<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended October 3, 1998
--------------------------------
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 (I.R.S. Employer Identification #)
Incorporation or Organization)
Routes 55 & 553, P.O. Box 888, Pitman, New Jersey 08071-0888
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (609) 589-0500
------------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former Name, Former Address and Formal Fiscal Year,
if Changed Since Last Report)
Indicate by check X 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 October 3, 1998 was:
---------------
3,016,468 Shares
- ---------
<PAGE> 2
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
October 3, 1998 and January 3, 1998 1
Consolidated Statements of Income
& Retained Earnings for the Three and
Nine Months Ended October 3, 1998 and
September 27, 1997 2
Consolidated Statements of Cash Flows
for the Nine Months Ended October 3, 1998
and September 27, 1997 3
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands except Share Data)
<TABLE>
<CAPTION>
October 3, January 3,
1998 1998
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,838 $ 5,154
Accounts receivable (less allowance for doubtful accounts of
$1,275 and $1,119) 18,744 15,336
Inventories 11,228 10,010
Deferred income taxes 950 950
Prepaid expenses and other current assets 1,545 1,196
-------- --------
Total current assets 36,305 32,646
PROPERTY, PLANT AND EQUIPMENT, net 16,174 15,437
PATENTS, net 744 694
GOODWILL, net 4,658 4,844
OTHER ASSETS 273 628
-------- --------
Total assets $ 58,154 $ 54,249
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $ 9 $ 2,088
Current portion of long-term debt 1,310 1,060
Accounts payable 5,823 5,426
Accrued expenses & other current liabilities 5,302 4,270
Accrued payroll 4,237 3,869
Accrued commissions 2,869 2,463
Customer advances 2,777 1,627
Accrued warranty 1,043 912
Income taxes payable 1,605 1,508
-------- --------
Total current liabilities 24,975 23,223
LONG-TERM DEBT, net of current portion 11,544 10,619
DEFERRED INCOME TAXES 431 431
OTHER NONCURRENT LIABILITIES 846 1,084
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 50,000,000 shares;
issued 4,319,418 shares and 4,271,300 shares 43 43
Paid-in capital 15,350 14,833
Retained earnings 19,946 15,246
Cumulative translation adjustments 14 (766)
-------- --------
35,353 29,356
-------- --------
Treasury stock, 1,302,950 shares - at cost (14,995) (10,464)
-------- --------
Total shareholders' equity 20,358 18,892
-------- --------
Total liabilities and shareholders' equity $ 58,154 $ 54,249
======== ========
</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 Nine Months Ended
------------------ -----------------
October 3, Sept. 27, October 3, Sept. 27,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $21,244 $21,790 $65,065 $64,897
COST OF REVENUES 11,751 11,813 35,559 $35,767
------- ------- ------- -------
Gross profit 9,493 9,977 29,506 29,130
OPERATING EXPENSES
Selling, general and administrative 6,456 7,016 20,512 21,042
Research and development 661 644 2,080 2,050
------- ------- ------- -------
7,117 7,660 22,592 23,092
------- ------- ------- -------
Operating profit 2,376 2,317 6,914 6,038
INTEREST EXPENSE 166 281 522 915
------- ------- ------- -------
Income before income taxes 2,210 2,036 6,392 5,123
INCOME TAX PROVISION 632 575 1,692 1,360
------- ------- ------- -------
Net income 1,578 1,461 4,700 3,763
RETAINED EARNINGS
Beginning of period 18,368 12,104 15,246 9,802
------- ------- ------- -------
End of period $19,946 $13,565 $19,946 $13,565
======= ======= ======= =======
EARNINGS PER SHARE
Basic $ .52 $ .46 $ 1 .48 $ 1.19
======= ======= ======= =======
Diluted $ .51 $ .45 $ 1. 44 $ 1.17
======= ======= ======= =======
</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>
Nine Months Ended
-----------------
October 3, Sept. 27,
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,700 $ 3,763
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,270 2,287
Amortization of deferred gain on sale/leaseback transaction (281) (284)
Changes in assets and liabilities:
Accounts receivable, net (2,691) (871)
Inventories (832) 1,321
Prepaid expenses and other current assets (300) 214
Other assets 218 (66)
Accounts payable 169 (95)
Accrued expenses and other current liabilities 2,528 3,229
Accrued warranty 95 226
Income taxes 73 (221)
------- -------
Net cash provided by operating activities 5,949 9,503
------- -------
INVESTING ACTIVITIES:
Capital expenditures (1,870) (1,774)
Investment in patents (94) (151)
------- -------
Net cash used in investing activities (1,964) (1,925)
------- -------
FINANCING ACTIVITIES:
Net repayments under notes payable to banks (1,393) (5,420)
Principal payments on long-term debt (1,075) (475)
Proceeds from issuance of long-term debt 1,005 225
Proceeds from issuance of common stock 517 421
Purchase of treasury shares (4,531) --
------- -------
Net cash used in financing activities (5,477) (5,249)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 176 (264)
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,316) 2,065
------- -------
CASH AND CASH EQUIVALENTS
Beginning of period 5,154 3,079
------- -------
End of period $ 3,838 $ 5,144
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE> 6
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 3, 1998
(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. and its subsidiaries ("K-Tron" or the "Company").
