-----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, ThaHAuGfAZo9wbzqehgC8bfkMnyhIydBhL3og31Y9QXB97IX7+jvnjYcW9xyOzFH Vc76bGLlkSPmVS9s7YHnGg== 0000893220-99-000855.txt : 19990729 0000893220-99-000855.hdr.sgml : 19990729 ACCESSION NUMBER: 0000893220-99-000855 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990703 FILED AS OF DATE: 19990728 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-Q SEC ACT: SEC FILE NUMBER: 000-09576 FILM NUMBER: 99671957 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-Q 1 K-TRON INTERNATIONAL INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended July 3, 1999 -------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ------------------- Commission file number 0-9576 ------ K-TRON INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) New Jersey 22-1759452 - -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification #) Incorporation or Organization) Routes 55 & 553, P.O. Box 888, Pitman, New Jersey 08071-0888 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (856) 589-0500 ----------------------------- Not Applicable - -------------------------------------------------------------------------------- (Former Name, Former Address and Formal Fiscal Year, if Changed Since Last Report) Indicate by check X whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of Common Stock outstanding as of July 3, 1999 was: 2,965,091 Shares 2 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES INDEX ----- Page No. -------- PART I. FINANCIAL INFORMATION --------------------- Item 1. Financial Statements Consolidated Balance Sheets July 3, 1999 and January 2, 1999 1 Consolidated Statements of Income & Retained Earnings for the Three and Six Months Ended July 3, 1999 and July 4, 1998 2 Consolidated Statements of Cash Flows for the Six Months Ended July 3, 1999 and July 4, 1998 3 Notes to Consolidated Financial Statements 4 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 12 PART II. OTHER INFORMATION ----------------- Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 13 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. -------------------- K-TRON INTERNATIONAL, INC. & SUBSIDIARIES ----------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars in Thousands except Share Data)
July 3, January 2, 1999 1999 (Unaudited) (Audited) ----------- --------- ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 1,498 $ 3,220 Accounts receivable (less allowance for doubtful accounts of $1,166 and $1,286) 20,075 19,034 Inventories 11,034 10,743 Deferred income taxes 819 819 Prepaid expenses and other current assets 1,769 1,177 -------- -------- Total current assets 35,195 34,993 PROPERTY, PLANT AND EQUIPMENT, net 15,256 16,215 PATENTS, net 804 751 GOODWILL, net 3,780 4,454 OTHER ASSETS 108 204 -------- -------- Total assets $ 55,143 $ 56,617 ======== ======== LIABILITIES & SHAREHOLDERS' EQUITY ---------------------------------- CURRENT LIABILITIES: Notes payable to banks $ 2,219 $ 254 Current portion of long-term debt 868 1,280 Accounts payable 6,760 6,965 Accrued expenses & other current liabilities 3,813 4,034 Accrued payroll 2,812 4,307 Accrued commissions 2,180 2,609 Customer advances 2,243 1,810 Accrued warranty 891 1,055 Income taxes payable 1,507 1,233 -------- -------- Total current liabilities 23,293 23,547 LONG-TERM DEBT, net of current portion 8,658 9,638 DEFERRED INCOME TAXES 423 423 OTHER NONCURRENT LIABILITIES 468 735 COMMITMENTS AND CONTINGENCIES SERIES A JUNIOR PARTICIPATING PREFERRED SHARES, $.01 par value - authorized 50,000 shares; none issued -- -- SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value - authorized 950,000 shares; none issued -- -- Common stock, $.01 par value - authorized 50,000,000 shares; issued 4,362,441 shares and 4,328,555 shares 44 43 Paid-in capital 15,918 15,505 Retained earnings 25,018 21,839 Cumulative translation adjustments (1,815) (192) -------- -------- 39,165 37,195 -------- -------- Treasury stock, 1,397,350 and 1,295,450 shares - at cost (16,864) (14,921) -------- -------- Total shareholders' equity 22,301 22,274 -------- -------- Total liabilities and shareholders' equity $ 55,143 $ 56,617 ======== ========
See Notes to Consolidated Financial Statements -1- 4 K-TRON INTERNATIONAL, INC. & SUBSIDIARIES ----------------------------------------- CONSOLIDATED STATEMENTS OF INCOME & RETAINED EARNINGS ----------------------------------------------------- (Dollars in Thousands except Share Data) (Unaudited)
