e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2008


o		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 or Organization)		(I.R.S. Employer Identification No.)

Routes 55 & 553, P.O. Box 888, Pitman, New Jersey		08071-0888

(Address of Principal Executive Offices)		(Zip Code)

(856) 589-0500

Registrant’s Telephone Number, Including Area Code

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The Registrant had 2,772,197 shares of Common Stock outstanding as of July 25, 2008.

PART I. FINANCIAL INFORMATION


Item 1.		Consolidated Financial Statements.

K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands except Per Share Data)


	(Unaudited)
	June 28,			December 29,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	36,144		$	30,853
Restricted cash		581			1,183
Accounts receivable, net of allowance for doubtful accounts of $945 and $1,065		37,448			30,987
Inventories, net		32,929			30,233
Costs and estimated earnings in excess of billings		941			2,801
Deferred income taxes		1,904			1,904
Prepaid expenses and other current assets		3,001			3,778

Total current assets		112,948			101,739


Property, plant and equipment, net		27,696			27,424
Patents, net		1,423			1,496
Goodwill		27,839			27,385
Other intangibles, net		21,833			22,320
Other assets		3,644			3,562
Deferred income taxes		236			192

Total assets	$	195,619		$	184,118


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	1,209		$	1,201
Accounts payable		15,330			11,973
Accrued expenses and other current liabilities		11,158			16,517
Accrued commissions		4,926			3,923
Customer advances and billings in excess of costs and estimated earnings		12,607			8,667
Income taxes payable		5,212			4,581
Deferred income taxes		2,635			2,635

Total current liabilities		53,077			49,497


Long-term debt, net of current portion		26,714			36,913
Deferred income taxes		3,286			3,286
Other non-current liabilities		615			469
Series B Junior Participating Preferred Shares, $.01 par value. Authorized 50,000 shares; issued none		—			—
Shareholders’ equity:
Preferred stock, $.01 par value. Authorized 950,000 shares; issued none		—			—
Common stock, $.01 par value. Authorized 50,000,000 shares; issued 4,750,306 shares and 4,716,383 shares		48			47
Paid-in capital		26,353			24,568
Retained earnings		103,385			90,576
Accumulated other comprehensive income		10,424			6,276

		140,210			121,467
Treasury stock, 2,008,192 and 2,002,574 shares, at cost		(28,283	)		(27,514	)

Total shareholders’ equity		111,927			93,953

Total liabilities and shareholders’ equity	$	195,619		$	184,118

See accompanying Notes to Consolidated Financial Statements.

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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in Thousands except Per Share Data)
(Unaudited)


	Three Months Ended						Six Months Ended
	June 28,			June 30,			June 28,			June 30,
	2008			2007			2008			2007
Revenues:
Equipment and parts	$	56,947		$	44,077		$	111,423		$	88,416
Services and freight		3,263			3,397			6,185			5,942
Other		—			92			—			92

Total revenues		60,210			47,566			117,608			94,450
Cost of revenues:
Equipment and parts		32,302			24,317			63,090			49,080
Services and freight		2,406			2,692			4,767			5,174

Total cost of revenues		34,708			27,009			67,857			54,254


Gross profit		25,502			20,557			49,751			40,196

Operating expenses:
Selling, general and administrative		14,615			12,320			29,676			23,926
Research and development		631			611			1,284			1,202

		15,246			12,931			30,960			25,128


Operating income		10,256			7,626			18,791			15,068

Interest (expense), net		(246	)		(433	)		(625	)		(900	)

Income before income taxes		10,010			7,193			18,166			14,168

Income tax provision		2,852			1,940			5,357			4,036


Net income		7,158			5,253			12,809			10,132

Retained earnings:
Beginning of period		96,227			74,134			90,576			69,255

End of period	$	103,385		$	79,387		$	103,385		$	79,387


Earnings per share:
Basic	$	2.62		$	1.96		$	4.70		$	3.79

Diluted	$	2.49		$	1.84		$	4.47		$	3.56


Weighted average common shares outstanding (basic)		2,733,000			2,684,000			2,725,000			2,674,000


Weighted average common and common equivalent shares outstanding (diluted)		2,877,000			2,859,000			2,868,000			2,846,000

See accompanying Notes to Consolidated Financial Statements.

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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)


	Six Months Ended
	June 28,			June 30,
	2008			2007
Operating activities:
Net income	$	12,809		$	10,132
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of asset		—			(92	)
Depreciation and amortization		3,091			2,677
Non-cash compensation		248			192
Deferred income taxes		(44	)		34
Changes in assets and liabilities, net of business acquired:
Accounts receivable, net		(5,034	)		(5,642	)
Inventories, net		(1,713	)		(1,083	)
Prepaid expenses and other current assets		939			616
Other assets		(12	)		241
Accounts payable		2,690			2,509
Accrued expenses and other current liabilities		746			(722	)

Net cash provided by operating activities		13,720			8,862


Investing activities:
Proceeds from disposition of asset		—			406
Businesses acquired, net of cash received		(500	)		(1,854	)
Capital expenditures		(1,811	)		(903	)
Restricted cash		602			375
Other		(18	)		(26	)

Net cash used in investing activities		(1,727	)		(2,002	)


Financing activities:
Proceeds from issuance of long-term debt		8,250			4,010
Principal payments on long-term debt		(18,441	)		(10,803	)
Purchase of treasury stock		(769	)		—
Tax benefit from stock option exercises		1,022			1,518
Proceeds from issuance of common stock		118			1,064

Net cash used in financing activities		(9,820	)		(4,211	)


Effect of exchange rate changes on cash and cash equivalents		3,118			(9	)


Net increase in cash and cash equivalents		5,291			2,640

Cash and cash equivalents:
Beginning of period		30,853			14,038

End of period	$	36,144		$	16,678


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	1,017		$	1,223
Income taxes	$	3,536		$	2,108

Seller financing for businesses acquired	$	—		$	635

See accompanying Notes to Consolidated Financial Statements.

