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<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 28, 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 June 28, 1997 was:
-------------
3,151,665 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
June 28, 1997 and December 28, 1996 1
Consolidated Statements of Income
and Retained Earnings for the Three and Six
Months Ended June 28, 1997 and June 29, 1996 2
Consolidated Statements of Cash Flows
Six Months Ended June 28, 1997 and
June 29, 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 4. Submission of Matters to a Vote of
Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
</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 28, December 28,
1997 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 3,621 $ 3,079
Accounts receivable (less allowance for doubtful accounts of
$995 and $1,037) 16,429 16,336
Inventories 12,410 13,258
Deferred income taxes 641 641
Prepaid expenses and other current assets 894 1,353
--------- ---------
Total Current Assets 33,995 34,667
PROPERTY, PLANT AND EQUIPMENT, net 14,593 15,624
PATENTS, Net 582 493
EXCESS OF COST OVER NET ASSETS ACQUIRED, net 3,910 4,422
OTHER ASSETS 354 124
--------- ---------
Total Assets $ 53,434 $ 55,330
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
----------------------------------
CURRENT LIABILITIES:
Notes payable to banks $ -- $ 494
Current portion of long-term debt 366 367
Accounts payable 6,224 5,641
Accrued expenses & other current liabilities 4,923 3,440
Accrued payroll 3,129 2,579
Accrued commissions 2,355 2,407
Customer advances 2,693 2,318
Accrued warranty 879 826
Income taxes payable 766 1,226
Deferred income taxes 7 7
--------- ---------
Total Current Liabilities 21,342 19,305
LONG-TERM DEBT, net of current portion 15,407 20,807
DEFERRED INCOME TAXES 459 459
OTHER NONCURRENT LIABILITIES 1,276 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 4,214,615 shares and 4,200,328 shares 42 42
Paid-in capital 14,241 14,120
Retained earnings 12,104 9,802
Cumulative translation adjustments (873) (206)
---------- ----------
25,514 23,758
Treasury stock, 1,062,950 shares - at cost (10,564) (10,564)
---------- ----------
Total Shareholders' Equity 14,950 13,194
--------- ---------
Total Liabilities and Shareholders' Equity $ 53,434 $ 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 Six Months Ended
------------------ ----------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $21,763 $ 21,880 $43,107 $45,459
COST OF REVENUES 11,973 11,804 23,954 25,450
------- -------- ------- -------
Gross profit 9,790 10,076 19,153 20,009
OPERATING EXPENSES
Selling, general and administrative 7,064 7,406 14,026 14,918
Research and development 684 619 1,406 1,232
------- -------- ------- -------
7,748 8,025 15,432 16,150
------- -------- ------- -------
Operating Profit 2,042 2,051 3,721 3,859
INTEREST EXPENSE 320 583 634 1,179
------- -------- ------- -------
Income Before Income Taxes 1,722 1,468 3,087 2,680
INCOME TAX PROVISION 470 540 785 1,000
------- -------- ------- -------
Net Income 1,252 928 2,302 1,680
RETAINED EARNINGS
Beginning of period 10,852 6,528 9,802 5,776
------- -------- ------- -------
End of period $12,104 $ 7,456 $12,104 $ 7,456
======= ======== ======= =======
EARNINGS PER SHARE $ .39 $ .30 $ .72 $ .54
======= ======== ======= =======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,197,000 3,120,000 3,193,000 3,120,000
========= ========= ========= =========
</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 28, June 29,
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 2,302 $ 1,680
Adjustment to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,696 1,567
Amortization of deferred gain on sale/leaseback transaction (192) (227)
Deferred income taxes -- 189
Changes in assets and liabilities:
Accounts receivable, net (995) 2,408
Inventories 344 1,648
Prepaid expenses and other current assets 413 358
Other assets (249) 4
Accounts payable 860 (3,807)
Accrued expenses and other current liabilities 2,762 2,032
Accrued warranty 94 15
Income taxes (448) 83
------ -------
Net cash provided by operating activities 6,587 5,950
------ -------
INVESTING ACTIVITIES:
Capital expenditures (1,056) (639)
Investment in patents (109) (30)
------ -------
Net cash used in investing activities (1,165) (669)
------ -------
FINANCING ACTIVITIES:
Net re-payments under notes payable to banks (4,709) (10,917)
Principal payments on long-term debt (389) (163)
Proceeds from issuance of long-term debt 211 5,949
Proceeds from issuance of common stock 121 70
------ -------
Net cash used in financing activities (4,766) (5,061)
------ -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (114) (134)
------ -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 542 86
------ -------
CASH AND CASH EQUIVALENTS
Beginning of period 3,079 3,239
------ -------
End of period $3,621 $ 3,325
====== =======
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE> 6
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(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 six months of 1997 and 1996 for interest was $.6 million and $.9 million,
respectively, and for income taxes was $1.2 million and $.6 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, pro forma
"basic" and "diluted" earnings per share as defined for the second quarter and
six month periods ended June 28, 1997 and June 29, 1996 would be, if SFAS No.