Three Months Ended Six Months Ended ---------------------- --------------------- July 3, July 4, July 3, July 4, 1999 1998 1999 1998 ---- ---- ---- ---- REVENUES $22,617 $22,366 $42,457 $43,821 COST OF REVENUES 12,590 11,993 23,309 23,808 ------- ------- ------- ------- Gross profit 10,027 10,373 19,148 20,013 OPERATING EXPENSES Selling, general and administrative 6,708 7,201 13,314 14,056 Research and development 905 684 1,726 1,419 ------- ------- ------- ------- 7,613 7,885 15,040 15,475 ------- ------- ------- ------- Operating income 2,414 2,488 4,108 4,538 INTEREST EXPENSE 122 148 256 356 ------- ------- ------- ------- Income before income taxes 2,292 2,340 3,852 4,182 INCOME TAX PROVISION 473 525 673 1,060 ------- ------- ------- ------- Net income 1,819 1,815 3,179 3,122 RETAINED EARNINGS Beginning of period 23,199 16,553 21,839 15,246 ------- ------- ------- ------- End of period $25,018 $18,368 $25,018 $18,368 ======= ======= ======= ======= EARNINGS PER SHARE Basic $ .62 $ .56 $ 1 .07 $ .96 ======= ======= ======= ======= Diluted $ .60 $ .54 $ 1 .04 $ .93 ======= ======= ======= =======
See Notes to Consolidated Financial Statements -2- 5 K-TRON INTERNATIONAL, INC. & SUBSIDIARIES ----------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Dollars in Thousands) (Unaudited)
Six Months Ended ---------------------- July 3, July 4, 1999 1998 ---- ---- OPERATING ACTIVITIES: Net income $ 3,179 $ 3,122 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,601 1,549 Amortization of deferred gain on sale/leaseback transaction (187) (186) Changes in assets and liabilities: Accounts receivable, net (2,912) (3,226) Inventories (1,064) (588) Prepaid expenses and other current assets (747) 10 Other assets 76 349 Accounts payable 435 636 Accrued expenses and other current liabilities (572) 676 Accrued warranty (80) 101 Income taxes 327 (73) ------- ------- Net cash provided by operating activities 56 2,370 ------- ------- INVESTING ACTIVITIES: Capital expenditures (1,659) (1,449) Investment in patents (86) (72) ------- ------- Net cash used in investing activities (1,745) (1,521) ------- ------- FINANCING ACTIVITIES: Net borrowings (repayments) under notes payable to banks 2,139 (1,764) Principal payments on long-term debt (479) (984) Proceeds from issuance of long-term debt -- 405 Purchase of treasury stock (2,110) -- Proceeds from issuance of common stock 581 489 ------- ------- Net cash provided by (used in) financing activities 131 (1,854) ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (164) (42) ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,722) (1,047) ------- ------- CASH AND CASH EQUIVALENTS Beginning of period 3,220 5,154 ------- ------- End of period $ 1,498 $ 4,107 ======= =======
See Notes to Consolidated Financial Statements -3- 6 K-TRON INTERNATIONAL, INC. & SUBSIDIARIES ----------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ July 3, 1999 ------------ (Unaudited) 1. Basis of Presentation --------------------- The accompanying unaudited financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The consolidated financial statements include the accounts of K-Tron International, Inc. and its subsidiaries ("K-Tron" or the "Company"). All intercompany transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for a fair presentation of results for interim periods have been made. The results for the interim periods are not necessarily indicative of the results for a full year. The unaudited financial statements herein should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended January 2, 1999 which was previously filed with the Securities and Exchange Commission. 2. Supplemental Disclosures of Cash Flow Information ------------------------------------------------- The Company considers all highly liquid short-term investments purchased with a maturity of three months or less to be cash equivalents. Cash paid in the first six months of 1999 and 1998 for interest was $.2 million and $.3 million, respectively, and for income taxes was $.4 million and $1.2 million, respectively. 3. Earnings per Share ------------------ The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 requires that the Company report Basic and Diluted Earnings Per Share. Basic Earnings Per Share represents net income less preferred dividends divided by the weighted average common shares outstanding. Diluted Earnings Per Share is calculated similarly, except that the denominator includes weighted average common shares outstanding plus the dilutive effect of options, warrants, convertible securities and other instruments with dilutive effects if exercised. -4- 7 The Company's Basic and Diluted Earnings Per Share are calculated as follows:
