-----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, JZ098smHPS0HwnfmSvyVHSSqGFY28nNdh2JpgHvLB3ZSJq5MCvBdnyUX0Fk3klAQ hqDVgFDGpAs5dv1SlsOo+g== 0000893220-98-000560.txt : 19980319 0000893220-98-000560.hdr.sgml : 19980319 ACCESSION NUMBER: 0000893220-98-000560 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980103 FILED AS OF DATE: 19980318 SROS: NONE 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: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-09576 FILM NUMBER: 98567846 BUSINESS ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 BUSINESS PHONE: 6096616240 MAIL ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: P O BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 10-K405 1 K-TRON INTERNATIONAL, INC. FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [NO FEE REQUIRED] for the fiscal year ended January 3, 1998 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [NO FEE REQUIRED] for the transition period from ________ to ________ COMMISSION FILE NUMBER 0-9576 K-TRON INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) New Jersey 22-1759452 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Routes 55 and 553 P.O. Box 888 Pitman, New Jersey 08071-0888 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609)589-0500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No 2 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy statement incorporated by reference in Part III of this annual report on Form 10-K or any amendment to this annual report on Form 10-K. / / As of March 10, 1998, the aggregate market value of the Common Stock held by non-affiliates of the registrant was $52,337,662. Such aggregate market value was computed by reference to the closing sale price of the Common Stock as reported on the National Market segment of The Nasdaq Stock Market on such date. For purposes of making this calculation only, the registrant has defined affiliates as including all directors and executive officers, but excluding the Estate of Dr. Mario Gallo and David L. Babson Company, Incorporated, which are the only beneficial owners of more than ten percent of the registrant's Common Stock. As of March 10, 1998, there were 3,245,314 shares of the registrant's Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: As stated in Part III of this annual report on Form 10-K, portions of the following document are incorporated herein by reference: Definitive proxy statement to be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K. Unless the context indicates otherwise, the terms "K-Tron" and "Company" refer to K-Tron International, Inc. and, where appropriate, one or more of its subsidiaries. -2- 3 PART I ITEM 1. BUSINESS. FORWARD-LOOKING STATEMENTS This annual report on Form 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements made with respect to the results of operations and businesses of the Company. Words such as "may," "should," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon management's current plans, expectations, estimates and assumptions and are subject to a number of risks and uncertainties that could significantly affect current plans, anticipated actions and the Company's financial condition and results of operations. Factors that may cause actual results to differ materially from those discussed in such forward-looking statements include, among others, the following possibilities: (i) fluctuations in foreign currency exchange rates; (ii) heightened competition, specifically the intensification of price competition, the entry of new competitors and the introduction of new products by new and existing competitors; (iii) failure to obtain new customers or retain existing customers; (iv) inability to carry out marketing and sales plans; (v) loss of key executives; (vi) loss of suppliers; (vii) failure to identify, acquire or profitably manage additional businesses or to successfully integrate acquired businesses, if any, into the Company without substantial costs, delays or other operational or financial problems; (viii) general economic and business conditions which are less favorable than expected; and (ix) unanticipated changes in industry trends. The Company does not intend to update these cautionary statements. GENERAL K-Tron International, Inc. was incorporated in New Jersey in 1964. Its principal operating businesses are conducted by subsidiaries which design, produce, market and sell gravimetric and volumetric feeders and related equipment for the handling of bulk solids in a wide variety of manufacturing processes. K-Tron has manufacturing facilities in the United States, Switzerland and Canada, and its equipment is sold throughout the world. K-Tron feeders control by either mass or weight (gravimetric feeding) or volume (volumetric feeding) the rate at which ingredients are fed into the manufacturing processes of numerous products. The principal industries served are plastics, food, chemical and cement, but the Company's feeders are also used in many other industries. In addition, the Company designs, produces, markets and sells electronic assemblies and controls, and provides customer and employee training through its K-Tron Institute in the United States and similar programs in Switzerland and elsewhere. -3- 4 See Note 13 of Notes to consolidated financial statements, included in Item 8 of this annual report on Form 10-K, for certain financial information about foreign and domestic operations. PRINCIPAL PRODUCTS The Company produces, markets and sells its principal products under three brand names: K-Tron Soder (feeders for other than heavy industries), Hasler (feeders for heavy industries) and Hurricane (pneumatic conveying equipment). The Company sells these brands on both an equipment and total systems basis. FEEDING EQUIPMENT The Company's feeders control the flow of materials into a manufacturing process by either mass or weight (gravimetric feeding) or volume (volumetric feeding). Feeding equipment manufactured by the Company is used in many industries. Weigh Belt Feeders. Weigh belt feeders move dry bulk material along a belt, continuously weighing the material and adjusting the belt speed in order to control precisely the flow rate of the material being fed into the manufacturing process. The feeder regulates the flow rate according to the set points in its electronic controller. A typical application would incorporate several feeders, each supplying an ingredient of the final product, and electronic controllers that determine the feed rate of each ingredient and are capable of instantly altering individual feed rates to maintain the desired proportion of each ingredient. Weigh belt feeders may also be used as batchers, to feed bulk material into bags, mixers, or as meters, to measure accurately the amount of material flowing into or out of a container. Loss-in-Weight Feeders. The loss-in-weight principle involves weighing the entire feeding system, both equipment and material, which may be either dry or liquid. The feeding mechanism controls the rate at which material is discharged into the manufacturing process based upon a change in the total weight of the system as material flows from the feeder. Electronic controllers determine the feed rate and are capable of instantly altering feed rates to maintain an accurate flow of materials. In dry material applications, loss-in-weight feeders usually utilize an auger or vibratory feeding mechanism, and in the case of screw feeders (usually single or twin auger-like screws) are generally associated with low feed rates, where precise control is required or where material flow is hard to control. The outflow is adjusted continuously to maintain the desired feed rate. In liquid applications, the flow rate is maintained by a pump or valve. Loss-in-weight feeders are especially suitable for applications requiring a very high degree of accuracy, as in adding minor ingredients to food processes or colorants to plastics, or applications requiring a closed system, as in feeding dusty materials. Loss-in-weight feeders virtually never need recalibration and may also be used as batchers. -4- 5 Volumetric Feeders. Volumetric feeders utilize single or twin screw feeding mechanisms or other systems to regulate flow by volume instead of weight, thereby offering an economical method of feeding bulk solids where demands for accuracy are less stringent. They also can be used to make batches by feeding sequentially into a hopper which is weighed and using the weight signal to start and stop each feeder. K-Tron Soder Brand. The K-Tron Soder brand of products offers feeding equipment and systems to control precisely the flow of ingredients in the manufacture of numerous products in industries other than heavy industries. K-Tron Soder feeders, including loss-in-weight feeders, weigh belt feeders, volumetric feeders, flow meters and related controls, are assembled at Company facilities in the United States and Switzerland in a complete range of feeding equipment types and sizes for these industries. The plastics compounding, food, chemical, detergent and pharmaceutical industries are among those served by K-Tron Soder feeders. Hasler Brand. The Hasler brand of products includes weigh belt feeders, belt scales, flow meters, electronic ears, loss-in-weight feeders and related controls. Hasler feeders, like K-Tron Soder feeders, control the flow of ingredients into a manufacturing process. However, Hasler feeders serve heavy industry applications which generally require high rates of material flow in rugged environments. Hasler feeders are used in cement mills, mines and quarries and in the fertilizer, aluminum, coal, glass and steel industries. They are primarily assembled at Company facilities in Switzerland, with some Hasler feeders also being assembled at Company facilities in the United States. PNEUMATIC CONVEYING EQUIPMENT In 1997, K-Tron acquired Hurricane Pneumatic Conveying Inc., a Canadian company that manufactures pneumatic conveying equipment for the food, plastics and pharmaceutical industries. Hurricane's brand of products, which include powder hopper loaders and filterless hopper loaders, may be used in conjunction with K-Tron Soder feeders or separately. Hurricane products are manufactured at Company facilities in Canada. K-TRON ELECTRONICS K-Tron Electronics designs, assembles and tests electronic circuit boards for outside customers as well as for use by the Company in its products. In addition to electronic circuit boards and electro-mechanical contract assembly services, K-Tron Electronics offers engineering and development services. State-of-the-art facilities, which are located in the United States, provide automated surface mount as well as through-hole assembly capabilities and testing equipment. -5- 6 CUSTOMERS The Company has over 1,000 customers, including many major corporations. No single customer accounted for more than 10% of the Company's total revenues in fiscal 1997, and its five largest customers accounted for approximately 12.6% of total revenues in that year. MANUFACTURING AND SUPPLIERS The Company's primary manufacturing activities consist of the assembly, calibration and testing of equipment, the machining and fabrication of certain components and producing electronic circuit boards and controllers. The Company also manufactures the weight sensors which are used in most of its gravimetric feeders. The Company assembles a number of components used in its products that are manufactured by others to its specifications. These components include sheet metal parts, screws, castings, integrated circuits, printed circuit boards and enclosures. The Company produces a number of basic feeder models and related equipment. Although feeder units are completed to specific customer orders, customization is generally limited to combining existing mechanical and electronic modules to meet a customer's application requirements. Although certain components of the Company's products are currently purchased from sole sources, the Company believes that comparable components can be obtained readily from alternative suppliers or can be manufactured by the Company internally, at prices competitive with those of its current sources. The Company has never had a significant production delay which was primarily attributable to an outside supplier. PATENTS The Company's technology is protected by numerous patents in the United States and in other major countries which offer patent protection. Certain of the Company's patents have expired and others will expire at various future dates. The loss of such patent protection is not expected to have a significant adverse effect on the Company's operations. RESEARCH AND DEVELOPMENT The Company invests in research and development to maintain a technological leadership position for its products. R&D focuses on new products as well as on refinements to existing products. Current development efforts are aimed at developing new products, shortening the development cycle of new products, recycling existing products by using lower cost designs and becoming more -6- 7 sensitive to the most optimal price/performance relationship for both new and existing products. Centralized electronic R&D also facilitates the development of common or compatible controls. The Company utilizes a common weighing technology for both of its feeder brands. The Company's research and development expenses were $2,768,000, $2,316,000 and $3,135,000 in fiscal years 1997, 1996 and 1995, respectively. COMPETITION The Company is a leading world-wide producer of feeders and related equipment for the handling of bulk solids in manufacturing processes. The Company believes it has reached this position primarily because of its use of electronic and digital control technology, its use of weighing technology and its development of various mechanical design improvements to its products. The Company also relies on other technological advantages and on its reputation and experience in serving the needs of over 1,000 customers to maintain a competitive advantage. Strong competition exists in every major market that the Company serves. Competitors range in size from subsidiaries and divisions of large multinationals with a broad line of products to regional organizations which may specialize in a limited range of products. BACKLOG At the end of fiscal year 1997, the Company's backlog of unfilled orders was approximately $18,211,000, compared to a backlog of approximately $20,504,000 a year earlier, a decrease of approximately 11.2%. Using January 3, 1998 exchange rates, the backlog at the end of fiscal year 1996 was approximately $19,654,000, representing a decrease in the 1997 backlog of approximately 7.3%. The backlog of orders, excluding the effect of foreign currency exchange translations, decreased in 1997 primarily due to a reduced backlog in the United States. The bulk of the Company's backlog represents orders that will be ready for delivery in less than 120 days. Thus, except for shipments to be made later in the year at customer requests, it is expected that most of the backlog as of the end of fiscal 1997 will be shipped prior to April 30, 1998. EMPLOYEES At the end of fiscal 1997, the Company had 491 employees, of which 289 were located in Europe, 183 in the United States, 14 in Singapore, 4 in Canada and 1 in China. -7- 8 None of the Company's employees are represented by labor unions. The Company considers relations with its employees to be good. ITEM 2. PROPERTIES. In the United States, the Company owns a 92,000 square foot building on 17 acres in Pitman, New Jersey where it has manufacturing facilities, administrative offices, its corporate headquarters, research and development offices and a tech center for product demonstration and training. A portion (approximately 10,000 square feet) of the Company's Pitman facility is leased to a sheet metal business. The Company also has leased facilities in Blackwood, New Jersey where it assembles electronic circuit boards. The Company also has leased facilities in Brantford, Ontario where it manufactures pneumatic conveying equipment. In Niederlenz, Switzerland, the Company owns a 60,000 square foot building where it has manufacturing facilities and a tech center for product demonstrations, and an adjacent five floor, 40,000 square foot office building which houses administrative offices, training facilities and research and development offices. One floor of the office building is leased to third parties. The Company also occupies an adjacent leased facility where it manufactures weight sensors. In Colombier, Switzerland, the Company leases a 51,000 square foot building where it has manufacturing facilities, administrative offices, training facilities and research and development offices. Certain sales and service activities are also conducted at Company-owned facilities in England (20% leased to a third party) and Germany and from leased office space in Germany, France and Singapore. The Company believes that its present facilities will be sufficient to meet its needs for the foreseeable future. Based primarily on a one shift/40 hour week, the Company was operating its current manufacturing facilities during fiscal 1997 at approximately 70% of their present capacity. ITEM 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. -8- 9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. This item is not applicable because there were no matters submitted to a vote of security holders during the fourth quarter of 1997. EXECUTIVE OFFICERS OF THE REGISTRANT The current executive officers of the Company are as follows:
Name Age Position ---- --- -------- Edward B. Cloues, II 50 Chairman of the Board of Directors and Chief Executive Officer Robert L. Weinberg 61 Senior Executive Vice President, Chief Financial Officer and Treasurer Kevin C. Bowen 46 President and Chief Executive Officer of K-Tron America, Inc. Lukas Gunthardt 39 Managing Director and Chief Executive Officer of K-Tron (Switzerland) Ltd.
