<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 March 28, 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 May 7, 1999:
6,789,613 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)
                                                                    March 28,         December 31,
                                                                      1999                1998
--------------------------------------------------------------------------------------------------
<S>                                                                  <C>                 <C>    
Current assets
     Cash and cash equivalents                                       $ 9,326             $10,594
     Accounts receivable, less reserves of
         $160 in 1999 and $160 in 1998                                14,343              12,427
     Inventories (Note 2)                                              9,291              10,084
     Other current assets                                                452                 411
--------------------------------------------------------------------------------------------------
         Total current assets                                         33,412              33,516
--------------------------------------------------------------------------------------------------

Property, plant and equipment, at cost
     Land                                                                210                 210
     Buildings and improvements                                        7,187               7,186
     Machinery and equipment                                           5,900               5,675
     Furniture and fixtures                                              824                 828
--------------------------------------------------------------------------------------------------
                                                                      14,121              13,899
     Less-Accumulated depreciation                                     9,439               9,159
--------------------------------------------------------------------------------------------------

         Net property, plant and equipment                             4,682               4,740

Other assets, net of accumulated amortization of $436
     in 1999 and $434 in 1998                                            357                 359
--------------------------------------------------------------------------------------------------

                                                                     $38,451             $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)
                                                                     March 28,         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                                                  5.153               5,382
     Other current liabilities                                         2,592               2,947
---------------------------------------------------------------------------------------------------
         Total current liabilities                                     7,972               8,555
---------------------------------------------------------------------------------------------------

Long-term debt and capital lease obligations, less
     current maturities (Note 3)                                       5,105               5,167
Deferred income taxes                                                  1,756               1,756
---------------------------------------------------------------------------------------------------

                                                                      14,833              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 - 7,698,774 and 7,695,924 shares
         at March 28, 1999 and
            December 31, 1998, respectively                               77                  77
     Additional paid-in capital                                       20,325              20,322
     Accumulated earnings                                              6,138               5,594
     Treasury stock- 909,161 and 889,161 shares
         at cost, at March 28, 1999 and
     December 31, 1998, respectively                                  (3,233)             (3,166)
     Accumulated other comprehensive income                              311                 310
---------------------------------------------------------------------------------------------------

         Total stockholders' investment                               23,618              23,137
---------------------------------------------------------------------------------------------------

                                                                     $38,451             $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 OPERATIONS
          FOR THE THREE MONTHS ENDED MARCH 28, 1999 AND MARCH 29, 1998
                 (in thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        Three Months Ended  
                                                                  -------------------------------
                                                                   March 28,            March 29,
                                                                     1999                 1998
--------------------------------------------------------------------------------------------------
<S>                                                               <C>                  <C>       
Net sales                                                         $   15,876           $   12,101
Cost of goods sold                                                     9,773                7,162
--------------------------------------------------------------------------------------------------

         Gross profit                                                  6,103                4,939

Operating expenses:
     Selling, general and administrative                               4,330                3,673
     Research, development and engineering                             1,053                1,172

--------------------------------------------------------------------------------------------------

         Income from operations                                          720                   94
--------------------------------------------------------------------------------------------------

     Interest income                                                     132                  118
     Interest expense                                                   (110)                (112)
     Other income, net                                                    39                    4
--------------------------------------------------------------------------------------------------

         Income before provision for income taxes                        781                   104
         Income tax provision                                            237                  (22)
--------------------------------------------------------------------------------------------------

         Net income                                               $      544           $       126
==================================================================================================
     Earnings Per Share:
         Basic                                                    $     0.08           $      0.02
         Diluted                                                  $     0.08           $      0.02
==================================================================================================
     Weighted average number of 
     Shares Outstanding:
         Basic Shares                                              6,803,581             7,277,299
         Effect of Dilutive Options                                  106,749                82,816
--------------------------------------------------------------------------------------------------
         Diluted Shares                                            6,910,330             7,360,115
==================================================================================================
</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 THREE MONTHS ENDED MARCH 28, 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                --             --           544           --           --               544
                                                                                             
Exercise of stock                                                                            
 Options                  --              3            --           --           --                 3
                                                                                             
Purchase of                                                                                  
 Treasury Stock           --             --            --          (67)          --               (67)
                                                                                             
Translation                                                                                  
 Adjustment               --             --            --           --            1                 1
                                                                                             
