<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 July 3, 1999
--------------------------------------
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 (856) 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 July 3, 1999 was:
2,965,091 Shares
<PAGE> 2
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets
July 3, 1999 and January 2, 1999 1
Consolidated Statements of Income
& Retained Earnings for the Three and
Six Months Ended July 3, 1999 and
July 4, 1998 2
Consolidated Statements of Cash Flows
for the Six Months Ended July 3, 1999
and July 4, 1998 3
Notes to Consolidated Financial Statements 4 - 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8 - 12
PART II. OTHER INFORMATION
-----------------
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
<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>
July 3, January 2,
1999 1999
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,498 $ 3,220
Accounts receivable (less allowance for doubtful accounts of
$1,166 and $1,286) 20,075 19,034
Inventories 11,034 10,743
Deferred income taxes 819 819
Prepaid expenses and other current assets 1,769 1,177
-------- --------
Total current assets 35,195 34,993
PROPERTY, PLANT AND EQUIPMENT, net 15,256 16,215
PATENTS, net 804 751
GOODWILL, net 3,780 4,454
OTHER ASSETS 108 204
-------- --------
Total assets $ 55,143 $ 56,617
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
----------------------------------
CURRENT LIABILITIES:
Notes payable to banks $ 2,219 $ 254
Current portion of long-term debt 868 1,280
Accounts payable 6,760 6,965
Accrued expenses & other current liabilities 3,813 4,034
Accrued payroll 2,812 4,307
Accrued commissions 2,180 2,609
Customer advances 2,243 1,810
Accrued warranty 891 1,055
Income taxes payable 1,507 1,233
-------- --------
Total current liabilities 23,293 23,547
LONG-TERM DEBT, net of current portion 8,658 9,638
DEFERRED INCOME TAXES 423 423
OTHER NONCURRENT LIABILITIES 468 735
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 4,362,441 shares and 4,328,555 shares 44 43
Paid-in capital 15,918 15,505
Retained earnings 25,018 21,839
Cumulative translation adjustments (1,815) (192)
-------- --------
39,165 37,195
-------- --------
Treasury stock, 1,397,350 and 1,295,450 shares - at cost (16,864) (14,921)
-------- --------
Total shareholders' equity 22,301 22,274
-------- --------
Total liabilities and shareholders' equity $ 55,143 $ 56,617
======== ========
</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
---------------------- ---------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $22,617 $22,366 $42,457 $43,821
COST OF REVENUES 12,590 11,993 23,309 23,808
------- ------- ------- -------
Gross profit 10,027 10,373 19,148 20,013
OPERATING EXPENSES
Selling, general and administrative 6,708 7,201 13,314 14,056
Research and development 905 684 1,726 1,419
------- ------- ------- -------
7,613 7,885 15,040 15,475
------- ------- ------- -------
Operating income 2,414 2,488 4,108 4,538
INTEREST EXPENSE 122 148 256 356
------- ------- ------- -------
Income before income taxes 2,292 2,340 3,852 4,182
INCOME TAX PROVISION 473 525 673 1,060
------- ------- ------- -------
Net income 1,819 1,815 3,179 3,122
RETAINED EARNINGS
Beginning of period 23,199 16,553 21,839 15,246
------- ------- ------- -------
End of period $25,018 $18,368 $25,018 $18,368
======= ======= ======= =======
EARNINGS PER SHARE
Basic $ .62 $ .56 $ 1 .07 $ .96
======= ======= ======= =======
Diluted $ .60 $ .54 $ 1 .04 $ .93
======= ======= ======= =======
</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
----------------------
July 3, July 4,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,179 $ 3,122
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,601 1,549
Amortization of deferred gain on sale/leaseback transaction (187) (186)
Changes in assets and liabilities:
Accounts receivable, net (2,912) (3,226)
Inventories (1,064) (588)
Prepaid expenses and other current assets (747) 10
Other assets 76 349
Accounts payable 435 636
Accrued expenses and other current liabilities (572) 676
Accrued warranty (80) 101
Income taxes 327 (73)
------- -------
Net cash provided by operating activities 56 2,370
------- -------
INVESTING ACTIVITIES:
Capital expenditures (1,659) (1,449)
Investment in patents (86) (72)
------- -------
Net cash used in investing activities (1,745) (1,521)
------- -------
FINANCING ACTIVITIES:
Net borrowings (repayments) under notes payable to banks 2,139 (1,764)
Principal payments on long-term debt (479) (984)
Proceeds from issuance of long-term debt -- 405
Purchase of treasury stock (2,110) --
Proceeds from issuance of common stock 581 489
------- -------
Net cash provided by (used in) financing activities 131 (1,854)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (164) (42)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,722) (1,047)
------- -------
CASH AND CASH EQUIVALENTS
Beginning of period 3,220 5,154
------- -------
End of period $ 1,498 $ 4,107
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE> 6
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
July 3, 1999
------------
(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 2, 1999 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 1999 and 1998 for interest was $.2 million and $.3 million,
respectively, and for income taxes was $.4 million and $1.2 million,
respectively.
