-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NcC2eXm841Z2PMNX6QW3ukQqb26Ocd6GUazphP5EHd7O6347iGTpTdf2/aHpzRDd ktId6v/EFTCyJUVo0J5rqA== 0000893220-02-001331.txt : 20021112 0000893220-02-001331.hdr.sgml : 20021111 20021112105747 ACCESSION NUMBER: 0000893220-02-001331 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020928 FILED AS OF DATE: 20021112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: K TRON INTERNATIONAL INC CENTRAL INDEX KEY: 0000000020 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 221759452 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09576 FILM NUMBER: 02815858 BUSINESS ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 BUSINESS PHONE: 8562563318 MAIL ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: P O BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 10-Q 1 w65409e10vq.txt FORM 10-Q FOR PERIOD ENDED SEPTEMBER 28, 2002 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 September 28, 2002 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 Incorporation (I.R.S. Employer Identification #) 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 Registrant had 2,432,092 shares of Common Stock outstanding as of September 28, 2002. K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES INDEX
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets 1 September 28, 2002 and December 29, 2001 Consolidated Statements of Income 2 & Retained Earnings for the Three and Nine Months Ended September 28, 2002 and September 29, 2001 Consolidated Statements of Cash Flows 3 for the Nine Months Ended September 28, 2002 and September 29, 2001 Notes to Consolidated Financial Statements 4 - 8 Item 2. Management's Discussion and Analysis 9 - 15 of Financial Condition and Results of Operations. Item 4. Controls and Procedures. 15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. 16 SIGNATURES 17 CERTIFICATIONS 18-19
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. K-TRON INTERNATIONAL, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands except Share Data) (Unaudited)
September 28, December 29, 2002 2001 ------------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,240 $ 2,214 Accounts receivable, net of allowance for doubtful accounts of $716 and $687 15,027 14,723 Inventories 9,441 10,212 Deferred income taxes 326 326 Prepaid expenses and other current assets 1,875 1,293 -------- -------- Total current assets 29,909 28,768 PROPERTY, PLANT AND EQUIPMENT, net 14,367 13,848 PATENTS, net 781 799 GOODWILL, net 2,053 2,053 NOTES RECEIVABLE AND OTHER ASSETS 2,500 2,176 -------- -------- Total assets $ 49,610 $ 47,644 ======== ======== LIABILITIES & SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 2,660 $ 2,186 Accounts payable 4,724 4,218 Accrued expenses and other current liabilities 6,665 4,547 Accrued commissions 1,024 1,220 Customer advances 847 1,032 -------- -------- Total current liabilities 15,920 13,203 LONG-TERM DEBT, net of current portion 7,394 12,499 DEFERRED INCOME TAXES 381 381 COMMITMENTS AND CONTINGENCIES SERIES B 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 4,433,342 shares and 4,432,742 shares 44 44 Paid-in capital 16,701 16,697 Retained earnings 37,885 35,484 Cumulative translation adjustments (1,218) (3,167) -------- -------- 53,412 49,058 -------- -------- Treasury stock, 2,001,250 and 2,001,250 shares-at cost (27,497) (27,497) -------- -------- Total shareholders' equity 25,915 21,561 -------- -------- Total liabilities and shareholders' equity $ 49,610 $ 47,644 ======== ========
See Notes to Consolidated Financial Statements -1- K-TRON INTERNATIONAL, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME & RETAINED EARNINGS (Dollars in Thousands except Share Data) (Unaudited)
Three Months Ended Nine Months Ended ------------------ ----------------- September 28, September 29, September 28, September 29, 2002 2001 2002 2001 ------------- ------------- ------------- ------------- REVENUES $ 16,905 $ 16,081 $ 50,560 $ 56,957 COST OF REVENUES 9,969 9,716 29,294 34,009 -------- -------- -------- -------- Gross Profit 6,936 6,365 21,266 22,948 OPERATING EXPENSES: Selling, general & administrative 5,057 5,940 15,610 18,345 Research and development 603 622 1,895 2,093 Loss on disposition of business -- 620 -- 620 -------- -------- -------- -------- 5,660 7,182 17,505 21,058 -------- -------- -------- -------- Operating Income (Loss) 1,276 (817) 3,761 1,890 INTEREST EXPENSE 104 256 406 842 -------- -------- -------- -------- Income (loss) before income taxes 1,172 (1,073) 3,355 1,048 INCOME TAX PROVISION (Benefit) 336 (305) 954 231 -------- -------- -------- -------- Net Income (Loss) 836 (768) 2,401 817 RETAINED EARNINGS Beginning of period 37,049 36,021 35,484 34,436 -------- -------- -------- -------- End of period $ 37,885 $ 35,253 $ 37,885 $ 35,253 ======== ======== ======== ======== EARNINGS (LOSS) PER SHARE Basic $ 0.34 $ (0.32) $ 0.99 $ 0.34 ======== ======== ======== ======== Diluted $ 0.34 $ (0.32) $ 0.97 $ 0.33 ======== ======== ======== ========