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 January 3, 1998 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
nine months of 1998 and 1997 for interest was $.5 million and $1.0 million,
respectively, and for income taxes was $1.7 million and $1.5 million,
respectively.
3. Earnings per Share
In 1997, the Company adopted SFAS No. 128, "Earnings per Share." SFAS No. 128
requires that the Company report Basic and Diluted Earnings Per Share. Basic
Earnings Per Share represents net income less preferred dividends divided by the
weighted average common shares outstanding. Diluted Earnings Per Share is
calculated similarly, except that the denominator includes weighted average
common shares outstanding plus the dilutive effect of options, warrants,
convertible securities and other instruments with dilutive effects if exercised
or converted.
The Company's Basic and Diluted Earnings Per Share are calculated as follows:
<TABLE>
<CAPTION>
For the Three Months Ended October 3, 1998
------------------------------------------
(In Thousands except Per Share Data)
Income Available
To Common Per Share
Shareholders Shares Amount
------------ ------ ------
<S> <C> <C> <C>
Basic Net Income $1,578 3,019 $ .52
Common Share Equivalent
of Options Issued -- 97 (.01)
------ ------ -------
Diluted $1,578 3,116 $ .51
====== ===== =======
</TABLE>
-4-
<PAGE> 7
<TABLE>
<CAPTION>
For the Three Months Ended September 27, 1997
---------------------------------------------
(In Thousands except Per Share Data)
Income Available
To Common Per Share
Shareholders Shares Amount
------------ ------ ------
<S> <C> <C> <C>
Basic Net Income $1,461 3,170 $ .46
Common Share Equivalent
of Options Issued -- 57 (.01)
------ ----- -------
Diluted $1,461 3,227 $ .45
====== ===== =======
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended October 3, 1998
-----------------------------------------
(In Thousands except Per Share Data)
Income Available
to Common Per Share
Shareholders Shares Amount
------------ ------ ------
<S> <C> <C> <C>
Basic Net Income $4,700 3,169 $1.48
Common Share Equivalent
of Options Issued -- 97 (.04)
------ ----- -----
Diluted $4,700 3,266 $1.44
====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 27, 1997
--------------------------------------------
(In Thousands except Per Share Data)
Income Available
to Common Per Share
Shareholders Shares Amount
------------ ------ ------
<S> <C> <C> <C>
Basic Net Income $3,763 3,150 $1.19
Common Share Equivalent
of Options Issued -- 57 $(.02)
------ ----- -----
Diluted $3,763 3,207 $1.17
====== ===== =====
</TABLE>
Diluted earnings per common share are based on the weighted average number of
common and common equivalent shares outstanding during each year. Such average
shares include the weighted average number of common shares outstanding plus the
shares issuable upon exercise of stock options after the assumed repurchase of
common shares with the related proceeds.
-5-
<PAGE> 8
4. Impact of New Accounting Pronouncement
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", which
establishes standards for the reporting and display of comprehensive income and
its components. Comprehensive income is the total of net income and all other
non-owner changes in equity. For the three and nine month periods ended October
3, 1998 and September 27, 1997, the following table sets forth the Company's
comprehensive income:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------
Three Months Ended Nine Months Ended
------------------ -----------------
October 3, Sept. 27, October 3, Sept. 27,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $1,578 $1,461 $4,700 $3,763
Cumulative Translation Adjustments 1,311 (17) 780 (684)
------ ------- ------ ------
Comprehensive Income $2,889 $1,444 $5,480 $3,079
====== ====== ====== ======
</TABLE>
-6-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the third quarter and first nine months of 1998, the Company
reported net income of $1,578,000 and $4,700,000 respectively, compared to
$1,461,000 and $3,763,000 in the same periods in 1997.
