<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
-------------
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 0-9576
------
K-TRON INTERNATIONAL, INC.
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1759452
- ------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer ID #)
incorporation of organization)
Routes 55 & 553
P.O. Box 888
Pitman, New Jersey
08071-0888
----------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(609) 589-0500
----------------------------------------
(Registrant's Telephone Number Including Area Code)
Not Applicable
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(Former name, former address and formal fiscal year,
if changed since last report)
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
----- -----
The number of shares of Common Stock outstanding as of June 29, 1996 was:
3,126,657 Shares
<PAGE> 2
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
Consolidated Balance Sheets 1
June 29, 1996 and December 30, 1995
Consolidated Statements of Operations 2
and Retained Earnings for the Three and
Six Months Ended June 29, 1996 and
July 1, 1995
Consolidated Statements of Cash Flows 3
Six Months Ended June 29, 1996 and
July 1, 1995
Notes to Consolidated Financial 4-5
Statements
Item 2. Management's Discussion and Analysis 6-12
of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
-----------------
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of
Security Holders 13-14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
PART I. FINANCIAL STATEMENTS
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars in Thousands except Share Data)
<TABLE>
<CAPTION>
June 29, December 30,
1996 1995
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 3,325 $ 3,239
Accounts receivable (less allowance for doubtful accounts of
$1,002 and $1,077) 17,676 20,849
Inventories 16,190 18,534
Deferred income taxes 868 1,088
Prepaid expenses and other current assets 1,098 1,512
------- -------
TOTAL CURRENT ASSETS 39,157 45,222
PROPERTY, PLANT AND EQUIPMENT, net 16,253 17,595
PATENTS AND LICENSES (Net of accumulated amortization
of $4,664 and $4,644) 490 480
EXCESS OF COST OVER NET ASSETS ACQUIRED
(Net of accumulated amortization of $3,063 and $3,009) 5,046 5,597
OTHER ASSETS 196 402
------- -------
TOTAL ASSETS $61,142 $69,296
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
----------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $24,309 $ 2,133
Revolver borrowings 3,013 --
Accounts payable 5,177 9,250
Accrued expenses & other current liabilities 4,863 2,558
Accrued payroll 1,959 1,459
Accrued commissions 2,207 2,523
Customer advances 2,300 2,612
Accrued warranty 858 893
Income taxes payable 762 680
------- -------
TOTAL CURRENT LIABILITIES 45,448 22,108
LONG-TERM DEBT, NET OF CURRENT PORTION 2,725 35,004
DEFERRED INCOME TAXES 466 466
OTHER NONCURRENT LIABILITIES 1,911 2,297
COMMITMENTS AND CONTINGENCIES
SERIES A JUNIOR PARTICIPATING PREFERRED
SHARES, $.01 par value - authorized 50,000 shares; none issued -- --
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value - authorized 950,000 shares;
none issued -- --
Common stock, $.01 par value - authorized 15,000,000 shares;
issued 4,189,607 shares and 4,175,585 shares 42 42
Paid-in capital 14,049 13,980
Retained earnings 7,456 5,776
Cumulative translation adjustments (391) 187
------- -------
21,156 19,985
Treasury stock, 1,062,950 shares - at cost (10,564) (10,564)
------- -------
TOTAL SHAREHOLDERS' EQUITY 10,592 9,421
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $61,142 $69,296
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
-1-
<PAGE> 4
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS & RETAINED EARNINGS
(Dollars in Thousands except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- -------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
------- -------- ------- -------
<S> <C> <C> <C> <C>
REVENUES $21,880 $ 32,982 $45,459 $63,485
COST OF REVENUES 11,804 20,874 25,450 40,166
------- -------- ------- -------
Gross profit 10,076 12,108 20,009 23,319
OPERATING EXPENSES
Selling, general and administrative 7,406 9,725 14,918 19,935
Research and development 619 1,004 1,232 1,980
Loss on disposition of business -- 10,529 -- 10,529
------- -------- ------- -------
8,025 21,258 16,150 32,444
------- -------- ------- -------
OPERATING PROFIT (LOSS) 2,051 (9,150) 3,859 (9,125)