For the Three Months Ended July 3, 1999 --------------------------------------- (Dollars in Thousands except Per Share Data) Income Available To Common Per Share Shareholders Shares Amount ------------ ------ ------ Basic Net Income $1,819 2,948,000 $ .62 Common Share Equivalent of Options Issued -- 80,000 (.02) ------ --------- ----- Diluted $1,819 3,028,000 $ .60 ====== ========= ===== For the Three Months Ended July 4, 1998 --------------------------------------- (Dollars in Thousands except Per Share Data) Income Available To Common Per Share Shareholders Shares Amount ------------ ------ ------ Basic Net Income $1,815 3,251,000 $ .56 Common Share Equivalent of Options Issued -- 99,000 (.02) ------ --------- ----- Diluted $1,815 3,350,000 $ .54 ====== ========= ===== For the Six Months Ended July 3, 1999 ------------------------------------- (Dollars in Thousands except Per Share Data) Income Available To Common Per Share Shareholders Shares Amount ------------ ------ ------ Basic Net Income $3,179 2,965,000 $1.07 Common Share Equivalent of Options Issued -- 80,000 (.03) ------ --------- ----- Diluted $3,179 3,045,000 $1.04 ====== ========= ===== For the Six Months Ended July 4, 1998 ------------------------------------- (Dollars in Thousands except Per Share Data) Income Available To Common Per Share Shareholders Shares Amount ------------ ------ ------ Basic Net Income $3,122 3,243,000 $ .96 Common Share Equivalent of Options Issued -- 99,000 (.03) ------ --------- ----- Diluted $3,122 3,342,000 $ .93 ====== ========= =====
Diluted earnings per common share are based on the weighted average number of common and common equivalent shares outstanding. Such average shares include the weighted average number of common shares outstanding plus the shares issuable upon exercise of stock options after the assumed repurchase of common shares with the related proceeds. -5- 8 4. Impact of New Accounting Pronouncements --------------------------------------- In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components. Comprehensive income is the total of net income and the current year change in cumulative translation adjustments which is the only nonowner change in equity. For the three and six months in the periods ended July 3, 1999 and July 4, 1998, the following table sets forth the Company's comprehensive income:
Three Months Ended Six Months Ended ------------------ ---------------- July 3, July 4, July 3, July 4, 1999 1998 1999 1998 ---- ---- ----- ---- (Dollars in Thousands) Net Income $1,819 $1,815 $ 3,179 $3,122 Cumulative Translation Adjustments (616) (32) (1,623) (531) ------ ------ ------- ------ Comprehensive Income $1,203 $1,783 $ 1,556 $2,591 ====== ====== ======= ======
In 1998 the Company adopted the provisions of SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 introduces a new model for segment reporting called the management approach. The management approach is based on the way that the chief operating decision maker organizes segments within a company for making operating decisions and assessing performance. The Company is engaged in one business segment, the development, manufacturing and marketing of gravimetric and volumetric feeders, pneumatic conveying systems and related equipment. The Company operates in two primary geographic locations, North America and Western Europe. For the three and six months in the periods ended July 3, 1999 and July 4, 1998, the following tables set forth the Company's segment information:
North Western Elimi- Consoli- America Europe nations dated ------- ------ ------- ----- (in thousands) THREE MONTHS ENDED July 3, 1999: Revenues- Sales to unaffiliated customers $ 9,222 $13,395 $ -- $22,617 Sales to affiliates 829 589 (1,418) -- ------- ------- ------- ------- Total sales $10,051 $13,984 $(1,418) $22,617 ======= ======= ======= ======= Operating income $ 1,564 $ 863 $ (13) $ 2,414 ======= ======= ======= Interest expense (122) ------- Income before income taxes $ 2,292 =======
-6- 9
North Western Elimi- Consoli- America Europe nations dated ------- ------ ------- ----- (in thousands) THREE MONTHS ENDED July 4, 1998: Revenues- Sales to unaffiliated customers $ 9,453 $12,913 $ -- $22,366 Sales to affiliates 972 447 $(1,419) -- ------- ------- ------- ------- Total sales $10,425 $13,360 $(1,419) $22,366 ======= ======= ======= ======= Operating income $ 1,328 $ 1,163 $ (3) $ 2,488 ======= ======= ======= Interest expense (148) ------- Income before income taxes $ 2,340 ======= SIX MONTHS ENDED July 3, 1999: Revenues- Sales to unaffiliated customers $16,549 $25,908 $ -- $42,457 Sales to affiliates 1,840 1,110 (2,950) -- ------- ------- ------- ------- Total sales $18,389 $27,018 $(2,950) $42,457 ======= ======= ======= ======= Operating income $ 2,155 $ 1,970 $ 17 $ 4,108 ======= ======= ======= Interest expense (256) ------- Income before income taxes $ 3,852 ======= SIX MONTHS ENDED July 4, 1998: Revenues- Sales to unaffiliated customers $18,671 $25,150 $ -- $43,821 Sales to affiliates 1,408 949 (2,357) -- ------- ------- ------- ------- Total sales $20,079 $26,099 $(2,357) $43,821 ======= ======= ======= ======= Operating income $ 2,219 $ 2,191 $ 128 $ 4,538 ======= ======= ======= Interest expense (356) ------- Income before income taxes $ 4,182 =======