128 were adopted for those periods:
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------- ----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic $.40 $.30 $.73 $.54
Diluted $.39 $.30 $.72 $.54
</TABLE>
-4-
<PAGE> 7
ITEM 2. K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 28, 1997
Results of Operations
For the second quarter and first six months of 1997, the Company
reported net income of $1,252,000 and $2,302,000, respectively, compared to
$928,000 and $1,680,000 in the same periods in 1996.
K-Tron is an international company with approximately 60% of its
revenues derived 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 Six Months Ended
----------------------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Revenues 55.0 53.9 55.6 56.0
---- ---- ---- ----
Gross Profit 45.0 46.1 44.4 44.0
Selling, General & Administrative 32.5 33.9 32.5 32.8
Research & Development 3.1 2.8 3.3 2.7
--- --- --- ---
Operating Income 9.4 9.4 8.6 8.5
Interest 1.5 2.7 1.4 2.6
--- --- --- ---
Income before income taxes 7.9% 6.7% 7.2% 5.9%
==== ==== ==== ====
Backlog at end of period (at June 28,
1997 constant foreign exchange
rates, in millions):
</TABLE>
<TABLE>
<CAPTION>
June 1997 Dec. 1996 June 1996
--------- --------- ---------
<S> <C> <C>
$20,121 $19,737 $20,813
======= ======= =======
</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
-5-
<PAGE> 8
franc, U.S. dollar/Deutsche mark and Deutsche mark/Swiss franc exchange rates.
For the second quarter and first six months of 1997 as well as the same periods
in 1996, the changes in these exchange rates were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Average U.S. dollar equivalent of
one Swiss franc $.693 $.807 $.695 $.823
% devaluation vs. prior year -14.1 % -15.6 %
Average U.S. dollar equivalent of
one Deutsche mark $.584 $.659 $.594 $.670
% devaluation vs. prior year -11.4% -11.3%
Average Swiss franc equivalent of
one Deutsche mark .842 .817 .854 .814
% appreciation vs. prior year +3.1% +4.9%
</TABLE>
Total revenues decreased by $.1 million or 0.1% in the second quarter
of 1997 and by $2.4 million or 5.2% for the first six months of 1997 when
compared to the same periods in 1996. The decrease in revenues was due to
lower exchange translation rates of certain currencies into U.S. dollars. If
the average foreign currency exchange rates for the first quarter and first six
months of 1997 were applied to the same periods in 1996, revenues would have
increased 8.9% for the quarter and 4.6% for the first six months.
Gross margin as a percent of revenues declined to 45% in the second
quarter of 1997 and improved to 44.4% for the first six months of 1997, as
compared to 46.1% and 44.0% for the same periods in 1996. The change in gross
margin in 1997 was primarily due to sales mix.
Selling, general and administrative (SG&A) expense decreased by $.3
million or 4.6% in the second quarter of 1997 and by $.9 million or 6.0% for
the first six months of 1997, as compared to the same periods in 1996. The
decrease in SG&A was due to the lower foreign exchange translation rates
previously described.
Research and development (R&D) expenditures increased by $.1 million
or 10.5% in the second quarter of 1997 and by $.2 million or 14.1% for the
first six months of 1997, as compared to the same periods in 1996. R&D
expenses increased due to the development of new product enhancements, offset
in part by lower foreign exchange translation rates.
Interest expense decreased by $.3 million or 45.1% in the second
quarter of 1997 and by $.5 million or 46.2% for the first six months of 1997,
as compared to the same periods in 1996, primarily due to lower debt levels and
lower foreign exchange translation rates.
The effective tax rates for the second quarter and first six months of
1997 were 27% and 25%, respectively, compared to 37% for the same periods in
1996. The effective tax rates in the second quarter and first six months of
1997 were lower than the same periods in 1996 due to the utilization of foreign
net operating loss carry forwards.
