GLOBAL LEADER IN THERMAL PROCESS SOLUTIONS 2004 Annual Report

Transcription

1 GLOBAL LEADER IN THERMAL PROCESS SOLUTIONS 2004 Annual Report

2 Elevated Hearth Furnace Systems High Temperature Belt Furnace Family Integrated Wafer Bump Reflow Systems 2 Portfolio of Products Pyramax SMT Reflow Platform

3 BTU provides precision thermal processing technology and equipment solutions from 100 C to 1800 C for a broad spectrum of customer applications. These applications range from Surface Mount Technology and Semiconductor Packaging to Metals, Thick Film, Advanced Ceramics, Fuel Cells, plus Nuclear Fuel Fabrication. BTU has a history of innovation in which the technology, often jointly developed with our customers, has been successfully utilized in these markets C Nuclear Fuel Fabrication 1500 C Advanced Ceramics Fuel Cells 1200 C 900 C Metals and Thick Film PHOTO: SULZER HEXIS 600 C Semiconductor Packaging 300 C Surface Mount Technology 100 C 3 A Broad Range of Applications

4 To Our Shareholders 2004 was a year of recovery and significant progress for BTU after several years of prolonged weakness in our primary markets. During the past year, we began optimizing our product offerings and streamlining our manufacturing processes, including the China operations, and put BTU in a position to take advantage of an industry recovery. This strategy is starting to work. Our net sales increased by 92 percent over last year and in the fourth quarter we returned to profitability. The year witnessed several key events for BTU, one of which was the opening of our new manufacturing plant in Shanghai, China. Leveraging more than a decade of BTU experience in China, this plant will enable us to provide our Asian customers with rapid supply, significant freight savings and the same high quality products and services they have come to expect from BTU. In addition, our factory in China will benefit our customers outside of Asia by providing quality materials at a lower cost for our manufacturing operations in the USA. We also had a management change as of October 1st, 2004, when the Board of Directors asked me to come back into my previous position as CEO. After an absence of over two years, my team and I are excited to lead the company and we have set a clear directive: to return the company to success. Since that time, we have been working diligently in pursuit of our primary goals: to redouble our emphasis on understanding and satisfying our customers needs, and to reduce our operating costs and return to profitability. In a short length of time, we have already made some significant progress toward these objectives. Financial results Net sales for the year 2004 nearly doubled to $54.6 million, compared to $28.5 million for the year Before a one-time restructuring charge of $1.6 million, or $0.23 per share, the net loss for 2004 was $2.5 million, or $0.35 per share. Including the restructuring charge, the net loss for the year 2004 was $4.2 million, or $0.58 per share, an improvement of 40% over the loss of $6.8 million, or $0.97 per share, for the year More importantly, we returned to profitability in the fourth quarter of 2004 and started to bring our working capital under control, which resulted in a net positive cash flow during the last quarter. Recent Actions During the fourth quarter we took a number of actions. We made some significant changes in the organization, redefined our key objectives and instituted a team approach to problem solving. Moreover, the culture to win and succeed together, combined with a focus on clearly defined objectives and metrics, is serving to inspire all our employees to achieve our goals. I believe that with these and other actions, we have started to build the foundation for success. Moving in the right direction The year 2004 saw improving conditions in many of the markets we serve: 4 Printed Circuit Board Assembly In this market BTU offers Solder Reflow Systems for Surface Mount Technology (SMT) used for attaching electronic components to a printed circuit board. Here, we are positioned to benefit from an industrywide transition to lead-free processing. BTU s patented technology ensures repeatable performance within the critical process window for lead-free processing, with a low cost of ownership. We estimate that, worldwide, up to one third of the existing solder reflow systems will have to be replaced over the next 2 to 4 years in order to meet the more stringent

