<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 September 26, 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)

<TABLE>
<CAPTION>


<S>                                                     <C>
                   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)
</TABLE>

       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 November 3,
1999: 6,787,276 shares.


<PAGE>   2



                             BTU INTERNATIONAL, INC.

                                TABLE OF CONTENTS

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




<PAGE>   3



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

                                     ASSETS
<TABLE>
<CAPTION>

                                                               (Unaudited)
                                                             September 26,        December 31,
                                                                  1999                1998
                                                             -------------        ------------
<S>                                                              <C>                 <C>
Current assets
     Cash and cash equivalents                                   $10,620             $10,594
     Accounts receivable, less reserves of
         $160 in 1999 and $160 in 1998                            15,291              12,427
     Inventories (Note 2)                                          9,397              10,084
     Other current assets                                            392                 411
                                                                 -------             -------
         Total current assets                                     35,700              33,516
                                                                 -------             -------

Property, plant and equipment, at cost
     Land                                                            210                 210
     Buildings and improvements                                    7,203               7,186
     Machinery and equipment                                       6,356               5,675
     Furniture and fixtures                                          818                 828
                                                                 -------             -------
                                                                  14,587              13,899
                                                                 -------             -------
     Less-Accumulated depreciation                                 9,813               9,159
                                                                 -------             -------
         Net property, plant and equipment                         4,774               4,740

Other assets, net of accumulated amortization of $439
     in 1999 and $434 in 1998                                        315                 359
                                                                 -------             -------
                                                                 $40,789             $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)
                                                             September 26,      December 31,
                                                                 1999               1998
                                                             -------------      -----------
<S>                                                           <C>                  <C>
Current liabilities
     Current maturities of long-term debt and
         capital lease obligations (Note 3)                       $224                $226
     Accounts payable                                            5,421               5,382
     Other current liabilities                                   3,525               2,947
                                                               -------             -------
         Total current liabilities                               9,170               8,555
                                                               -------             -------

Long-term debt and capital lease obligations, less
     current maturities (Note 3)                                 5,058               5,167
Deferred income taxes                                            1,756               1,756
                                                               -------             -------
                                                                15,984              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 - 7,742,748 and 7,695,924 shares
         at September 26, 1999 and
            December 31, 1998, respectively                         77                  77
     Additional paid-in capital                                 20,388              20,322
     Accumulated earnings                                        7,447               5,594
     Treasury stock- 955,472 and 889,161 shares
      at cost, at September 26, 1999 and
     December 31, 1998, respectively                            (3,436)             (3,166)
     Accumulated other comprehensive income                        329                 310
                                                               -------             -------
         Total stockholders' investment                         24,805              23,137
                                                               -------             -------
                                                               $40,789             $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 AND NINE MONTHS ENDED SEPTEMBER 26, 1999 AND
                               SEPTEMBER 27, 1998
                 (in thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                        Three Months Ended           Nine Months Ended
                                                     ------------------------     -----------------------
                                                      Sept. 26,     Sept. 27,     Sept. 26,     Sept. 27,
                                                        1999           1998          1999         1998
                                                     ---------      ---------     ----------    ---------
<S>                                                  <C>            <C>            <C>          <C>
Net sales                                              $17,795        $14,039        $49,870      $40,454
Cost of goods sold                                      10,780          8,472         30,236       24,167
                                                     ---------      ---------      ---------    ---------
         Gross profit                                    7,015          5,567         19,634       16,287

Operating expenses:
     Selling, general and administrative                 4,845          4,017         13,546       11,664
     Research, development and engineering               1,148            964          3,448        3,371
                                                     ---------      ---------      ---------    ---------
         Income from operations                          1,022            586          2,640        1,252
                                                     ---------      ---------      ---------    ---------
     Interest income                                       133             97            334          309
     Interest expense                                     (107)          (112)          (325)        (340)
     Other income (expense), net                           (44)            11              1           55
                                                     ---------      ---------      ---------    ---------
         Income before taxes                             1,004            582          2,650        1,276
         Income tax provision                              303            181            797          269
                                                     ---------      ---------      ---------    ---------
         Net income                                       $701           $401         $1,853       $1,007
                                                     =========      =========      =========    =========
     Earnings Per Share:
         Basic                                           $0.10          $0.06          $0.27        $0.14
         Diluted                                         $0.10          $0.06          $0.27        $0.14
                                                     =========      =========      =========    =========
     Weighted Average Number of
      Shares Outstanding:
         Basic                                       6,791,389      7,044,647      6,796,913    7,157,186
         Effect of Dilutive Options                    219,030         15,598        153,543       43,764
                                                     ---------      ---------      ---------    ---------
         Diluted Shares                              7,010,419      7,060,245      6,950,456    7,200,950
                                                     =========      =========      =========    =========
</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 NINE MONTHS ENDED SEPTEMBER 26, 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            --              --           1,853             --             --            1,853

Exercise of stock
Options               --              66              --             --             --               66

Purchase of
Treasury Stock        --              --              --           (270)            --             (270)