See Notes to Consolidated Financial Statements -2- K-TRON INTERNATIONAL, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Nine Months Ended September 28, September 29, ------------- ------------- 2002 2001 ------------- ------------- OPERATING ACTIVITIES: Net income $2,401 $817 Adjustment to reconcile net income to net cash provided by operating activities: Loss of disposition of business -- 620 Depreciation and amortization 2,109 2,413 Changes in assets and liabilities: Accounts receivable, net 845 2,910 Inventories 1,298 281 Prepaid expenses and other current assets (483) 112 Other assets (91) 185 Accounts payable 163 (4,225) Accrued expenses and other current liabilities 1,324 1,161 ------ ------ Net cash provided by operating activities 7,566 4,274 ------ ------ INVESTING ACTIVITIES: Proceeds from disposition of business -- 594 Capital expenditures (1,594) (1,868) Investment in patents (51) (88) ------ ------ Net cash used in investing activities (1,645) (1,362) ------ ------ FINANCING ACTIVITIES: Net (repayments) borrowing under notes payable to banks (1,677) 154 Proceeds from issuance of long-term debt 752 438 Principal payments on long-term debt (4,263) (1,804) Purchase of treasury stock -- (438) Proceeds from issuance of common stock 4 254 ------ ------ Net cash used in financing activities (5,184) (1,396) ------ ------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 289 (31) ------ ------ NET INCREASE IN CASH AND CASH EQUIVALENTS 1,026 1,485 ------ ------ CASH AND CASH EQUIVALENTS Beginning of period 2,214 553 ------ ------ End of period $3,240 $2,038 ------ ------
See Notes to Consolidated Financial Statements -3- K-TRON INTERNATIONAL, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 28, 2002 (Unaudited) 1. Basis of Presentation The accompanying unaudited consolidated 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 accounting principles generally accepted in the United States 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 unaudited financial statements herein should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 29, 2001 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 an original maturity of three months or less to be cash equivalents. Cash paid in the first nine months of 2002 and 2001 for interest was $434 thousand and $813 thousand, respectively, and for income taxes in the same periods the Company received a net refund of $116 thousand and made a cash payment of $256 thousand, respectively. 3. Inventories Inventories consist of the following:
September 28, December 29, 2002 2001 ------ ------- (in thousands) Components $8,237 $ 8,416 Work-in-process 1,080 1,692 Finished goods 124 104 ------ ------- $9,441 $10,212 ====== =======
-4- 4. Earnings Per Share The Company's Basic and Diluted Earnings Per Share are calculated as follows:
For the Three Months Ended September 28, 2002 --------------------------------------------- (Dollars and Shares in Thousands except Per Share Data) Net Income Available To Common Earnings Shareholders Shares Per Share ------------ ------ --------- Basic $836 2,432 $0.34 Common Share Equivalent of Outstanding Options -- 36 (0.00) ---- ----- ----- Diluted $836 2,468 $0.34 ==== ===== =====
For the Three Months Ended September 29, 2001 --------------------------------------------- (Dollars and Shares in Thousands except Per Share Data) Net Income (Loss) Available To Common Earnings (Loss) Shareholders Shares Per Share ------------ ------ --------- Basic $(768) 2,436 $(0.32) Common Share Equivalent of Outstanding Options -- --(1) (0.00) ----- ----- ------ Diluted $(768) 2,436 $(0.32) ===== ===== ======
(1)Common share equivalents were not considered for the three months ended September 29, 2001 as they are antidilutive.