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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 2008
(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 of America 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. All references to the second quarter or first six months of 2008 or 2007 mean the 13-week or 26-week period ended June 28, 2008 or June 30, 2007.

		The unaudited financial statements herein should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended December 29, 2007 which was filed with the Securities and Exchange Commission on March 12, 2008.

		Certain reclassifications were made to the prior year’s consolidated financial statements to conform them to the current year presentation.

2.		Acquisitions

		On March 27, 2007, the Company purchased certain assets of Wuxi Chenghao Machinery Co., Ltd. (“Wuxi Chenghao”), a privately-owned company in the People’s Republic of China. The purchased assets were transferred from Wuxi Chenghao to Wuxi K-Tron Colormax Machinery Co., Ltd. (“Wuxi K-Tron Colormax”), a newly-created Wholly Foreign-Owned Enterprise which the Company established in connection with this transaction, and the financial results of Wuxi K-Tron Colormax have been included in the Company’s consolidated financial statements since that date. The total cost of the transaction over a five-year period, including the $1,000,000 purchase price and payments under related employment and other arrangements with one of Wuxi Chenghao’s owners, could be as much as approximately $3,500,000. As of June 28, 2008 and December 29, 2007, the Company recorded $1,505,000 and $1,152,000 of goodwill as part of acquiring the Wuxi Chenghao assets.

		On September 14, 2007, the Company purchased all of the outstanding stock of Rader Companies, Inc. (“Rader”), and the financial results of Rader have been included in the Company’s consolidated financial statements since that date. The preliminary purchase price was $15,945,000, all of which was paid in cash, including $2,300,000 held in escrow to satisfy any potential indemnification claims made by the Company. The Company borrowed the full amount of the purchase price under its existing U.S. revolving credit facility (see Note 7 — Long-Term Debt). The final purchase price of $17,632,000 included a $1,687,000 adjustment based upon Rader’s increase in net working capital between January 1, 2007 and the September 14, 2007 closing date, which

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adjustment was paid to the sellers on February 5, 2008. At the sellers’ direction, $3,798,000 of the purchase price was delivered to Rader on the closing date to satisfy indebtedness owed to Rader by two other unrelated companies also owned by the sellers. This cash, together with other cash of Rader, was then used to pay off all of Rader’s bank debt, which amounted to approximately $3,832,000.

The excess of the purchase price, including the working capital adjustment, over the carrying value of the identifiable net assets acquired was $7,881,000, which was allocated as follows:


	Useful Life	2007
		(in thousands)

Patents	10 years	$	200
Goodwill	Indefinite		2,394
Customer relationships	10 years		2,700
Drawings	25 years		1,160
Tradenames	Indefinite		1,400
Other asset	4 months		27

		$	7,881

The purchase price of $15,945,000, after being reduced by the $2,300,000 escrow and increased by the $1,687,000 working capital adjustment, for an adjusted purchase price of $15,332,000, was allocated as follows:


	2007
	(in thousands)

Cash	$	1,670
Accounts receivables, net		5,107
Inventories, net		5,084
Costs in excess of billings, net of billings in excess of costs		1,568
Other current assets		531
Property, plant and equipment		52
Patents		200
Goodwill		2,394
Customer relationships		2,700
Drawings		1,160
Tradenames		1,400
Accounts payable		(2,821	)
Accrued expenses and other current liabilities		(3,713	)

	$	15,332

		Customer relationships, drawings and tradenames are included in other intangibles in the consolidated balance sheet.

3.		New Accounting Pronouncements

		In July 2006, the Financial Accounting Standards Board (the “FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes: an interpretation of

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FASB Statement No. 109”. Interpretation No. 48, which clarified Statement of Financial Accounting Standard (“SFAS”) No. 109, “Accounting for Income Taxes”, established the criterion that an individual tax position has to meet for some or all of the benefits of that position to be recognized in the Company’s financial statements. Interpretation No. 48 was effective for fiscal years beginning after December 15, 2006, and was adopted by the Company effective December 31, 2006. On initial application, Interpretation No. 48 was applied to all tax positions for which the statute of limitations remained open. Only tax positions that met the more-likely-than-not recognition threshold at the adoption date were recognized and, with respect to later dates, only those that met or meet the threshold on those later dates have been or will be recognized at those dates. The Company is subject to income taxes in the U.S. federal jurisdiction and also in various state, local and foreign jurisdictions. Tax laws and regulations within each jurisdiction are subject to interpretation and require significant judgment to apply. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for tax years up to and including 2003. In 2008, the Internal Revenue Service completed an audit of the Company’s U.S. corporation tax filings for 2004, 2005 and 2006, and in 2007, the Swiss government completed an audit of the Company’s Swiss income tax filings for 2004 and 2005. The Company recognizes interest accrued related to unrecognized tax liabilities in interest expense and recognizes penalties in operating expenses. The adoption of Interpretation No. 48 did not have a material impact on the Company’s consolidated financial statements.

		In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, a standard that provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever assets or liabilities are measured at fair value as required or permitted by other standards. SFAS No. 157 does not expand the use of fair value in any new circumstances. SFAS No. 157 establishes a fair value hierarchy that prioritizes the information used to develop fair value assumptions. SFAS No. 157 is effective for fiscal years and interim periods beginning after November 15, 2007. The adoption of SFAS No. 157 by the Company effective December 30, 2007 did not have a material impact on the Company’s consolidated financial statements.