3. Earnings per Share
------------------
The Company adopted Statement of Financial Accounting Standards ("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.
-4-
<PAGE> 7
The Company's Basic and Diluted Earnings Per Share are calculated as follows:
<TABLE>
<CAPTION>
For the Three Months Ended July 3, 1999
---------------------------------------
(Dollars in Thousands except Per Share Data)
Income Available
To Common Per Share
Shareholders Shares Amount
------------ ------ ------
<S> <C> <C> <C> <C>
Basic Net Income $1,819 2,948,000 $ .62
Common Share Equivalent
of Options Issued -- 80,000 (.02)
------ --------- -----
Diluted $1,819 3,028,000 $ .60
====== ========= =====
<CAPTION>
For the Three Months Ended July 4, 1998
---------------------------------------
(Dollars in Thousands except Per Share Data)
Income Available
To Common Per Share
Shareholders Shares Amount
------------ ------ ------
<S> <C> <C> <C> <C>
Basic Net Income $1,815 3,251,000 $ .56
Common Share Equivalent
of Options Issued -- 99,000 (.02)
------ --------- -----
Diluted $1,815 3,350,000 $ .54
====== ========= =====
<CAPTION>
For the Six Months Ended July 3, 1999
-------------------------------------
(Dollars in Thousands except Per Share Data)
Income Available
To Common Per Share
Shareholders Shares Amount
------------ ------ ------
<S> <C> <C> <C> <C>
Basic Net Income $3,179 2,965,000 $1.07
Common Share Equivalent
of Options Issued -- 80,000 (.03)
------ --------- -----
Diluted $3,179 3,045,000 $1.04
====== ========= =====
<CAPTION>
For the Six Months Ended July 4, 1998
-------------------------------------
(Dollars in Thousands except Per Share Data)
Income Available
To Common Per Share
Shareholders Shares Amount
------------ ------ ------
<S> <C> <C> <C> <C>
Basic Net Income $3,122 3,243,000 $ .96
Common Share Equivalent
of Options Issued -- 99,000 (.03)
------ --------- -----
Diluted $3,122 3,342,000 $ .93
====== ========= =====
</TABLE>
Diluted earnings per common share are based on the weighted average number of
common and common equivalent shares outstanding. 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 Pronouncements
---------------------------------------
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income".
SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components. Comprehensive income is the total of
net income and the current year change in cumulative translation adjustments
which is the only nonowner change in equity. For the three and six months in the
periods ended July 3, 1999 and July 4, 1998, the following table sets forth the
Company's comprehensive income:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
---- ---- ----- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net Income $1,819 $1,815 $ 3,179 $3,122
Cumulative Translation Adjustments (616) (32) (1,623) (531)
------ ------ ------- ------
Comprehensive Income $1,203 $1,783 $ 1,556 $2,591
====== ====== ======= ======
</TABLE>
In 1998 the Company adopted the provisions of SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS No. 131 introduces a
new model for segment reporting called the management approach. The management
approach is based on the way that the chief operating decision maker organizes
segments within a company for making operating decisions and assessing
performance.