INTEREST EXPENSE 583 1,350 1,179 2,655
------- -------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES 1,468 (10,500) 2,680 (11,780)
INCOME TAX PROVISION (BENEFIT) 540 (1,550) 1,000 (1,550)
------- -------- ------- -------
NET INCOME (LOSS) 928 (8,950) 1,680 (10,230)
RETAINED EARNINGS
Beginning of period 6,528 13,790 5,776 15,070
------- -------- ------- -------
End of period $ 7,456 $ 4,840 $ 7,456 $ 4,840
======= ======== ======= =======
EARNINGS (LOSS) PER SHARE $ .30 $ (2.90) $ .54 $ (3.31)
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 3,120,000 3,088,000 3,120,000 3,088,000
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
-2-
<PAGE> 5
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------
June 29, July 1,
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (loss) $ 1,680 $(10,230)
Adjustment to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Loss on disposition of business - 10,529
Depreciation and amortization 1,567 3,011
Amortization of deferred gain on sale/leaseback transaction (227) (231)
Deferred income taxes 189 (1,474)
Changes in assets and liabilities:
Accounts receivable, net 2,408 1,217
Inventories 1,648 (1,158)
Prepaid expenses and other current assets 358 (886)
Other assets 4 294
Accounts payable (3,807) (24)
Accrued expenses and other current liabilities 2,032 (1,311)
Accrued warranty 15 336
Income taxes 83 (165)
-------- --------
Net cash provided by (used in) operating activities 5,950 (92)
-------- --------
INVESTING ACTIVITIES:
Proceeds from disposition of business --- 9,000
Capital expenditures (639) (332)
Investment in patents and licenses (30) 5
-------- --------
Net cash (used in) provided by investing activities (669) 8,673
-------- --------
FINANCING ACTIVITIES:
Net payments under notes payable to banks (10,917) (7,558)
Principal payments on long-term debt (163) (311)
Proceeds from issuance of long-term debt 5,949 --
Proceeds from issuance of common stock 70 73
Net cash (used in) provided by financing activities (5,061) (7,796)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (134) (137)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 86 648
-------- --------
CASH AND CASH EQUIVALENTS
Beginning of period 3,239 1,086
-------- --------
End of period $ 3,325 $ 1,734
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE> 6
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The consolidated financial statements
include the accounts of K-Tron International, Inc. ("K-Tron" or the "Company")
and its subsidiaries. All intercompany transactions have been eliminated in
consolidation. In the opinion of management, all adjustments (consisting of a
normal recurring nature) considered necessary for a fair presentation of
results for interim periods have been made. The results for the interim
periods are not necessarily indicative of the results for a full year.
The unaudited financial statements herein should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 30, 1995
which was previously filed with the Securities and Exchange Commission.
2. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company considers all highly liquid short-term investments purchased with a
maturity of three months or less to be cash equivalents. Cash paid in the
first six months of 1996 and 1995 for interest was $.9 million and $1.9
million, respectively and for income taxes was $.6 million and $.7 million,
respectively.
3. DISPOSITION OF BUSINESSES
In June 1995 the Company sold Colortronic GmbH and rights to several related
patents and patent applications, resulting in a pretax loss of $10.5 million in
1995. In the fourth quarter of 1995, the Company sold certain operations in
France and Brazil, resulting in a pretax loss of $0.7 million in 1995.
See Management's Discussion and Analysis of Financial Conditions and Results of
Operations ("MD&A") for the pro forma impact of the sale of these businesses on
the results of operations for the first quarter and six months ended June 1995.
4. MATURITY OF DEBT
As discussed in the MD&A, the Company is currently operating under a Swiss
forbearance agreement, which is scheduled to expire March 31,
-4-
<PAGE> 7
1997. Swiss bank debt, previously long term debt ($24.0 million as of June 29,
1996), was reclassified to short-term debt at the end of the second quarter of
1996. The Company is exploring ways to refinance or reduce its bank
indebtedness in Switzerland.