Edward B. Cloues, II has been a director since July 1985 and was most recently reelected at the 1997 annual meeting of shareholders. He became Chairman of the Board of Directors and Chief Executive Officer of the Company on January 5, 1998. Since May 1985, Mr. Cloues has served as Secretary of the Company. Prior to joining the Company, Mr. Cloues was a senior partner in the law firm of Morgan, Lewis & Bockius LLP, which is the Company's general counsel. Mr. Cloues is also a director and non-executive Chairman of the Board of AMREP Corporation. Robert L. Weinberg has been Senior Executive Vice President, Chief Financial Officer and Treasurer of the Company since March 1994. Mr. Weinberg was Senior Executive Vice President and Chief Administrative Officer of the Company from November 1993 until March 1994, Executive Vice President - Strategic Planning and Marketing from May 1993 until November 1993, Executive Vice President - Strategic Planning, Product Development and Marketing from August 1991 until May 1993, Vice President - Marketing, Strategic Planning and Product Development from March 1990 until August 1991, Vice President - Product Development, Manufacturing and Marketing from April 1989 until March 1990, and Vice President - Marketing from October 1988 until April 1989. Prior to joining the Company in October 1988, he served as a consultant to Arthur D. Little, Inc. from 1986 until 1988, and in -9- 10 various executive positions with marketing and strategic planning responsibilities at RCA Corporation and Philco Ford Corporation from 1962 until 1986. Kevin C. Bowen has been President and Chief Executive Officer of K-Tron America, Inc. since March 1995. From March 1994 to March 1995, Mr. Bowen was President of K-Tron North America, the North American sales division of K-Tron America. Mr. Bowen served as President of K-Tron America from May 1990 to March 1994. From 1979 to May 1990, Mr. Bowen worked at U.S. subsidiaries of the Company in various manufacturing, sales and marketing capacities. Prior to joining the Company in 1979, he worked in various capacities for Digital Equipment Corporation and Motorola. Lukas Gunthardt has been Managing Director of K-Tron (Switzerland) Ltd. since July 1995. From March 1994 until July 1995, he was Managing Director of the Soder Division of K-Tron (Switzerland) Ltd. and from July 1992 until March 1994 was Director of International Research & Development of the Company. Prior to 1992, Mr. Gunthardt worked in various engineering capacities for Staefa Control Systems and Gamewell Corporation. The executive officers are elected or appointed by the Board of Directors of the Company or its appropriate subsidiary to serve until the appointment or election and qualification of their successors or their earlier death, resignation or removal. -10- 11 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock trades on the National Market segment of The Nasdaq Stock Market under the symbol "KTII." The following table sets forth the high and low sales prices for each quarter in 1996 and 1997 as quoted on The Nasdaq Stock Market.
FISCAL YEAR 1996 HIGH LOW - ---------------- ---- --- First Quarter..................................... $ 7.75 $ 5.50 Second Quarter.................................... 9.00 6.75 Third Quarter..................................... 9.25 7.75 Fourth Quarter.................................... 11.27 8.25 FISCAL YEAR 1997 First Quarter..................................... 11.75 10.25 Second Quarter.................................... 15.25 10.25 Third Quarter..................................... 15.75 13.00 Fourth Quarter.................................... 19.75 14.00
On March 10, 1998, the closing sale price of a share of Common Stock as reported by The Nasdaq Stock Market was $17.00. The number of record holders of the Company's Common Stock as of March 10, 1998 was 342. DIVIDEND POLICY The Company has never paid a cash dividend on its Common Stock, and it currently intends to retain all earnings for use in its business. The declaration and payment of dividends in the future will be determined by the Board of Directors in light of conditions then existing, including the Company's earnings, financial condition, capital requirements and other factors. ITEM 6. SELECTED FINANCIAL DATA. The selected consolidated financial data presented below for, and as of the end of, each of the Company's last five fiscal years have been derived from and are qualified by reference to the Company's consolidated financial statements. The consolidated financial statements of the Company for the fiscal years ended January 3, 1998, December 28, 1996, December 30, 1995 and December 31, 1994 have been audited by Arthur Andersen LLP, independent public accountants. The consolidated financial statements of the Company for the fiscal year in the -11- 12 period ended January 1, 1994 have been audited by Deloitte & Touche LLP, independent public accountants. This information should be read in conjunction with the Company's consolidated financial statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere herein. The Company has not paid any cash dividends on its shares of Common Stock during the periods presented. -12- 13
FISCAL YEAR ENDED ------------------------------------------------------------------------ JAN. 3 DEC. 28 PRO FORMA DEC. 30 DEC. 31 JAN. 1 1998 1996 1995(1) 1995 1994 1994 --------- --------- --------- --------- --------- --------- FINANCIAL SUMMARY($000): Revenues $ 87,152 $ 89,871 $ 89,640 $ 110,394 $ 104,772 $ 107,966 Income (loss) before loss on disposition of businesses, cumulative effect of accounting changes and taxes 7,309 5,841 2,717 834 (6,200) (1,784) Income (loss) on disposition of businesses and cumulative effect of accounting changes (2) (11,278) (852) 854 Net income (loss) 5,444 4,026 1,408 (9,294) (6,826) (1,065) Total assets 54,249 55,330 69,296 109,950 101,296 Working capital 9,423 15,362 23,114 (549) 17,216 Additions to property, plant and equipment 3,000 2,081 370 2,467 3,062 Depreciation and amortization 2,977 3,334 4,844 6,314 6,562 PER SHARE ($): Basic net earnings (loss) $ 1.72 $ 1.29 $ .45 $ (3.00) $ (2.22) $ (0.35)(3) Diluted net earnings (loss) 1.69 1.28 .45 (3.00) (2.22) (0.35)(3) Book value 5.87 4.21 3.03 6.00 8.08 CAPITALIZATION ($000): Shareholders' equity $ 18,892 $ 13,194 $ 9,421 $ 18,521 $ 24,694 Long-term debt 10,619 20,807 35,004 27,413 38,571 Short-term debt (4) 3,148 861 2,133 32,512 14,565 Total debt 13,767 21,668 37,137 59,925 53,136 RATIOS: Return on average shareholders' equity(%) 33.9 35.6 10.1 N/A N/A N/A Return on revenues (%) 6.2 4.5 1.6 N/A N/A N/A Long-term debt to shareholders' equity(%) 56.2 157.7 371.6 148.0 156.2 Current assets to current liabilities 1.41 1.80 2.05 .99 1.53 Average inventory turnover 4.1 3.2 2.9 2.9 3.0 Average accounts receivable turnover 5.5 4.8 4.3 3.8 3.8 OTHER DATA: Shares outstanding (000) (5) 3,218 3,137 3,113 3,088 3,056 Shareholders of record (6) 342 350 383 423 437 Number of employees 491 461 466 683 724
(1) Reflects pro forma adjustments for loss on disposition of businesses described in (2) and the discontinuance of the Company's other Colortronic brand business, all as more fully explained in Note 3 of the Company's 1997 consolidated financial statements as if such dispositions and discontinuances were consummated as of the beginning of the 1995 fiscal year. (2) 1995 - loss on disposition of businesses of $10,529 from sale of Colortronic GmbH and rights to several related patents and patent applications and $749 loss on the sale of Hasler France and Brazilian businesses; 1994 - reserves established for the anticipated sale of Hasler France and -13- 14 Brazilian businesses; 1993 - cumulative effect of changes in accounting principles for the cost of inventory of $504, net of tax, and for income taxes of $350. (3) Basic and diluted loss per share before cumulative effect of accounting changes for fiscal year ended January 1, 1994 was $(0.62). (4) Including current portion of long-term debt. (5) Net of treasury stock of 1,063 shares for fiscal years 1993 through 1996 and 1,053 for fiscal year 1997. (6) Does not include shareholders whose shares are held in street name. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW In 1997 and 1996, the Company reported net income of $5,444,000 and $4,026,000, respectively, compared to a 1995 net loss of $9,294,000. The principal components of the 1995 loss were a second quarter loss of $10,529,000 recorded in connection with the sale of Colortronic GmbH ("Colortronic"), a German subsidiary, and related patent and patent applications and third and fourth quarter losses totaling $749,000 resulting from the sale of the Company's Brazilian and Hasler France businesses. On a pro forma basis, assuming that these 1995 transactions, and the discontinuance of the Company's other Colortronic brand business, had occurred at the beginning of the 1995 fiscal year, the Company would have had 1995 net income of $1,408,000. By early 1996, all debt was subject to forbearance agreements with the Company's U.S. and Swiss lenders which arose as a result of the significant losses in 1995 and 1994. During 1996 and early 1997, the Company replaced all of the U.S. lenders and successfully negotiated revised financing arrangements with the Swiss lenders. The U.S. forbearance agreement was terminated in 1996, and in early 1997 the Swiss forbearance agreement was amended and extended to March 31, 1999. Since the Company's Swiss subsidiary achieved better than a 1.5 to 1.0 debt-to-equity ratio as of January 3, 1998, many of the restrictions in the Swiss forbearance agreement will end on March 31, 1998. Moreover, the Swiss lenders have requested that the Swiss forbearance agreement also terminate at that time rather than on March 31, 1999, and the Company's Swiss subsidiary has agreed in principle to this request provided that satisfactory new loan arrangements with the Swiss lenders are in place by that date. Since the 1995 dispositions of the Company's Colortronic, Brazilian and Hasler France businesses and the discontinuance of the other Colortronic brand business (collectively the "Discontinued Businesses"), the Company's results have improved significantly, and it has reported ten consecutive quarters in which net income has exceeded net income in the prior year period. Cash flow from operations has also improved, enabling the Company to reduce indebtedness for money borrowed by $7,901,000 in 1997, $15,469,000 in 1996 and -14- 15 $5,978,000 in the second half of 1995 ($7,103,000, $11,946,000 and $5,368,000, respectively, after taking into account the effect of foreign currency exchange translation.) K-Tron is an international company with approximately 59% percent of its revenues derived from products manufactured and services performed from its facilities outside the United States, primarily in Europe. As such, the financial position and performance of the Company is sensitive to both translation and transaction fluctuations in foreign currency exchange rates ("foreign exchange rates"). RESULTS OF OPERATIONS The following table sets forth the Company's results of operations expressed as a percentage of total revenues for the periods indicated. The 1995 pro forma results illustrate the estimated effects on operations of the disposition of the Colortronic, Brazilian and Hasler France businesses noted above, and the discontinuance of the Company's other Colortronic brand business, as if the dispositions and discontinuance (previously defined as "Discontinued Businesses") were consummated as of the beginning of the 1995 fiscal year: -15- 16
FISCAL YEAR --------------------------------------------- PRO FORMA --------- 1997 1996 1995 1995 --------- --------- --------- --------- Total revenues 100.0% 100.0% 100.0% 100.0% Cost of revenues 55.2 56.6 58.9 61.3 -------- -------- -------- -------- Gross profit 44.8 43.4 41.1 38.7 Selling, general and administrative 31.9 32.1 32.1 31.4 Research and development 3.2 2.5 2.8 2.8 Loss on disposition of businesses -- -- -- 10.2 -------- -------- -------- -------- Operating income (loss) 9.7 8.8 6.2 (5.7) Interest 1.3 2.3 3.2 3.7 -------- -------- -------- -------- Income (loss) before income taxes 8.4% 6.5% 3.0% (9.4%) ======== ======== ======== ======== Year-end backlog after excluding the Discontinued Businesses (at year end 1997 constant foreign exchange rates, in thousands) $ 18,211 $ 19,654 $ 23,066 $ 23,066 ======== ========= ======== ========
Translation of the Company's foreign revenues and results of operations into U.S. dollars is affected by changes in foreign exchange rates, particularly with respect to the Swiss franc and the Deutsche mark. In addition, revenues and income of the Company with respect to particular transactions may be affected by changes in foreign exchange rates where sales are made in other currencies, including in particular the average U.S. dollar/Swiss franc, U.S. dollar/Deutsche mark and Deutsche mark/Swiss franc exchange rates. For 1997, 1996 and 1995 the changes in these exchange rates were as follows: -16- 17
FISCAL YEAR --------------------------------------- 1997 1996 1995 ---- ---- ---- Average U.S. dollar equivalent of one Swiss franc $.689 $.810 $.848 % change vs. prior year -14.9% -4.5% Average U.S. dollar equivalent of one Deutsche mark $.577 $.666 $.699 % change vs. prior year -13.4% -4.7% Average Swiss franc equivalent of one Deutsche mark .837 .822 .824 % change vs. prior year +1.8% -0.2%
Total revenues decreased by $2,719,000 or 3.0% in 1997 when compared to 1996. The decrease in revenues was due to lower exchange translation rates of certain currencies into U.S. dollars. If the average foreign exchange translation rates for 1997 were applied to 1996, revenues would have increased 6.8%. The local currency revenue increase was in the United States and Europe. Total revenues decreased by $20,500,000 or 18.6% (15.4% when using constant foreign exchange rates) in 1996 as compared to 1995, and increased by $200,000 or 0.3% (3.1% when using constant foreign exchange rates) when compared to the pro forma 1995 revenues. The 1996 revenues decrease versus 1995 was primarily due to the absence of the Discontinued Businesses as well as to a weaker Swiss franc and Deutsche mark compared to the U.S. dollar. The 1996 revenue increase as compared to the pro forma 1995 was primarily due to a strong United States and European backlog at the end of 1995 and strong 1996 order in-flow, offset in part by lower foreign exchange translation rates. Gross profit as a percent of revenues improved to 44.8% in 1997 as compared to 43.4% in 1996. The change in gross margin in 1997 was primarily due to sales mix and increased volume in local currencies. Gross margin as a percent of revenues improved to 43.4% in 1996 as compared to 38.7% in 1995 (41.1% after excluding the Discontinued Businesses). The improvement in gross margin in 1996 was due to volume, sales mix, price increases and cost reductions as well as the June 1995 sale and discontinuance of the Colortronic business which had low margins, offset in part by the inability to pass on increased costs caused by the appreciation of the Swiss franc to customers in certain European countries, primarily Germany. The increase in margin when compared to the margins without -17- 18 the Discontinued Businesses was primarily due to volume, sales mix, price increases and cost reductions. Selling, general and administrative (SG&A) expense decreased by $1,019,000 or 3.5% in 1997 as compared to 1996. The decrease in SG&A was due to the lower foreign exchange translation rates previously described offset in part by higher selling expenses. SG&A expense decreased by $5,800,000 or 16.7% in 1996 as compared to 1995 (but remained constant after excluding the Discontinued Businesses). The decrease in SG&A in 1996 was due to the elimination of SG&A expenses associated with the Discontinued Businesses as well as lower foreign exchange translation rates. As a percent of sales, SG&A was 31.9% in 1997, 32.1% in 1996 and 31.4% in 1995 (32.1% after excluding the Discontinued Businesses). Research and development (R&D) expenditures increased by $452,000 or 19.5% in 1997 as compared to 1996. R&D expenses increased due to the development of new products and enhancement to existing products, offset in part by lower foreign exchange translation rates. R&D expenditures decreased by $819,000 or 26.1% in 1996 as compared to 1995 due to the elimination of Colortronic expenses and lower foreign exchange translation rates, offset in part by using for other purposes certain resources previously allocated to Colortronic. R&D expense as a percent of revenues was 3.2% in 1997, 2.5% in 1996 and 2.8% in 1995 (2.8% excluding Colortronic for 1995). The 1995 loss on the disposition of businesses included a pre-tax loss of $10,529,000 from the June 1995 sale of Colortronic and rights to several related patents and patent applications, as well as a pre-tax loss of $749,000 from the fourth quarter sale of the Company's Brazilian and Hasler France operations. Interest expense decreased by $902,000 or 44.3% in 1997 as compared to 1996, primarily due to lower debt levels and lower foreign exchange translation rates. Interest expense decreased by $2,107,000 or 50.9% in 1996 as compared to 1995 due to lower debt levels and lower foreign exchange translation rates, offset in part by increased interest rates. Interest expense as a percent of sales was 1.3% in 1997, 2.3% in 1996 and 3.7% in 1995 (3.2% after excluding the Discontinued Businesses). Income before income taxes was $7,309,000 in 1997 and $5,841,000 in 1996, while the loss before income taxes was $10,444,000 in 1995. The change during the periods was the result of the items discussed above. The 1997 and 1996 provision for income tax of $1,865,000 and $1,815,000, respectively, were related primarily to the United States and German operations. The Company's 1995 net income tax benefit was comprised of a fourth quarter $400,000 provision on U.S. operations and a $1,550,000 benefit recognized on European losses. The Company has available New Jersey state and foreign tax loss carry forwards that total $3,165,000 and -18- 19 $9,417,000, respectively, which, if realized, would have an estimated future benefit of $190,000 and $2,600,000, respectively. The Company does not believe that inflation has had a material impact on the results of operations during the last three years. The Company's backlog decreased by 7.3% at the end of 1997 compared to 1996 (at constant foreign exchange rates), primarily due to reduced backlog in the United States. The Company's backlog decreased by 15% at the end of 1996 compared to 1995 (excluding the Discontinued Businesses and at constant foreign exchange rates), primarily due to reduced backlog in the United States and Germany. LIQUIDITY AND CAPITAL RESOURCES As noted earlier under the "Overview," the Company has entered into new or amended and extended loan arrangements with respect to its debt, and there are no defaults under any of the existing loan agreements. All current loan agreements are with the Company's U.S. and Swiss manufacturing subsidiaries. In June 1996, the Company's U.S. manufacturing subsidiary entered into a two-year secured revolving credit facility with a lender which provides for a maximum borrowing of $5,700,000, subject to certain limitations based upon inventory and receivable levels. The interest rate at January 3, 1998 was 10.0%. At January 3, 1998, there were no borrowings under the agreement. Also in June 1996, the Company's U.S. manufacturing subsidiary obtained a $2,700,000 twenty-year mortgage loan at an interest rate of 9.0%. Monthly principal and interest payments are $24,293. Every five years the bank has the right to review the mortgage and adjust its terms, including due dates and interest rates, with the first such right occurring in June 2001. At January 3, 1998, the amount borrowed under the mortgage loan was $2,632,000. As a result of the Swiss forbearance agreement referred to in the "Overview," the board of directors of the Company's Swiss manufacturing subsidiary was expanded from one director to three directors, with one of the directors being designated by the Swiss lenders. In addition, the Swiss lenders imposed a number of limitations and requirements on the Swiss subsidiary, including certain restrictions on intercompany transactions with K-Tron's U.S. companies and a prohibition on the payment of management fees to the Company after March 1, 1996. As part of the February 1997 agreement amending and extending the forbearance agreement with the Swiss lenders to March 31, 1999, the Swiss subsidiary agreed to a 50% average reduction in the maximum amount that may be borrowed under its operating lines of credit, effective April 1, 1997, and also agreed not to terminate the existing arrangement prior to March 31, 1998, and the Swiss lenders agreed to continue to defer until March 31, 1999 the repayment of credit lines and the principal payments on fixed loans that become due prior to that date. Effective April 1, 1997, interest rates on the Swiss lines of credit were adjusted to -19- 20 market rates plus 2% while the rates on other long-term loans were similarly adjusted on the next renewal dates. At January 3, 1998, the Swiss subsidiary achieved better than a 1.5 to 1.0 debt to equity ratio and, accordingly, on March 31, 1998 the 2% interest premium will terminate, the Swiss lenders will cease to have the right to designate one director of the Swiss subsidiary and certain other restrictions will end. Moreover, the Swiss lenders have requested that the Swiss forbearance agreement also terminate at that time rather than on March 31, 1999, and the Company's Swiss subsidiary has agreed in principle to this request provided that satisfactory new loan arrangements with the Swiss lenders are in place by that date. At January 3, 1998, the Company's Swiss subsidiary had $2,083,000 borrowed under short-term lines of credit with Swiss lenders. The interest rates, including the 2% premium described above, on the lines of credit ranged from 5.5% to 9.0%. In addition, at January 3, 1998, the Company's Swiss subsidiary had mortgage borrowings of $6,638,000 from Swiss lenders. These mortgage loans carried interest rates of 5.63% to 7.25%. At January 3, 1998, the Company had $5,449,000 of availability under its U.S. revolving credit agreement and $11,180,000 of availability under its Swiss short-term lines of credit. The Company's capitalization as of the end of fiscal years 1997, 1996 and 1995 is set forth below:
($'S IN THOUSANDS) 1997 1996 1995 - ------------------------------------------------------------------------------ Short-term debt, including current portion of long-term debt $ 3,148 $ 861 $ 2,133 Long-term debt 10,619 20,807 35,004 ------- ------- ------- Total debt 13,767 21,668 37,137 Shareholders' equity 18,892 13,194 9,421 ------- ------- ------- Total debt and shareholders' equity $32,659 $34,862 $46,558 ======= ======= ======= Percent debt to total capitalization 42% 62% 80% Percent long-term debt to equity 56% 158% 372% Percent total debt to equity 73% 164% 394%
Total debt decreased in 1997 and 1996 by $7,901,000 and $15,469,000, respectively, of which $7,103,000 and $11,946,000 was from cash provided by operations and $927,000 and $3,523,000 was due to the effect of foreign exchange translation. -20- 21 At the end of 1997 and 1996, working capital was $9,423,000 and $15,362,000, respectively, and the ratio of current assets to current liabilities was 1.41 and 1.80, respectively. Working capital decreased in 1997 primarily due to the utilization of funds generated from operations and improved asset management to reduce indebtedness. In 1997 and 1996, the Company utilized internally generated funds to meet its working capital needs. Net cash provided by operating activities was $12,594,000 in 1997, $13,969,000 in 1996 and $6,111,000 in 1995. The increase in operating cash flow since 1995 was primarily the result of operating profits generated since mid-1995 and significant reductions in accounts receivable and inventory, offset in part in 1996 by a reduction in the total amount of accounts payable and accrued expenses. The significant loss in 1995 was primarily a non-cash loss on the sale of the Discontinued Businesses. Excluding the effect of foreign currency translation, receivables and inventory provided cash of $3,241,000 in 1997, while the total amount of accounts payables and accrued expenses increased $1,642,000 during 1997. Improved asset management enabled the Company to reduce accounts receivable and inventory in 1997. The average number of days to convert accounts receivable to cash was 66 days in 1997 compared to 76 days in 1996 and 84 days in 1995. The average number of days to convert inventory into accounts receivable was 88 in 1997 compared to 114 days in 1996 and 126 days in 1995. Net cash (used in) provided by investing activities was ($3,955,000), ($2,128,000), and $8,943,000 in 1997, 1996 and 1995, respectively. Capital expenditures were $3,000,000, $2,081,000 and $370,000 in 1997, 1996 and 1995, respectively. Funds used in 1997 to acquire a Canadian company were $783,000. The 1995 proceeds from the sale of Colortronic (and related patents and patent applications) and the Brazilian and Hasler France businesses were $9,000,000 and $320,000, respectively. The Company has no outstanding material commitments for capital improvements, but does expect to make normal capital expenditures to maintain and enhance its operations. Cash used in financing activities in 1997, 1996 and 1995, which was primarily used for the reduction of debt, was obtained from the strong cash flow provided by operations as well as in 1995 from the proceeds of the disposition of the Discontinued Businesses. Cash and short-term investments increased to $5,154,000 at the end of fiscal 1997 from $3,079,000 a year earlier. Changes in foreign exchange rates, particularly with respect to the Swiss franc and Deutsche mark, caused translation adjustment decreases in shareholders' equity of $560,000 and $393,000 in 1997 and 1996, respectively, following an increase of $78,000 in 1995. -21- 22 OTHER MATTERS The Company is completing an evaluation of the possible effects of the "Year 2000" issue on its business. The Company does not believe that this issue will have a material adverse effect on the Company. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company and its subsidiaries and supplementary data required by this item are attached to this annual report on Form 10-K beginning on page F-1. ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information concerning directors and compliance with Section 16(a) of the Securities Exchange Act of 1934 called for by Item 10 of Form 10-K will be set forth under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive proxy statement, to be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K, and is incorporated herein by reference. The required information as to executive officers is set forth in Part I hereof and incorporated herein by reference. -22- 23 ITEM 11. EXECUTIVE COMPENSATION. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information called for by Items 11 and 12 of Form 10-K will be set forth under the captions "Executive Compensation" and "Security Ownership of Certain Beneficial Owners and Management," respectively, in the Company's definitive proxy statement, to be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. Financial Statements. Financial Statements listed in the accompanying Index to Financial Statements and Financial Statement Schedules appearing on page F-1 are filed as part of this annual report on Form 10-K. 2. Financial Statement Schedules. Financial Statement Schedules listed in the accompanying Index to Financial Statements and Financial Statement Schedules appearing on page F-1 are filed as part of this annual report on Form 10-K. 3. Exhibits. (see (c) below). (b) Reports on Form 8-K. The Company did not file a report on Form 8-K during the quarter ended January 3, 1998. (c) Exhibits. The following is a list of exhibits filed as part of this annual report on Form 10-K. Where so indicated, exhibits which were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated in parentheses. -23- 24 2.1 Share Purchase Agreement, dated as of June 23, 1995, by and among K-Tron Holding AG, K-Tron Deutschland GmbH and Dr. Dolemeyer GmbH (Filed as Exhibit 2.1 to the Company's report on Form 8-K dated June 23, 1995 and incorporated herein by reference) 3.1 Restated Certificate of Incorporation (Filed as Exhibit 3.1 to the Company's annual report on Form 10-K for the year ended January 4, 1992 ("1991 Form 10-K") and incorporated herein by reference) 3.2 By-Laws, as amended (Filed as Exhibit 3.2 to the Company's annual report on Form 10-K for the year ended January 1, 1994 ("1993 Form 10-K") and incorporated herein by reference) 4.1 Form of Certificate for Shares of Common Stock (Filed as Exhibit 4.1 to the 1993 Form 10-K and incorporated herein by reference) 4.2 Rights Agreement dated as of October 3, 1991 with First Interstate Bank of Arizona, N.A., as Rights Agent (Filed as Exhibit 1 to the Company's report on Form 8-K dated October 3, 1991 and incorporated herein by reference) 10.1 Forbearance Agreement by and among Swiss Bank Corp. Aarau, Credit Suisse Aarau, Swiss Volksbank, Union Bank of Switzerland, Banque Cantonale Neuchateloise, CS Immobilien Leasing Ltd., K-Tron (Switzerland) Ltd., K-Tron Vertech Ltd., K-Tron Patent Ltd., K-Tron Asia Pacific Pte Ltd, K-Tron International Inc. and K-Tron Investment Co. (Filed as Exhibit 10.1.6 to the Company's annual report on Form 10-K for the year ended December 30, 1995 and incorporated herein by reference) 10.2 Amendment 1 to Forbearance Agreement by and among Swiss Bank Corp. Aarau, Credit Suisse, Swiss Volksbank, Union Bank of Switzerland, Banque Cantonale Neuchateloise, CS Immobilien Leasing Ltd., K-Tron (Switzerland) Ltd., K-Tron Asia Pacific Pte Ltd, K-Tron International Inc. and K-Tron Investment Co.(Filed as Exhibit 10.1.7 to the Company's annual report on Form 10-K for the year ended December 28, 1996 ("1996 Form 10-K") and incorporated herein by reference) 10.3 Amendment 2 to Forbearance Agreement by and among Swiss Bank Corp. Aarau, Credit Suisse, Swiss Volksbank, Union Bank of Switzerland, Banque Cantonale Neuchateloise, CS Immobilien Leasing Ltd., K-Tron (Switzerland) Ltd., K-Tron Asia Pacific Pte Ltd, K-Tron International Inc. and K-Tron Investment Co. (Filed as Exhibit 10.1.8 to the 1996 Form 10-K and incorporated herein by reference) -24- 25 10.4 1986 Stock Option Plan, as amended and restated (Filed as Exhibit 10.2.1 to the 1991 Form 10-K and incorporated herein by reference)** 10.5 1988 Stock Option Plan for Non-Employee Directors (Filed as Exhibit 10.2.4 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1988 ("1988 Form 10-K") and incorporated herein by reference)** 10.6 K-Tron International, Inc. 1996 Equity Compensation Plan, as amended (Filed as Exhibit 10.1 to the Company's quarterly report on Form 10-K for the fiscal quarter ended September 28, 1996 ("September 1996 Form 10-Q") and incorporated herein by reference)** 10.7 K-Tron International, Inc. Amended and Restated Employee Stock Purchase Plan (Filed as Exhibit 10.2 to the September 1996 Form 10-Q and incorporated herein by reference)** 10.8 K-Tron International, Inc. Profit-Sharing and Thrift Plan, as amended and restated (Filed as Exhibit 10.2.5 to the Company's annual report on Form 10-K for the year ended December 30, 1989 and incorporated herein by reference)** 10.9 Amendment No. 1992-1 to K-Tron International, Inc. Profit-Sharing and Thrift Plan (Filed as Exhibit 10.2.6 to the 1991 Form 10-K and incorporated herein by reference)** 10.10 Amendment No. 1996-1 to K-Tron International, Inc. Profit-Sharing and Thrift Plan (Filed as Exhibit 10.2.7 to the 1996 Form 10-K and incorporated herein by reference)** 10.11 K-Tron International, Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.2.7 to the 1991 Form 10-K and incorporated herein by reference)** 10.12 Form of Employment Agreement with certain employees of the Company listed on Schedule 10.12, which are identical in all material respects except for the employee, amount of salary to be paid and date of execution* ** 10.13 Employment Agreement dated as of October 6, 1997 by and between K-Tron International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the fiscal quarter ended September 27, 1997 and incorporated herein by reference)** -25- 26 10.14 Indemnification Agreement with Leo C. Beebe, dated March 23, 1987, and Schedule 10.2.9 listing other indemnification agreements which are identical in all material respects except for the director or officer who is a party thereto (Filed as Exhibit 10.2.9 to the Company's annual report on Form 10-K for the year ended January 2, 1988 and incorporated herein by reference)** 10.15 Schedule 10.2.11 listing other indemnification agreements which are dated November 18, 1988 and are identical in all material respects to the Indemnification Agreement set forth in Exhibit 10.2.12 except for the director or officer who is a party thereto (Filed as Exhibit 10.2.11 to the 1988 Form 10-K and incorporated herein by reference)** 10.16 Schedule 10.2.16 listing other indemnification agreements which are dated September 20, 1993, November 12, 1993 and January 14, 1994 and are identical in all material respects to the Indemnification Agreement set forth in Exhibit 10.14 except for the director or officer who is a party thereto (Filed as Exhibit 10.2.16 to the 1993 Form 10-K and incorporated herein by reference)** 10.17 Leasing Agreement, dated October 30, 1990, between CS Immobilien Leasing AG, Zurich and Hasler Freres SA, with limited guaranty of K-Tron Soder AG (Filed as Exhibit 10.1(b) to the Company's report on Form 8-K dated October 30, 1990 and incorporated herein by reference) 10.18 Amendment, dated January 25, 1991, to Leasing Agreement, dated October 30, 1990, between CS Immobilien Leasing AG, Zurich and Hasler Freres SA and to the related limited guaranty of K-Tron Soder AG (Filed as Exhibit 10.3.3 to the Company's annual report on Form 10-K for the year ended December 29, 1990 and incorporated herein by reference) 21.1 Subsidiaries* 23.1 Consent of Arthur Andersen LLP* 24.1 Power of Attorney (Included on Signature Page) 27.1 Financial Data Schedule* - ---------- * Filed herewith ** Management contract or compensatory plan or arrangement required to be filed or incorporated as an exhibit -26- 27 COPIES OF THE EXHIBITS ARE AVAILABLE TO SHAREHOLDERS (UPON PAYMENT OF A $.20 PER PAGE FEE TO COVER THE COMPANY'S EXPENSES IN FURNISHING THE EXHIBITS) FROM ROBERT L. WEINBERG, SENIOR EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, K-TRON INTERNATIONAL, INC., ROUTES 55 AND 553, P.O. BOX 888, PITMAN, NEW JERSEY 08071-0888. -27- 28 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: March 13, 1998 By /s/ Edward B. Cloues, II -------------------------- Edward B. Cloues, II Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person in so signing also makes, constitutes and appoints Edward B. Cloues, II, Chairman and Chief Executive Officer of K-Tron International, Inc., and Robert L. Weinberg, Senior Executive Vice President, Chief Financial Officer and Treasurer of K-Tron International, Inc., and each of them acting alone, as his true and lawful attorneys-in-fact, in his name, place and stead, to execute and cause to be filed with the Securities and Exchange Commission any or all amendments to this report.