		In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option of Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”, which provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years and interim periods beginning after November 15, 2007. The adoption of SFAS No. 159 by the Company effective December 30, 2007 did not have a material impact on the Company’s consolidated financial statements.

		In December 2007, the FASB issued SFAS No. 141(R) (revised 2007), “Business Combinations”. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize, at full fair value, all the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all

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assets acquired and liabilities assumed; and requires the acquiring entity to disclose information needed to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008 and is to be applied prospectively. The Company is evaluating the impact that the adoption of SFAS No. 141(R) will have on its process of analyzing business combinations.

		In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities, an Amendment to FASB Statement No. 133”. SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effects of these instruments and activities on an entity’s financial position, financial performance and cash flows. The new standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company has not yet determined the impact on its consolidated financial statements of adopting SFAS No. 161.

		In April 2008, the FASB issued Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets”, which amends SFAS No. 142, “Goodwill and Other Intangible Assets”. The new pronouncement requires companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension. The new standard, FAS 142-3, is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008, and must be applied prospectively to intangible assets acquired after the effective date. Because the pronouncement is to be applied prospectively, there will be no impact on the Company’s current financial statements as a result of adopting FAS 142-3 effective January 4, 2009.

4.		Inventories

		Inventories consist of the following:


	June 28,			December 29,
	2008			2007
	(in thousands)

Components	$	26,349		$	22,759
Work-in-process		7,955			8,480
Finished goods		708			775
Inventory reserves		(2,083	)		(1,781	)

	$	32,929		$	30,233

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5.		Intangible Assets

		Intangible assets consist of the following:


	June 28, 2008				December 29, 2007
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
			(in thousands)

Amortized intangible assets
Patents	$	3,046	$	1,623	$	3,027	$	1,531
Drawings		6,140		882		6,140		754
Customer relationships		11,299		1,334		11,299		975

	$	20,485	$	3,839	$	20,466	$	3,260

Unamortized intangible assets
Trademarks and tradenames	$	6,610			$	6,610

		The amortized intangible assets are being amortized on the straight-line basis (half-year expense in the year of issuance of a patent) over the expected periods of benefit, which range from 10 to 50 years. The weighted average remaining life of the amortizable intangible assets is 26 years (14 years for patents, 25 years for drawings and 28 years for customer relationships). The amortization expense of intangible assets for the six-month periods ended June 28, 2008 and June 30, 2007 was $579,000 and $389,000.

		Goodwill increased by $454,000 during the first six months of 2008, of which $354,000 was related to the acquisition of certain assets of Wuxi Chenghao and $100,000 was related to the acquisition of the stock of Rader.

6.		Accrued Warranty

		The Company offers a one-year warranty on a majority of its products. Warranty is accrued as a percentage of sales, based upon historical experience, on a monthly basis and is included in accrued expenses and other current liabilities. The following is an analysis of accrued warranty for the six-month periods ended June 28, 2008 and June 30, 2007:


	Six Months Ended
	June 28,			June 30,
	2008			2007
	(in thousands)

Beginning balance	$	2,194		$	1,538
Accrued warranty of acquired business		—			50
Accrual of warranty expense		1,339			970
Warranty costs incurred		(1,136	)		(636	)
Foreign exchange adjustment		104			(1	)

Ending balance	$	2,501		$	1,921

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7.		Long-Term Debt

		Long-term debt consists of the following, with the annual interest rates shown being those in effect on June 28, 2008:


	June 28,			December 29,
	2008			2007
	(in thousands)

U.S. revolving line of credit	$	24,950		$	33,750
U.S. mortgage, interest at 6.45%		973			1,364
U.S. term note, interest at 5.00%		2,000			3,000

		27,923			38,114
Less current portion		(1,209	)		(1,201	)

	$	26,714		$	36,913

All amounts borrowed under the U.S. revolving line of credit are due on September 29, 2011. As of June 28, 2008, interest on the $24,950,000 borrowed under that line of credit was payable at the following rates for the periods ending on the dates indicated:


				Expiration of
	Amount			Interest Rate Period		Per Annum Rate

Prime loan	$	250,000	*				4.000	%
Six-month LIBOR loan		3,700,000			9/26/2008		3.507	%
Eighteen-month interest rate swap		2,000,000			5/31/2009		4.985	%
Two-year interest rate swap		2,000,000			9/24/2009		5.605	%
Three-year interest rate swap		5,000,000			10/13/2009		6.085	%
Two-year interest rate swap		3,000,000			10/31/2009		5.385	%
Two-year interest rate swap		2,000,000			11/30/2009		4.925	%
Three-year interest rate swap		2,000,000			9/24/2010		5.665	%
Four-year interest rate swap		5,000,000			10/13/2010		6.095	%

	$	24,950,000


*		The prime loan was paid in full on July 9, 2008.

8.		Earnings Per Share

		The Company previously adopted SFAS No. 128, “Earnings Per Share”, which 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 number of common shares outstanding. Diluted Earnings Per Share is calculated similarly, except that the denominator includes the weighted average number of common shares outstanding plus the dilutive effect of options, warrants, convertible securities and other instruments with dilutive effects if exercised.