-5-
<PAGE> 8
ITEM 2. K-TRON INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 29, 1996
Overview
As reported in the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995, at the end of that year the Company and its U.S.
manufacturing subsidiary were in default under several financial covenants
contained in their loan agreement with three U.S. banks, while the Company's
Swiss manufacturing subsidiary was in violation of certain equity guarantees
contained in its loan agreements with several Swiss lenders, resulting in a
default under each of the loan agreements. In June 1996 the Company's U.S.
manufacturing subsidiary refinanced the U.S. bank debt with two new lenders.
The new loans were made directly to the subsidiary and consisted of a mortgage
loan in the amount of $2.7 million and a two-year secured revolving credit
facility with maximum availability of $5.7 million. Borrowings under the new
loan agreements of $5.9 million along with $1.4 million of cash were used to
repay $7.3 million outstanding under the old loan agreement and that loan
facility and related forbearance agreement have been terminated. The Swiss
defaults are continuing, however, and have not been waived. A forbearance
agreement exists with Swiss lenders which is described in more detail in the
1995 Form 10-K. At June 29, 1996, the principal amount outstanding under the
Swiss loan agreement was $24.2 million. The Company is exploring ways to
refinance or reduce its bank indebtedness in Switzerland.
Since the 1995 dispositions of the Company's Colortronic, Brazilian
and Hasler France businesses and the discontinuance of the other Colortronic
brand business (collectively the "Discontinued Businesses"), the Company's
results have improved significantly, and it reported net income of $928,000 and
$752,000 for the second quarter and first quarters of 1996, respectively, as
well as $561,000 and $375,000 for the fourth and third quarters of 1995,
respectively. Cash flow from operations has also improved, enabling the
Company to reduce bank debt in the first half of 1996 by $5,131,000 and by
$5,368,000 in the second half of 1995.
The Company has $2.7 million of availability under its U.S. loan
agreement and $5.2 million of availability under certain of its Swiss loan
agreements. Management believes that cash flow will be sufficient in 1996 to
sustain the business and further that the Company and its subsidiaries will be
able to comply with all of the covenants and payment provisions contained in
the U.S. loan agreements and Swiss forbearance agreement. Management further
believes that with the completion of new U.S. financing and continuing
operating improvement, the Company will be able to either refinance or extend
the maturity of the Swiss forbearance agreement before it expires in 1997, but
there can be no assurance that this will happen.
-6-
<PAGE> 9
K-Tron is an international company with approximately 60% of its business
arising from sources outside the United States, primarily Europe. As such the
financial position and performance of the Company is sensitive to both
translation and transaction fluctuations in foreign currency exchange rates.
Results of Operations
For the second quarter and first six months of 1996, the Company reported
net income of $928,000 and $1,680,000, respectively, as compared to a net loss
of $8,950,000 and $10,230,000, respectively, for the same periods in 1995. On a
pro forma basis, if the actions regarding the Discontinued Businesses had
occurred at the beginning of the 1995 fiscal year, the Company would have had
net income of $225,000 and $378,000 for the second quarter and first six months
of 1995, respectively.