Signature Date Capacity - --------- ---- -------- /s/ Edward B. Cloues, II March 13, 1998 Chief Executive Officer - -------------------------- (principal executive officer) and Edward B. Cloues, II Chairman of the Board of Directors /s/ Robert L. Weinberg March 6, 1998 Senior Executive Vice President, - -------------------------- Chief Financial Officer and Robert L. Weinberg Treasurer (principal financial officer) /s/ Alan R. Sukoneck March 13, 1998 Vice President, Chief - ------------------------------ Accounting and Tax Officer Alan R. Sukoneck (principal accounting officer)
-28- 29
Signature Date Capacity - --------- ---- -------- /s/ Leo C. Beebe March 13, 1998 Director - ----------------------------- Leo C. Beebe - ----------------------------- Director Norman Cohen /s/ Richard J. Pinola March 13, 1998 Director - ----------------------------- Richard J. Pinola /s/ Hans-Jurg Schurmann March 13, 1998 Director - ----------------------------- Hans-Jurg Schurmann /s/ Jean Head Sisco March 13, 1998 Director - ---------------------------- Jean Head Sisco /s/ Johannes Wirth March 13, 1998 Director - ---------------------------- Johannes Wirth
-29- 30 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF JANUARY 3, 1998 TOGETHER WITH AUDITORS' REPORT 31 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES: Consolidated Balance Sheets -- January 3, 1998 and December 28, 1996 F-3 Consolidated Statements of Operations for the Fiscal Year Ended January 3, 1998, December 28, 1996, and December 30, 1995 F-5 Consolidated Statements of Changes in Shareholders' Equity for the Fiscal Year Ended January 3, 1998, December 28, 1996 and December 30, 1995 F-6 Consolidated Statements of Cash Flows for the Fiscal Year Ended January 3, 1998, December 28, 1996 and December 30, 1995 F-7 Notes to Consolidated Financial Statements F-9 Schedule I--Condensed Financial Information of Registrant S-1 Schedule II--Valuation Reserves S-5
F-1 32 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To K-Tron International, Inc.: We have audited the accompanying consolidated balance sheets of K-Tron International, Inc. (a New Jersey corporation) and subsidiaries as of January 3, 1998 and December 28, 1996, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for each of the three fiscal years in the period ended January 3, 1998. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of K-Tron International, Inc. and subsidiaries as of January 3, 1998 and December 28, 1996, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 3, 1998, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to financial statements as of January 3, 1998 and December 28, 1996, and for each of the three years in the period ended January 3, 1998, are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Philadelphia, Pa., February 10, 1998 F-2 33 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) ASSETS
January 3, December 28, 1998 1996 ----------------- ----------------- CURRENT ASSETS: Cash and cash equivalents $ 5,154 $ 3,079 Accounts receivable (less allowance for doubtful accounts of $1,119 and $1,037) 15,336 16,336 Inventories 10,010 13,258 Deferred income taxes 950 641 Prepaid expenses and other current assets 1,196 1,353 ----------- ------------- Total current assets 32,646 34,667 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $24,588 and $27,023 15,437 15,624 PATENTS, net of accumulated amortization of $2,997 and $2,956 694 493 GOODWILL, net of accumulated amortization of $3,376 and $3,086 4,844 4,422 OTHER ASSETS 628 124 ----------- ------------- Total assets $ 54,249 $ 55,330 =========== =============
The accompanying notes are an integral part of these financial statements. F-3 34 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands except share data) LIABILITIES AND SHAREHOLDERS' EQUITY
January 3, December 28, 1998 1996 -------------- ------------- CURRENT LIABILITIES: Notes payable to banks $ 2,088 $ 494 Current portion of long-term debt 1,060 367 Accounts payable 5,426 5,641 Accrued expenses and other current liabilities 4,270 3,440 Accrued payroll 3,869 2,579 Accrued commissions 2,463 2,407 Customer advances 1,627 2,318 Accrued warranty 912 826 Income taxes payable 1,508 1,226 Deferred income taxes -- 7 ---------- --------- Total current liabilities 23,223 19,305 ---------- --------- LONG-TERM DEBT, net of current portion 10,619 20,807 ---------- --------- DEFERRED INCOME TAXES 431 459 ---------- --------- OTHER NONCURRENT LIABILITIES 1,084 1,565 ---------- --------- COMMITMENTS AND CONTINGENCIES (Note 12) SERIES A JUNIOR PARTICIPATING PREFERRED SHARES, $.01 par value, 50,000 shares authorized; none issued -- -- ---------- --------- SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value; 950,000 shares authorized; none issued -- -- Common stock, $.01 par value; 15,000,000 shares authorized; 4,271,300 and 4,200,328 shares issued 43 42 Paid-in capital 14,833 14,120 Retained earnings 15,246 9,802 Cumulative translation adjustment (766) (206) ---------- --------- 29,356 23,758 Treasury stock, 1,052,950 and 1,062,950 shares, at cost (10,464) (10,564) ---------- --------- Total shareholders' equity 18,892 13,194 ---------- --------- Total liabilities and shareholders' equity $ 54,249 $ 55,330 ========== =========
The accompanying notes are an integral part of these financial statements. F-4 35 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands except share data)
For the Fiscal Year Ended ------------------------------------------- January 3, December 28, December 30, 1998 1996 1995 ----------- ------------ ------------ REVENUES $ 87,152 $ 89,871 $ 110,394 COST OF REVENUES 48,121 50,839 67,658 ---------- --------- ---------- Gross profit 39,031 39,032 42,736 ---------- --------- ---------- OPERATING EXPENSES: Selling, general and administrative 27,821 28,840 34,625 Research and development 2,768 2,316 3,135 Loss on disposition of businesses -- -- 11,278 ---------- --------- ---------- 30,589 31,156 49,038 ---------- --------- ---------- Operating income (loss) 8,442 7,876 (6,302) INTEREST EXPENSE 1,133 2,035 4,142 ---------- --------- ---------- Income (loss) before income taxes 7,309 5,841 (10,444) INCOME TAX PROVISION (BENEFIT) 1,865 1,815 (1,150) ---------- --------- ---------- Net income (loss) $ 5,444 $ 4,026 $ (9,294) ========== ========= ========== BASIC EARNINGS (LOSS) PER SHARE $ 1.72 $ 1.29 $ (3.00) ========== ========= ========== DILUTED EARNINGS (LOSS) PER SHARE $ 1.69 $ 1.28 $ (3.00) ========== ========= ==========
The accompanying notes are an integral part of these financial statements. F-5 36 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (dollars in thousands)
Common Stock Cumulative Treasury Stock -------------------- Paid-in Retained Translation ---------------------- Shares Amount Capital Earnings Adjustment Shares Amount Total --------- -------- --------- -------- ------------ ---------- ------- -------- BALANCE, JANUARY 1, 1995 4,150,887 $ 41 $ 13,865 $ 15,070 $ 109 1,062,950 $(10,564) $ 18,521 Issuance of Common stock 24,698 1 115 -- -- -- -- 116 Net loss -- -- -- (9,294) -- -- -- (9,294) Translation adjustments -- -- -- -- 78 -- -- 78 --------- --------- --------- --------- ----------- ----------- -------- --------- BALANCE, DECEMBER 30, 1995 4,175,585 42 13,980 5,776 187 1,062,950 (10,564) 9,421 Issuance of Common stock 24,743 -- 140 -- -- -- -- 140 Net income -- -- -- 4,026 -- -- -- 4,026 Translation adjustments -- -- -- -- (393) -- -- (393) --------- --------- --------- --------- ----------- ----------- -------- --------- BALANCE, DECEMBER 28, 1996 4,200,328 42 14,120 9,802 (206) 1,062,950 (10,564) 13,194 Issuance of Common stock 70,972 1 713 -- -- (10,000) 100 814 Net income -- -- -- 5,444 -- -- -- 5,444 Translation adjustments -- -- -- -- (560) -- -- (560) --------- --------- --------- --------- ----------- ----------- -------- --------- BALANCE, JANUARY 3, 1998 4,271,300 $ 43 $ 14,833 $ 15,246 $ (766) 1,052,950 $(10,464) $ 18,892 ========= ========= ========= ========= =========== =========== ========= =========
The accompanying notes are an integral part of these financial statements. F-6 37 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
For the Fiscal Year Ended ---------------------------------------------------- January 3, December 28, December 30, 1998 1996 1995 --------------- ---------------- ---------------- OPERATING ACTIVITIES: Net income (loss) $ 5,444 $ 4,026 $ (9,294) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Loss on disposition of businesses -- -- 11,278 Depreciation and amortization 2,977 3,338 4,844 Amortization of deferred gain on sale/leaseback transaction (380) (447) (468) Deferred income taxes (321) 443 (1,651) Changes in assets and liabilities excluding effects of dispositions-- Accounts receivable, net 250 3,266 1,802 Inventories 2,991 4,101 1,353 Prepaid expenses and other current assets 88 20 (678) Other assets (532) 52 739 Accounts payable (286) (3,027) (5) Accrued expenses and other current liabilities 1,928 1,598 (2,317) Accrued warranty 112 18 201 Income taxes 323 581 307 -------- --------- ---------- Net cash provided by operating activities 12,594 13,969 6,111 -------- --------- ---------- INVESTING ACTIVITIES: Business acquired (783) -- -- Proceeds from disposition of businesses -- -- 9,320 Capital expenditures (3,000) (2,081) (370) Investment in patents (172) (47) (7) -------- --------- ---------- Net cash (used in) provided by investing activities (3,955) (2,128) 8,943 -------- --------- ----------
(continued) F-7 38 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (continued)
For the Fiscal Year Ended --------------------------------------------------- January 3, December 28, December 30, 1998 1996 1995 -------------- -------------- ---------------- FINANCING ACTIVITIES: Net repayments under notes payable to banks $ (6,925) $ (17,684) $ (12,224) Proceeds from issuance of long-term debt 689 6,037 -- Principal payments on long-term debt (867) (299) (1,013) Proceeds from issuance of Common stock 814 140 116 ----------- ------------ ------------ Net cash used in financing activities (6,289) (11,806) (13,121) ----------- ------------ ------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (275) (195) 220 ----------- ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,075 (160) 2,153 CASH AND CASH EQUIVALENTS: Beginning of year 3,079 3,239 1,086 ---------- ------------ ------------ End of year $ 5,154 $ 3,079 $ 3,239 ========== ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for- Interest $ 1,182 $ 1,928 $ 3,597 ========== ============ ============ Income taxes $ 1,951 $ 699 $ 345 ========== ============ ============
The accompanying notes are an integral part of these financial statements. F-8 39 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEAR ENDED JANUARY 3, 1998 1. NATURE OF OPERATIONS: K-Tron International, Inc. and its subsidiaries (the "Company") design, produce, market, and sell gravimetric and volumetric feeders and related equipment for the handling of bulk solids in a wide variety of manufacturing processes. The Company has manufacturing facilities in the United States, Switzerland and Canada, and its equipment is sold throughout the world. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All material intercompany accounts and transactions have been eliminated. Fiscal Year The Company's fiscal year is reported on a fifty-two/fifty-three week period. The fiscal year ended January 3, 1998 (referred to herein as "1997") includes fifty-three weeks, while the fiscal year ended December 28, 1996 (referred to herein as "1996") and December 30, 1995 (referred to herein as "1995") each include fifty-two weeks. Cash and Cash Equivalents Cash equivalents represent all highly liquid, interest-bearing investments purchased with maturities of three months or less. Inventories Inventories are stated at the lower of cost (first-in, first-out) method or market. Property, Plant and Equipment Property, plant and equipment is carried at cost and is depreciated and amortized on a straight-line basis over the following estimated useful lives: buildings and improvements, 25 to 50 years; automotive equipment, 3 years; machinery and equipment, 3 to 10 years; and furniture and fixtures, 5 to 7 years. Leasehold improvements are amortized over the shorter of the estimated useful lives of such assets or the remaining term of the applicable lease. F-9 40 Patents Patents are stated at cost less accumulated amortization. The costs of patents are amortized on a straight-line basis over the remaining economic life of the respective asset, but in no event longer than the remaining legal life. Goodwill Excess of cost over net assets acquired is being amortized on a straight-line basis over 15 years. Subsequent to an acquisition, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of this asset may warrant revision or that the remaining balance may not be recoverable. Income Taxes Income taxes are accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred income taxes are provided for differences between amounts shown for financial reporting purposes and those included with tax return filings that will reverse in future periods. Additionally, the effects of income taxes are measured based upon enacted tax laws and rates. Research and Development Expenditures for research, development and engineering of products are expensed as incurred. Foreign Currency Translation Assets and liabilities denominated in foreign currencies are translated to U.S. dollars at current rates of exchange. Revenues and expenses are translated at average rates prevailing during the year. The Company incurred a foreign currency transaction gain of approximately $177,000 in 1997 and losses amounting to $96,000 and $1,589,000 for 1996 and 1995, respectively. Translation gains and losses are recorded as a separate component of shareholders' equity. Fair Value Disclosures The carrying value of financial instruments such as cash, accounts receivables and payables, and other current assets and liabilities approximates their fair value, based on the short-term nature of these instruments. The carrying amount of the Company's long-term debt and notes payable approximates their fair value. The fair value is estimated based on the current rates offered to the Company for debt and notes payable of the same remaining maturities. F-10 41 Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. 3. DISPOSITION OF BUSINESSES: In June 1995, the Company sold Colortronic GmbH and rights to several related patents and patent applications to an investment group including former members of the Company's management for $9 million, resulting in a pre-tax loss of $10,529,000 on the sale. Proceeds from the sale were used to pay down non-U.S. and U.S. borrowings. The Company discontinued its other Colortronic brand business. Additionally, in the fourth quarter of 1995, the Company sold certain operations in France to a former member of the Company's management and its operation in Brazil to a third party for a total of $951,000, resulting in a pre-tax loss of $749,000 in 1995. The following unaudited pro forma consolidated statement of operations for 1995 illustrates the estimated effect of the dispositions and the application of the net proceeds, and the discontinuance of the other Colortronic brand business, as if the transactions were consummated as of the beginning of 1995 (in thousands except per-share data): Revenues $ 89,640 Cost of revenues 52,819 ---------------- Gross profit 36,821 Operating expenses 31,236 ---------------- Operating income 5,585 Interest expense 2,868 ---------------- Income before taxes 2,717 Income taxes 1,309 ---------------- Net income $ 1,408 ================ Basic earnings per share $ .45 ================ Diluted earnings per share $ .45 ================