For the Nine Months Ended September 28, 2002 -------------------------------------------- (Dollars and Shares in Thousands except Per Share Data) Net Income Available To Common Earnings Shareholders Shares Per Share ------------ ------ --------- Basic $2,401 2,432 $0.99 Common Share Equivalent of Outstanding Options -- 31 (0.02) ------ ----- ----- Diluted $2,401 2,463 $0.97 ====== ===== =====
-5-
For the Nine Months Ended September 29, 2001 -------------------------------------------- (Dollars and Shares in Thousands except Per Share Data) Net Income Available To Common Earnings Shareholders Shares Per Share ------------ ------ --------- Basic $817 2,436 $0.34 Common Share Equivalent of Outstanding Options -- 41 (0.01) ---- ----- ----- Diluted $817 2,477 $0.33 ==== ===== =====
Diluted earnings per common share are based on the weighted average number of common and common equivalent shares outstanding during a given time period. 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. Comprehensive Income Comprehensive income is the total of net income and the current year change in translation adjustments, which is the Company's only non-owner change in equity. For the three and nine month periods ending September 28, 2002 and September 29, 2001, the following table sets forth the Company's comprehensive income:
(Dollars in Thousands) Three Months Ended Nine Months Ended ----------------------- ----------------------- Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2002 2001 2002 2001 ---- ----- ------ ---- Net Income (Loss) $836 $(768) $2,401 $817 Translation Adjustments (143) 1,458 1,949 43 ---- ----- ------ ---- Comprehensive Income $693 $ 690 $4,350 $860 ==== ===== ====== ====
-6- 6. Management Segment Information The Company is engaged in one principal business segment -- material handling equipment and systems. The Company operates in two primary geographic locations, North and South America (the "Americas") and Europe, the Middle East, Africa and Asia ("EMEA/Asia"). For the three and nine months ended September 28, 2002 and September 29, 2001, the following tables set forth the Company's segment information:
(Dollars in Thousands) EMEA/ Elimi- Consoli- Americas Asia nations dated -------- ---- ------- ----- THREE MONTHS ENDED September 28, 2002 Revenues Sales to unaffiliated customers $ 6,591 $10,314 $ -- $16,905 Sales to affiliates 837 585 (1,422) -- ------- ------- --------- ------- Total sales $ 7,428 $10,899 $ (1,422) $16,905 ======= ======= ========= ======= Operating income $ 118 $ 1,118 $ 40 $ 1,276 ======= ======= ========= Interest expense (104) ------- Income before income taxes $ 1,172 =======
(Dollars in Thousands) EMEA/ Elimi- Consoli- Americas Asia nations dated -------- ---- ------- ----- THREE MONTHS ENDED September 29, 2001 Revenues Sales to unaffiliated customers $ 6,606 $9,475 $ -- $16,081 Sales to affiliates 875 294 (1,169) -- -------- ------ --------- ------- Total sales $7,481 $9,769 $(1,169) $16,081 ======== ====== ========= ======= Operating income (loss) $ 85 $ (902) $ -- $ (817) ======== ====== ========= Interest expense (256) ------- Income (loss) before income taxes $(1,073) =======
-7-
(Dollars in Thousands) EMEA/ Elimi- Consoli- Americas Asia nations dated -------- ---- ------- ----- NINE MONTHS ENDED September 28, 2002 Revenues Sales to unaffiliated customers $21,131 $29,429 $ -- $50,560 Sales to affiliates 2,749 1,383 (4,132) -- ------- ------- ------- ------- Total sales $23,880 $30,812 $(4,132) $50,560 ======= ======= ======= ======= Operating income $ 1,393 $ 2,328 $ 40 $ 3,761 ======= ======= ======= Interest expense (406) ------- Income before income taxes $ 3,355 =======
(Dollars in Thousands) EMEA/ Elimi- Consoli- Americas Asia nations dated -------- ---- ------- ----- NINE MONTHS ENDED September 29, 2001 Revenues Sales to unaffiliated customers $23,098 $33,859 $ -- $56,957 Sales to affiliates 3,423 1,382 (4,805) -- ------- ------- ------- ------- Total sales $26,521 $35,241 $(4,805) $56,957 ======= ======= ======= ======= Operating income $ 1,304 $ 611 $ (25) $ 1,890 ======= ======= ======= Interest expense (842) ------- Income before income taxes $ 1,048 =======