K-Tron is an international company with approximately 59% 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 changes 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 for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- --------------------------------
October 3, 1998 Sept. 27, 1997 October 3, 1998 Sept. 27, 1997
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 55.3 54.2 54.7 55.1
----- ----- ----- -----
Gross profit 44.7 45.8 45.3 44.9
Selling, general & administrative 30.4 32.2 31.5 32.5
Research & development 3.1 3.0 3.2 3.1
----- ----- ----- -----
Operating income 11.2 10.6 10.6 9.3
Interest .8 1.3 .8 1.4
----- ----- ----- -----
Income before income taxes 10.4% 9.3% 9.8% 7.9%
===== ===== ===== =====
Backlog at end of period (at October 1998 December 1997 September 1997
October 3, 1998 constant foreign ------------ ------------- --------------
exchange rates, in millions): 24,852 $18,826 $19,273
====== ======= =======
</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.
-7-
<PAGE> 10
dollar/Swiss franc, U.S. dollar/Deutsche mark and Swiss franc/Deutsche mark
exchange rates. For the third quarter and first nine months of 1998 as well as
the same periods in 1997, the changes in these exchange rates were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ----------------------------
October 3, Sept. 27, October 3, Sept. 27,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average U.S. dollar equivalent of
one Swiss franc $.688 $.671 $.678 $.687
% change vs. prior year +2.5% -1.3%
Average U.S. dollar equivalent of
one Deutsche mark $.572 $.554 $.560 $.580
% change vs. prior year +3.2% -3.4%
Average Swiss franc equivalent of
one Deutsche mark .831 .826 .826 .845
% change vs. prior year +0.6 % -2.2%
</TABLE>
Total revenues decreased by $.5 million or 2.5% in the third quarter of
1998 and increased by $.2 million or 0.3% in the first nine months of 1998 when
compared to the same periods in 1997. If the average foreign exchange rate
translation for the third quarter and first nine months of 1998 were applied to
the same periods in 1997, revenues would have decreased 3.0% for the quarter and
increased 1.4% for first nine months. The third quarter 1998 revenue decline was
primarily due to reduced sales in Asia and Russia.
Gross profit as a percent of revenues decreased to 44.7% in the third
quarter of 1998 and improved to 45.3% for the first nine months of 1998, as
compared to 45.8% and 44.9%, respectively, for the same periods in 1997. The
change in gross margin in 1998 was primarily due to changes in the sales mix.
Selling, general and administrative (SG&A) expense decreased by $.6
million or 8.0% in the third quarter of 1998 and by $.5 million or 2.5% for the
first nine months of 1998, as compared to the same periods in 1997. The decrease
in SG&A was primarily due to lower general administrative expenses.
Research and development (R&D) expenditures remained constant for the
third quarter and first nine months of 1998, as compared to the same periods in
1997. R&D expenses increased for the nine months of 1998 in local currencies due
to the development of new product enhancements, but these increases were offset
by lower foreign exchange rate translation.
Interest expense decreased by $.1 million or 40.9% for the third
quarter of 1998 and by $.4 million or 43.0% for the first nine months of 1998,
as compared to the same periods in 1997, primarily due to lower debt levels,
lower interest rates on some loans and lower foreign exchange rate translation.
-8-
<PAGE> 11
The effective tax rates for the third quarter and first nine months of
1998 were 28.6% and 26.4%, respectively, compared to 28.2% and 26.5% for the
same periods in 1997.
The backlog increased by 32.0% at the end of the third quarter when
compared to the end of 1997 and increased by 28.9% when compared to the end of
the third quarter in 1997, in each case at constant foreign exchange rates.