Pro forma adjustments include only the effects of events directly attributable to the transactions and are expected to have a continuing impact. The above unaudited pro forma financial information is not necessarily indicative of the results that would actually have been obtained if the transactions had been effected at the beginning of 1995 or that may be obtained in the future. F-11 42 4. INVENTORIES: Inventories consist of the following:
January 3, December 28, 1998 1996 -------- ----------- (in thousands) Components $ 7,926 $ 10,608 Work-in-process 1,796 1,773 Finished goods 288 877 --------- --------- $ 10,010 $ 13,258 ========= =========
5. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following:
January 3, December 28, 1998 1996 ---------- ------------ (in thousands) Land $ 1,163 $ 1,234 Buildings and improvements 16,736 17,130 Automotive equipment 592 739 Machinery and equipment 11,282 11,799 Furniture and fixtures 10,252 11,745 --------- ---------- 40,025 42,647 Less- Accumulated depreciation and amortization (24,588) (27,023) --------- ---------- $ 15,437 $ 15,624 ========= ==========
Depreciation of property, plant and equipment for 1997, 1996 and 1995 was $2,457,000, $2,467,000 and $3,521,000, respectively. 6. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT: Prior to 1996, all debt was subject to U.S. and non-U.S. forbearance agreements which arose as a result of the significant losses in prior years. During 1996 and early 1997, the Company replaced all of the U.S. lenders and successfully negotiated financing arrangements with the non-U.S. lenders. The U.S. forbearance agreement was terminated in 1996, and in early 1997 the non-U.S. forbearance agreement was amended and extended to March 31, 1999. In June 1996, the Company's U.S. manufacturing subsidiary obtained a 20-year mortgage for $2.7 million at an interest rate of 9%. Monthly principal and interest payments are $24,293 and are due through June 2001. The bank has the right to review and adjust the terms of the mortgage every five years. Also in June 1996, the U.S. manufacturing subsidiary entered into a two-year secured revolving credit facility with a lender that provides for a maximum borrowing of $5.7 F-12 43 million, subject to certain maximum borrowing limitations based upon inventory and receivable levels. The interest rate as of January 3, 1998 was 10.0%. As of January 3, 1998, there were no outstanding borrowings under the agreement and $5,449,000 was available for borrowing. Under the terms of the U.S. mortgage and revolving credit facilities, $10,529,000 of receivables and inventory and $3,358,000 of fixed assets are pledged as collateral. In addition, $5,075,000 of accounts receivable are pledged as collateral under the non-U.S. lines of credit and $6,635,000 of fixed assets are pledged as collateral under the non-U.S. mortgages. At January 3, 1998, the Company's Swiss subsidiary had $2,083,000 borrowed under short-term lines of credit with its Swiss bank lenders and $11,180,000 was available for future borrowing. The interest rates, including a 2% premium (discussed below), on these lines of credit ranged from 5.5% to 9.0%. As part of the extension of the agreement with the non-U.S. lenders, the interest rates on these short-term lines of credit and non-U.S. mortgages were adjusted to market plus 2%, effective April 1, 1997. The 2% interest rate premium will terminate on April 1, 1998 since the Company's Swiss subsidiary had achieved a 1.5 to 1.0 debt-to-equity ratio as of January 3, 1998 as stipulated in the forbearance agreement. Moreover, the Swiss lenders to the Company have agreed in principle that the non-U.S. forbearance agreement will also terminate on April 1, 1998. In addition to the short-term lines of credit, the Company's Swiss subsidiary had mortgage borrowings of $6,638,000 with maturities through 1999 from its Swiss bank lenders. These mortgages carried interest rates of 5.63% and 7.25%, including the 2% premium referred to above. Long-term debt consists of the following:
January 3, December 28, 1998 1996 -------------- --------------- (in thousands) Non-U.S. long-term lines of credit $ -- $ 8,999 U.S. mortgage, interest at 9.0% per annum 2,632 2,680 Non-U.S. mortgages, interest at market rates (5.5% to 7.25% at January 3, 1998 and 3.6% to 8.25% at December 28, 1996) payable annually 7,934 8,781 Other 1,113 714 ---------- ------------ 11,679 21,174 Less- Current portion (1,060) (367) ---------- ------------ $ 10,619 $ 20,807 ========== ============
F-13 44 Future annual payments required on long-term debt are as follows (in thousands):
Fiscal Year Amount ----------- ------ 1998 $ 1,060 1999 6,792 2000 98 2001 80 2002 86 Thereafter 3,563 --------- $ 11,679 =========
7. EMPLOYEE BENEFIT PLANS: The Company has a profit-sharing and thrift plan for all domestic employees who have worked for the Company for at least one year and who are employed at the end of the year. All Company contributions to the plan are at the discretion of the Board of Directors. The Company's profit-sharing contribution vests over a seven-year period. In addition, employees may voluntarily participate in the thrift plan and authorize payroll deductions ranging from 1% to 15% of their compensation. Related matching Company contributions are vested immediately. In 1997, 1996, and 1995, the Board of Directors authorized matching contributions of up to 6% of participants' compensation. The Board of Directors did not authorize any 1997, 1996, or 1995 contribution to the profit-sharing portion of the plan. Substantially all foreign employees participate in defined contribution group pension plans. Contributions are paid by the employee and employer at percentages that vary according to age and other factors. The expense associated with the domestic profit-sharing and thrift plan for 1997, 1996, and 1995 was $355,000, $269,000 and $225,000, respectively. The foreign pension expense for 1997, 1996, and 1995 was $1,066,000, $1,122,000 and $1,402,000, respectively. In 1995, the Colortronic GmbH employees participated in an unfunded defined benefit plan. The net periodic pension cost for the unfunded defined benefit plan was $177,000 for 1995. (See Note 3 for further discussion on the Colortronic disposition). In June 1981, the Company adopted an employee stock purchase plan under which eligible employees of the Company may elect to participate through payroll deductions for up to 10% of their gross compensation, but not to exceed $25,000. Such deductions are used to purchase Common stock of the Company at a price equal to 85% of the market value. Under this plan, the Company issued 17,468 shares of Common stock with an average price of $10.72 in 1997, 24,743 shares of Common stock at an average price of $5.67 in 1996 and 24,698 shares of Common stock at an average price of $4.68 in 1995. F-14 45 8. SHAREHOLDERS' EQUITY: In 1991, the Board of Directors determined the rights on 50,000 shares of the authorized Preferred stock as the Series A Junior Participating Preferred Shares (the "Series A Preferred Shares"). Each one one-hundredth of a share of the Series A Preferred Shares carries voting and dividend rights that are equivalent to one share of the Common stock. The voting and dividend rights are subject to adjustment in the event of a dividend on Common stock which is payable in Common stock or any subdivisions or combinations with respect to the outstanding shares of Common stock (see Note 9). The Board of Directors has not determined the rights on the remaining 950,000 shares of the authorized Preferred stock as of January 3, 1998. The Company has a stock option plan for nonemployee directors (the "1988 nonemployee directors' plan"). The plan provides that each eligible director is granted a single option to purchase 10,000 shares of the Company's Common stock at a price equal to the fair market value at the date of grant. The aggregate number of shares which may be issued under the plan is 100,000. These options have a term of 10 years and become exercisable in four equal annual installments beginning on the date of the grant. The Company's 1986 Stock Option Plan, as amended (the "1986 plan"), expired in January 1996, but option grants under the 1986 plan remain outstanding under the 1996 plan. Key employees of and consultants to the Company could be granted options to purchase shares of the Company's Common stock. These options could be either incentive stock options or nonqualified stock options. The Stock Option Committee (the "Committee") under the 1986 plan determined the term of each option, but no option could be exercisable more than 10 years from the date the option is granted. The Committee also determined the option exercise price per share. With respect to incentive stock options, the exercise price must at least equal the fair market value of a share of Common stock as of the date the option is granted. In 1996, the Company replaced the 1986 plan with the 1996 Equity Compensation Plan, as amended (the "1996 plan") with features similar to the 1986 plan, except that the maximum number of shares that may be issued is 450,000. The 1996 plan is administered by a committee selected by the Board of Directors. F-15 46 A summary of the Company's stock option activity for its stock option plans for the three fiscal years ended January 3, 1998, is as follows:
Options --------------------------------------------- Average Shares Price Reserved Outstanding Per Share Available ------------ ----------- ------------ ----------- BALANCE, JANUARY 1, 1995 553,315 287,543 $ -- 265,772 Granted -- 74,000 6.25 (74,000) Canceled -- (107,859) 10.50 107,859 ------------ ----------- ---------- BALANCE, DECEMBER 30, 1995 553,315 253,684 299,631 Granted -- Canceled (5,000) (5,000) 8.45 -- 1996 Plan Adoption 450,000 -- -- 450,000 1986 Plan Expiration (249,631) -- -- (249,631) ------------ ----------- ---------- BALANCE, DECEMBER 28, 1996 748,684 248,684 500,000 Granted 100,000 14.00 (100,000) Canceled (1,500) (1,500) 8.00 -- Exercised (56,150) (56,150) 9.37 -- ------------ ----------- ---------- BALANCE, JANUARY 3, 1998 691,034 291,034 400,000 ============ =========== ==========
As of January 3, 1998, 40 employees held options under the 1986 plan for an aggregate of 152,134 shares at exercise prices from $6.25 to $14.00 with a weighted average option price of $8.66. These options expire in varying amounts through the year 2005. As of January 3, 1998, one employee held options under the 1996 plan for an aggregate of 100,000 shares at an exercise price of $14.00. The options expire in 2007. As of January 3, 1998, under the 1988 nonemployee directors' plan, four directors held options for an aggregate of 38,900 shares at exercise prices from $9.25 to $11.00 with a weighted average option price of $10.39. These options expire in varying amounts through the year 2004. F-16 47 Pro Forma Information SFAS No. 123 requires the Company to disclose pro forma net income and pro forma earnings per share amounts as if compensation expense were recognized for options granted after fiscal year 1994. Using this approach, net income and earnings per share would have been reduced to the pro forma amounts indicated in the table:
1997 1996 ------------ ------------ (millions, except per share) Net income - as reported $ 5,444 $ 4,026 Net income - pro forma 5,256 3,947 Basic earnings per share - as reported 1.72 1.29 Basic earnings per share - pro forma 1.66 1.27 Diluted earnings per share - as reported 1.69 1.28 Diluted earnings per share - pro forma 1.63 1.26
This pro forma impact may not be representative of the effects for future years and is likely to increase as additional options are granted and amortized over the vesting period. For disclosure purposes, the fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: no dividend yield; expected volatility of 43.60% and 41.60%; risk-free interest rate of 6.02% and 6.06%; and expected life of 6 years in 1997 and 1996, respectively. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of subjective assumptions, including the expected stock price volatility. F-17 48 9. SHAREHOLDER RIGHTS PLAN: The Company has a Shareholder Rights Plan (the "Rights Agreement") which was adopted by the Board of Directors on October 3, 1991. The Rights Agreement provides that each share of the Company's Common stock outstanding as of October 14, 1991 has associated with it one right (a "Right") to purchase one one-hundredth of a share of the Series A Preferred Shares at an exercise price of $40 per share. Such exercise price is subject to adjustment as described in the Rights Agreement. The Rights will be exercisable only if a person or group obtains the right to acquire beneficial ownership of 20% or more of the outstanding Common stock of the Company, or after the commencement of a tender offer or an exchange offer that would result in a person or group beneficially owning 20% or more of the outstanding Common stock. If anyone acquires 20% or more of the Company's outstanding Common stock, the Rights would entitle shareholders (other than the 20% acquiror) to purchase for $40 the number of shares of the Company's Common stock which would have a market value of $80. In the event that the Company is acquired in a merger or other business combination, the Rights would entitle the shareholders (other than the acquiror) to purchase securities of the surviving company at a similar discount. In lieu of requiring payment of the exercise price of the Rights upon the occurrence of the above-noted events, the Company may permit the holders to simply surrender the Rights and receive the number of shares of the Company's Common stock which would have a market value of $40. The Company can redeem the Rights at $.01 per Right at any time until the 20th day following a public announcement that a person or a group has acquired or obtained the right to acquire beneficial ownership of at least 20% of the Company's outstanding Common stock. Under certain circumstances set forth in the Rights Agreement, the decision to redeem shall require the concurrence of a majority of the Continuing Directors, as defined in the Rights Agreement. The redemption period may be extended by the Board of Directors as long as the Rights are still redeemable. The Rights expire October 14, 2001. 10. INCOME TAXES: Following are the domestic and foreign components of the income (loss) before income taxes:
Fiscal Year Ended --------------------------------------------------- January 3, December 28, December 30, 1998 1996 1995 -------------- --------------- -------------- (in thousands) United States $ 2,387 $ 2,648 $ 756 Foreign 4,922 3,193 (11,200) ----------- ------------ ----------- Income (loss) before income taxes $ 7,309 $ 5,841 $ (10,444) =========== ============ ============
F-18 49 The income tax provision (benefit) consists of the following:
Fiscal Year Ended ---------------------------------------------------- January 3, December 28, December 30, 1998 1996 1995 ------------- --------------- -------------- (in thousands) Current: Federal $ 2,061 $ 1,056 $ 501 Foreign 125 316 -- ---------- ----------- ----------- Total current 2,186 1,372 501 ---------- ----------- ----------- Deferred: Federal and State (325) (141) (106) Foreign 4 (8) (526) Benefit of foreign net operating loss carryforwards -- 592 (1,019) ---------- ----------- ----------- Total deferred (321) 443 (1,651) ---------- ----------- ----------- Total income tax provision (benefit) $ 1,865 $ 1,815 $ (1,150) ========== =========== ===========
Significant components of the deferred tax accounts at January 3, 1998 and December 28, 1996, are as follows:
