<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 March 29, 1997
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
(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 March 29, 1997 was:
3,142,865 Shares
<PAGE> 2
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
March 29, 1997 and December 28, 1996 1
Consolidated Statements of Income
and Retained Earnings Three Months
Ended March 29, 1997 and March 30, 1996 2
Consolidated Statements of Cash Flows
Three Months Ended March 29, 1997 and
March 30, 1996 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5 - 8
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 9
Item 6. Exhibits and Reports on Form 8-K 9
<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>
March 29, December 28,
1997 1996
(Unaudited) (Audited)
-------- --------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,426 $ 3,079
Accounts receivable (less allowance for doubtful accounts of
$995 and $1,037) 16,045 16,336
Inventories 11,946 13,258
Deferred income taxes 641 641
Prepaid expenses and other current assets 854 1,353
-------- --------
Total Current Assets 33,912 34,667
PROPERTY, PLANT AND EQUIPMENT, net 14,413 15,624
PATENTS, Net 523 493
EXCESS OF COST OVER NET ASSETS ACQUIRED, net 3,972 4,422
OTHER ASSETS 217 124
-------- --------
Total Assets $ 53,037 $ 55,330
======== ========
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks -- 494
Current portion of long-term debt 325 367
Accounts payable 5,414 5,641
Accrued expenses & other current liabilities 4,428 3,440
Accrued payroll 2,218 2,579
Accrued commissions 2,187 2,407
Customer advances 2,925 2,318
Accrued warranty 857 826
Income taxes payable 778 1,226
Deferred income taxes 7 7
-------- --------
Total Current Liabilities 19,139 19,305
LONG-TERM DEBT, net of current portion 18,316 20,807
DEFERRED INCOME TAXES 459 459
OTHER NONCURRENT LIABILITIES 1,353 1,565
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 4,205,815 shares and 4,200,328 shares 42 42
Paid-in capital 14,170 14,120
Retained earnings 10,852 9,802
Cumulative translation adjustments (730) (206)
-------- --------
24,334 23,758
Treasury stock, 1,062,950 shares - at cost (10,564) (10,564)
-------- --------
Total Shareholders' Equity 13,770 13,194
-------- --------
Total Liabilities and Shareholders' Equity $ 53,037 $ 55,330
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
-1-
<PAGE> 4
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME & RETAINED EARNINGS
(Dollars in Thousands except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 29, March 30,
1997 1996
---------- ----------
<S> <C> <C>
REVENUES $ 21,344 $ 23,579
COST OF REVENUES 11,981 13,646
---------- ----------
Gross profit 9,363 9,933
OPERATING EXPENSES
Selling, general and administrative 6,962 7,512
Research and development 722 613
---------- ----------
7,684 8,125
---------- ----------
Operating Profit 1,679 1,808
INTEREST EXPENSE 314 596
---------- ----------
Income Before Income Taxes 1,365 1,212
INCOME TAX PROVISION 315 460
---------- ----------
Net Income 1,050 752
RETAINED EARNINGS
Beginning of period 9,802 5,776
---------- ----------
End of period $ 10,852 $ 6,528
========== ==========
EARNINGS PER SHARE $ .33 $ .24
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 3,182,000 3,127,000
========== ==========
</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>
Three Months Ended
------------------
March 29, March 30,
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 1,050 $ 752
Adjustment to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 770 796
Amortization of deferred gain on sale/leaseback transaction (96) (116)
Deferred income taxes -- 110
Changes in assets and liabilities:
Accounts receivable, net (499) (272)
Inventories 800 1,284
Prepaid expenses and other current assets 454 286
Other assets (108) (143)
Accounts payable 37 (2,637)
Accrued expenses and other current liabilities 1,442 1,214
Accrued warranty 76 202
Income taxes (431) (115)
------- -------
Net cash provided by operating activities 3,495 1,361
------- -------
INVESTING ACTIVITIES:
Capital expenditures (184) (125)
Investment in patents (40) (16)
------- -------
Net cash used in investing activities (224) (141)
------- -------
FINANCING ACTIVITIES:
Net re-payments under notes payable to banks (1,400) (1,871)
Principal payments on long-term debt (282) (89)
Proceeds from issuance of common stock 50 --
------- -------
Net cash used in financing activities (1,632) (1,960)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (292) (49)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,347 (789)
CASH AND CASH EQUIVALENTS
Beginning of period 3,079 3,239
------- -------
End of period $ 4,426 $ 2,450
======= =======
</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 28, 1996 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
three months of 1997 and 1996 for interest was $.2 million and $.4 million,
respectively, and for income taxes was $.7 million and $.5 million,
respectively.