Liquidity and Capital Resources
The Company's capitalization as of the end of the third quarter of 1998
and as of the end of fiscal years 1997 and 1996 is set forth below:
<TABLE>
<CAPTION>
October 3, January 3, December 28,
(Dollars in Thousands) 1998 1998 1996
---------- ---------- ------------
<S> <C> <C> <C>
Short-term debt, including current
portion of long-term debt $ 1,319 $ 3,148 $ 861
Long-term debt 11,544 10,619 20,807
------- ------- -------
Total debt 12,863 13,767 21,668
Shareholders' equity 20,358 18,892 13,194
------- ------- -------
Total debt and shareholders' equity $33,221 $32,659 $34,862
======= ======= =======
Percent total debt to total capitalization 39% 42% 62%
Percent long-term debt to equity 57% 56% 158%
Percent total debt to equity 63% 73% 164%
</TABLE>
In June 1998, the Company's U.S. manufacturing subsidiary refinanced
its bank debt. The new loan facilities consist of a mortgage loan with a maximum
availability of $2.7 million and a two year secured revolving credit facility
with maximum availability of $5.0 million. As of October 3, 1998, outstanding
debt was $2.7 million (interest at 7.625% per annum) under the mortgage loan and
$.8 million (interest at U.S. prime) under the revolving credit facility. In
July 1998, the Company repurchased 250,000 shares of its common stock,
representing approximately 7.7% of its outstanding common stock. The purchase
price of $4,531,250, or $18.125 per share, was funded by a combination of cash
in the amount of $1,981,250 and U.S. bank borrowings of $2,550,000.
Total debt decreased by $.9 million in the first nine months of 1998,
and this decrease would have been $1.5 million using a constant foreign exchange
rate. European debt decreased by $2.0 million ($2.6 million at a constant
foreign exchange rate) and U.S. debt increased by $1.1 million. At October 3,
1998, the Company had $4.2 million of availability under its U.S. loan
agreements and $4.4 million of availability under its Swiss loan agreements.
-9-
<PAGE> 12
At October 3, 1998, there was working capital of $11.3 million as
compared to $9.4 million at January 3, 1998, and the ratio of current assets to
current liabilities at those dates was 1.45 and 1.41, respectively.
In the first nine months of 1998 and 1997, 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 $5.9 million in the first
nine months of 1998 as compared to $9.5 million in the same period of 1997. The
lower operating cash flow was primarily from an increase in accounts receivable
and inventories.
Net cash used in investing activities in the first nine months of 1998
and 1997 was for capital additions.
Net cash used in financing activities in the first nine months of 1998
was for the reduction of debt and purchase of treasury shares and was provided
by operating activities and bank borrowings.
Changes in foreign exchange rates, particularly with respect to the
Swiss franc and Deutsche mark, caused a translation adjustment increase in
shareholders' equity of $.8 million in the first nine months of 1998.
Year 2000 Compliance
The Company has substantially completed an evaluation of its
information technology infrastructure for Year 2000 compliance and is now
implementing its Year 2000 compliance strategy. The Company does not expect that
the cost to modify its information technology infrastructure to be Year 2000
compliant will be material to its financial condition or results of operations .
The Company does not anticipate any material disruptions in its operations as a
result of any failure by the Company to be in compliance. The Company is also in
the process of obtaining information concerning the Year 2000 compliance status
of its suppliers and customers, and there can be no assurance that such
suppliers and customers are or will be Year 2000 compliant. In the event that
any of the Company's significant suppliers or customers does not successfully
and timely achieve Year 2000 compliance, the Company's business operations could
be adversely affected.
-10-
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Amendment No. 1 to Employment Agreement dated October 5, 1998
by and between K-Tron International, Inc. and Edward B.
Cloues, II.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the nine months ended October 3,
1998.
-11-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 5, 1998 K-TRON INTERNATIONAL, INC.
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)
Date: November 5, 1998 By: /s/ Alan R. Sukoneck
--------------------------------
Alan R. Sukoneck
Vice President, Chief Accounting
& Tax Officer
(Duly authorized officer and
principal accounting officer
of the registrant)
-12-
<PAGE> 15
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
10.1 Amendment No. 1 to Employment Agreement dated
October 5, 1998 by and between K-Tron
International, Inc. and Edward B. Cloues, II.
27.1 Financial Data Schedule
<PAGE> 1
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this "Amendment") is made
and entered into on October 5, 1998 by and between K-TRON INTERNATIONAL, INC., a
New Jersey corporation ("K-Tron"), and EDWARD B. CLOUES, II, a resident of
Pennsylvania (the "Employee"). This Amendment amends and otherwise modifies the
Employment Agreement ( the "Agreement") dated as of October 6, 1997 by and
between K-Tron and the Employee. Terms used herein that are not defined herein
shall have the meanings ascribed thereto in the Agreement.