-7- 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS. ---------------------- Results of Operations - --------------------- For the second quarter and first six months of 1999, the Company reported net income of $1,819,000 and $3,179,000, respectively, compared to $1,815,000 and $3,122,000 for the same periods in 1998. K-Tron is an international company which derived approximately 61% and 57% of its first six months of 1999 and 1998 revenues, respectively, from products manufactured in, and services performed from, its facilities located outside the United States, primarily in Europe. As such, the financial position and performance of the Company is sensitive to changes in foreign currency exchange rates ("foreign exchange rates"), which can affect both the translation of financial statement items into U.S. dollars and the impact of transactions where the revenues and related expenses may initially be accounted for in different currencies, such as sales made from the Company's Swiss manufacturing facilities in currencies other than the Swiss franc. The following table sets forth the Company's results of operations expressed as a percentage of total revenues for the periods indicated:
Three Months Ended Six Months Ended ------------------ ---------------- July 3, July 4, July 3, June 4, 1999 1998 1999 1998 ---- ---- ---- ----- Total revenues 100.0% 100.0% 100.0% 100.0% Cost of revenues 55.7 53.6 54.9 54.3 ----- ----- ----- ----- Gross profit 44.3 46.4 45.1 45.7% Selling, general & administrative 29.6 32.2 31.4 32.1 Research & development 4.0 3.1 4.0 3.2 ----- ----- ----- ----- Operating income 10.7 11.1 9.7 10.4 Interest .6 .7 .6 .8 ----- ----- ----- ----- Income before income taxes 10.1% 10.4% 9.1% 9.6% ===== ===== ===== ===== Backlog at end of period (at June 1999 December 1998 June 1998 July 3, 1999 foreign exchange --------- ------------- --------- rates, in thousands) $20,446 $20,743 $23,245 ======= ======= =======
-8- 11 As noted above, more than half of the Company's revenues are normally derived from activities in foreign jurisdictions. Consequently, the Company's results can be significantly affected by changes in foreign exchange rates, particularly in U.S. dollar exchange rates with respect to the Swiss franc, German mark and euro and, to a lesser degree, the British pound sterling, French franc and other currencies. When the U.S. dollar strengthens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales decreases. When the U.S. dollar weakens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales increases. Correspondingly, the U.S. dollar value of non-U.S. dollar-based costs increases when the U.S. dollar weakens and decreases when the U.S. dollar strengthens. Overall, the Company typically receives a majority of its revenues in currencies other than the U.S. dollar and, as such, benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major currencies worldwide, especially those identified above. Accordingly, changes in foreign exchange rates, and in particular a strengthening of the U.S. dollar, may adversely affect the Company's total revenues, gross profit and operating income as expressed in U.S. dollars. In addition, revenues and income of the Company with respect to particular transactions may be affected by changes in foreign exchange rates where sales are made in currencies other than the functional currency of the facility manufacturing the product subject to the sale, including in particular the U.S. dollar/Swiss franc (for inter-company transactions) and the euro/Swiss franc and German mark/Swiss franc exchange rates (for sales from the Company's Swiss manufacturing facilities which are made in euros or German marks). For the second quarter and first six months of 1999 as well as the same periods in 1998, the changes in these and the U.S. dollar/euro and U.S. dollar/German mark exchange rates were as follows:
Three Months Ended Six Months Ended ------------------ ---------------- July 3, July 4, July 3, July 4, 1999 1998 1999 1998 ---- ---- ---- ---- Average U.S. dollar equivalent of one Swiss franc $ .658 $.669 $.678 $.673 % change vs. prior year -1.6% +0.1% Average U.S. dollar equivalent of one euro $1.054 N/A $ 1.086 N/A Average U.S. dollar equivalent of one German mark $ .539 $.558 $ .555 $.554 % change vs. prior year -3.4% NIL Average Swiss franc equivalent of one German mark .819 .834 .819 .823 % change vs. prior year -1.8% -0.1% Average Swiss franc equivalent of one euro 1.602 N/A 1.602 N/A