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The Company’s Basic and Diluted Earnings Per Share are calculated as follows:


	For the Three Months Ended June 28, 2008
	Net Income Available
	To Common				Earnings
(Dollars and Shares in Thousands except Per Share Data)	Shareholders		Shares		Per Share
Basic	$	7,158		2,733	$	2.62
Common share equivalent of outstanding options		—		144		(0.13	)

Diluted	$	7,158		2,877	$	2.49


	For the Three Months Ended June 30, 2007
	Net Income Available
	To Common				Earnings
(Dollars and Shares in Thousands except Per Share Data)	Shareholders		Shares		Per Share
Basic	$	5,253		2,684	$	1.96
Common share equivalent of outstanding options		—		175		(0.12	)

Diluted	$	5,253		2,859	$	1.84


	For the Six Months Ended June 28, 2008
	Net Income Available
	To Common				Earnings
(Dollars and Shares in Thousands except Per Share Data)	Shareholders		Shares		Per Share
Basic	$	12,809		2,725	$	4.70
Common share equivalent of outstanding options		—		143		(0.23	)

Diluted	$	12,809		2,868	$	4.47


	For the Six Months Ended June 30, 2007
	Net Income Available
	To Common				Earnings
(Dollars and Shares in Thousands except Per Share Data)	Shareholders		Shares		Per Share
Basic	$	10,132		2,674	$	3.79
Common share equivalent of outstanding options		—		172		(0.23	)

Diluted	$	10,132		2,846	$	3.56

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 weighted average number includes the weighted average number of common shares outstanding plus the shares issuable upon the exercise of stock options after the assumed repurchase of common shares with the related proceeds at the average market price during the period.

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9.		Share-Based Compensation

		The Company adopted SFAS No. 123(R), “Share-Based Payment”, effective January 1, 2006. SFAS No. 123(R) requires the Company to recognize expense related to the fair value of share-based compensation awards, including stock grants and options. For unvested awards granted prior to the effective date of the Company’s adoption of SFAS No. 123(R) which were not fully expensed in prior years, either in the Company’s income statement or in pro forma disclosures in the notes thereto, the Company recognizes compensation expense in the same manner as was used in its income statement or for pro forma disclosures prior to the effective date of its adoption of SFAS No. 123(R).

		There was no prospective cost of stock option compensation expensed in the first six months of 2008 or 2007. There were no stock options granted in 2007 or in the first six months of 2008.

		The Company issued 9,000 shares of restricted common stock in May 2007 pursuant to five grants, each of which vests on the four-year anniversary of the date of grant. Compensation expense related to this restricted stock is recognized ratably over the four years based on the fair value of the shares at the date of the grants, which was $93.50 per share.

		The Company issued 2,500 shares of restricted common stock in February 2008 pursuant to a grant that vests on the four-year anniversary of the date of grant. Compensation expense related to this restricted stock is recognized ratably over the four years based on the fair value of the shares at the date of the grant, which was $117.00 per share.

10.		Comprehensive Income

		Comprehensive income is the total of net income, the change (net of tax) in the unrealized gain or loss on interest rate swaps and the change in foreign currency translation adjustments, which were the Company’s only non-owner changes in equity in the first six months of 2008 and 2007.

		For the three and six-month periods ended June 28, 2008 and June 30, 2007, the following table sets forth the Company’s comprehensive income:


	Three Months Ended						Six Months Ended
	June 28,			June 30,			June 28,			June 30,
	2008			2007			2008			2007
	(in thousands)

Net income	$	7,158		$	5,253		$	12,809		$	10,132
Unrealized gain (loss) on interest rate swaps, net of tax		237			71			(67	)		50
Foreign currency translation gain (loss)		(1,026	)		(104	)		4,215			35

Comprehensive income	$	6,369		$	5,220		$	16,957		$	10,217

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11.		Management Geographic Information

		The Company has adopted the provisions of SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information”. SFAS No. 131 introduced a 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 — 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 six-month periods ended June 28, 2008 and June 30, 2007, the following table sets forth the Company’s geographic information:


	Americas		EMEA/Asia		Eliminations			Consolidated
	(in thousands)

THREE MONTHS ENDED June 28, 2008
Revenues
Sales to unaffiliated customers	$	40,572	$	19,638	$	—		$	60,210
Sales to affiliates		2,910		1,627		(4,537	)		—

Total sales	$	43,482	$	21,265	$	(4,537	)	$	60,210


Operating income	$	6,390	$	3,839	$	27		$	10,256

Interest (expense), net									(246	)

Income before income taxes								$	10,010


	Americas		EMEA/Asia		Eliminations			Consolidated
	(in thousands)

THREE MONTHS ENDED June 30, 2007
Revenues
Sales to unaffiliated customers	$	31,756	$	15,810	$	—		$	47,566
Sales to affiliates		1,269		1,515		(2,784	)		—

Total sales	$	33,025	$	17,325	$	(2,784	)	$	47,566


Operating income	$	4,861	$	2,800	$	(35	)	$	7,626

Interest (expense), net									(433	)

Income before income taxes								$	7,193

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	Americas		EMEA/Asia		Eliminations			Consolidated
	(in thousands)

SIX MONTHS ENDED June 28, 2008
Revenues
Sales to unaffiliated customers	$	77,871	$	39,737	$	—		$	117,608
Sales to affiliates		4,627		2,640		(7,267	)		—

Total sales	$	82,498	$	42,377	$	(7,267	)	$	117,608


Operating income	$	11,542	$	7,288	$	(39	)	$	18,791

Interest (expense), net									(625	)

Income before income taxes								$	18,166


	Americas		EMEA/Asia		Eliminations			Consolidated
	(in thousands)

SIX MONTHS ENDED June 30, 2007
Revenues
Sales to unaffiliated customers	$	60,097	$	34,353	$	—		$	94,450
Sales to affiliates		2,305		2,528		(4,833	)		—

Total sales	$	62,402	$	36,881	$	(4,833	)	$	94,450


Operating income	$	8,092	$	6,998	$	(22	)	$	15,068

Interest (expense), net									(900	)

Income before income taxes								$	14,168

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

We are engaged in one principal business segment — material handling equipment and systems. We operate in two primary geographic locations — North and South America (the “Americas”) and Europe, the Middle East, Africa and Asia (“EMEA/Asia”). Within the material handling equipment and systems segment, we have two main business lines (“business lines”), which are our process and size reduction business lines.