-7-
<PAGE> 10
The following table sets forth the Company's results of operations for the
periods indicated, as well as 1995 on a pro forma basis as described above:
($ in 000's)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------
June 29, 1996 July 1, 1995
------------------ -----------------------------------------------
Proforma As Reported
------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $21,880 100.0% $23,812 100.0% $32,982 100.0%
Cost of Revenues 11,804 53.9 14,382 60.4 20,874 63.3
------- ----- ------- ----- ------- -----
Gross Profit 10,076 46.1 9,430 39.6 12,108 36.7
Selling, General & Administrative 7,406 33.9 7,639 32.0 9,725 29.5
Research & Development 619 2.8 705 3.0 1,004 3.0
Loss on Disposition of Business -- -- 10,529 31.9
------- ----- ------- ----- ------- -----
Operating Profit (loss) 2,051 9.4 1,086 4.6 (9,150) (27.7)
Interest 583 2.7 711 3.0 1,350 4.1
------- ----- ------- ----- ------- -----
Income (loss) before income taxes 1,468 6.7 375 1.6 (10,500) (31.8)
Income tax (benefit) 540 2.5 150 .6 (1,550) (4.7)
------- ----- ------- ----- ------- -----
Net income (loss) $ 928 4.2% $ 225 1.0% $(8.950) (27.1)%
======= ===== ======= ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------------------------------------------------
June 29, 1996 July 1, 1995
------------------ ------------------------------------------------
Proforma As Reported
--------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $45,459 100.0% $42,936 100.0% $ 63,485 100.0%
Cost of Revenues 25,450 56.0 25,162 58.6 40,166 63.3
------- ----- ------- ----- -------- -----
Gross Profit 20,009 44.0 17,774 41.4 23,319 36.7
Selling, General & Administrative 14,918 32.8 14,577 34.0 19,935 31.4
Research & Development 1,232 2.7 1,321 3.1 1,980 3.1
Loss on Disposition of Business -- -- 10,529 16.6
------- ----- ------- ----- -------- -----
Operating Profit (loss) 3,859 8.5 1,876 4.3 (9,125) (14.4)
Interest 1,179 2.6 1,348 3.1 2,655 4.2
------- ----- ------- ----- -------- -----
Income (loss) before income taxes 2,680 5.9 528 1.2 (11,780) (18.6)
Income tax (benefit) 1,000 2.2 150 .3 (1,550) (2.5)
------- ----- ------- ----- -------- -----
Net income (loss) $ 1,680 3.7% $ 378 .9% $(10.230) (16.1)%
======= ===== ======= ===== ======== =====
Backlog after excluding the
Discontinued Businesses
(at a constant foreign exchange
rate) $22,355 $21,302
======= =======
</TABLE>
-8-
<PAGE> 11
Translation of the Company's foreign revenues and results of
operations into U.S. dollars is affected by changes in foreign exchange rates,
particularly with respect to the Swiss franc and the Deutsche mark. Revenues
and earnings for the second quarter and first six months of 1996 as well as for
the same periods in 1995 were affected by changes in various foreign currency
exchange rates, including in particular the average U.S. dollar/Swiss franc,
average U.S. dollar/Deutsche mark and average Deutsche mark/Swiss franc
exchange rates, as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Swiss franc average rate $.807 $.868 $.823 $.838
% depreciation vs. prior year -7.0% -1.8%
Deutsche mark average rate $.659 $.718 $.670 $.698
% depreciation vs. prior year -8.2% -4.0%
Deutsche mark average rate vs.
Swiss franc average rate .817 .827 .814 .833
% depreciation vs. prior year -1.2% -2.3%
</TABLE>
Total revenues decreased by $11.1 million or 33.7% (29.9% when
using a constant foreign exchange rate) in the second quarter of 1996 when
compared to the same periods in 1995 and decreased by $1.9 million or 8.1%
(6.1% when using a constant foreign exchange rate) in the second quarter of
1996 when compared to the pro forma 1995 revenues. Total revenues for the
second quarter decreased as compared to the pro forma 1995 second quarter
revenues primarily due to the effect of a stronger U.S. dollar relative to the
Swiss franc and Deutsche mark and a reduced level of shipments from Europe.
Total revenues increased by $2.5 million or 5.9% for the first six months of
1996 as compared to the pro forma 1995 revenues primarily due to a strong
United States and European backlog at the end of 1995, strong first quarter
1996 order inflow offset by a lower foreign exchange translation rate.
Gross margin as a percent of revenues improved to 46.1% and 44.0%
in the second quarter and first six months of 1996, respectively, as compared
to 36.7% for the same periods in 1995 (39.6% and 41.4% in 1995, respectively,
after excluding the Discontinued Businesses). The improvement in gross margin
in 1996 was due to volume, mix and price increases and cost reductions as well
as the June 1995 sale and discontinuance of the Colortronic business which had
low margins, offset by the inability to pass on increased costs caused by the
appreciation of the Swiss franc to customers in certain European countries,
primarily Germany. The increase in margin when compared to the margins without
the Discontinued Businesses was primarily due to volume, mix and price
increases and cost reductions.
