                                        $5,423       $5,440
                                                        ======       ======
</TABLE>

            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.

                                        6

<PAGE>

                             BTU INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

            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 April 4, 2004. No
borrowings were outstanding under this agreement at April 4, 2004; at which time
the available funds on the borrowing base formula was approximately $9.2
million.

(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 ended April 4, 2004 and March 30, 2003 because
they were antidilutive, were 1,140,666 and 1,258,398 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:

<TABLE>
<CAPTION>
                                    Three Months Ended
                                    ------------------
                                 April 4,        March 30,
                                   2004             2003
                                   ----             ----
<S>                             <C>              <C>
Net Income (loss):
  As reported                   $    (980)       $  (1,773)
  Pro forma                        (1,078)          (1,806)
Income per basic share:
  As reported                   $   (0.14)       $   (0.25)
  Pro forma                         (0.15)           (0.25)
Income per diluted share:
  As reported                   $   (0.14)       $   (0.25)
  Pro forma                         (0.15)           (0.25)
</TABLE>

(5) Segment Reporting

      Segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision-maker in deciding how to allocate resources and in assessing
performance. The Company operates as a single business segment called thermal
processing capital equipment.

      The thermal processing capital equipment segment consists of the
designing, manufacturing, selling and servicing of thermal processing equipment
and related process controls for use in the electronics, power generation,
automotive and other industries. This business segment includes the supply of
solder reflow systems used for surface mount applications in printed circuit
board assembly. Thermal processing equipment is used in: low temperature
curing/encapsulation; hybrid integrated circuit manufacturing; integrated
circuit packaging and sealing; and processing multi-chip modules. In addition,
the thermal process equipment is used for sintering nuclear fuel for commercial
power generation, as well as brazing and the sintering of ceramics and powdered
metals, and the deposition of precise thin film coatings. The business segment's
customers are multinational original equipment manufacturers and electronic
manufacturing service providers.

                                        7

<PAGE>

                             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 updated 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 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 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 three months ended April 4, 2004 there was $572,296 of revenue was
recognized using the percentage of completion method. For the three months ended
March 30, 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) 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.

The following table reflects changes in the Company's accrued warranty account
during the first quarter ended April 4, 2004:

<TABLE>
<CAPTION>
                                                   2004
                                                   ----
            (in thousands)
<S>                                               <C>
Beginning Balance, December 31, 2003              $ 635
Plus accruals related to new sales                  165
Less: warranty claims incurred                     (108)
Less: amortization of prior period accruals         (57)
                                                  -----
Ending Balance, April 4, 2004                     $ 635
                                                  =====
</TABLE>

                                        8

<PAGE>

                             BTU INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

(8) Recent Accounting Pronouncements

      In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, which addressed accounting for special-purposes and
variable interest entities. This interpretation was effective for financial
statements issued after December 31, 2002. In September 2003, the FASB issued a
Staff Position to allow a deferment of the effective date to the end of the
first interim or annual period ending after December 15, 2003 if certain
conditions were met. In December 2003, the FASB issued Interpretation No. 46R,
Consolidation of Variable Interest Entities, which addresses accounting for
special-purpose and variable interest entities and which superseded
Interpretation 46. The effective date of this interpretation is the end of the
first reporting period that ends after March 15, 2004, unless the entity is
considered to be a special-purpose entity in which case, the effective date is
the end of the first reporting period that ends after December 15, 2003.
Companies that have adopted Interpretation No. 46 prior to the effective date of
Interpretation No. 46R will either continue to apply Interpretation No. 46 until
the effective date of Interpretation No. 46R or apply the provision of
Interpretation No. 46R at an earlier date. The Company's adoption of
Interpretations No. 46 and No. 46R, did not have a material impact on the
Company's consolidated financial position or results of operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

            Net Sales. Net sales increased 65.2% from $6.8 million in the first
quarter of 2003 to $11.3 million in the first quarter of 2004. The primary
increase represents the expanding demand for our surface mount technology
products. In addition, the first quarter sales for 2004 were favorably impacted,
by approximately three percent, through a settlement of certain pricing
adjustments in previously recorded sales.