The Company is engaged in one business segment, the development, manufacturing
and marketing of gravimetric and volumetric feeders, pneumatic conveying systems
and related equipment. The Company operates in two primary geographic locations,
North America and Western Europe. For the three and six months in the periods
ended July 3, 1999 and July 4, 1998, the following tables set forth the
Company's segment information:
<TABLE>
<CAPTION>
North Western Elimi- Consoli-
America Europe nations dated
------- ------ ------- -----
(in thousands)
<S> <C> <C> <C> <C>
THREE MONTHS ENDED
July 3, 1999:
Revenues-
Sales to unaffiliated customers $ 9,222 $13,395 $ -- $22,617
Sales to affiliates 829 589 (1,418) --
------- ------- ------- -------
Total sales $10,051 $13,984 $(1,418) $22,617
======= ======= ======= =======
Operating income $ 1,564 $ 863 $ (13) $ 2,414
======= ======= =======
Interest expense (122)
-------
Income before income taxes $ 2,292
=======
</TABLE>
-6-
<PAGE> 9
<TABLE>
<CAPTION>
North Western Elimi- Consoli-
America Europe nations dated
------- ------ ------- -----
(in thousands)
<S> <C> <C> <C> <C>
THREE MONTHS ENDED
July 4, 1998:
Revenues-
Sales to unaffiliated customers $ 9,453 $12,913 $ -- $22,366
Sales to affiliates 972 447 $(1,419) --
------- ------- ------- -------
Total sales $10,425 $13,360 $(1,419) $22,366
======= ======= ======= =======
Operating income $ 1,328 $ 1,163 $ (3) $ 2,488
======= ======= =======
Interest expense (148)
-------
Income before income taxes $ 2,340
=======
SIX MONTHS ENDED
July 3, 1999:
Revenues-
Sales to unaffiliated customers $16,549 $25,908 $ -- $42,457
Sales to affiliates 1,840 1,110 (2,950) --
------- ------- ------- -------
Total sales $18,389 $27,018 $(2,950) $42,457
======= ======= ======= =======
Operating income $ 2,155 $ 1,970 $ 17 $ 4,108
======= ======= =======
Interest expense (256)
-------
Income before income taxes $ 3,852
=======
SIX MONTHS ENDED
July 4, 1998:
Revenues-
Sales to unaffiliated customers $18,671 $25,150 $ -- $43,821
Sales to affiliates 1,408 949 (2,357) --
------- ------- ------- -------
Total sales $20,079 $26,099 $(2,357) $43,821
======= ======= ======= =======
Operating income $ 2,219 $ 2,191 $ 128 $ 4,538
======= ======= =======
Interest expense (356)
-------
Income before income taxes $ 4,182
=======
</TABLE>
-7-
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
Results of Operations
- ---------------------
For the second quarter and first six months of 1999, the Company
reported net income of $1,819,000 and $3,179,000, respectively, compared to
$1,815,000 and $3,122,000 for the same periods in 1998.
K-Tron is an international company which derived approximately 61% and
57% of its first six months of 1999 and 1998 revenues, respectively, from
products manufactured in, and services performed from, its facilities located
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"), which can affect both the translation
of financial statement items into U.S. dollars and the impact of transactions
where the revenues and related expenses may initially be accounted for in
different currencies, such as sales made from the Company's Swiss manufacturing
facilities in currencies other than the Swiss franc.