-9-
<PAGE> 12
Selling, general and administrative (SG&A) expense decreased by
$2.3 million or 23.8% in the second quarter of 1996 and by $5.0 million, or
25.2% for the first six months of 1996 as compared to the same periods in 1995.
The decrease in SG&A was due to the elimination of SG&A expenses associated
with the Discontinued Businesses as well as lower foreign exchange translation
rates. After excluding the SG&A expenses relating to the Discontinued
Businesses from 1995, the 1996 second quarter SG&A decreased by $0.2 million
and increased by 1.9% as a percent of revenues. For the first six months of
1996, SG&A increased by $.3 million but decreased by 1.2% when compared to the
1995 pro forma. The increase in dollars for the first six months of 1996 was
due to higher commissions and selling expenses related to the increased sales
volume offset by lower foreign exchange translation rates. The decrease as a
percentage of revenues was due to an increase in revenues.
Research and development (R&D) expenditures decreased by $.4
million or 38.3% in the second quarter of 1996 and $.7 million or 37.8% for the
first six months of 1996, as compared to the same periods in 1995 due to the
elimination of Colortronic expenses, and lower foreign exchange translation
rates, offset in part by using for other purposes certain resources previously
allocated to Colortronic. R&D expense as a percent of revenues was 2.8% in the
second quarter of 1996 and 2.7% for the first six months of 1996, and 3.0% and
3.1% in 1995, respectively, in the same periods in 1995 (3.0% and 3.1%,
respectively, excluding the Discontinued Businesses).
Interest expense decreased by $.8 million or 56.8% in the second
quarter of 1996 and $1.4 million or 55.7% for the first six months of 1996 as
compared to the same periods in 1995 due to lower debt levels and lower foreign
exchange translation rates, offset in part by increased interest rates in the
United States. Interest expense as a percent of revenues was 2.7% in the second
quarter of 1996 and 2.6% for the first six months of 1996 and 4.1% and 4.2%,
respectively, for the same periods in 1995 (3.0% and 3.1%, in 1995
respectively, excluding Discontinued Businesses).
A provision for income taxes was recorded on the second quarter
and first six months of 1996 income. A tax benefit was recorded in 1995 due to
the significant loss generated from the sale of Colortronic. The effective tax
rate for the second quarter and first six months of 1996 was 37%.
The Company's backlog increased by 4.9% at the end of the second quarter
of 1996 compared to the same period in 1995 (excluding the Discontinued
Businesses and at a constant foreign exchange rate) due to strong bookings in
Europe and the Far East.
-10-
<PAGE> 13
Liquidity and Capital Resources
The Company's capitalization as of the end of the second quarter and
first quarters of 1996 and fiscal year end 1995 is set forth below:
<TABLE>
<CAPTION>
June 29, March 30, Dec. 30,
(Dollars in Thousands) 1996 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Short-term debt including
current portion of
long-term debt $27,322 $ 7,882 $ 2,133
Long-term debt 2,725 26,593 35,004
-------- -------- --------
Total debt 30,047 34,475 37,137
Shareholders' equity 10,592 9,897 9,421
------- ------- -------
Total debt and share-
holders' equity $40,639 $44,372 $46,558
======= ======= =======
Percent debt to total
capitalization 74% 78% 80%
Percent long-term
debt to equity 26% 269% 372%
Percent total debt to
equity 283% 348% 394%
</TABLE>
In June 1996 the Company's U.S. manufacturing subsidiary obtained a
mortgage and a two-year secured revolving credit facility from two new lenders.
Proceeds of $5.9 million together with $1.4 million of cash were used to repay
all the outstanding U.S. debt under the old loan agreement. The Company and
its U.S. manufacturing subsidiary are no longer operating under a U.S.
forbearance agreement.