January 3, December 28, 1998 1996 ------------ ------------ (in thousands) Deferred tax assets: Depreciation $ 172 $ 101 Accrued liabilities 672 541 Net operating loss carryforwards 2,790 5,448 Inventory basis differences 291 281 Other 177 93 ------- --------- 4,102 6,464 Valuation allowance (2,993) (5,676) ------- --------- Total assets 1,109 788 ------- --------- Deferred tax liabilities: Depreciation (210) (301) Other (380) (312) ------- --------- Total liabilities (590) (613) ------- --------- Net deferred asset $ 519 $ 175 ======= =========
Foreign and U.S. state operating loss carryforwards as of January 3, 1998 were $9.4 million and $3.2 million, respectively. Of the $9.4 million of foreign losses, $7.9 million are F-19 50 available to offset future income through 2003. The balance of $1.5 million has an unlimited carryforward period. U.S. state operating losses are available through 2004. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has established valuation allowances for all foreign and state net operating loss carryforwards generated from losses prior to 1995 and certain other deferred tax assets for which realization is dependent on future taxable earnings. At January 3, 1998, retained earnings include $9.4 million of undistributed net income of foreign subsidiaries. Management considers such income to have been permanently invested and, therefore, no federal income taxes have been provided for these items. A reconciliation of the provision for income taxes and the amounts that would be computed using the statutory federal income tax rates is set forth below:
Fiscal Year Ended ----------------------------------------------------- January 3, December 28, December 30, 1998 1996 1995 -------------- ---------------- ---------------- (in thousands) Income tax provision (benefit) on income (loss) before income tax at statutory federal income tax rates $ 2,485 $ 1,986 $ (3,551) Foreign tax rate differential (237) 80 918 State tax, net of federal benefit 133 28 (27) Goodwill amortization and other permanent differences 708 325 175 Change in valuation allowance (1,307) (640) 1,345 Other 83 36 (10) ----------- ----------- ---------- Income tax provision (benefit) $ 1,865 $ 1,815 $ (1,150) =========== =========== ==========
11. EARNINGS (LOSS) PER SHARE: In 1997, the Company adopted SFAS No. 128, "Earnings Per Share." SFAS No. 128 requires that the Company report Basic and Diluted Earnings Per Share. Basic Earnings Per Share represents net income less preferred dividends divided by the weighted average common shares outstanding. Diluted Earnings Per Share is calculated similarly, except that the denominator includes weighted average common shares outstanding plus the dilutive effect of options, warrants, convertible securities and other instruments with dilutive effects if exercised. F-20 51 The Company's Basic and Diluted Earnings Per Share are calculated as follows:
For the Fiscal Year Ended January 3, 1998 ------------------------------------------------------------ Income Available To Common Per Share Shareholders Shares Amount ---------------------- ---------------- --------------- Basic Net Income $ 5,444,000 3,162,000 $ 1.72 ---------------- ---------------- ------- Common Share Equivalent of Options Issued -- 65,000 ( .03) ---------------- ---------------- ------- Diluted $ 5,444,000 3,227,000 $ 1.69 ================ ================ =======
For the Fiscal Year Ended December 28, 1996 --------------------------------------------------------- Basic Net Income $ 4,026,000 3,120,000 $ 1.29 ---------------- --------------- ------- Common Share Equivalent of Options Issued -- 16,000 ( .01) ---------------- --------------- ------- Diluted $ 4,026,000 3,136,000 $ 1.28 ================ =============== =======
For the Fiscal Year Ended December 30, 1995 --------------------------------------------------------- Basic Net Income $ (9,294,000) 3,096,000 $ (3.00) ---------------- -------------- -------- Common Share Equivalent of Options Issued -- -- -- ---------------- -------------- -------- Diluted $ (9,294,000) 3,096,000 $ (3.00) ================ ============== ========
Earnings (loss) per common share are based on the weighted average number of common and common equivalent shares outstanding during each year. Such average shares include the weighted average number of common shares outstanding plus the shares issuable upon exercise of stock options after the assumed repurchase of common shares with the related proceeds. F-21 52 12. COMMITMENTS AND CONTINGENCIES: The Company leases certain office and plant facilities and equipment under noncancelable leases. These leases expire in periods ranging from one to five years and, in certain instances, provide for purchase options. Immediately prior to the acquisition of Hasler in 1990, the Company's large heavy duty feeder division, the acquired company entered into a sale/leaseback agreement on its real property in Switzerland. The net proceeds of this transaction were distributed to the seller as a dividend. The gain from this transaction has been classified as Other Noncurrent Liabilities in the Company's consolidated balance sheets. This deferred gain is being amortized over the life of the resulting operating lease (10 years). Amortization of the deferred gain for 1997, 1996 and 1995 was $380,000, $447,000 and $468,000, respectively. As of January 3, 1998, future minimum payments under operating leases having noncancelable terms in excess of one year are summarized below:
Operating Leases ---------------- (in thousands) 1998 $ 847 1999 659 2000 417 2001 28 2002 77 --------- $ 2,028 =========
Rent expense for 1997, 1996 and 1995 was $647,000, $1,129,000 and $1,719,000, respectively. The Company has employment contracts with eight executives. Generally, these contracts may be terminated by the Company on one year's advance notice. Under the agreements, each individual is guaranteed minimum compensation over the contract period. As of January 3, 1998, the estimated future obligation under these contracts is $1,282,000 (1998), $380,000 (1999) and $380,000 (2000). F-22 53 13. GEOGRAPHIC AREA INFORMATION: The Company is engaged in one business segment, the development, manufacturing and marketing of gravimetric and volumetric feeders and related equipment.
United Western Elimi- Consoli- States Europe nations dated ------------- ----------- ----------- ------------- (in thousands) FISCAL YEAR ENDED JANUARY 3, 1998: Revenues- Sales to unaffiliated customers $ 35,507 $ 51,645 $ -- $ 87,152 Sales to affiliates 1,976 1,931 (3,907) -- ------------- ---------- ---------- ------------- Total sales $ 37,483 $ 53,576 $ (3,907) $ 87,152 ============= ========== ========== ============ Operating income $ 3,040 $ 5,607 $ (205) $ 8,442 ============= ========== ========== Interest expense 1,133 ------------ Income before income taxes $ 7,309 ============ Total assets $ 21,276 $ 32,973 $ -- $ 54,249 ============= ========== =========== ============ FISCAL YEAR ENDED DECEMBER 28, 1996: Revenues- Sales to unaffiliated customers $ 34,123 $ 55,748 $ -- $ 89,871 Sales to affiliates 4,204 2,995 (7,199) -- ------------- ---------- ---------- ------------ Total sales $ 38,327 $ 58,743 $ (7,199) $ 89,871 ============= ========== ========== ============ Operating income $ 3,297 $ 4,485 $ 94 $ 7,876 ============= ========== ========== Interest expense (2,035) ------------ Income before income taxes $ 5,841 ============ Total assets $ 17,863 $ 37,467 $ -- $ 55,330 ============= ========== ========== ============ FISCAL YEAR ENDED DECEMBER 30, 1995: Revenues- Sales to unaffiliated customers $ 32,156 $ 78,238 $ -- $ 110,394 Sales to affiliates 3,445 4,034 (7,479) -- ------------- ---------- ---------- ------------ Total sales $ 35,601 $ 82,272 $ (7,479) $ 110,394 ============= ========== ========== ============ Operating income (loss) $ 2,014 $ (8,282) $ (34) $ (6,302) ============= ========== ========== Interest expense (4,142) ------------ Loss before income taxes $ (10,444) ============ Total assets $ 21,553 $ 47,843 $ (100) $ 69,296 ============= ========== ========== ============
F-23 54 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES FINANCIAL STATEMENT SCHEDULES 55 SCHEDULE I K-TRON INTERNATIONAL, INC CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS (dollars in thousands except share data)
January 3, December 28, ASSETS 1998 1996 ------ ------------- --------------- CURRENT ASSETS: Cash and cash equivalents $ 1 $ 13 Deferred income taxes 950 641 Prepaid expenses and other current assets 193 171 ---------- ----------- Total current assets 1,144 825 PROPERTY, PLANT AND EQUIPMENT, net 45 44 INVESTMENT IN SUBSIDIARIES 21,827 14,788 ---------- ----------- Total assets $ 23,016 $ 15,657 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accrued expenses and other current liabilities $ 2,184 $ 1,736 Intercompany payables, net 1,713 473 ---------- ----------- Total current liabilities 3,897 2,209 ---------- ----------- DEFERRED INCOME TAXES 227 254 ---------- ----------- SERIES A JUNIOR PARTICIPATING PREFERRED SHARES, $.01 par value, authorized 50,000 shares; none issued -- -- ---------- ----------- SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value; 950,000 shares authorized; none issued -- -- Common stock, $.01 par value; 15,000,000 shares authorized; 4,271,300 and 4,200,328 shares issued 43 42 Paid-in capital 14,833 14,120 Retained earnings 15,246 9,802 Cumulative translation adjustments (766) (206) ---------- ----------- Total 29,356 23,758 Treasury stock, 1,052,950 and 1,062,950 shares, at cost (10,464) (10,564) ---------- ----------- Total shareholders' equity 18,892 13,194 ---------- ----------- Total liabilities and shareholders' equity $ 23,016 $ 15,657 ========== ===========
The accompanying note is an integral part of these financial statements. S-1 56 SCHEDULE I (Continued) K-TRON INTERNATIONAL, INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS (dollars in thousands except share data)
Fiscal Year Ended ------------------------------------------------------ January 3, December 28, December 30, 1998 1996 1995 --------------- ----------------- ---------------- REVENUES: Management fees $ 1,816 $ 2,203 $ 4,393 Other income, net -- -- 10 ----------- ---------- ---------- Total revenues 1,816 2,203 4,403 ----------- ---------- ---------- OPERATING EXPENSES: Selling, general and administrative 3,703 3,690 3,385 Research and development 251 -- 95 Loss on disposition of business -- -- 1,045 ----------- ---------- ---------- 3,954 3,690 4,525 ----------- ---------- ---------- OPERATING (LOSS) (2,138) (1,487) (122) INTEREST EXPENSE 150 415 803 ----------- ---------- ---------- Loss before income tax benefit and net (income) loss of subsidiaries (2,288) (1,902) (925) INCOME TAX BENEFIT (778) (647) (314) ----------- ---------- ---------- Loss before net income (loss) of subsidiaries (1,510) (1,255) (611) EQUITY IN NET INCOME (LOSS) OF SUBSIDIARIES 6,954 5,281 (8,683) ----------- ---------- ---------- Net income (loss) $ 5,444 $ 4,026 $ (9,294) =========== ========== ========== BASIC EARNINGS (LOSS) PER SHARE $ 1.72 $ 1.29 $ (3.00) =========== ========== ========== DILUTED EARNINGS (LOSS) PER SHARE $ 1.69 $ 1.28 $ (3.00) =========== ========== ==========
The accompanying note is an integral part of these financial statements. S-2 57 SCHEDULE I (Continued) K-TRON INTERNATIONAL, INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS (dollars in thousands)
Fiscal Year Ended --------------------------------------------------------- January 3, December 28, December 30, 1998 1996 1995 ---------------- ---------------- ---------------- OPERATING ACTIVITIES: Net income (loss) $ 5,444 $ 4,026 $ (9,294) Equity in net (income) loss of subsidiaries (7,599) (5,281) 8,683 Depreciation and amortization 31 151 129 Other, primarily working capital changes 1,330 5,945 6,273 ----------- ----------- ----------- Net cash (used in) provided by operating activities (794) 4,841 5,791 ----------- ----------- ----------- INVESTING ACTIVITIES: Capital expenditures (32) (8) (25) ----------- ----------- ----------- Net cash used in investing activities (32) (8) (25) ----------- ----------- ----------- FINANCING ACTIVITIES: Net (repayments) borrowings under bank agreements -- (5,005) (5,845) Proceeds from issuance of Common stock 814 140 116 ----------- ----------- ----------- Net cash provided by (used in) financing activities 814 (4,865) (5,729) ----------- ----------- ----------- Net (decrease) increase in cash and cash equivalents (12) (32) 37 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 13 45 8 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 1 $ 13 $ 45 =========== =========== ===========
The accompanying note is an integral part of these financial statements. S-3 58 SCHEDULE I (Continued) K-TRON INTERNATIONAL, INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT NOTE TO FINANCIAL STATEMENTS JANUARY 3, 1998 Note 1: These schedules should be read in conjunction with the Company's consolidated financial statements and notes thereto beginning on page F-3. S-4 59 SCHEDULE II K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES VALUATION RESERVES
Balance at Additions Beginning Charged Balance at of Period Disposed(2) to Income Deductions(1) End of Period ------------- ---------- --------- ------------- --------------- Fiscal year ended 1/3/98: Allowance for doubtful accounts $ 1,037,000 $ -- $ 184,000 $ 102,000 $ 1,119,000 Fiscal year ended 12/28/96: Allowance for doubtful accounts 1,077,000 -- 366,000 406,000 1,037,000 Fiscal year ended 12/30/95: Allowance for doubtful accounts 1,523,000 (956,000) 564,000 54,000 1,077,000
(1) Accounts written off less recoveries, net of foreign exchange translation adjustment. (2) Reduction due to sale of subsidiaries. S-5 60 EXHIBIT INDEX Exhibit Number Description 2.1 Share Purchase Agreement, dated as of June 23, 1995, by and among K-Tron Holding AG, K-Tron Deutschland GmbH and Dr. Dolemeyer GmbH (Filed as Exhibit 2.1 to the Company's report on Form 8-K dated June 23, 1995 and incorporated herein by reference) 3.1 Restated Certificate of Incorporation (Filed as Exhibit 3.1 to the Company's annual report on Form 10-K for the year ended January 4, 1992 ("1991 Form 10-K") and incorporated herein by reference) 3.2 By-Laws, as amended (Filed as Exhibit 3.2 to the Company's annual report on Form 10-K for the year ended January 1, 1994 ("1993 Form 10-K") and incorporated herein by reference) 4.1 Form of Certificate for Shares of Common Stock (Filed as Exhibit 4.1 to the 1993 Form 10-K and incorporated herein by reference) 4.2 Rights Agreement dated as of October 3, 1991 with First Interstate Bank of Arizona, N.A., as Rights Agent (Filed as Exhibit 1 to the Company's report on Form 8-K dated October 3, 1991 and incorporated herein by reference) 10.1 Forbearance Agreement by and among Swiss Bank Corp. Aarau, Credit Suisse Aarau, Swiss Volksbank, Union Bank of Switzerland, Banque Cantonale Neuchateloise, CS Immobilien Leasing Ltd., K-Tron (Switzerland) Ltd., K-Tron Vertech Ltd., K-Tron Patent Ltd., K-Tron Asia Pacific Pte Ltd, K-Tron International Inc. and K-Tron Investment Co. (Filed as Exhibit 10.1.6 to the Company's annual report on Form 10-K for the year ended December 30, 1995 and incorporated herein by reference) 61 Exhibit Number Description 10.2 Amendment 1 to Forbearance Agreement by and among Swiss Bank Corp. Aarau, Credit Suisse, Swiss Volksbank, Union Bank of Switzerland, Banque Cantonale Neuchateloise, CS Immobilien Leasing Ltd., K-Tron (Switzerland) Ltd., K-Tron Asia Pacific Pte Ltd, K-Tron International Inc. and K-Tron Investment Co.