7. Goodwill The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001. As required by SFAS No. 142, the Company completed the transitional impairment test on goodwill, which resulted in no impairment charge. The Company has reassessed the balance sheet classification, useful lives and residual values of all acquired intangible assets. No adjustments or reclassifications were required by this reassessment, and only goodwill was determined to have an indefinite life. Goodwill amortization in fiscal 2001 was $345 thousand on an after-tax basis, or $0.14 per share. Goodwill amortization for the three and nine months ended September 29, 2001 was $67 thousand and $322 thousand, respectively, on an after-tax basis, or $0.02 per share and $0.13 per share, respectively. Based on these amounts, net income and diluted earnings (loss) per share for the three and nine months ended September 29, 2001, adjusted to eliminate goodwill amortization, was $(701) thousand and $(0.30) per share and $1.139 million and $0.46 per share, respectively. -8- 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 2002, K-Tron reported net income of $836 thousand and $2.401 million, respectively, compared to a net loss of $768 thousand and net income of $817 thousand for the same periods in 2001. On July 31, 2001, we sold our Hasler heavy feeder business ("Hasler"), recording a pretax loss of $620 thousand, and on November 30, 2001 we acquired Pneumatic Conveying Systems Limited ("PCS") in the United Kingdom, which transactions are more fully discussed in our Annual Report on Form 10-K for the year ended December 29, 2001. We are an international company and derived approximately 58% and 59% of our revenues for the first nine months of 2002 and 2001, respectively, from products manufactured in, and services performed from, our facilities located outside the United States, primarily in Europe. Since we operate globally, we are sensitive to changes in foreign currency exchange rates ("foreign exchange rates"), which can affect both the translation of financial statement items of foreign subsidiaries into U.S. dollars as well as transactions where the revenues and related expenses may initially be accounted for in different currencies, such as sales made from our Swiss manufacturing facility in currencies other than the Swiss franc. The following table sets forth our results of operations expressed as a percentage of total revenues for the periods indicated:
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2002 2001 2002 2001 ---- ---- ---- ---- Total revenues 100.0% 100.0% 100.0% 100.0% Cost of revenues 59.0 60.4 57.9 59.7 ----- ----- ----- ----- Gross profit 41.0 39.6 42.1 40.3 Selling, general & administrative 29.9 36.9 30.9 32.2 Research & development 3.6 3.9 3.8 3.7 Loss on disposition of business -- 3.9 -- 1.1 ----- ----- ----- ----- Operating income (loss) 7.5 (5.1) 7.4 3.3 Interest 0.6 1.6 0.8 1.5 ----- ----- ----- ----- Income (loss) before income taxes 6.9% (6.7%) 6.6% 1.8% ===== ===== ===== =====
-9- The following table summarizes our order backlog as of the dates indicated, all adjusted to September 28, 2002 foreign exchange rates:
(Dollars in Thousands) Sept. 28, 2002 December 29, 2001 Sept. 29, 2001 -------------- ----------------- -------------- Order backlog $10,506 $12,935 $11,425
As previously noted, more than half of our revenues are normally derived from activities in foreign jurisdictions. Consequently, our results can be significantly affected by changes in foreign exchange rates, particularly in U.S. dollar exchange rates with respect to the Swiss franc, euro and British pound sterling and, to a lesser degree, the Singapore dollar 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, since we typically receive a majority of our revenues in currencies other than the U.S. dollar, we generally benefit from a weaker dollar and are adversely affected by a stronger dollar relative to major currencies worldwide, especially those identified above. In particular, a general weakening of the U.S. dollar against other currencies would positively affect our total revenues, gross profit and operating income as expressed in U.S. dollars (provided that the gross profit and operating income numbers from foreign operations are not losses, since in the case of a loss, the effect would be to increase the loss), whereas a general strengthening of the U.S. dollar against such currencies would have the opposite effect. In addition, our revenues and income 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 Swiss franc/euro and Swiss franc/British pound sterling (for sales from the Company's Swiss manufacturing facility) exchange rates. -10- For the third quarter and first nine months of 2002 and 2001, the changes in certain key exchange rates were as follows:
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2002 2001 2002 2001 ---- ---- ---- ---- Average U.S. dollar equivalent of one Swiss franc 0.672 0.594 0.633 0.589 % change vs. prior year +13.1% +7.4% Average U.S. dollar equivalent of one euro 0.983 0.894 0.928 0.897 % change vs. prior year +10.0% +3.5% Average U.S. dollar equivalent of one British pound sterling 1.549 1.440 1.480 1.440 % change vs. prior year +7.6% +2.8% Average Swiss franc equivalent of one euro 1.463 1.505 1.466 1.523 % change vs. prior year -2.8% -3.7% Average Swiss franc equivalent of one British pound sterling 2.305 2.424 2.338 2.445 % change versus prior year -4.9% -4.4%