In order to comply with a consensus issued in November 1995 set forth
by the Emerging Issues Task Force in EITF 95-22 regarding classification of
certain debt instruments that include both a requirement for a lock box
arrangement and a subjective acceleration clause, $3.0 million of the
borrowings under the new revolving line of credit have been classified as a
current liability. Under the terms of the revolving credit agreement, however,
K-Tron will not be required to repay this amount during the next fiscal year.
Payment will only be required at the expiration of the agreement on June 14,
1998 or if the borrowing base is reduced below the amount outstanding. Based
on anticipated borrowing base levels, K-Tron believes the amount outstanding
will be due and payable in June 1998.
-11-
<PAGE> 14
Total debt decreased by $7.1 million for the first six months of 1996,
of which $2.0 million was due to the effect of foreign exchange translation.
Total debt without the effect of the foreign exchange translation decreased by
$5.1 million. European and U.S. debt decreased by $2.9 million and $2.2
million, respectively. The Company had $2.7 million availability under its
U.S. loan agreement and $5.2 million of available credit facilities in Europe
as of June 29, 1996.
The increase in short-term debt of $19.4 million in the second quarter
of 1996 is primarily due to the reclassification of the European bank debt to
short-term as a result of the maturity in March 1997 of the debt in accordance
with the forbearance agreement.
At the end of June 1996, working capital was a deficit of $6.3 million
as compared to working capital of $23.1 million at December 1995, and the ratio
of current assets to current liabilities was .86 and 2.05, respectively.
Working capital decreased in 1996 primarily due to the reclassification of
long-term debt to short-term debt as discussed above.
For the first six months of 1996, the Company utilized earnings from
operations and internally-generated funds to meet its working capital needs and
reduce debt. In 1995, the Company met its working capital needs by utilizing
its short and long-term borrowings.
Operating activities provided $6.0 million in positive cash flow in
the first six months of 1996 as compared to using $.1 million in the same
period of 1995. The increase in operating cash flow was primarily the result of
operating profits generated in the first six months of 1996, and reduction of
accounts receivable and inventory levels, offset in part by a net reduction in
accounts payable and accrued expenses. The significant loss in 1995 was the
primary reason for the use of cash in 1995.
Cash used in investing activities for the first six months of 1996 was
due to capital additions. The funds provided in 1995 were primarily due to the
funds received from the sale of Colortronic.
Cash used in financing activities for the first six months of 1996 was
for the reduction of debt and was obtained from the cash provided from
operating activities. The funds used in 1995 were the result of using the
proceeds from the sale of Colortronic to reduce bank debt.
Changes in foreign exchange rates, particularly with respect to the
Swiss franc and Deutsche mark, caused a translation adjustment decrease in
shareholders' equity of $.6 million in the first six months of 1996.
-12-
<PAGE> 15
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
As reported in the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995, at the end of that year the Company and its U.S.
manufacturing subsidiary were in default under several financial covenants
contained in their loan agreement with three U.S. banks, while the Company's
Swiss manufacturing subsidiary was in violation of certain equity guarantees
contained in its loan agreements with several Swiss lenders, resulting in a
default under each of the loan agreements. In June 1996 the Company's U.S.
manufacturing subsidiary refinanced the U.S. bank debt with two new lenders,
the old lenders were repaid and the related loan and forbearance agreement was
terminated. The Swiss defaults are continuing, however, and have not been
waived.
In early 1996, an agreement was entered into among the Company's Swiss
subsidiary, several other K-Tron companies and the lenders to the Swiss
subsidiary under which the lenders have agreed to defer until March 31, 1997
the repayment of credit lines and the principal payments on fixed loans that
become due prior to that date. At June 29, 1996, the principal amount
outstanding under the Swiss loan agreements was $24.2 million.
More details about the Swiss Forbearance Agreement are contained in
the Company's Annual Report on Form 10-K for the fiscal year ending December
30, 1995.
The Company is exploring ways to refinance or reduce its bank
indebtedness in Switzerland.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on May 10,
1996.
(b) Not applicable.