(Filed as Exhibit 10.1.7 to the Company's annual report on Form 10-K for the year ended December 28, 1996 ("1996 Form 10-K") and incorporated herein by reference) 10.3 Amendment 2 to Forbearance Agreement by and among Swiss Bank Corp. Aarau, Credit Suisse, Swiss Volksbank, Union Bank of Switzerland, Banque Cantonale Neuchateloise, CS Immobilien Leasing Ltd., K-Tron (Switzerland) Ltd., K-Tron Asia Pacific Pte Ltd, K-Tron International Inc. and K-Tron Investment Co. (Filed as Exhibit 10.1.8 to the 1996 Form 10-K and incorporated herein by reference) 10.4 1986 Stock Option Plan, as amended and restated (Filed as Exhibit 10.2.1 to the 1991 Form 10-K and incorporated herein by reference)** 10.5 1988 Stock Option Plan for Non-Employee Directors (Filed as Exhibit 10.2.4 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1988 ("1988 Form 10-K") and incorporated herein by reference)** 10.6 K-Tron International, Inc. 1996 Equity Compensation Plan, as amended (Filed as Exhibit 10.1 to the Company's quarterly report on Form 10-K for the fiscal quarter ended September 28, 1996 ("September 1996 Form 10-Q") and incorporated herein by reference)** 10.7 K-Tron International, Inc. Amended and Restated Employee Stock Purchase Plan (Filed as Exhibit 10.2 to the September 1996 Form 10-Q and incorporated herein by reference)** 10.8 K-Tron International, Inc. Profit-Sharing and Thrift Plan, as amended and restated (Filed as Exhibit 10.2.5 to the Company's annual report on Form 10-K for the year ended December 30, 1989 and incorporated herein by reference)** 62 Exhibit Number Description 10.9 Amendment No. 1992-1 to K-Tron International, Inc. Profit- Sharing and Thrift Plan (Filed as Exhibit 10.2.6 to the 1991 Form 10-K and incorporated herein by reference)** 10.10 Amendment No. 1996-1 to K-Tron International, Inc. Profit- Sharing and Thrift Plan (Filed as Exhibit 10.2.7 to the 1996 Form 10-K and incorporated herein by reference)** 10.11 K-Tron International, Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.2.7 to the 1991 Form 10-K and incorporated herein by reference)** 10.12 Form of Employment Agreement with certain employees of the Company listed on Schedule 10.12, which are identical in all material respects except for the employee, amount of salary to be paid and date of execution* ** 10.13 Employment Agreement dated as of October 6, 1997 by and between K-Tron International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the fiscal quarter ended September 27, 1997 and incorporated herein by reference)** 10.14 Indemnification Agreement with Leo C. Beebe, dated March 23, 1987, and Schedule 10.2.9 listing other indemnification agreements which are identical in all material respects except for the director or officer who is a party thereto (Filed as Exhibit 10.2.9 to the Company's annual report on Form 10-K for the year ended January 2, 1988 and incorporated herein by reference)** 10.15 Schedule 10.2.11 listing other indemnification agreements which are dated November 18, 1988 and are identical in all material respects to the Indemnification Agreement set forth in Exhibit 10.2.12 except for the director or officer who is a party thereto (Filed as Exhibit 10.2.11 to the 1988 Form 10-K and incorporated herein by reference)** 63 Exhibit Number Description 10.16 Schedule 10.2.16 listing other indemnification agreements which are dated September 20, 1993, November 12, 1993 and January 14, 1994 and are identical in all material respects to the Indemnification Agreement set forth in Exhibit 10.2.14 except for the director or officer who is a party thereto (Filed as Exhibit 10.2.16 to the 1993 Form 10-K and incorporated herein by reference)** 10.17 Leasing Agreement, dated October 30, 1990, between CS Immobilien Leasing AG, Zurich and Hasler Freres SA, with limited guaranty of K-Tron Soder AG (Filed as Exhibit 10.1(b) to the Company's report on Form 8-K dated October 30, 1990 and incorporated herein by reference) 10.18 Amendment, dated January 25, 1991, to Leasing Agreement, dated October 30, 1990, between CS Immobilien Leasing AG, Zurich and Hasler Freres SA and to the related limited guaranty of K-Tron Soder AG (Filed as Exhibit 10.3.3 to the Company's annual report on Form 10-K for the year ended December 29, 1990 and incorporated herein by reference) 21.1 Subsidiaries* 23.1 Consent of Arthur Andersen LLP* 24.1 Power of Attorney (Included on Signature Page) 27.1 Financial Data Schedule* - -------------------------- * Filed herewith ** Management contract or compensatory plan or arrangement required to be filed or incorporated as an exhibit EX-10.12 2 FORM OF EMPLOYMENT AGREEMENT 1 EXHIBIT 10.12 FORM OF EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (the "Agreement") dated as of October 25, 1996 by and between K-TRON INTERNATIONAL, INC., a New Jersey corporation ("K-Tron"), and __________________, a resident of _______________ (the "Employee"). WHEREAS, the Employee is presently employed by K-Tron or one of its subsidiaries; WHEREAS, K-Tron desires to have the continuing benefit of the Employee's knowledge and experience in the affairs of K-Tron and its subsidiaries (K-Tron and its subsidiaries as they may exist from time to time are collectively referred to herein as the "K-Tron Group" and each is sometimes individually referred to herein as a "member" of the K-Tron Group); and WHEREAS, the Employee desires to be employed by K-Tron or another member of the K-Tron Group upon the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment. K-Tron agrees that either K-Tron or another member of the K-Tron Group will employ the Employee, and the Employee hereby accepts such employment and agrees to perform his duties and responsibilities hereunder, in accordance with the terms and conditions hereinafter set forth. 2 1.1 Employment Term. The employment term of this Agreement (the "Employment Term") shall commence as of the date hereof and shall continue until terminated in accordance with Section 8 hereof. 1.2 Duties and Responsibilities. During the Employment Term, the Employee shall be employed by K-Tron or another member of the K-Tron Group, as determined by K-Tron, and he shall perform all duties and accept all responsibilities incidental to any position in which he shall be so employed or as may be assigned to him by the Board of Directors of K-Tron (the "K-Tron Board") or its chief executive officer and shall cooperate fully with the K-Tron Board and K-Tron's chief executive officer. If the Employee is employed by another member of the K-Tron Group, the foregoing reference to the K-Tron Board and to K-Tron's chief executive officer shall also be deemed to include the board of directors and chief executive officer of such other member. 1.3 Extent of Service. During the Employment Term, the Employee shall use his best efforts in the business of the member of the K-Tron Group by which he is employed, and he shall devote substantially his full time, attention and energy to the business of the member of the K-Tron Group by which he is employed and to the performance of his services and the discharge of his duties and responsibilities hereunder. Except as provided in Section 5 hereof, the foregoing shall not be construed as preventing the Employee from making investments in other businesses or enterprises provided that the Employee agrees not to become engaged in any other business activity which may interfere with his ability to discharge his duties and responsibilities hereunder to K-Tron or another member of the K-Tron Group. The Employee further agrees not to work on either a part time or independent contractual basis for any other -2- 3 business or enterprise during the Employment Term without the prior written approval of the K-Tron Board. 1.4 Compensation. For all the services rendered during the Employment Term by the Employee hereunder as an employee of a member of the K-Tron Group, such member of the K-Tron Group by which he is employed shall pay the Employee an annual base salary of _______________________________ (___________), less such withholding and other deductions as may be required by law or any employee benefit plan in which the Employee participates or agreed to by the Employee, payable in installments at such times as such member of the K-Tron Group customarily pays its other officers (but in no event less often than monthly). Such salary may be increased from time to time during the Employment Term in the sole discretion of K-Tron, and any such increased salary shall thereafter be the Employee's new base salary for purposes of this Agreement. Notwithstanding the foregoing, either the K-Tron Board or K-Tron's chief executive officer, or the board of directors or chief executive officer of any other member of the K-Tron Group employing the Employee, shall have the right at any time or times to reduce the Employee's base salary if such reduction is generally being made for other officers of K-Tron or of other members of the K-Tron Group holding comparable positions. The Employee shall also be entitled to receive bonus payments in the sole discretion of the K-Tron Board or its Compensation and Human Resources Committee. In addition to said annual salary and bonus payments (if any), and except as may otherwise be agreed with the Employee in writing, the Employee shall be entitled to annual paid vacation and to participate in such employee benefit plans of the member of the K-Tron Group employing the Employee as may exist from time to time on the same basis as other persons holding comparable positions with -3- 4 such member of the K-Tron Group, except that the Employee shall have no right solely by virtue of this Agreement to participate in any such plans that are not generally available to all employees of K-Tron or of the other member of the K-Tron Group by which he is employed. 2. Reimbursement of Expenses. The member of the K-Tron Group employing the Employee shall reimburse the Employee for all ordinary and necessary out-of-pocket business expenses incurred by him in connection with the discharge of his duties and responsibilities hereunder during the Employment Term in accordance with such company's expense approval procedures then in effect and upon presentation to such company of an itemized account and written proof of such expenses. 3. Developments. The Employee shall disclose fully, promptly and in writing to K-Tron or to any other member of the K-Tron Group by which he is employed any and all inventions, discoveries, improvements, modifications and the like, whether patentable or not, which he conceives, makes or develops, solely or jointly with others, while employed by K-Tron or another member of the K-Tron Group and which (i) relate to the business, work or activities of any member of the K-Tron Group or (ii) result from or are suggested by the carrying out of his duties hereunder, or from or by any information which he may receive while employed by K-Tron or another member of the K-Tron Group. The Employee hereby assigns, transfers and conveys to K-Tron or its designee all of his right, title and interest in and to any and all such inventions, discoveries, improvements, modifications and the like and agrees to take all such actions as may be requested by K-Tron at any time and with respect to any such invention, discovery, improvement, modification or the like to confirm or evidence such assignment, transfer and conveyance. Furthermore, at any time and from time to time, upon the request of -4- 5 K-Tron, the Employee shall execute and deliver to K-Tron, or to another member of the K-Tron Group designated by K-Tron, any and all instruments, documents and papers, give evidence and do any and all other acts which, in the opinion of counsel for K-Tron, are or may be necessary or desirable to document such assignment, transfer and conveyance or to enable K-Tron or such other member of the K-Tron Group to file and prosecute applications for and to acquire, maintain and enforce any and all patents, trademark registrations or copyrights under United States or foreign law with respect to any such inventions, discoveries, improvements, modifications or the like or to obtain any extension, validation, reissue, continuance or renewal of any such patent, trademark or copyright. K-Tron or such other member of the K-Tron Group shall be responsible for the preparation of any such instruments, documents and papers and for the prosecution of any such proceedings and shall reimburse the Employee for all reasonable expenses incurred by him in compliance with the provisions of this Section 3. 4. Confidential Information. The Employee acknowledges that, by reason of his employment by K-Tron or another member of the K-Tron Group, he will have access to confidential information of the K-Tron Group, including, without limitation, information and knowledge pertaining to products, inventions, discoveries, improvements, innovations, designs, ideas, trade secrets, proprietary information, manufacturing, packaging, advertising, distribution and sales methods, sales and profit figures, customer and client lists and relationships between members of the K-Tron Group and dealers, distributors, sales representatives, wholesalers, customers, clients, suppliers and others who have business dealings with them ("Confidential Information"). The Employee acknowledges that such Confidential Information is a valuable and unique asset of K-Tron and the other members of the K-Tron Group and covenants that, both -5- 6 during and after the Employment Term, he will not disclose any Confidential Information to any person (except as his duties as an employee of K-Tron or another member of the K-Tron Group may require) without the prior written authorization of the K-Tron Board. The obligation of confidentiality imposed by this Section 4 shall not apply to information which appears in issued patents or printed publications, which otherwise becomes generally known in the industry through no act of the Employee in breach of this Agreement or which is required to be disclosed by court order or applicable law. 5. Non-Competition. During (i) the term of the Employment Term and (ii) for one year thereafter only in the event that (A) such Employment Term is terminated under Section 8.2 or 8.4 (but only if it is terminated by a member of the K-Tron Group) hereof or (B) the Employee terminates employment with the member of the K-Tron Group employing him without giving the notice required by Section 8.1 hereof, the Employee shall not, unless acting as an employee pursuant hereto or with the prior written consent of the K-Tron Board, directly or indirectly, own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing or control of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit his name to be used in connection with, any business or enterprise engaged in the business of designing, engineering, manufacturing, marketing or distributing feeding or blending equipment, or in any other business then engaged in by K-Tron or any other member of the K-Tron Group, within (i) any state of the United States or the District of Columbia or (ii) any other country in which K-Tron or any member of the K-Tron Group has engaged in any such business within the prior year or is about to engage in any such business; provided, however, that notwithstanding -6- 7 the foregoing, this provision shall not be construed to prohibit the passive ownership by the Employee of not more than 1% of the capital stock of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934. In the event that the provisions of this Section 5 should ever be adjudicated to exceed the time, geographic, product or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, product or other limitations permitted by applicable law. 6. No Solicitation. During (i) the term of the Employment Term and (ii) for one year thereafter only in the event that (A) such Employment Term is terminated under Section 8.2 or 8.4 (but only if it is terminated by a member of the K-Tron Group) hereof or (B) the Employee terminates employment with the member of the K-Tron Group employing him without giving the notice required by Section 8.1 hereof, the Employee shall not, unless acting as an employee pursuant hereto or with the prior written consent of the K-Tron Board, call on or solicit, either directly or indirectly, any person, firm, corporation or other entity who or which is, or within two years prior thereto had been, a customer of any member of the K-Tron Group, with respect to any matters involving the designing, engineering, manufacturing, marketing or distributing of feeding or blending equipment or involving any other businesses then engaged in by any member of the K-Tron Group. 