--------------------------------------------------------------------------------------------------------
                                                                                             
Balance,                                                                                     
 end of                                                                                      
 the period              $77        $20,325        $6,138      $(3,233)        $311           $23,618
========================================================================================================
</TABLE>




                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
          FOR THE THREE MONTHS ENDED MARCH 28, 1999 AND MARCH 29, 1998
                                 (in thousands)
                                   (Unaudited)

                                                    Three Months Ended  
                                                 ------------------------
                                                 March 28,      March 29,
                                                   1999           1998

Net Income                                         $544           $126
Other comprehensive income
    Foreign currency translation adjustment           1             (3)
                                                   --------------------
   Comprehensive Income                            $545           $123 
                                                   ====================




  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 THREE MONTHS ENDED MARCH 28, 1999 AND MARCH 29, 1998
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          MARCH 28,       MARCH 29,
                                                                            1999            1998
---------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>    
Cash flows from operating activities:
         Net income                                                       $   544          $   126
         Adjustments to reconcile net income to net cash
           provided by(used in) operating activities -
           Depreciation and amortization                                      293              254
           Net changes in operating assets and liabilities-
              Accounts receivable                                          (1,916)            2001
              Inventories                                                     793             (624)
              Other current assets                                            (41)              72
              Accounts payable                                               (229)          (1,605)
              Other current liabilities                                      (355)            (400)
              Other assets                                                      2              (30)
---------------------------------------------------------------------------------------------------

         Net cash used in  operating activities                              (909)            (206)
---------------------------------------------------------------------------------------------------

Cash flows from investing activities:
         Purchases of property, plant and equipment, net                     (235)            (455)
---------------------------------------------------------------------------------------------------

         Net cash used in investing activities                               (235)            (455)
---------------------------------------------------------------------------------------------------

Cash flows from financing activities:
         Principal payments under long-term debt and capital lease
           obligations                                                        (61)              (9)
         Exercise of stock options                                              3              --
         Purchase of treasury stock                                           (67)            (688)
---------------------------------------------------------------------------------------------------

         Net cash used in financing activities                               (125)            (697)
---------------------------------------------------------------------------------------------------
Effect of exchange rates on cash                                                1               (3)
---------------------------------------------------------------------------------------------------

Net decrease in cash and cash equivalents                                  (1,268)          (1,361)
Cash and cash equivalents, at beginning of the period                      10,594           11,873
---------------------------------------------------------------------------------------------------

Cash and cash equivalents, at end of the period                           $ 9,326          $10,512
===================================================================================================

Supplemental disclosures of cash flow information
         Cash paid during the periods for -
         Interest                                                         $   110          $   112
         Income taxes                                                         660               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 March 28, 1999, the
condensed consolidated statement of stockholders' investment for the three
months ended March 28, 1999, the condensed consolidated statements of cash flows
for the three months ended March 28, 1999 and March 29, 1998, the consolidated
statements of comprehensive income for the three months ended March 28, 1999 and
March 29, 1998 and the related condensed consolidated statements of operations
for the quarters ended March 28, 1999 and March 29, 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 March 28, 1999 and December 31, 1998 consisted of:

<TABLE>
<CAPTION>
                                                                                      ($000)        
                                                                           -----------------------------
                                                                           March 28,        December 31,
                                                                             1999              1998
--------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>    
Raw materials and manufactured components                                   $4,613           $ 4,970
Work-in-process                                                              3,041             3,395
Finished goods                                                               1,637             1,719
========================================================================================================
                                                                            $9,291           $10,084
========================================================================================================
</TABLE>


(3) Debt

     Debt at March 28, 1999 and December 31,1998 consisted of:

<TABLE>
<CAPTION>
                                                                                      ($000)
                                                                           -----------------------------
                                                                           March 28,        December 31,
                                                                             1999              1998
--------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>   
Mortgage note payable                                                       $5,258            $5,312
Capital lease obligations, interest rates ranging from 10.2% to 12.0%,
  net of interest of $24,000 and $ 26,000 in 1999 and 1998, respectively        74                81
--------------------------------------------------------------------------------------------------------
                                                                             5,332             5,393
Less-current maturities                                                        227               226
--------------------------------------------------------------------------------------------------------
                                                                            $5,105            $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 $3,825,00 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 is presented in compliance with the Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share." Under SFAS
No. 128, 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 38,300 and
27,800 as of March 28, 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. 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