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 Six Months Ended
------------------ ----------------
July 3, July 4, July 3, June 4,
1999 1998 1999 1998
---- ---- ---- -----
<S> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 55.7 53.6 54.9 54.3
----- ----- ----- -----
Gross profit 44.3 46.4 45.1 45.7%
Selling, general & administrative 29.6 32.2 31.4 32.1
Research & development 4.0 3.1 4.0 3.2
----- ----- ----- -----
Operating income 10.7 11.1 9.7 10.4
Interest .6 .7 .6 .8
----- ----- ----- -----
Income before income taxes 10.1% 10.4% 9.1% 9.6%
===== ===== ===== =====
Backlog at end of period (at June 1999 December 1998 June 1998
July 3, 1999 foreign exchange --------- ------------- ---------
rates, in thousands) $20,446 $20,743 $23,245
======= ======= =======
</TABLE>
-8-
<PAGE> 11
As noted above, more than half of the Company's revenues are normally
derived from activities in foreign jurisdictions. Consequently, the Company's
results can be significantly affected by changes in foreign exchange rates,
particularly in U.S. dollar exchange rates with respect to the Swiss franc,
German mark and euro and, to a lesser degree, the British pound sterling, French
franc and other currencies. When the U.S. dollar strengthens against these
currencies, the U.S. dollar value of non-U.S. dollar-based sales decreases. When
the U.S. dollar weakens against these currencies, the U.S. dollar value of
non-U.S. dollar-based sales increases. Correspondingly, the U.S. dollar value of
non-U.S. dollar-based costs increases when the U.S. dollar weakens and decreases
when the U.S. dollar strengthens. Overall, the Company typically receives a
majority of its revenues in currencies other than the U.S. dollar and, as such,
benefits from a weaker dollar and is adversely affected by a stronger dollar
relative to major currencies worldwide, especially those identified above.
Accordingly, changes in foreign exchange rates, and in particular a
strengthening of the U.S. dollar, may adversely affect the Company's total
revenues, gross profit and operating income as expressed in U.S. dollars.
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 currencies other than the functional currency of the
facility manufacturing the product subject to the sale, including in particular
the U.S. dollar/Swiss franc (for inter-company transactions) and the euro/Swiss
franc and German mark/Swiss franc exchange rates (for sales from the Company's
Swiss manufacturing facilities which are made in euros or German marks). For the
second quarter and first six months of 1999 as well as the same periods in 1998,
the changes in these and the U.S. dollar/euro and U.S. dollar/German mark
exchange rates were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average U.S. dollar equivalent of
one Swiss franc $ .658 $.669 $.678 $.673
% change vs. prior year -1.6% +0.1%
Average U.S. dollar equivalent of
one euro $1.054 N/A $ 1.086 N/A
Average U.S. dollar equivalent of
one German mark $ .539 $.558 $ .555 $.554
% change vs. prior year -3.4% NIL
Average Swiss franc equivalent of
one German mark .819 .834 .819 .823
% change vs. prior year -1.8% -0.1%
Average Swiss franc equivalent of
one euro 1.602 N/A 1.602 N/A
</TABLE>
Total revenues increased by $.3 million or 1.1% in the second quarter
of 1999 and decreased by $1.4 million or 3.1% in the first six months of 1999
compared to the same periods in 1998. Western European
-9-
<PAGE> 12
revenues increased and North American revenues decreased in the second quarter
and first six months of 1999 as compared to the same periods in 1998. As
reflected in the preceding chart, revenues for the first half of 1999 were
insignificantly affected by the foreign exchange translation while revenues for
the second quarter of 1999 would have been slightly higher than the same period
in 1998 if translated at prior year rates.
Gross profit as a percent of revenues decreased to 44.3% for the second
quarter of 1999 and 45.1% for the first six months of 1999 as compared to 46.4%
and 45.7% for the same periods in 1998. The reduction in gross margin in 1999
was primarily due to sales mix.
Selling, general and administrative (SG&A) expense decreased by $.5
million or 6.8% for the second quarter of 1999 and by $.7 million or 5.2% for
the first six months of 1999 as compared to the same periods in 1998. This
decrease in SG&A was due to lower selling expenses, as well as to lower foreign
exchange translation rates. As a percent of total revenues, SG&A for the second
quarter and first six months of 1999 was 29.6% and 31.4%, respectively, compared
to 32.2% and 32.1% for the same periods in 1998.