7. Equitable Relief. (a) The Employee acknowledges that the restrictions contained in Sections 3, 4, 5 and 6 hereof are, in view of the nature of the business of K-Tron and the other members of the -7- 8 K-Tron Group, reasonable and necessary to protect the legitimate interests of the K-Tron Group, that K-Tron would not have entered into this Agreement in the absence of such restrictions, that the business of the K-Tron Group is international in scope and that any violation of any provision of those Sections will result in irreparable injury to K-Tron and the other members of the K-Tron Group. (b) The Employee agrees that in the event of any violation of the restrictions referred to in Section 7(a) above, K-Tron and any other member of the K-Tron Group shall be entitled to preliminary and permanent injunctive relief, without the necessity of posting a bond or proving actual damages, and to an equitable accounting of all earnings, profits and other benefits arising from any such violation, which rights shall be cumulative and in addition to any other rights or remedies to which K-Tron or any other member of the K-Tron Group may be entitled. (c) The Employee irrevocably and unconditionally agrees that in the event of any violation of the restrictions referred to in Section 7(a) above, an action may be commenced for preliminary and permanent injunctive relief and other equitable relief in any federal or state court of competent jurisdiction sitting in Gloucester or Camden County, New Jersey or in any other court of competent jurisdiction. The Employee hereby waives, to the fullest extent permitted by law, any objection that he may now or hereafter have to such jurisdiction or to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that such suit, action or proceeding has been brought in an inconvenient forum. The Employee agrees that effective service of process may be made upon him by mail under the notice provisions contained in Section 10 hereof and that all pleadings, notices and other papers may be served upon him in the same manner. -8- 9 (d) The Employee agrees that he will provide, and that any member of the K-Tron Group may similarly provide, a copy of Sections 3, 4, 5 and 6 of this Agreement to any business or enterprise (i) which he may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing or control of, or (ii) with which he may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Sections 5 and 6 of this Agreement after expiration of the time periods set forth therein. (e) The Employee represents and acknowledges that (i) he has been advised by K-Tron to consult his own legal counsel in respect of this Agreement and (ii) he has had full opportunity to do so. 8. Termination. 8.1 Generally. Either party may terminate the Employment Term upon not less than one year's prior notice to the other party. Should either party elect to terminate the Employment Term on this basis, neither K-Tron nor any member of the K-Tron Group shall have any liability or obligation to the Employee after the date on which the Employment Term ends except for unpaid salary and benefits accrued to such date and any additional benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of any member of the K-Tron Group which covers the Employee at the time of his termination. 8.2 Partial or Total Disability. If in the judgment of the K-Tron Board, the Employee is unable to perform his duties and responsibilities hereunder by reason of illness, -9- 10 injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of 12 calendar months, during which time K-Tron or the member of the K-Tron Group actually employing the Employee at the time of his disability shall continue to compensate the Employee hereunder (with such compensation to be reduced by the amount of any payments due the Employee for this time period under any applicable disability benefit programs, including Social Security disability, worker's compensation and disability retirement benefits), the Employment Term may be terminated by K-Tron in which event neither K-Tron nor any other member of the K-Tron Group shall have any further liability or obligation to the Employee except for unpaid salary and benefits accrued to the date of his termination and for any additional disability or other benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of any member of the K-Tron Group which covers the Employee at the time of his termination. The Employee agrees, in the event of any dispute under this Section 8.2 and if requested by K-Tron, to submit to a physical examination by a licensed physician selected by K-Tron, the cost of such examination to be paid by K-Tron. 8.3 Death. In the event that the Employee dies during the Employment Term, the member of the K-Tron Group actually employing the Employee at the time of his death shall pay to his executors, administrators or personal representatives, as appropriate, an amount equal to the installment of his salary payable for the month in which he dies. Thereafter, neither K-Tron nor any other member of the K-Tron Group shall have any further liability or obligation hereunder to the Employee's executors, administrators, personal representatives, heirs, assigns or any other person claiming under or through him, except for any benefits or other payments -10- 11 (excluding any severance benefits or payments) payable to the Employee under any applicable formal policy or plan of any member of the K-Tron Group which covered the Employee at the time of his death. 8.4 For Cause. Nothing in this Agreement shall be construed to prevent the termination of the Employment Term at any time either (i) by the Employee for the failure of K-Tron or any other member of the K-Tron Group actually employing the Employee at the time to observe or perform any of the material terms or provisions hereof provided that the Employee has given written notice of such failure to K-Tron and any other member of the K-Tron Group employing the Employee and such failure has continued for 30 days thereafter, or (ii) by K-Tron, by action of the K-Tron Board, for "cause." For purposes of this Agreement, "cause" shall mean the failure of the Employee to observe or perform (other than by reason of illness, injury or incapacity) any of the material terms or provisions of this Agreement provided that the Employee has been given written notice of such failure and such failure has continued for 30 days thereafter, dishonesty, disloyalty, willful misconduct, conviction of a felony or other crime involving moral turpitude, misappropriation of funds, habitual insobriety, substance abuse, similar like cause, any action on the part of the Employee involving willful and deliberate malfeasance or gross negligence in the performance of his duties and responsibilities hereunder, any other action on the part of the Employee that is damaging or detrimental in a significant way to any member of the K-Tron Group or any willful violation by the Employee of a written directive from the K-Tron Board or K-Tron's chief executive officer. 8.5 Without Cause. K-Tron, by action of the K-Tron Board, may terminate the Employment Term at any time without cause upon notice to the Employee accompanied by -11- 12 payment to the Employee of a lump sum amount equal to 100% of the Employee's then-annual base salary hereunder, in which event neither K-Tron nor any other member of the K-Tron Group shall have any further liability or obligation to the Employee after the date of termination of the Employment Term except for any unpaid salary and benefits accrued to such date and for any additional or other benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of any member of the K-Tron Group which covers the Employee at the time of his termination. Notwithstanding the foregoing, if notice of termination shall have previously been given to the Employee under Section 8.1 hereof and be in effect, the amount to be paid to the Employee shall be reduced to 100% of the base salary hereunder to which the Employee would otherwise have been entitled for the remaining balance of his Employment Term. 9. Survival. Notwithstanding the termination of the Employment Term for any reason whatsoever, the obligations of the Employee under Sections 3, 4, 5 and 6 hereof shall survive and remain in full force and effect for the periods therein provided, and the provisions for equitable relief found in Section 7 hereof shall continue in force. 10. Notices. All notices and other communications hereunder shall be in writing and deemed to have been given when hand delivered, in person or by a recognized courier or delivery service, when telefaxed to the recipient's correct telefax number (with receipt confirmed) or when mailed by registered or certified mail, return receipt requested, or by air mail to any addressee located outside the United States, as follows (provided that notice of change of address shall be deemed given only when received): -12- 13 If to K-Tron, to: K-Tron International, Inc. Routes 55 and 553 Pitman, NJ 08071 Attention: Chief Executive Officer With a required copy to: Morgan, Lewis & Bockius LLP 2000 One Logan Square Philadelphia, PA 19103 Attention: Edward B. Cloues, II, Esquire If to the Employee, to: ----------------------- ----------------------- ----------------------- ----------------------- or to such other name or address as any designated recipient shall specify by notice to the other designated recipients in the manner specified in this Section 10. Any communication delivered in another manner shall be deemed given when actually received. 11. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New Jersey, United States of America without giving effect to any conflict of laws provisions. 12. Contents of Agreement, Amendment and Assignment. (a) This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, supersedes any prior employment agreement between the -13- 14 parties and shall not be changed, modified or terminated except upon written amendment executed by a duly authorized officer of K-Tron and the Employee; provided, however, that notwithstanding anything herein to the contrary, this Agreement shall not be deemed to modify or otherwise limit (i) (except as to salary) any pre-existing written agreements between the Employee and members of the K-Tron Group involving the relocation of the Employee, or (ii) any requirement of, or protection provided to the Employee under, any applicable law governing his employment by any member of the K-Tron Group. Furthermore and without limitation, nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of any member of the K-Tron Group beyond the expiration of the Employment Term, and if employed thereafter the Employee specifically acknowledges that he shall be an employee-at-will and thus subject to discharge with or without cause and without further compensation of any nature. (b) Employee acknowledges that from time to time, K-Tron and other members of the K-Tron Group may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of K-Tron or other members of the K-Tron Group may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of any member of the K-Tron Group (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement or to create express or implied obligations of employment or continued employment by K-Tron or any other member of the K-Tron Group. -14- 15 (c) All of the provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, personal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee hereunder are of a personal nature and shall not be assignable or delegable in whole or in part by the Employee. (d) In the event that the Employee is employed by a member ("such other member") of the K-Tron Group other than K-Tron, and in the further event that either (i) K-Tron or another member of the K-Tron Group shall sell 50% or more of the voting stock of such other member to a third party after such other member shall have assumed all of K-Tron's obligations hereunder or (ii) such other member shall sell substantially all of its operating assets to a third party which agrees in writing to assume all of K-Tron's obligations hereunder, then K-Tron shall, upon the closing of any such transaction, have no further duties or obligations hereunder. (e) All references in this Agreement to the "K-Tron Board" shall also be deemed to include the Executive Committee of the K-Tron Board. 13. Severability. If any provision of this Agreement or the application thereof to anyone or any circumstance is held invalid or unenforceable in any jurisdiction, the remainder of this Agreement, and the application of such provision to such person or entity or such circumstance in any other jurisdiction or to other persons, entities or circumstances in any jurisdiction, shall not be affected thereby, and to this end the provisions of this Agreement are severable. 14. Remedies Cumulative; No Waiver. No remedy conferred upon any party by this Agreement is intended to be exclusive of any other remedy, and each and every such -15- 16 remedy shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by any party in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its or his sole discretion. 15. Miscellaneous. The masculine pronoun whenever used shall include the feminine and the singular shall be construed as the plural, where applicable. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which shall be an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. IN WITNESS WHEREOF, K-Tron and the Employee have executed this Agreement as of the date first above written. [Corporate Seal] K-TRON INTERNATIONAL, INC. Attest: By: - ------------------------------ ----------------------------- Secretary As its Chairman and Chief Executive Officer EMPLOYEE - ------------------------------ ----------------------------- Witness -16- 17 SCHEDULE 10.12 Robert M. Barnett Kevin C. Bowen Lukas Gunthardt Alan R. Sukoneck Robert L. Weinberg Ulrich Wiedenbeck David H. Wilson EX-21.1 3 LIST OF SUBSIDIARIES 1 EXHIBIT 21.1 K-Tron International, Inc. List of Subsidiaries*
State or Jurisdiction Name of Subsidiary of Incorporation - ------------------ ---------------- K-Tron Investment Co.............................. Delaware Hurricane Pneumatic Conveying Inc............ Canada K-Tron America, Inc.......................... Delaware K-Tron (Switzerland) Ltd..................... Switzerland K-Tron Asia Pacific Pte Ltd............ Singapore K-Tron Asia Pacific Pte......... Singapore K-Tron Deutschland GmbH................ Germany K-Tron France S.a.r.l.................. France K-Tron Great Britain Ltd............... England K-Tron Technologies, Inc.......................... Delaware
- ------------- * Pursuant to applicable Securities and Exchange Commission regulations, the Registrant has omitted those subsidiaries which when considered in the aggregate as a single subsidiary, would not have been considered a significant subsidiary as of the end of fiscal year 1997. EX-23.1 4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 File Nos. 333-26531, 33-7921, 33-8043, 33-39039, 33-39040 and 2-72898. Arthur Andersen LLP Philadelphia, PA March 11, 1998 EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 YEAR JAN-03-1998 JAN-03-1998 5,154 0 16,455 1,119 10,010 32,646 40,025 24,588 54,249 23,223 10,619 0 0 43 18,849 54,249 87,152 87,152 48,121 48,121 30,589 0 1,133 7,309 1,865 5,444 0 0 0 5,444 1.72 1.69
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