On March 27, 2007, we purchased certain assets of Wuxi Chenghao Machinery Co., Ltd. (“Wuxi Chenghao”), a privately-owned company in the People’s Republic of China. The purchased assets were transferred from Wuxi Chenghao to Wuxi K-Tron Colormax Machinery Co., Ltd. (“Wuxi K-Tron Colormax”), a newly-created Wholly Foreign-Owned Enterprise which we established in connection with this transaction, and the financial results of Wuxi K-Tron Colormax have been included in our consolidated financial statements since that date. The total cost of the transaction over a five-year period, including the $1,000,000 purchase price and payments under related employment and other arrangements with one of Wuxi Chenghao’s owners, could be as much as approximately $3,500,000.

On September 14, 2007, we purchased all of the outstanding stock of Rader Companies, Inc. (“Rader”), and the financial results of Rader have been included in our consolidated financial statements since that date. The preliminary purchase price was $15,945,000, all of which was paid in cash, including $2,300,000 held in escrow to satisfy any potential indemnification claims made by us. We borrowed the full amount of the purchase price under our existing U.S. revolving credit facility. The final purchase price of $17,632,000 included a $1,687,000 adjustment based upon Rader’s increase in net working capital between January 1, 2007 and the September 14, 2007 closing date, which adjustment was paid to the sellers on February 5, 2008.

The following provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with our consolidated financial statements and accompanying notes. All references in this Item 2 to the second quarter or first six months of 2008 or 2007 mean the 13-week or 26-week period ended June 28, 2008 or June 30, 2007.

Critical Accounting Assumptions, Estimates and Policies; Recent Pronouncements

This discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2007 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the fiscal year ended December 29, 2007 which was filed with the Securities and Exchange Commission on March 12, 2008 (our “2007 Form 10-K”). The preparation of those financial statements required management to make assumptions and estimates that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods. Actual amounts or results could differ from those based on such assumptions and estimates.

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Our critical accounting policies, assumptions and estimates are described in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Assumptions and Estimates” in our 2007 Form 10-K. There have been no changes in these accounting policies.

Our significant accounting policies are described in Note 2 to our 2007 consolidated financial statements contained in our 2007 Form 10-K. Information concerning our implementation and the impact of recent accounting standards issued by the Financial Accounting Standards Board is included in the notes to our 2007 consolidated financial statements and also in Note 3 to our consolidated financial statements contained in this quarterly report on Form 10-Q. We did not adopt any accounting policy in the first six months of 2008 that had a material impact on our consolidated financial statements.

Results of Operations

Overview

For the second quarter and first six months of 2008, we reported revenues of $60,210,000 and $117,608,000 and net income of $7,158,000 and $12,809,000, compared to revenues of $47,566,000 and $94,450,000 and net income of $5,253,000 and $10,132,000 for the same periods in 2007. The increases in our revenues and net income in the second quarter of 2008 compared with the same period in 2007 were primarily due to the stronger performance of our process business line in EMEA/Asia, the inclusion of Rader which we acquired on September 14, 2007, better results from the other three companies in our size reduction business line, and the positive effect of a weaker U.S. dollar versus the same period in 2007 on the translation of the revenues and profits of our foreign operations into U.S. dollars. The increase in our revenues and net income in the first six months of 2008 compared with the same period in 2007 were primarily due to the contributions of Rader and the other three companies in our size reduction business line and the positive effect of a weaker U.S. dollar versus the same period in 2007 on the translation of the revenues and profits of our foreign operations into U.S. dollars. Our effective tax rates for the second quarter and first six months of 2008 were 28.5% and 29.5%, up from 27.0% and 28.5% in the same periods of 2007. These increases were primarily due to a higher proportion of earnings in the United States which are taxed at an overall higher rate than are our earnings in EMEA/Asia. Income tax expense in the second quarter of 2008 was reduced by approximately $223,000, of which $173,000 was from the reversal of a previously recorded foreign tax contingency and $50,000 was from a tax refund due from the U.S. Treasury related to the completion of an Internal Revenue Service audit of the Company’s U.S. corporation tax filings for 2004, 2005 and 2006. Income tax expense in the second quarter of 2007 was reduced by approximately $410,000 as a result of the finalization of a Swiss tax audit of our Swiss subsidiary for the years 2004 and 2005.

Foreign Exchange Rates

We are an international company, and we derived approximately 34% and 36% of our revenues for the first six months of 2008 and 2007 from products manufactured in, and sales made and services performed from, our facilities located outside the United States, primarily in Europe. With our global operations, we are 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 as well as transactions where the revenues and related expenses may

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initially be accounted for in different currencies, such as sales made from our Swiss manufacturing facility in currencies other than the Swiss franc.

Since we receive substantial revenues from activities in foreign jurisdictions, 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, British pound sterling, Canadian dollar and Swedish krona and, to a lesser degree, other currencies. When the U.S. dollar weakens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales increases. When the U.S. dollar strengthens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales decreases. 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, our revenues in U.S. dollars 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 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 sales transactions may be affected by changes in foreign exchange rates where the sale is made in a currency other than the functional currency of the facility manufacturing the product subject to the sale.