Translation
Adjustment            --              --              --             --             19               19
                     ---         -------          ------        -------           ----          -------
Balance,
end of
the period           $77         $20,388          $7,447        $(3,436)          $329          $24,805
                     ===         =======          ======        =======           ====          =======
</TABLE>



                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 26, 1999 AND SEPTEMBER 27, 1998
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                       Three Months Ended          Nine Months Ended
                                                     ------------------------     ---------------------
                                                      Sept. 26,     Sept. 27,     Sept 26,    Sept. 27,
                                                        1999          1998          1999        1998
                                                     ----------     ---------     --------    ---------
<S>                                                    <C>           <C>          <C>          <C>
Net Income                                             $ 701         $ 401        $ 1,853      $1,007

Other comprehensive income
   Foreign currency translation adjustment               (41)           (4)            19         (49)
                                                       -----         -----        -------      ------

Comprehensive Income                                   $ 660         $ 397        $ 1,872      $  958
                                                       =====         =====        =======      ======
</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 NINE MONTHS ENDED SEPTEMBER 26, 1999 AND SEPTEMBER 27, 1998
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                       SEPTEMBER 26,     SEPTEMBER 27,
                                                                            1999               1998
                                                                       -------------     -------------
<S>                                                                       <C>              <C>
Cash flows from operating activities:
         Net income                                                       $ 1,853          $ 1,007
         Adjustments to reconcile net income to net cash
           provided by(used in) operating activities -
           Depreciation and amortization                                      870              803
           Net changes in operating assets and liabilities-
              Accounts receivable                                          (2,864)            (312)
              Inventories                                                     687              271
              Other current assets                                             19               (1)
              Accounts payable                                                 39             (726)
              Other current liabilities                                       578             (297)
              Other assets                                                     44              (35)
                                                                           ------          -------
         Net cash provided by (used in)  operating activities               1,226              710
                                                                           ------          -------

Cash flows from investing activities:
         Purchases of property, plant and equipment, net                     (832)          (1,063)
                                                                           ------          -------
         Net cash provided by (used in) investing activities                 (832)          (1,063)
                                                                           ------          -------
Cash flows from financing activities:
         Principal payments under long-term debt and capital lease
           obligations                                                       (181)            (116)
         Current maturities of long-term debt                                  (2)               6
         Proceeds from issuance of common stock
             and exercise of stock options                                     66               46
         Purchase of treasury stock                                          (270)          (1,833)
                                                                           ------          -------
         Net cash provided by (used in) financing activities                 (387)          (1,897)
                                                                           ------          -------
Effect of exchange rates on cash                                               19              (49)
                                                                           ------          -------
Net increase (decrease) in cash and cash equivalents                           26           (2,299)
Cash and cash equivalents, at beginning of the period                      10,594           11,873
                                                                          -------          -------
Cash and cash equivalents, at end of the period                           $10,620          $ 9,574
                                                                          =======          =======
Supplemental disclosures of cash flow information
         Cash paid during the periods for -
         Interest                                                            $325             $309
         Income taxes                                                       1,001               18
</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 September 26, 1999, the
condensed consolidated statement of stockholders' investment for the nine months
ended September 26, 1999, the condensed consolidated statements of cash flows
for the nine months ended September 26, 1999 and September 27, 1998, the
consolidated statements of comprehensive income for the three and nine months
ended September 26, 1999 and September 27, 1998 and the related condensed
consolidated statements of operations for the three and nine months ended
September 26, 1999 and September 27, 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 September 26, 1999 and December 31, 1998 consisted of:

<TABLE>
<CAPTION>

                                                            ($000)
                                                 ------------------------------
                                                 September 26,     December 31,
                                                      1999             1998
                                                 -------------     ------------
<S>                                                 <C>              <C>
Raw materials and manufactured components           $4,288           $ 4,970
Work-in-process                                      3,605             3,395
Finished goods                                       1,504             1,719
                                                    ------           -------
                                                    $9,397           $10,084
                                                    ======           =======
</TABLE>


(3) Debt

     Debt at September 26, 1999 and December 31,1998 consisted of:

<TABLE>
<CAPTION>

                                                                                      ($000)
                                                                          ------------------------------
                                                                          September 26,     December 31,
                                                                              1999             1998
                                                                          -------------     ------------
<S>                                                                          <C>               <C>
Mortgage note payable                                                        $5,147            $5,312
Capital lease obligations, interest rates ranging from 10.2% to 12.0%,
  net of interest of $39,000 and $ 26,000 in 1999 and 1998, respectively        135                81
                                                                             ------            ------
                                                                              5,282             5,393
Less-current maturities                                                         224               226
                                                                             ------            ------
                                                                             $5,058            $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 29,600 and
27,800 as of September 26, 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          Nine Months Ended
                                    -----------------------     ----------------------
                                    Sept. 26,     Sept. 27,     Sept. 26,    Sept. 27,
                                      1999           1998          1999        1998
                                    ---------     ---------     ---------    ---------
<S>                                  <C>           <C>           <C>         <C>
Net sale                             $17,795       $14,039       $49,870     $40,454
Gross Profit                           7,015         5,567        19,634      16,287
Operating Income                       1,022           586         2,640       1,252
Capital Expenditures                     439           175           832       1,063
Depreciation & Amortization              284           270           870         803
</TABLE>