Total revenues increased by $0.8 million or 5.1% in the third quarter of 2002 and decreased by $6.4 million or 11.2% in the first nine months of 2002 compared to the same periods in 2001. Without Hasler, revenues increased by $1.7 million or 11.3% in the third quarter of 2002 and decreased by $1.9 million or 3.7% in the first nine months of 2002 compared to the same periods in 2001. The decrease in revenues without Hasler for the nine months was driven by declines in EMEA/Asia and the Americas, due to a weaker global economy with reduced capital spending in the process industries we serve, partially offset by three full quarters of revenues from the November 30, 2001 acquisition of PCS and the positive effect of a weaker U.S. dollar when translating the revenues of foreign operations. The increase in revenues without Hasler for the third quarter was due to revenues from PCS and the positive effect of a weaker U.S. dollar, partially offset by revenue declines in EMEA/Asia. If the average foreign exchange rates for the third quarter and first nine months of 2001 were applied to the same periods of 2002, total revenues for 2002 (excluding Hasler) would have increased by $0.6 million or 3.6% for the third quarter and decreased by $3.8 million or 7.3% for the first nine months versus the same periods in 2001. -11- Gross profit as percentage of revenues increased to 41.0% for the third quarter and 42.1% for the first nine months of 2002 compared to 39.6% and 40.3% for the same periods in 2001. The improvements in gross profit were primarily due to the change in sales mix as a result of the July 31, 2001 sale of the Hasler business and a reduction in fixed costs, including the elimination of goodwill expense as the Company adopted SFAS No. 142 on December 30, 2001. Goodwill amortization for the three months and nine months ended September 29, 2001 was $67 thousand and $322 thousand, respectively. Selling, general and administrative (SG&A) expense decreased by $0.9 million or 14.9% ($0.6 million or 11.1% without Hasler) for the third quarter and by $2.7 million or 14.9% ($1.1 million or 6.8% without Hasler) for the first nine months of 2002 compared to the same periods in 2001. These decreases in SG&A were primarily due to lower commissions on the reduced revenues for the nine months, fewer employees, the elimination of Hasler SG&A after the sale of Hasler on July 31, 2001 and the benefits realized from one-time costs associated with cost reductions implemented in the third quarter of 2001, offset in part by higher foreign exchange translation rates (weaker U.S. dollar). SG&A expense as a percent of total revenues was 29.9% for the third quarter and 30.9% for the first nine months of 2002 compared to 36.9% and 32.2% for the same periods in 2001. Research and development (R&D) expenditures were essentially constant for the third quarter of 2002 and decreased by $198 thousand or 9.5% for the first nine months of 2002, compared to the same periods in 2001. R&D expenses decreased for the first nine months due to lower staff costs, partially offset by an increase in tooling costs and by higher foreign exchange translation rates (weaker U.S. dollar). R&D expense as a percent of total revenues was 3.6% for the third quarter and 3.8% for the first nine months of 2002 compared to 3.9% and 3.7% for the same periods in 2001. Interest expense decreased by $152 thousand or 59.4% for the third quarter and by $436 thousand or 51.8% for the first nine months of 2002 compared to the same periods in 2001, primarily due to lower interest rates and debt reductions of $2.6 million in Switzerland ($3.2 million at constant foreign exchange rates) and $2.0 million in the U.S. Income before income taxes was $1.2 million for the third quarter and $3.4 million for the first nine months of 2002 compared to a loss of $1.1 million and income of $1.0 million for the same periods in 2001. The changes from year-to-year were the result of the items discussed above, with the third quarter and first nine months of 2002 income before income taxes improving versus a year ago, despite lower revenues for the nine months, primarily as a result of the Hasler sale and the globalization and cost reduction initiatives which we implemented during the latter half of 2001. The effective tax rates for the third quarter and first nine months of 2002 were 28.7% and 28.4% compared to 28.4% (benefit) and 22.0% for the same periods in 2001. The higher effective tax rates in 2002 were primarily due to the