Research and development (R&D) expenditures increased by $.2 million or
32.3% for the second quarter of 1999 and by $.3 million or 21.6% for the first
six months of 1999 as compared to the same periods in 1998. R&D expenses
increased due to greater emphasis on the development of new products and
enhancements to existing products, offset in part by lower foreign exchange
translation rates. R&D expense as a percent of total revenues was 4.0% for the
second quarter and first six months of 1999 as compared to 3.1% and 3.2%,
respectively, for the same periods in 1998.
Interest expense decreased by $.1 million or 28.1% for the first six
months of 1999 as compared to the same period in 1998, primarily due to weighted
average lower debt levels and lower rates on some loans.
The effective tax rates for the second quarter and first six months of
1999 were 20.6% and 17.5%, respectively, compared to 22.4% and 25.3% for the
same periods in 1998. The effective tax rates for 1999 were lower than the same
periods in 1998 due to reduced taxable income in the United States. The
effective tax rates for both 1999 and 1998 were also reduced by the utilization
of foreign net operating loss carryforwards with full valuation allowances.
The backlog decreased by 1.4% at the end of the second quarter when
compared to the end of 1998 and by 12.0% when compared to the same period in
1998, in each case at constant foreign exchange rates. The decrease was
primarily in Europe.
-10-
<PAGE> 13
Liquidity and Capital Resources
- -------------------------------
The Company's capitalization as of the end of the second quarter of 1999
and as of the end of fiscal years 1998 and 1997 is set forth below:
<TABLE>
<CAPTION>
July 3, January 2, January 3,
(Dollars in Thousands) 1999 1999 1998
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
Short-term debt, including current
portion of long-term debt $ 3,087 $ 1,534 $ 3,148
Long-term debt 8,658 9,638 10,619
------- ------- -------
Total debt 11,745 11,172 13,767
Shareholders' equity 22,301 22,274 18,892
------- ------- -------
Total debt and shareholders' equity
(total capitalization) $34,046 $33,446 $32,659
======= ======= =======
Percent total debt to total capitalization 34% 33% 42%
Percent long-term debt to equity 39% 43% 56%
Percent total debt to equity 53% 50% 73%
</TABLE>
Total debt increased by $.6 million in the first six months of 1999,
and this increase would have been $1.7 million using a constant foreign exchange
rate. U.S. debt decreased by $.1 million while European debt increased by $.7
million ($1.8 million at a constant foreign exchange rate). At July 3, 1999, the
Company had $5.0 million of availability under its U.S. loan agreements and $1.6
million of availability under its Swiss loan agreements.
At July 3, 1999, there was working capital of $11.9 million as compared
to $11.4 million at January 2, 1999, and the ratio of current assets to current
liabilities at those dates was 1.51 and 1.49, respectively.
In the first six months of 1999, the Company utilized internally-
generated funds and short-term borrowings to meet its working capital needs.
Net cash provided by operating activities was $.1 million in the first
six months of 1999 as compared to $2.4 million in the same period of 1998. The
lower operating cash flow for 1999 as compared to 1998 was primarily due to a
reduction in accrued expenses and accounts payable and an increase in prepaid
expenses.
Net cash used in investing activities in the first six months of 1999
and 1998 was for capital additions.
Net cash provided by financing activities in the first six months of
1999 was primarily from net borrowings used for working capital and the proceeds
from the issuance of common stock offset by the purchase of 116,400 shares from
two shareholders.
-11-
<PAGE> 14
Changes in foreign exchange rates, particularly with respect to the
Swiss franc and German mark, caused a translation adjustment decrease in
shareholders' equity of $1.6 million in the first six months of 1999.
Readiness for Year 2000
- -----------------------
The Company has substantially completed an evaluation of its
information technology infrastructure for Year 2000 compliance and has
substantially implemented its Year 2000 compliance strategy. The cost to modify
its information technology infrastructure to be Year 2000 compliant has not been
and is not expected to be material to its financial condition or results of
operations. The Company does not anticipate any material disruptions in its
business as a result of any failure by the Company to be Year 2000 compliant.