                                        7


<PAGE>   10


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

RESULTS OF OPERATIONS

     In the third quarter of 1999, net sales increased by $3.8 million to $17.8
million, an increase of 26.8% when compared to the third quarter of 1998. For
the first nine months of 1999, net sales increased by $9.4 million to $49.9
million, an increase of 23.3% over the comparable 1998 period. The increase in
sales in 1999 for both the third quarter and first nine months as compared to
the same periods in 1998 reflects higher demand for our products, primarily by
our large multinational electronic and PC board contract manufacturing
customers. The effect of price changes for specific products has not materially
impacted the change in net sales for the periods presented.

     In the third quarter and first nine months of 1999 as compared to the same
periods in 1998, net sales to all geographic regions increased. When comparing
the third quarter and first nine 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 $1.4 million, or 26.0%, in the third quarter of
1999, compared to the third quarter of 1998. Gross profit as a percent of sales
decreased for the third quarter of 1999 from 39.7% to 39.4% as compared to the
third quarter of 1998. For the first nine months of 1999, gross profit increased
by $3.3 million or 20.6%, compared to the first nine months of 1998 but
decreased as a percentage of sales from 40.3% to 39.4%. The increase in gross
profit dollars for both the third quarter and first nine months of 1999 was due
to the increase in revenues. The decrease in gross margin percentage for the
third quarter and year to date period was primarily the result of product mix
and price pressure.

     Selling, general and administrative (SG&A) expenses increased in the third
quarter of 1999 by $0.8 million, or 20.6%, but decreased as a percentage of net
sales to 27.2% compared to 28.6% the third quarter of 1998. For the first nine
months of 1999 (SG&A) expense increased by $1.9 million, or 16.1%, as compared
to the same period in 1998. As a percentage of net sales (SG&A) expenses
decreased for the first nine months of 1999 to 27.2% from 28.8% for the same
period in 1998. The higher costs in 1999 are primarily the result of $3.8
million and $9.4 million increase in net sales for the third quarter and first
nine 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. In the third quarter of 1999 as compared to
the third quarter of 1998 a significant amount of the increase in (SG&A) was
commission expense as products sold through sales agents increased.

     Research, development and engineering expenses in the third quarter of 1999
increased by $184,000 or 19.1%, as compared to the third quarter of 1998. For
the first nine months of 1999, research, development and engineering expenses
increased by $77,000, or 2.3%, as compared to the first nine months of 1998. As
a percentage of net sales research development and engineering expenses
decreased for both the third quarter of 1999 to 6.5% from 6.9% and first nine
months of 1999 to 6.9% from 8.3% as compared to the same periods in 1998. The
primary reason for the increase in the third quarter of 1999 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 third quarter and first nine months of 1999
increased by $36,000, or 37.1%, and $25,000, or 8.1% respectively, as compared
to the same periods in 1998.

     Interest expense decreased by $5,000, or 4.5%, for the third quarter of
1999, and decreased by $15,000 or 4.4% for the first nine 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 third quarter of 1999 by $122,000 to
$303,000 when compared to the third quarter of 1998. For the first nine months
of 1999 income taxes increased by $528,000 to $797,000 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 30.2% and
30.1% for the third quarter and first nine 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, 2004, and is subject to certain
financial covenants. No amounts were outstanding under this agreement as of
September 26, 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 September 26, 1999 of
$5,147,000. 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 has actively pursued 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 minimal. 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. These 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 has addressed all known Y2K problems on its products 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 totally 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 Information Technology and Facility management and the 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 internal Y2K out of pocket costs are estimated to be approximately $350,000,
most of which has already been incurred. Internal Y2K implementation is nearly
complete. Of the twenty-eight Y2K potential problem areas identified, 100% have
definable solutions; of these, twenty-three or 82% are now in compliance; two
will be complete by November 30th and the remaining three have tested solutions
to be implemented at year end. The Company believes that all internal Y2K
identified potential problems are solvable and that the impact of Y2K compliance
on the efficient operation of the business will have little or no effect on
operations.

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<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
materials management group has communicated with all our suppliers regarding
their Y2K program status. To date 100% of our key suppliers have responded with
their Y2K implementation plans. 96% of the key suppliers are presently Y2K
compliant with the remainder scheduled to be Y2K compliant by December 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 materials
management group 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 materials
management group is developing contingency plans to address any 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.

BTU's dependency upon electrical supply, communication and traffic
infrastructure in and with certain foreign countries might pose a risk in
serving certain customers during the first days of the next millennium. The
Company believes that most counties have workarounds and that the overall impact
upon our ability to serve our customers worldwide will be minimal.

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: November 9, 1999          BY: /s/ Paul J. van der Wansem
                                        ----------------------------------------
                                    Paul J. van der Wansem
                                    President, Chief Executive Officer
                                    (principal executive officer) and Director


    DATE: November 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


            NONE


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.



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