-6-
<PAGE> 9
The backlog increased by 1.9% at the end of the second quarter of 1997
when compared to the end of 1996 and decreased by 3.3% when compared to the
same period in 1996 (at constant foreign exchange rates).
Liquidity and Capital Resources
The Company's capitalization as of the end of the second quarter of 1997
and fiscal years 1996 and 1995 is set forth below:
<TABLE>
<CAPTION>
June December December
(Dollars in Thousands) 1997 1996 1995
-------- ---------- --------
<S> <C> <C> <C>
Short-term debt including current
portion of long-term debt $ 366 $ 861 $ 2,133
Long-term debt 15,407 20,807 35,004
------ ------ -------
Total debt 15,773 21,668 37,137
Shareholders' equity 14,950 13,194 9,421
------ ------- -----
Total debt and shareholders' equity $30,723 $34,862 $46,558
======= ======= =======
Percent total debt to total capitalization 51% 62% 80%
Percent long-term debt to equity 103% 158% 372%
Percent total debt to equity 106% 164% 394%
</TABLE>
Total debt decreased by $5.9 million in the first six months of 1997,
of which $1.0 million was due to the effect of foreign exchange translation.
Total debt without the effect of the foreign exchange translation decreased by
$4.9 million. European and U.S. debt decreased by $5.8 million and $.1
million, respectively. At June 28, 1997, the Company had $4.9 million of
availability under its U.S. revolving credit agreement and $9.2 million of
availability under certain of its Swiss loan agreements.
At June 28, 1997, there was working capital of $12.7 million as
compared to $15.4 million at December 28, 1996, and the ratio of current assets
to current liabilities at those dates was 1.59 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.
In the first six 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 $6.6 million in the
first six months of 1997 as compared to $6.0 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.
-7-
<PAGE> 10
Net cash used in investing activities in the first six months of 1997
and 1996 was for capital additions.
Net cash used in financing activities in the first six 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 $.7 million in the first six months of 1997.
-8-
<PAGE> 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on May 2,
1997.
(b) Not applicable.
(c) Shareholders of the Company were asked to vote on the election of two
Class IV directors. The Board of Directors, acting on the
recommendation of its Nominating Committee, nominated Leo C. Beebe and
Edward B. Cloues, II as Class IV directors. There were no other
nominations. The result of the vote taken at the Annual Meeting was
as follows:
<TABLE>
<CAPTION>
Number of Votes
---------------
FOR WITHHELD
--- --------
<S> <C> <C>
Leo C. Beebe 2,652,604 4,152
Edward B. Cloues, II 2,654,856 1,900
</TABLE>
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.
-9-
<PAGE> 12
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 six months ended June 28,
1997.
-10-
<PAGE> 13
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.
K-TRON INTERNATIONAL, INC.
Date: July 18, 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)
-11-
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
AVERAGE COMMON AND
COMMON-EQUIVALENT
SHARES:
Weighted Average Common
Shares Outstanding per Period 3,146,000 3,113,000 3,142,000 3,113,000
Stock Options 51,000 7,000 51,000 7,000
--------- --------- --------- ---------
ADJUSTED AVERAGE COMMON
AND COMMON-EQUIVALENT
SHARES COMPUTATION 3,197,000 3,120,000 3,193,000 3,120,000
========= ========= ========= =========
EARNINGS FOR COMMON
AND COMMON-EQUIVALENT
SHARES COMPUTATION:
Net income applicable to Common
Stock $1,252,000 $ 928,000 $2,302,000 $1,680,000
========== ========= ========== ==========
EARNINGS PER SHARE $ .39 $ .30 $ .72 $ .54
========== ========= ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1998
<CASH> 3,621
<SECURITIES> 0
<RECEIVABLES> 17,424
<ALLOWANCES> 995
<INVENTORY> 12,410
<CURRENT-ASSETS> 33,995
<PP&E> 41,637
<DEPRECIATION> 27,044
<TOTAL-ASSETS> 53,434
<CURRENT-LIABILITIES> 21,342
<BONDS> 15,407
0
0
<COMMON> 42
<OTHER-SE> 14,908
<TOTAL-LIABILITY-AND-EQUITY> 53,434
<SALES> 43,107
<TOTAL-REVENUES> 43,107
<CGS> 23,954
<TOTAL-COSTS> 23,954
<OTHER-EXPENSES> 15,432
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 634
<INCOME-PRETAX> 3,087
<INCOME-TAX> 785
<INCOME-CONTINUING> 2,302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,302
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
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