The Company anticipates having all systems Year 2000 compliant no later
than September 30, 1999 and has not developed a contingency plan. If Year 2000
compliance issues are discovered, the Company then will evaluate the need for a
contingency plan relative to those issues.
The Company is also in the process of obtaining information concerning
the Year 2000 compliance status of its significant suppliers, customers and
business partners to determine the extent to which the Company is vulnerable to
these third parties' failure to remedy their Year 2000 problems. There can be no
assurance that such suppliers, customers and business partners are or will be
Year 2000 compliant. The risk to the Company resulting from the failure of third
parties in the public and private sector to attain Year 2000 readiness is the
same as for other firms in the Company's industry or other business enterprises
generally and could involve many different types of disruption to the Company's
business.
The costs to complete the Company's Year 2000 evaluation and to secure
Year 2000 compliance are based on management's best estimates. These estimates
were derived using numerous assumptions, including continued availability of
resources, third party contingency plans and other factors. However, there can
be no assurance that these estimates will be achieved and actual results could
differ materially from those anticipated. The following are representative of
the types of risks that could result in the event a critical component of the
Company's information systems, factories or facilities fails to be Year 2000
ready, or there is a similar failure by one or more major third party suppliers
to the Company: (i) information systems--could include interruptions or
disruptions of business and transaction processing such as customer billing,
payroll, accounts payable and other operating and information processes, until
systems can be remedied or replaced; (ii) factories and facilities--could
include interruptions or disruptions of manufacturing processes and facilities
with delays in delivery of products, until non-compliant conditions or
components can be remedied or replaced; and (iii) major suppliers to the
Company--could include interruptions or disruptions of the supply of materials
and supplies which could cause interruptions or disruptions of manufacturing and
delays in delivery of products, until the third party supplier can remedy the
problem or contingency measures can be implemented.
-12-
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
(a) The Annual Meeting of the shareholders of the Company was held on May 7,
1999.
(b) Not applicable.
(c) Shareholders of the Company were asked to vote on a proposal to elect one
Class II director. The Board of Directors, acting on the recommendation of
its Nominating Committee, nominated Robert A. Engel as the Class II
director. There were no other nominations. Mr. Engel was then elected with
the result of the vote taken at the Annual Meeting being as follows:
Number of Votes
---------------
FOR WITHHELD
--- --------
Robert A. Engel 2,224,209 14,464
Directors are elected by a plurality of the votes cast; therefore, votes
cast in the election could not be recorded against or as an abstention,
nor could a broker non-vote be recorded.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the six months ended July 3, 1999.
-13-
<PAGE> 16
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 28, 1999 By: /s/ RONALD R. REMICK
--------------------------------------
Ronald R. Remick
Senior Vice President & Chief
Financial Officer
(Duly authorized officer and principal
financial officer of the registrant)
By: /s/ ALAN R. SUKONECK
--------------------------------------
Vice President, Chief Accounting &
Tax Officer
(Duly authorized officer and
principal accounting officer of the
registrant)
-14-
<PAGE> 17
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JUL-03-1999
<CASH> 1,498
<SECURITIES> 0
<RECEIVABLES> 21,241
<ALLOWANCES> 1,166
<INVENTORY> 11,034
<CURRENT-ASSETS> 35,195
<PP&E> 41,640
<DEPRECIATION> 26,384
<TOTAL-ASSETS> 55,143
<CURRENT-LIABILITIES> 23,293
<BONDS> 8,658
0
0
<COMMON> 44
<OTHER-SE> 22,257
<TOTAL-LIABILITY-AND-EQUITY> 55,143
<SALES> 42,457
<TOTAL-REVENUES> 42,457
<CGS> 23,309
<TOTAL-COSTS> 23,309
<OTHER-EXPENSES> 15,040
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 256
<INCOME-PRETAX> 3,852
<INCOME-TAX> 673
<INCOME-CONTINUING> 3,179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,179
<EPS-BASIC> 1.07
<EPS-DILUTED> 1.04
</TABLE>