5 performance parameters required for lead-free processing. We are pursuing this market opportunity aggressively. In 2004, our SMT business was up substantially more than doubling 2003 sales including a significant increase in orders from the world s leading mobile phone manufacturers, reinforcing BTU s strong position in the electronics industry. Semiconductor Packaging For this market BTU is active in applications such as flux coating, wafer bump reflow, flip chip reflow and ball attach. As wafers get larger and devices get smaller, packaging and handling are becoming more important considerations in manufacturing. BTU s integrated wafer bump tools are well suited for this application. Our business in this segment was also up in 2004, exceeding 2003 volume by over 100 percent. Advanced Materials This market consists of many applications such as thick-film devices, low temperature co-fired ceramics (LTCC) for wireless communications devices, multi-layer ceramics, metal brazing and fuel fabrication. During 2004, our Advanced Materials business began a recovery, including a repeat order and shipment for a large furnace system, valued at over $2 million, to be used for sintering nuclear fuel pellets for power generation. In addition, we focused on a few additional market potentials, such as the Solid Oxide Fuel Cell (SOFC) industry used for stationary power generation. During 2004, our engineers published several research papers, including one jointly with Boston University on a unique, new process for manufacturing ceramics for SOFC applications. Also during 2004, we received a large order for the world s first fully integrated fuel cell manufacturing line. The customer is one of the largest, European-based, global leaders in fuel cell technology. While it is too early to tell whether or not SOFCs are going to be commercially viable and produced in high volume, BTU s technology is a major enabler for this market. PHOTO: W. MARC BERNSAU/BOSTON BUSINESS JOURNAL Outlook Although capital spending in many of the markets we serve is still cautious, I believe that, as we proceed into 2005, BTU is positioned to grow and show continued improvement in its results. Our global organization will focus on increasing productivity and reducing costs while advancing our technology and satisfying our customers. With the ongoing support of our dedicated global team, our key suppliers and valued investors, we approach 2005 with a renewed enthusiasm and we look forward to continuing to build value in our company. Paul J. van der Wansem Chairman and CEO

6 BTU International IS THE GLOBAL leader in thermal processing systems serving the electronics and advanced materials markets. Operating in over 50 countries, with manufacturing facilities in the USA and China,the company provides products, services and support to customers in the Printed Circuit Board Assembly, Semiconductor Packaging, and Advanced Materials markets. Utilizing BTU technology, our customers manufacture products ranging from personal computers and cell phones to advanced devices such as fuel cells and wireless networking components. GUIDING BTU IS AN EXPERIENCED, INSIGHTFUL MANAGEMENT team with a clear vision for the future. Our goals include increasing our global market share as we leverage our strong position in new technologies and high growth markets. In addition, we will continue our cost reduction programs and our expansion in China to maximize our global reach and profitability. THE BTU ADVANTAGE MARKET DIVERSITY MEANS THAT WE SERVE SEVERAL key markets across the globe. In the Printed Circuit Board Assembly market, our ability to provide precise, accurate thermal control is a distinct advantage in the compliance with new lead-free regulations. For Semiconductor Packaging our integrated processing lines ease the transition to 300mm Wafer Level Packaging. Advanced Materials include applications like sintering Nuclear Fuel, and processing High Temperature Ceramics for Fuel Cells. While the Nuclear Fuel processing market offers growth opportunities, the Fuel Cell market is forecasted to achieve exceptional growth rates. The breadths of the markets we 6

7 serve provide a unique opportunity to leverage our innovation and technology across our customer base. In addition, our presence in these markets increases our visibility to new growth opportunities TECHNOLOGY LEADERSHIP IS THE BTU TRADITION. Our half-century of research and development has created thermal expertise ranging from 100 C to 1800 C, including challenging atmospheres such as hydrogen, nitrogen, and argon. BTU holds close to 100 technology patents with more in the pipeline. It s no wonder the top mobile phone manufacturers in the world, the leading automotive electronics manufacturers and the top semiconductor packaging contract manufacturers rely on BTU for uncompromising performance and reliability Sales History OUR GLOBAL PRESENCE HAS ALWAYS BEEN A BTU ADVANTAGE. We have grown and transitioned globally with our customers to the point where today more than 35% of our employees work outside of the USA. This global deployment of resources increases our support infrastructure and strengthens our bond with our worldwide customer base. As an example, our customers can choose to have their equipment and process training in any of BTU s global facilities or in their own plants around the world. LEAD FREE SUPERIORITY THE LEAD-FREE INITIATIVE, DRIVEN BY LEGISLATION IN many countries to prevent contamination in landfills, is impacting all areas of electronics manufacturing. The reflow process in Printed Circuit Board Assembly is the process step most affected, where the higher melting temperatures 7