For the second quarter and first six months of 2008 and 2007, the changes in certain key foreign exchange rates affecting us were as follows:


	Three Months Ended						Six Months Ended
	June 28,				June 30,		June 28,				June 30,
	2008				2007		2008				2007

Average U.S. dollar equivalent of one Swiss franc		0.971				0.818		0.956				0.814
% change vs. prior year			+18.7	%					+17.4	%

Average U.S. dollar equivalent of one euro		1.564				1.349		1.532				1.329
% change vs. prior year			+15.9	%					+15.3	%

Average U.S. dollar equivalent of one British pound sterling		1.975				1.987		1.976				1.970
% change vs. prior year			-0.6	%					+0.3	%

Average Swiss franc equivalent of one euro		1.611				1.649		1.604				1.633
% change vs. prior year			-2.3	%					-1.8	%

Average Swiss franc equivalent of one British pound sterling		2.035				2.429		2.070				2.420
% change vs. prior year			-16.2	%					-14.5	%

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Since we did not acquire Rader, which has subsidiaries located in Canada and Sweden, until September 14, 2007, the above table does not include changes in foreign exchange rates affecting the U.S. dollar versus the Canadian dollar and Swedish krona.

Presentation of Results and Analysis

The following table sets forth our results of operations, expressed as a percentage of total revenues, for the periods indicated:


	Three Months Ended						Six Months Ended
	June 28,			June 30,			June 28,			June 30,
	2008			2007			2008			2007

Total revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues		57.6			56.8			57.7			57.4

Gross profit		42.4			43.2			42.3			42.6
Selling, general and administrative		24.3			25.9			25.2			25.3
Research and development		1.1			1.3			1.1			1.3

Operating income		17.0			16.0			16.0			16.0
Interest expense, net		0.4			0.9			0.5			1.0

Income before income taxes		16.6			15.1			15.5			15.0
Income tax provision		4.7			4.1			4.6			4.3

Net income		11.9	%		11.0	%		10.9	%		10.7	%

The following table sets forth our order backlog at the dates indicated:


	June 28, 2008		Dec. 29, 2007		June 30, 2007

Backlog (at June 28, 2008 foreign exchange rates, in thousands of dollars)	$	75,547	$	73,545	$	57,811

Total revenues increased by $12,644,000 or 26.6% in the second quarter of 2008 and by $23,158,000 or 24.5% in the first six months of 2008 compared to the same periods in 2007. The increases in our revenues in the second quarter of 2008 compared with the same period in 2007 were primarily due to the stronger performance of our process business line in EMEA/Asia, the inclusion of Rader which we acquired on September 14, 2007, better results from the other three companies in our size reduction business line, and the positive effect of a weaker U.S. dollar versus the same period in 2007 on the translation of the revenues of our foreign operations into U.S. dollars. The increase in our revenues in the first six months of 2008 compared with the same period in 2007 were primarily due to the contributions of Rader and the other three companies in our size reduction business line and the positive effect of a weaker U.S. dollar versus the same period in 2007 on the translation of the revenues of our foreign operations into U.S. dollars.

Gross profit as a percentage of total revenues decreased to 42.4% in the second quarter of 2008 from 43.2% for the same period in 2007 and decreased to 42.3% in the first six months of

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2008 from 42.6% for the same period last year. We believe that these decreases primarily reflected a change in the sales mix of the products and services that we sold within our two business lines during these periods. Sales mix refers to the relative amounts of different products sold and services provided. Gross margin levels vary with the product sold or service provided. For example, sales of replacement parts in our size reduction business line generally carry a higher gross margin than sales of equipment within that line.

Selling, general and administrative (“SG&A”) expense increased by $2,295,000 or 18.6% in the second quarter of 2008 and by $5,750,000 or 24.0% in the first six months of 2008 compared to the same periods in 2007. We believe that these increases for the second quarter and first six months of 2008 were primarily due to the inclusion of the operations of Rader that we acquired on September 14, 2007, the unfavorable effect of a weaker U.S. dollar on the translation of foreign costs into U.S. dollars, higher sales commissions related to increased revenues and, in the first six months but not in the second quarter of 2008, foreign exchange losses on transaction exposure caused by the marking to market of non-Swiss franc balances to Swiss franc values on the balance sheet of our Swiss subsidiary. As a percentage of revenues, SG&A decreased to 24.3% and 25.2% in the second quarter and first six months of 2008 versus 25.2% and 25.3% in the second quarter and first six months of 2007.

Research and development (“R&D”) expense increased 3.3% in the second quarter of 2008 and 6.8% in the first six months of 2008 compared to the same periods in 2007 due primarily to the effect of a weaker U.S. dollar in the second quarter and first six months of 2008 on the translation into U.S. dollars of our R&D expenses incurred in Switzerland.

Interest expense, net of interest income, decreased by $187,000 or 43.2% in the second quarter of 2008 and by $275,000 or 30.6% in the first six months of 2008 compared to the same periods in 2007. These decreases were primarily due to the effect of lower debt levels (excluding borrowings related to the Rader acquisition), lower interest rates and higher interest income, partially offset by interest expense on the borrowings related to the Rader acquisition.

Income before income taxes increased to $10,010,000 in the second quarter of 2008 and $18,166,000 in the first six months of 2008 compared to $7,193,000 and $14,168,000 for the same periods in 2007. The increases of $2,817,000 in the second quarter of 2008 and $3,998,000 in the first six months of 2008 were primarily the net result of the items discussed above.