                                                           ($000)
                                                   ----------------------
FOR THE THREE MONTHS ENDED                         March 28,    March 29,
                                                     1999         1998
-------------------------------------------------------------------------

Net sales                                           $15,876      $12,101
Gross profit                                          6,103        4,939
Operating income                                        720           94
Capital Expenditures                                    235          455
Depreciation & Amortization                             293          254




                                        7


<PAGE>   10


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

RESULTS OF OPERATIONS

     In the first quarter of 1999, net sales increased by $3.8 million to 15.9
million an increase of 31.2% when compared to the first quarter of 1998. The
increase in sales between the two periods reflected 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 first quarter of 1999 as compared to the first quarter of 1998 net
sales to all geographic regions increased. When comparing the first quarter of
1999 to the first quarter of 1998 the geographic dispersion of net sales, saw no
significant change in regional sales as a percentage of total sales.

       Gross profit increased by $1.2 million or 23.6%, in the first quarter of
1999 as compared to the first quarter of 1998. Gross profit as a percentage of
sales decreased for the first quarter of 1999 by 2.4% from 40.8% to 38.4% as
compared to the first quarter of 1998. The increase in gross profit dollars for
the first quarter of 1999 was due to the increase in revenues versus the same
period in 1998. The decrease in the gross margin percentage between the two
periods was due to product mix and price pressure in our more competitive, high
volume markets.

        Selling, general and administrative expenses increased in the first
quarter of 1999 by $657,000 or 17.9%, but decreased as a percentage of net sales
to 27.3% compared to 30.4% for the first quarter of 1998. The higher costs in
1999 are primarily the result of $3.8 million increase in net sales, which
resulted in increased costs for sales, marketing and service 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 first quarter of
1999 decreased by $119,000, or 10.2%, and decreased as a percentage of net sales
to 6.6% compared to 9.7% for the same period in 1998. The primary reason for the
decrease in spending between the periods was 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 first quarter of 1999 interest income increased by
$14,000, or 11.9%, as compared to the first quarter of 1998. The increase in
interest income is due to the higher average interest rate in 1999 versus 1998.

       Interest Expense - Interest expense decreased by $2,000, or 1.8%, for the
first quarter of 1999, as compared to the first quarter of 1998. The decrease is
primarily due to the decreasing principal balance of the mortgage note payable.

      Income Taxes - Income taxes increased in the first quarter of 1999 by
$259,000 to $237,000 when compared to the tax benefit of $22,000 for the first
quarter of 1998. For both 1998 and 1997 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 for the
first quarter of 1999 of 30.3%. These compare to the Company's statutory Federal
rate of 34%.

                                        8


<PAGE>   11


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


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
March 28, 1999 or at any time in 1998 or 1999.

The Company has a mortgage note, which is secured by its land and building. The
Mortgage note payable had an outstanding balance at March 28, 1999 of
$5,258,000. 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
does not believe that adoption of SOP 98-1 will 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 will adopt SOP 98-5 beginning January 1, 1999.
The Company believes that adoption of SOP 98-5 will have no 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 warranties 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
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 our experienced knowledge base 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 effort and incremental out of pocket costs have been
estimated to be approximately $350,000; and an implementation plan is on-going
with a completion date of September 30, 1999. Of the Y2K problem areas
identified, 100% have a definable solution; of these 42% are now in compliance
and the remaining 58% 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 via a questionnaire
with all our suppliers regarding their Y2K program status. To date 100% of our
key suppliers have responded with their Y2K implementation plans. 62% 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 other non key suppliers to ensure Y2K compliance as early as possible.

In reviewing the significant supplier Y2K problems, the Company's Y2K
coordinator believes that all Y2K problems have known solutions that are
solvable within the required time frame to be Y2K compliant. 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 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 and costs beyond the scope detailed above that could materially
impact our ability to service our customers and financially perform to
investors' expectations.


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


PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

              (a) Exhibits

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

              (b) Reports on Form 8-K

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











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<PAGE>   15






                                   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 12, 1999             BY: /s/ Paul J. van der Wansem
                                          --------------------------------------
                                      Paul J. van der Wansem
                                      President, Chief Executive Officer
                                      (principal executive officer) and Director

       DATE: May 12, 1999             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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