8 Asia 59% Americas 24% Europe 17% Revenues By Region 2004 Asia 60% Americas 23% Europe 17% of lead-free solder materials require significantly higher process control. BTU utilizes technology developed well ahead of the no-lead edict to provide the industry s tightest control all within a dramatically reduced process window. With the lead-free deadlines soon upon us, it is estimated that roughly one-third of all reflow ovens will need to be replaced in order to meet the new process requirements. Superior thermal control capabilities make BTU the obvious choice for customers replacing existing equipment as well as for those manufacturers eager to make high quality and reliability an integral part of their operation. JEDEC January Japan Restriction of Hazardous Substances (RoHS) July Europe Waste Electrical & Electronic equipment (WEEE) July Europe Global Revenue Growth BTU IN ASIA / PACIFIC $30 $25 $20 $15 $10 $ Asia Europe Americas BTU HAS BEEN COMMITTED TO THE ASIA / PACIFIC MARKET since the 1960 s. We support the region through our direct offices in Singapore, Penang-Malaysia, Cavite-Philippines as well as Beijing, Suzhou and Shanghai in China. In fact BTU opened its first office in Beijing, China in A major milestone was achieved in 2004 when we opened our Shanghai China manufacturing facility and began shipping the first products to our customers. China has the highest concentration of BTU employees in Asia and remains our fastest growing region. Our strong investment in this important part of the world allows BTU to provide our customers with better delivery as well as enhanced process and equipment support. 8

9 FAQ what degree can BTU take advantage F R E Q U E N T L Y A S K E D Q U E S T I O N S QWhat impact do you expect your new manufacturing facility in China will have on the business AThe opening of the new manufacturing facility has significantly strengthened BTU. We made this strategic decision to expand our manufacturing capability and position ourselves with a foundation in the world s fastest growing marketplace. In addition, we have established a supply chain that provides quality assemblies and components to improve our cost position. The customers in the Asia/Pacific region also enjoy the benefits of superior support, reduced lead times and a reduction in transportation. QTo of the new lead-free requirements? ALead-free processing offers BTU an excellent market opportunity. Industry timelines call for lead-free manufacturing by the end of 2005 for the Japan market, and by mid-2006 for the European Union market. The practical reality is that virtually all electronics manufacturers plan to be lead-free by this general time frame so most of their products can be sold anywhere in the world. The impact we re seeing now is that all new ovens being sold must be lead-free capable. In addition, we estimate that up to a third of the existing installed base of reflow ovens will be replaced in order to meet the stringent process requirements for lead-free processing. Thanks to our advanced design and superior temperature control technology our Pyramax product is fully capable of lead-free processing. In addition, our Pyramax systems reduce the cost-of-ownership to our customers. So, we see this as a terrific opportunity. We are well positioned to capitalize on this technology transition and we are pursuing this business aggressively. QHow will changes in the Wafer Level Packaging market affect BTU s wafer bump reflow offerings? AThe most dynamic change forecast for the Wafer Level Packaging (WLP) market for the next few years is the full adoption of WLP technology for the manufacturing of DRAM memory chips. Many of the world s leading manufacturers of memory chips are already in the research and development or qualification stages of Wafer Level Packaging for their high-speed memory products. In the coming years, these products are expected to enter high volume production. This shift will drive significant growth, which is forecast by leading industry analysts to be at double-digit growth rates through Memory manufacturers have traditionally focused on high volume, low cost manufacturing. BTU s integrated wafer bump reflow lines are well matched for this challenge. Our continuous furnaces provide very high throughput when compared to batch processes. In addition, many of BTU s integrated wafer bump reflow lines use a flux process, which is well suited for low cost manufacturing. This technology will also help memory chip manufacturers to conquer the challenges of using lead-free solders, which are best processed using flux due to the difficulty of reducing the tin oxides found in these formulations. QWhat role can BTU play in the fuel cell business? AOne of the most promising alternative energy sources being developed today is the Solid Oxide Fuel Cell (SOFC) used for stationary power generation. These amazing devices can convert chemical energy directly into electricity without the need for combustion, providing much higher conversion efficiencies than conventional methods. SOFC s are already at work as standby energy sources for hospitals, emergency management facilities and large office buildings. In some places, these devices are also being used as the primary means for providing household electrical power, heat and hot water. Further development to make these devices commercially viable is being pursued actively by a number of manufacturers. SOFC units are constructed as a stack with many layers of ceramic materials. The ceramics must be thin, very uniform in shape and capable of operating at temperatures approaching ºC. Consequently, one of the keys to producing reliable, economical SOFC units is being able to efficiently manufacture the ceramic components. That s where BTU comes in. The precise temperature control and purity of the processing environment within BTU's thermal processing systems work to increase the throughput and yield of the critical ceramic materials, enabling the production of highquality, long-life, cost-effective fuel cells. While the fuel cell industry may still be in its infancy, BTU is working with the leaders in the field to advance the ceramics manufacturing process, which is vital to the commercial application of SOFC technology. 9