3. Impact of New Accounting Pronouncement
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128") which requires
the Company to present in the financial statements "basic" and "diluted"
earnings per share, as defined. SFAS No. 128 is effective for interim and annual
periods ending after December 15, 1997, however, "basic" and "diluted" earnings
per share as defined for the three month periods ended March 29, 1997 and March
30, 1996 would be $.33 and $.33; and $.24 and $.24, respectively, if SFAS No.
128 were adopted for those periods.
-4-
<PAGE> 7
ITEM 2. K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 29, 1997
Results of Operations
For the first three months of 1997 and 1996, the Company reported net
income of $1,050,000 and $752,000, respectively.
K-Tron is an international company with approximately 60% of its
revenues from products manufactured and services performed from its facilities
outside the United States, primarily in Europe. As such, the financial position
and performance of the Company is sensitive to both translation and transaction
fluctuations in foreign currency exchange rates ("foreign exchange rates").
The following table sets forth the Company's results of operations
expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 29, 1997 March 30, 1996
-------------- --------------
<S> <C> <C>
Total Revenues 100.0% 100.0%
Cost of Revenues 56.1 57.9
----- -----
Gross Profit 43.9 42.1
Selling, General & Administrative 32.6 31.9
Research & Development 3.4 2.6
----- -----
Operating Income 7.9 7.6
Interest 1.5 2.5
----- -----
Income before income taxes 6.4% 5.1%
===== =====
<CAPTION>
Backlog at end of period (at March
29, 1997 constant foreign exchange
rates, in millions):
March 1997 Dec. 1996 March 1996
---------- --------- ----------
<S> <C> <C> <C>
$22.3 $19.7 $22.3
========== ========= ==========
</TABLE>
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. In addition, revenues and
income of the Company with respect to particular transactions may be affected by
changes in foreign exchange rates where sales are made in other currencies,
including in particular the U.S. dollar/Swiss franc, U.S. dollar/Deutsche mark
and Deutsche mark/Swiss franc exchange rates. For the first quarters of 1997 and
1996, the changes in these exchange rates were as follows:
-5-
<PAGE> 8
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 29, March 30,
1997 1996
--------- ---------
<S> <C> <C> <C>
Swiss franc average rate $.697 $.839
% devaluation vs. prior year -16.9%
Deutsche mark average rate $.604 $.681
% devaluation vs. prior year -11.3%
Deutsche mark average rate vs.
Swiss franc average rate .867 .812
% appreciation vs. prior year +6.8%
</TABLE>
Total revenues decreased by $2.2 million or 9.4% in the first quarter
of 1997 when compared to the same period in 1996. The decrease in revenues was
due to lower foreign exchange translation rates. Revenue would have increased by
0.1% when using constant foreign exchange rates.
Gross margin as a percent of revenues improved to 43.9% in the first
quarter of 1997, as compared to 42.1% for the same period in 1996. The
improvement in gross margin in 1997 was due to sales mix and cost reductions.
Selling, general and administrative (SG&A) expense decreased by $.6
million or 7.3% in the first quarter of 1997 as compared to the same period in
1996. The decrease in SG&A was due to lower foreign exchange translation rates.
Research and development (R&D) expenditures increased by $.1 million or
17.8% in the first quarter of 1997 as compared to the same period in 1996. R&D
increased due to the development of new product enhancements.
Interest expense decreased by $.3 million or 47% in the first quarter
of 1997 as compared to the same period in 1996, primarily due to lower debt
levels and lower foreign exchange translation rates.
The effective tax rates for the first quarter of 1997 and 1996 were 23%
and 38%, respectively. The effective tax rate in the first quarter of 1997 was
lower than the 1996 first quarter rate due to the utilization of foreign net
operating loss carry forwards.
The Company's backlog remained constant at the end of the first quarter
of 1997 compared to the same period in 1996 (at constant foreign exchange
rates). The backlog increased by 13% at the end of the first quarter of 1997
when compared to the end of 1996 (at constant foreign exchange rates). The
increase was in Europe.