WHEREAS, K-Tron and the Employee wish to amend and modify the Agreement
in certain respects, effective as of January 2, 1998.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The fifth sentence of Section 1.4 of the Agreement shall be deemed
modified in the following respects: (a) the term life insurance policy having a
death benefit of $1,000,000 shall be in addition to any group term life
insurance which the Employee may be required to accept under any K-Tron group
plan, and K-Tron shall reimburse the Employee for the estimated income taxes on
the premiums paid for such $1,000,000 policy; and (b) the Employee and K-Tron
acknowledge that the disability coverage referred to in Section 1.4 shall be
satisfied by the QQ series Disability Income Policy in a lesser amount, with a
one year waiting period, which the Employee has purchased from Northwestern
Mutual Life.
2. Section 1.5 of the Agreement is amended and restated to read in its
entirety as follows:
"1.5 Stock Grant. On January 2, 1998, K-Tron shall issue to the
Employee 10,000 fully vested shares of its Common Stock, which shares shall
be unregistered and contain an appropriate securities law restrictive
legend. On October 7, 1998, K-Tron shall issue to the Employee 7,500 shares
(the "October Shares") of its Common Stock as a restricted stock grant
under Section 6 of the K-Tron International, Inc. 1996 Equity Compensation
Plan, as amended (the "1996 Equity Compensation Plan"), with the grant to
provide that the restrictions shall lapse on January 5, 1999, provided that
the Employee is still employed by K-Tron on that date. On January 5, 1999,
K-Tron shall issue to the Employee 12,500 shares of its Common Stock as a
restricted stock grant under Section 6 of the 1996 Equity Compensation
Plan, with the grant to provide that 2,500 of such shares shall be fully
vested shares on that date and that the restrictions shall lapse as to the
other 10,000 shares (the "January 2000 Shares") on January 5, 2000,
provided that the Employee is still employed by K-Tron on those dates.
Notwithstanding the foregoing, the restrictions on the October Shares and
the January 2000 Shares shall lapse immediately if the Employment Term is
terminated by (a) K-Tron for any reason other than "cause" as defined in
Section 8.4(b) hereof or (b) the Employee either pursuant to Section 8.4(a)
hereof or in
<PAGE> 2
connection with a Termination upon a Change of Control as described in
Section 9.1(c) hereof."
3. This Amendment shall be effective as of January 2, 1998 and shall be
governed by and interpreted under the laws of the State of New Jersey, without
giving effect to any conflict of laws provisions.
4. As amended and modified hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, K-Tron and the Employee have executed this
Amendment on October 5, 1998.
[Corporate Seal] K-TRON INTERNATIONAL, INC.
Attest:
/s/Mary E. Vaccara By: /s/Robert L. Weinberg
- ------------------ --------------------------------------
Mary E. Vaccara Robert L. Weinberg
As its Secretary As its Senior Executive Vice President
and Chief Financial Officer
EMPLOYEE
/s/Mary E. Vaccara /s/Edward B. Cloues, II
- ------------------ --------------------------------------
Witness Edward B. Cloues, II
Approved as of October 5, 1998
by the Compensation and Human
Resources Committee of the
K-Tron Board of Directors:
By: /s/Norman Cohen
---------------
Norman Cohen
As its Chairman
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-2-1999
<PERIOD-END> OCT-3-1998
<CASH> 3,838
<SECURITIES> 0
<RECEIVABLES> 20,019
<ALLOWANCES> 1,275
<INVENTORY> 11,228
<CURRENT-ASSETS> 36,305
<PP&E> 43,202
<DEPRECIATION> 27,028
<TOTAL-ASSETS> 58,154
<CURRENT-LIABILITIES> 24,975
<BONDS> 11,544
0
0
<COMMON> 43
<OTHER-SE> 20,315
<TOTAL-LIABILITY-AND-EQUITY> 58,154
<SALES> 65,065
<TOTAL-REVENUES> 65,065
<CGS> 35,559
<TOTAL-COSTS> 35,559
<OTHER-EXPENSES> 22,592
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<INCOME-PRETAX> 6,392
<INCOME-TAX> 1,692
<INCOME-CONTINUING> 4,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,700
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.44
</TABLE>