The income tax provisions for the second quarter and first six months of 2008 were $2,852,000 and $5,357,000 compared to $1,940,000 and $4,036,000 for the same periods in 2007. The overall effective tax rates were 28.5% and 29.5% for the second quarter and first six months of 2008 versus 27.0% and 28.5% for the same periods in 2007. The higher effective tax rates in 2008 versus 2007 were primarily due to a higher proportion of our earnings in the United States which are taxed at an overall higher rate than are our earnings in EMEA/Asia. Income tax expense in the second quarter of 2008 was reduced by approximately $223,000, of which $173,000 was from the reversal of a previously recorded foreign tax contingency and $50,000 was from a tax refund due from the U.S. Treasury related to the completion of an Internal Revenue Service audit of the Company’s U.S. corporation tax filings for 2004, 2005 and 2006. Income tax expense in the second quarter of 2007 was reduced by approximately $410,000 as a result of the finalization of a Swiss tax audit of our Swiss subsidiary for the years 2004 and 2005.

Our order backlog at constant foreign exchange rates increased by $2,002,000 or 2.7% at the end of the second quarter of 2008 compared to the end of fiscal year 2007, from $73,545,000

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to $75,547,000. Our order backlog at constant foreign exchange rates increased by $17,736,000 or 30.7% at the end of the second quarter of 2008 compared to the end of the second quarter of 2007, from $57,811,000 to $75,547,000. The increase in backlog at the end of the second quarter of 2008 versus year-end 2007 at constant foreign exchange rates primarily reflected stronger demand for equipment in our size reduction business line, while the increase in backlog at the end of the second quarter of 2008 versus the end of the second quarter of 2007 was primarily due to the acquisition of Rader on September 14, 2007 as well as to stronger demand for equipment in our process business line, especially in EMEA/Asia, as well as in our size reduction business line.

Liquidity and Capital Resources

Capitalization

Our capitalization at the end of the second quarter of 2008 and at the end of fiscal year 2007 is summarized below:


	June 28,			December 29,
(Dollars in Thousands)	2008			2007

Short-term debt, including current portion of long-term debt	$	1,209		$	1,201
Long-term debt		26,714			36,913

Total debt		27,923			38,114
Shareholders’ equity		111,927			93,953

Total debt and shareholders’ equity (total capitalization)	$	139,850		$	132,067

Percent total debt to total capitalization		20	%		29	%
Percent long-term debt to equity		24	%		39	%
Percent total debt to equity		25	%		41	%

The weighted average annual interest rate on total debt at June 28, 2008 was 5.31%.

Total debt decreased by $10,191,000 in the first six months of 2008. At June 28, 2008, and subject to certain conditions which may limit the amount that may be borrowed at any particular time, we had $23,061,000 of unused borrowing capacity under our U.S. revolving credit facility and $9,224,000 of unused borrowing capacity under our foreign loan agreements.

Other Items

At June 28, 2008, working capital was $59,871,000 compared to $52,242,000 at December 29, 2007, and the ratio of current assets to current liabilities at those dates was 2.13 and 2.06. In the first six months of 2008 and 2007, we utilized internally generated funds and our line of credit to meet our working capital needs.

Net cash provided by operating activities was $13,720,000 in the first six months of 2008 compared to $8,862,000 for the same period in 2007. This $4,858,000 increase in operating cash flow was primarily from higher net income, an increase in accrued expenses and other current liabilities in the first six months of 2008 compared to a decrease in the first six months of 2007, increased depreciation and amortization, and a higher increase in inventory in the first six months

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of 2008 compared with the same period in 2007, partially offset by a lower increase in accounts receivable when comparing the first six months of 2008 and 2007.

Net cash of $1,727,000 used in investing activities in the first six months of 2008 was primarily for capital additions and an installment payment related to the purchase of certain assets of Wuxi Chenghao, partially offset by a reduction of restricted cash associated with the collateralization of letters of credit, while net cash of $2,002,000 used in investing activities in the first six months of 2007 was primarily for an Internal Revenue Code Section 338(h)(10) election associated with the purchase of Premier Pneumatics, Inc. in October 2006, capital additions and the purchase of certain assets of Wuxi Chenghao, partially offset by a reduction of restricted cash associated with the collateralization of letters of credit and proceeds from the disposition of an asset.

Net cash used in financing activities in the first six months of 2008 was for principal payments on debt and the purchase of 5,618 shares of the Company’s common stock, partially offset by the proceeds from stock option exercises and the tax benefit associated therewith. Net cash used in financing activities in the first six months of 2007 was for net reductions in debt, partially offset by the proceeds of stock option exercises and the tax benefit associated therewith.

Shareholders’ equity increased $17,974,000 in the first six months of 2008, of which $12,809,000 was from net income, $764,000 was from the issuance of common stock pursuant to a restricted stock grant and the exercise of stock options, $1,022,000 was from the tax benefit associated with such stock option exercises and the vesting of restricted stock grants, and $4,215,000 was from changes in foreign exchange rates, primarily the translation of Swiss francs into U.S. dollars between the beginning and the end of the six-month period, partially offset by $769,000 used to purchase 5,618 shares of the Company’s common stock and $67,000 from an unrealized loss, net of taxes, attributable to several interest rate swaps.

Future Payments Under Contractual Obligations

We are obligated to make future payments under various contracts such as debt agreements and lease agreements, and we are subject to certain other commitments and contingencies. There have been no material changes to Future Payments Under Contractual Obligations as reflected in the Liquidity and Capital Resources section of Management’s Discussion and Analysis in our 2007 Form 10-K, except for an $8,800,000 decrease in the principal amount due in 2011 under our U.S. revolving credit facility and a $288,000 prepayment of principal due August 1, 2009 under our U.S. mortgage. Refer to Notes 8 and 15 to the consolidated financial statements in our 2007 Form 10-K for additional information on long-term debt and commitments and contingencies.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors.” in our 2007 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in our 2007 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

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Forward-Looking Statements

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 contingencies which are difficult to predict. These risks and uncertainties include, but are not limited to, the risks described above under the heading “Risk Factors”. Many of the factors that will determine our future results are beyond the ability of management to control or predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by any forward-looking statements that we may make. The forward-looking statements contained in this report include, but are not limited to, statements regarding the effect of changes in foreign exchange rates and interest rates on our business and financial results. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk.