-6-
<PAGE> 9
Liquidity and Capital Resources
The Company's capitalization as of the end of the first quarter of 1997
and fiscal years 1996 and 1995 is set forth below:
<TABLE>
<CAPTION>
March 29, Dec. 28, Dec. 30,
(Dollars in Thousands) 1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Short-term debt including current
portion of long-term debt $ 325 $ 861 $ 2,133
Long-term debt 18,316 20,807 35,004
------- ------- -------
Total debt 18,641 21,668 37,137
Shareholders' equity 13,770 13,194 9,421
------- ------- -------
Total debt and shareholders' equity $32,411 $34,862 $46,558
======= ======= =======
Percent total debt to total capitalization 58% 62% 80%
Percent long-term debt to equity 133% 158% 372%
Percent total debt to equity 135% 164% 394%
</TABLE>
At the end of 1995, 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 those loan
agreements. In early 1996, a forbearance agreement was entered into with the
Swiss lenders, which was described in detail in Item 7 of the Company's annual
report on Form 10-K for the fiscal year ended December 30, 1995. In February
1997, this forbearance agreement, which was scheduled to expire on March 31,
1997, was amended and extended until March 31, 1999, and such subsidiary is not
in default under any of its loan agreements with such lenders.
Total debt decreased by $3.0 million in the first three months of 1997,
of which $1.3 million was due to the effect of foreign exchange translation.
Total debt without the effect of the foreign exchange translation decreased by
$1.7 million. European and U.S. debt decreased by $1.5 million and $.2 million,
respectively. At March 29, 1997, the Company had $5.7 million of availability
under its U.S. revolving credit agreement and $5.8 million of availability under
certain of its Swiss loan agreements.
At March 29, 1997, there was working capital of $14.8 million as
compared to $15.4 million at December 28, 1996, and the ratio of current assets
to current liabilities at those dates was 1.77 and 1.80, respectively. Working
capital decreased in 1997 primarily due to the utilization of funds generated
from operations and improved asset management to reduce indebtedness.
-7-
<PAGE> 10
For the first three months of 1997 and 1996, the Company utilized
earnings from operations and internally-generated funds to meet its working
capital needs and reduce debt.
Net cash provided by operating activities was $3.5 million in the first
three months of 1997 as compared to $1.4 million in the same period of 1996. The
increase in operating cash flow was primarily due to improved operating profits
as well as continued focus on asset management.
Net cash used in investing activities for the first three months of
1997 and 1996 was for capital additions.
Net cash used in financing activities for the first three months of
1997 and 1996 was for the reduction of debt and was obtained from the cash
provided from operating activities.
Changes in foreign exchange rates, particularly with respect to the
Swiss franc and Deutsche mark, caused a translation adjustment decrease in
shareholders' equity of $.5 million in the first three months of 1997.
-8-
<PAGE> 11
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
At the end of 1995, 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 those loan
agreements. In early 1996, a forbearance agreement was entered into with the
Swiss lenders, which was described in detail in Item 7 of the Company's annual
report on Form 10-K for the fiscal year ended December 30, 1995. In February
1997, this forbearance agreement, which was scheduled to expire on March 31,
1997, was amended and extended until March 31, 1999, and such subsidiary is not
in default under any of its loan agreements with such lenders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended March 29,
1997.
-9-
<PAGE> 12
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: April 30, 1997
By: /s/ Robert L. Weinberg
--------------------------------
Robert L. Weinberg
Senior Executive 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, Chief Accounting
& Tax Officer
(Duly authorized officer and
principal accounting officer
of the registrant)
-10-
<PAGE> 13
EXHIBIT INDEX
Exhibit
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT INDEX
Exhibit
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 4,426
<SECURITIES> 0
<RECEIVABLES> 17,040
<ALLOWANCES> 995
<INVENTORY> 11,946
<CURRENT-ASSETS> 33,912
<PP&E> 40,511
<DEPRECIATION> 26,098
<TOTAL-ASSETS> 53,037
<CURRENT-LIABILITIES> 19,139
<BONDS> 18,316
0
0
<COMMON> 42
<OTHER-SE> 13,728
<TOTAL-LIABILITY-AND-EQUITY> 53,037
<SALES> 21,344
<TOTAL-REVENUES> 21,344
<CGS> 11,981
<TOTAL-COSTS> 11,981
<OTHER-EXPENSES> 7,684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 314
<INCOME-PRETAX> 1,365
<INCOME-TAX> 315
<INCOME-CONTINUING> 1,050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,050
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