increase in foreign taxable income in 2002 as compared to 2001, which included the loss on the sale of the Hasler business. On July 1, 2002, New Jersey approved legislation for corporation income tax reform. The changes made to the law accounted for an increase in the tax provision for the first nine months of 2002 of approximately $60 thousand after the related federal income tax benefit. -12- The order backlog decreased by 18.8% at the end of the third quarter of 2002 compared to year-end 2001 and by 8.0% compared to the end of the third quarter of 2001, in each case at constant foreign exchange rates. The decrease from the end of 2001 was primarily the result of lower orders received at our facility in Switzerland in the first nine months of 2002, while the decrease from the end of the third quarter of 2001 was the result of both lower orders received at our facility in Switzerland and the fact that the third quarter 2001 backlog did not include orders received by PCS which was acquired on November 30, 2001. LIQUIDITY AND CAPITAL RESOURCES Our capitalization as of the end of the third quarter of 2002 and as of the end of fiscal years 2001 and 2000 is set forth below:
Sept. 28, Dec. 29, Dec. 30, (Dollars in Thousands) 2002 2001 2000 ---- ---- ---- Short-term debt, including current portion of long-term debt $ 2,660 $ 2,186 $ 3,595 Long-term debt 7,394 12,499 12,390 ------- ------- ------- Total debt 10,054 14,685 15,985 Shareholders' equity 25,915 21,561 21,311 ------- ------- ------- Total debt and shareholders' equity $35,969 $36,246 $37,296 ======= ======= ======= (total capitalization) Percent total debt to total capitalization 28% 41% 43% Percent long-term debt to equity 29% 58% 58% Percent total debt to equity 39% 68% 75%
Total debt decreased by $4.6 million in the first nine months of 2002, or by $5.2 million when adjusted to a constant foreign exchange rate, with debt decreasing by $2.6 million in Switzerland ($3.2 million at constant foreign exchange rates) and $2.0 million in the U.S. At September 28, 2002, we had $5.0 million of unused borrowing availability under our U.S. revolving credit agreement and $6.0 million of unused borrowing availability under our foreign loan agreements. In July 2002, the $5.0 million U.S. revolving credit agreement was extended through July 2004. At September 28, 2002, working capital was $14.0 million compared to $15.6 million at December 29, 2001, and the ratio of current assets to current liabilities at those dates was 1.88 and 2.18, respectively. In the first nine months of 2002 and 2001, we utilized internally generated funds to meet our working capital needs. -13- Net cash provided by operating activities was $7.6 million in the first nine months of 2002 compared to $4.3 million in the same period of 2001. The increase in operating cash flow during the first nine months of 2002 compared to the same period in 2001 was primarily due to higher income, a reduction in inventory and an increase in accounts payable partially offset by an increase in prepaid expenses, a reduction in accounts receivable and lower amortization. Net cash used in investing activities in the first nine months of 2002 and 2001 was primarily for capital additions. In 2001, capital additions were partially offset by proceeds from the sale of the Hasler business. Cash used in financing activities in the first nine months of 2002 and 2001 was for debt reduction. Of the total increase in shareholders' equity of $4.4 million in the first nine months of 2002, $1.9 million was attributable to changes in foreign exchange rates, particularly the strengthening of the Swiss franc and euro versus the U.S. dollar. FORWARD-LOOKING STATEMENTS AND RISK FACTORS The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe harbor for forward-looking statements made by us or on our behalf. We and our representatives may from time to time make written or oral statements that are "forward-looking," including statements contained in this report and other filings with the Securities and Exchange Commission, reports to our shareholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Act. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "may," " should," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. The forward-looking statements contained in this report include statements regarding the effect of changes in foreign exchange rates on our business and the effect of recent New Jersey tax legislation. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A wide range of factors could materially affect our future performance and financial and competitive position, including the following: (i) increasing price and product/service competition by domestic and foreign competitors, including new entrants; (ii) the mix of products/services sold by us; (iii) rapid technological changes and developments and our ability to continue to introduce competitive new products on a timely and cost-effective basis; (iv) changes in U.S. and global financial and currency markets, including significant interest rate and foreign currency exchange rate fluctuations; (v) protection and validity of patent and other intellectual -14- property rights held by us and our competitors; (vi) the cyclical nature of our business as a capital goods supplier; (vii) possible future litigation and governmental proceedings; (viii) the availability of financing and financial resources in the amounts, at the times and on the terms required to support our future business, including capacity expansions and possible acquisitions; (ix) the loss of key customers, employees or suppliers; (x) the failure to carry out marketing and sales plans; (xi) the failure to integrate acquired businesses without substantial costs, delays or other operational or financial problems; (xii) economic, business and regulatory conditions and changes which may affect the level of new investments and purchases made by customers, including general economic and business conditions that are less favorable than expected; (xiii) domestic and international political and economic conditions; and (xiv) the outcome of any legal proceeding in which we are involved. These factors which may affect our future performance and financial and competitive position and also the accuracy of any forward-looking statements should be evaluated with an understanding of their inherent uncertainty. ITEM 4. CONTROLS AND PROCEDURES. (a) Evaluation of Disclosure Controls and Procedures An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was recently conducted under the supervision and with the participation of our management, including our chief executive officer and chief financial officer. Based on that evaluation, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective as of November 11, 2002. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to November 11, 2002. -15- PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K We did not file a report on Form 8-K during the quarter ended September 28, 2002. -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: November 12, 2002 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 ------------------- Alan R. Sukoneck Vice President, Chief Accounting & Tax Officer (Duly authorized officer and principal accounting officer of the registrant) -17- CERTIFICATIONS I, Edward B. Cloues, II, Chairman and Chief Executive Officer of K-Tron International, Inc. (the "Registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the Registrant; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and audit committee of Registrant's board of directors: a. all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/Edward B. Cloues, II ----------------- ----------------------- Edward B. Cloues, II Chairman and Chief Executive Officer -18- CERTIFICATIONS, continued I, Ronald R. Remick, Senior Vice President and Chief Financial Officer of K-Tron International, Inc. (the "Registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the Registrant; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and audit committee of Registrant's board of directors: a. all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/Ronald R. Remick ----------------- ------------------- Ronald R. Remick Senior Vice President & Chief Financial Officer -19- EX-99.1 4 w65409exv99w1.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of K-Tron International, Inc. (the "Company") on Form 10-Q for the period ended September 28, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Edward B. Cloues, II, Chairman of the Board and Chief Executive Officer of the Company, hereby certifies, based on my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. November 12, 2002 /s/Edward B. Cloues, II ----------------------- Edward B. Cloues, II Chairman and Chief Executive Officer EX-99.2 5 w65409exv99w2.txt CERTIFICATION OF CHIEF FINANCIAL OFFICER Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of K-Tron International, Inc. (the "Company") on Form 10-Q for the period ended September 28, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Ronald R. Remick, Senior Vice President, Chief Financial Officer and Treasurer of the Company, hereby certifies, based on my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. November 12, 2002 /s/Ronald R. Remick -------------------- Ronald R. Remick Senior Vice President, Chief Financial Officer and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----