10 STOCK LISTING BTU International, Inc. Common stock is traded on The Nasdaq National Market System under the symbol BTUI TRANSFER AGENT EquiServe Trust Company, N.A. PO Box Kansas City, MO Shareholder Inquiries SEC FORM 10-K A copy of the company s Form 10-K, filed with the Securities and Exchange Commission (SEC), is available without charge upon written request to: Vice President, Corporate Controller BTU International, Inc. 23 Esquire Road North Billerica, Massachusetts (978) , extension 106 GENERAL COUNSEL Ropes & Gray One International Place Boston, Massachusetts INDEPENDENT PUBLIC ACCOUNTANTS Vitale, Caturano & Company 80 City Square Boston, Massachusetts ANNUAL MEETING The annual meeting of stockholders will be held on May 26, 2005, at 10:00 AM EST, at BTU International, 23 Esquire Road, North Billerica, Massachusetts HEADQUARTERS BTU International, Inc. 23 Esquire Road North Billerica, Massachusetts 01862, USA OFFICERS Paul J. van der Wansem President and Chief Executive Officer Thomas P. Kealy Vice President, Corporate Controller and Chief Accounting Officer James M. Griffin Vice President of Sales Americas DIRECTORS Paul J. van der Wansem Chairman of the Board of Directors John E. Beard Of Counsel, Ropes & Gray, Attorneys Partner Dr. Jeffrey Chuan Chu Chairman, Columbia International Corporation J. Samuel Parkhill President and CEO, The Hall Corporation Joseph F. Wrinn Vice President Teradyne, Inc. G. Mead Wyman Retired Senior Vice President, Treasurer and CFO of Mercury Computer AUDIT COMMITTEE J. Samuel Parkhill Joseph F. Wrinn G. Mead Wyman COMPENSATION COMMITTEE Dr. Jeffrey Chuan Chu J. Samuel Parkhill Joseph F. Wrinn G. Mead Wyman GOVERNANCE COMMITTEE John E. Beard Dr. Jeffrey Chuan Chu Paul J. van der Wansem 10

11 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT This Annual Report may contain express or implied forwardlooking statements regarding the Company, its financial condition and its future prospects, including those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, These statements are neither promises nor guarantees, but rather are subject to risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. All stockholders and potential stockholders are encouraged to review carefully the discussion of risks and uncertainties, as well as further details concerning the Company's business and other information contained in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2004, which is included with this report. HEADQUARTERS BTU International, Inc. 23 Esquire Road North Billerica, MA EUROPE BTU Europe Ltd. 44 (0) (0) ASIA/PACIFIC BTU Singapore CHINA BTU China - Shanghai btush@btu.com

12 Headquarters BTU International, Inc. 23 Esquire Road, North Billerica, MA China BTU China - Shanghai btush@btu.com 0857-AR-05