We are currently exposed to certain market risks related to (i) fluctuations in foreign exchange rates and (ii) interest rate changes.

Foreign Exchange Rate Risk

The primary currencies for which we have exchange rate exposure are the U.S. dollar versus the Swiss franc, the U.S. dollar versus the euro, the U.S. dollar versus the British pound sterling, the Swiss franc versus the euro, the Swiss franc versus the British pound sterling, the U.S. dollar versus the Canadian dollar and the U.S. dollar versus the Swedish krona. We do not, as a routine matter, use hedging vehicles to manage foreign exchange exposures. Foreign cash balances in currencies other than the Swiss franc are limited in amount in order to manage the transaction exposure caused by the marking to market of non-Swiss franc balances to Swiss franc values on the balance sheet of our Swiss subsidiary.

As of June 28, 2008, a 10% unfavorable change in the foreign exchange rates affecting balance sheet transactional exposures would have resulted in a reduction in our pre-tax income for the first six months of 2008 of approximately $629,000, or 3.5%. This hypothetical reduction on transactional exposures is based on the differences between the June 28, 2008 actual foreign exchange rates and hypothetical rates assuming a 10% unfavorable change in foreign exchange rates on that date.

The translation of the balance sheets of our non-U.S. operations from local currencies into U.S. dollars is also sensitive to changes in foreign exchange rates. These translation gains or losses are recorded as translation adjustments within the accumulated other comprehensive

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income component of shareholders’ equity on our balance sheet. Using the above example, a hypothetical change in translation adjustments would be calculated by multiplying the net assets of our non-U.S. operations by a 10% unfavorable change in the applicable foreign exchange rates. The result of this calculation would be to reduce shareholders’ equity by approximately $4,965,000, or 4.4% of our June 28, 2008 shareholders’ equity of $111,927,000.

Interest Rate Risk

We have credit facilities and loans that require us to pay interest at rates that may change periodically. These variable rate obligations expose us to the risk of increased interest expense if short-term interest rates rise. We limit our exposure to increased interest expense from rising short-term interest rates by including in our debt portfolio various amounts of fixed rate debt as well as by the use of interest rate swaps. As of June 28, 2008, we had total debt of $27,923,000, $2,973,000 of which was subject to fixed interest rates which ranged from 5.00% to 6.45%, $3,950,000 of which was subject to variable interest rates which ranged from 3.507% to 4.0% and $21,000,000 of which was variable rate debt subject to several interest rate swaps with fixed interest rates which ranged from 4.925% to 6.095%, subject in the case of our variable rate debt and interest rate swaps to increases in the event our Debt Ratio exceeds certain specified levels at the end of any relevant measurement period, as described in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Reserves” in our 2007 Form 10-K. A 100 basis point increase in market interest rates on the $3,950,000 of variable rate debt would increase annual interest expense by approximately $40,000.


Item 4.		Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report was carried out by us under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities and Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION


Item 4.		Submission of Matters to a Vote of Security Holders.

	(a)		The Annual Meeting of Shareholders of the Company was held on May 8, 2008.

	(b)		Not applicable

	(c)		Shareholders of the Company were asked to vote on a proposal to elect two Class III directors. The Board of Directors nominated Norman Cohen and Richard J. Pinola as its nominees for election as the Class III directors. There were no other nominations. Messrs. Cohen and Pinola were elected as the Class III directors, with the result of the vote being as follows:


	Number of Votes
	For		Withheld
Norman Cohen		2,352,064		55,587
Richard J. Pinola		2,241,332		166,319

Directors are elected by a plurality of the votes cast; therefore, votes cast in the election were not recorded against or as an abstention, nor were broker non-votes recorded.

(d)

Not applicable


Item 6.		Exhibits.


	31.1		Chief Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

	31.2		Chief Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

	32.1		Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350

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		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements.

	Consolidated Balance Sheets as of June 28, 2008 (Unaudited) and December 29, 2007		1

	Consolidated Statements of Income and Retained Earnings (Unaudited) for the Three and Six Months Ended June 28, 2008 and June 30, 2007		2

	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 28, 2008 and June 30, 2007		3

	Notes to Consolidated Financial Statements (Unaudited)		4 — 14

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		15 — 22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		22 — 23

Item 4.	Controls and Procedures.		23

PART II.	OTHER INFORMATION

Item 4.	Submission of Matters to a Vote of Security Holders.		24

Item 6.	Exhibits.		24

SIGNATURES			25
Chief Executive Officer Certification
Chief Financial Officer Certification
CEO and CFO Certification pursuant to 18 U.S.C. Section 1350


	K-TRON INTERNATIONAL, INC.
Date: August 4, 2008	By:	RONALD R. REMICK
		Ronald R. Remick
		Senior Vice President, Chief Financial Officer and Treasurer (Duly authorized officer and principal financial officer of the Registrant)


Date: August 4, 2008	By:	ALAN R. SUKONECK
		Alan R. Sukoneck
		Vice President, Chief Accounting and Tax Officer (Duly authorized officer and principal accounting officer of the Registrant)

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Exhibit
Number		Description

31.1		Chief Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

31.2		Chief Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

32.1		Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350