      When comparing the first quarter of 2003 to the first quarter of 2004 the
percentage of net sales attributable to our customers in the United States
decreased from 43.5% to 19.2%, net sales attributable to our customers in Europe
decreased from 19.3% to 19.1%, net sales attributable to our Asia Pacific
customers increased from 37.2% to 58.7%, and net sales attributable to our
customers in the Other Americas increased from 0.0% to 3.0%.

      Gross Profit. Gross profit increased 43.0% from $1.9 million in the first
quarter of 2003 to $2.7 million in the first quarter of 2004, and as a
percentage of net sales, decreased from 27.1% to 23.5%. The decrease in the
gross profit percentage for the first quarter 2004 was principally the result of
a change in product mix that reflected a larger percent of the Company's revenue
for the SMT products, where price pressure continues.

      Selling, General and Administrative. Selling, general and administrative
expenses decreased 4.0% from $ 2.8 million in the first quarter of 2003 to $ 2.6
million in the first quarter of 2004. As a percentage of net sales, selling,
general and administrative expenses decreased from 40.2% in the first quarter
2003 to 23.4% in the first quarter of 2004. The decrease in the percentage of
net sales in the first quarter of 2004 was the result of higher revenues. The
decrease in costs in sales, service, marketing and administrative expense was
primarily due to a reduced workforce.

                                        9
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (continued)

      Research, Development and Engineering. Research, development and
engineering increased 11.6% from $822,000 in the first quarter of 2003 to
$917,000 in the first quarter of 2004, and as a percentage of net sales,
decreased from 12.0% to 8.1% for the same period. In the first quarter of 2004
we continued our support of product development.

      Operating Loss. Operating loss decreased 47.2% from $1.7 million in the
first quarter of 2003 to $907,000 in the first quarter of 2004, and as a
percentage of net sales, decreased from 25.1% to 8.0%. The decrease in operating
loss was primarily the result of increased revenues.

      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 April 4,
2004. Our statutory federal income tax rate is 34.0%.

LIQUIDITY AND CAPITAL RESOURCES

      As of April 4, 2004, we had $3.5 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 April 4, 2004. No
borrowings were outstanding under this agreement at April 4, 2004; at which time
the available funds on the borrowing base formula was approximately $9.2
million.

      We have a mortgage note that is secured by our real property in Billerica,
MA. The mortgage note had an outstanding balance at April 4, 2004 of
approximately $5.6 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.

      During the three months ended April 4, 2004, the Company used cash
resources of $3.1 million. This use of cash was primarily the result of net
losses of $980,000, an increase in accounts receivable of $2.7 million and an
increase in inventory of $1.8 million offset by an increase in accounts payable
of $2.4 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,
beginning in the second quarter of 2004, we expect to be utilizing our line of
credit to fund the increases in working capital needs.

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.

                                       10
<PAGE>

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.

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<PAGE>

PART II. OTHER INFORMATION

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 January 20, 2004, the Company furnished a Current
Report on Form 8-K to notify shareholders of the Company's release to affirm
its fourth quarter guidance.

                        On February 26, 2004, the Company furnished a Current
Report on Form 8-K to notify shareholders of the Company's release of its
financial results for the quarter ended December 31, 2003.

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<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                         BTU INTERNATIONAL, INC.

DATE: May 19, 2004            BY: /s/ Mark R. Rosenzweig
                                  ----------------------
                              Mark R. Rosenzweig
                              President, Chief Executive Officer
                              (principal executive officer) and Director

DATE: May 19, 2004            BY: /s/ Thomas P. Kealy
                                  -------------------
                              Thomas P. Kealy
                              Vice President, Corporate Controller and
                              Chief Accounting Officer (principal
                              financial and accounting officer)

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