(c) Shareholders of the Company were asked to vote on the following three
proposals:
1. Upon the proposal to elect two Class III directors, the Board
of Directors, acting on the recommendation of the Chairman of
its Nominating Committee, nominated Norman Cohen and Richard
J. Pinola as Class III directors. The results of the votes
taken at the Annual Meeting were as follows:
-13-
<PAGE> 16
Number of Votes
---------------
FOR WITHHELD
--- --------
Norman Cohen 2,586,767 8,996
Richard J. Pinola 2,586,867 8,896
Since directors are elected by a plurality of the votes cast, a
withheld vote had no effect. In addition, votes cast in the election
could not be recorded against or as an abstention, nor could a broker
non-vote be recorded.
2. Upon the proposal to extend the K-Tron International, Inc. Employee
Stock Purchase Plan, the results of the votes taken at the Annual
Meeting were as follows:
Number of Votes
---------------
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
2,082,298 477,595 1,400 34,470
Since the proposal in order to pass required the affirmative vote of a
majority of the shares present in person or represented by proxy at
the Annual Meeting and entitled to vote, an abstention (including a
broker non-vote) had the same effect as a vote against.
3. Upon the proposal to adopt the K-Tron International, Inc. 1996 Equity
Compensation Plan, the results of the votes taken at the Annual
Meeting were as follows:
Number of Votes
---------------
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
1,530,133 712,422 3,700 349,508
Since the proposal in order to pass required the affirmative vote of a
majority of the shares present in person or represented by proxy at
the Annual Meeting and entitled to vote, an abstention (including a
broker non-vote) had the same effect as a vote against.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Earnings (Loss) Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the six months ended June 29,
1996.
-14-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on his behalf by the
undersigned thereunto duly authorized.
K-TRON INTERNATIONAL, INC.
Date: July 26, 1996
-------------
By: /s/ Robert L. Weinberg
-----------------------
Robert L. Weinberg
Senior Vice President &
Chief Financial Officer
(Duly authorized officer
and principal financial
officer of the registrant)
By: /s/ Alan R. Sukoneck
------------------------
Alan R. Sukoneck
Vice President & Controller
(Duly authorized officer and
principal accounting officer
of the registrant)
-15-
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
11.1 Computation of Earnings
(Loss) Per Share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 11.1
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
AVERAGE COMMON AND
COMMON-EQUIVALENT
SHARES:
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING PER
PERIOD 3,113,000 3,088,000 3,113,000 3,088,000
STOCK OPTIONS 7,000 -- 7,000 --
----------- ----------- ---------- ------------
ADJUSTED AVERAGE COMMON
AND COMMON-EQUIVALENT
SHARES COMPUTATION 3,120,000 3,088,000 3,120,000 3,088,000
=========== =========== ========== ============
EARNINGS FOR COMMON AND
COMMON-EQUIVALENT
SHARES COMPUTATION:
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCK $ 928,000 $(8,950,000) $1,680,000 $(10,230,000)
=========== =========== ========== ============
EARNINGS (LOSS) PER SHARE:
EARNINGS (LOSS) PER SHARE $ .30 $ (2.90) $ .54 $ (3.31)
=========== =========== ========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 3,325
<SECURITIES> 0
<RECEIVABLES> 18,678
<ALLOWANCES> 1,002
<INVENTORY> 16,190
<CURRENT-ASSETS> 39,157
<PP&E> 42,950
<DEPRECIATION> 26,697
<TOTAL-ASSETS> 61,142
<CURRENT-LIABILITIES> 45,448
<BONDS> 2,725
0
0
<COMMON> 42
<OTHER-SE> 10,550
<TOTAL-LIABILITY-AND-EQUITY> 61,142
<SALES> 45,459
<TOTAL-REVENUES> 45,459
<CGS> 25,450
<TOTAL-COSTS> 25,450
<OTHER-EXPENSES> 16,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,179
<INCOME-PRETAX> 2,680
<INCOME-TAX> 1,000
<INCOME-CONTINUING> 1,680
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,680
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