Total revenues increased by $.3 million or 1.1% in the second quarter of 1999 and decreased by $1.4 million or 3.1% in the first six months of 1999 compared to the same periods in 1998. Western European -9- 12 revenues increased and North American revenues decreased in the second quarter and first six months of 1999 as compared to the same periods in 1998. As reflected in the preceding chart, revenues for the first half of 1999 were insignificantly affected by the foreign exchange translation while revenues for the second quarter of 1999 would have been slightly higher than the same period in 1998 if translated at prior year rates. Gross profit as a percent of revenues decreased to 44.3% for the second quarter of 1999 and 45.1% for the first six months of 1999 as compared to 46.4% and 45.7% for the same periods in 1998. The reduction in gross margin in 1999 was primarily due to sales mix. Selling, general and administrative (SG&A) expense decreased by $.5 million or 6.8% for the second quarter of 1999 and by $.7 million or 5.2% for the first six months of 1999 as compared to the same periods in 1998. This decrease in SG&A was due to lower selling expenses, as well as to lower foreign exchange translation rates. As a percent of total revenues, SG&A for the second quarter and first six months of 1999 was 29.6% and 31.4%, respectively, compared to 32.2% and 32.1% for the same periods in 1998. Research and development (R&D) expenditures increased by $.2 million or 32.3% for the second quarter of 1999 and by $.3 million or 21.6% for the first six months of 1999 as compared to the same periods in 1998. R&D expenses increased due to greater emphasis on the development of new products and enhancements to existing products, offset in part by lower foreign exchange translation rates. R&D expense as a percent of total revenues was 4.0% for the second quarter and first six months of 1999 as compared to 3.1% and 3.2%, respectively, for the same periods in 1998. Interest expense decreased by $.1 million or 28.1% for the first six months of 1999 as compared to the same period in 1998, primarily due to weighted average lower debt levels and lower rates on some loans. The effective tax rates for the second quarter and first six months of 1999 were 20.6% and 17.5%, respectively, compared to 22.4% and 25.3% for the same periods in 1998. The effective tax rates for 1999 were lower than the same periods in 1998 due to reduced taxable income in the United States. The effective tax rates for both 1999 and 1998 were also reduced by the utilization of foreign net operating loss carryforwards with full valuation allowances. The backlog decreased by 1.4% at the end of the second quarter when compared to the end of 1998 and by 12.0% when compared to the same period in 1998, in each case at constant foreign exchange rates. The decrease was primarily in Europe. -10- 13 Liquidity and Capital Resources - ------------------------------- The Company's capitalization as of the end of the second quarter of 1999 and as of the end of fiscal years 1998 and 1997 is set forth below:
July 3, January 2, January 3, (Dollars in Thousands) 1999 1999 1998 - ---------------------- ---- ---- ---- Short-term debt, including current portion of long-term debt $ 3,087 $ 1,534 $ 3,148 Long-term debt 8,658 9,638 10,619 ------- ------- ------- Total debt 11,745 11,172 13,767 Shareholders' equity 22,301 22,274 18,892 ------- ------- ------- Total debt and shareholders' equity (total capitalization) $34,046 $33,446 $32,659 ======= ======= ======= Percent total debt to total capitalization 34% 33% 42% Percent long-term debt to equity 39% 43% 56% Percent total debt to equity 53% 50% 73%
Total debt increased by $.6 million in the first six months of 1999, and this increase would have been $1.7 million using a constant foreign exchange rate. U.S. debt decreased by $.1 million while European debt increased by $.7 million ($1.8 million at a constant foreign exchange rate). At July 3, 1999, the Company had $5.0 million of availability under its U.S. loan agreements and $1.6 million of availability under its Swiss loan agreements. At July 3, 1999, there was working capital of $11.9 million as compared to $11.4 million at January 2, 1999, and the ratio of current assets to current liabilities at those dates was 1.51 and 1.49, respectively. In the first six months of 1999, the Company utilized internally- generated funds and short-term borrowings to meet its working capital needs. Net cash provided by operating activities was $.1 million in the first six months of 1999 as compared to $2.4 million in the same period of 1998. The lower operating cash flow for 1999 as compared to 1998 was primarily due to a reduction in accrued expenses and accounts payable and an increase in prepaid expenses. Net cash used in investing activities in the first six months of 1999 and 1998 was for capital additions. Net cash provided by financing activities in the first six months of 1999 was primarily from net borrowings used for working capital and the proceeds from the issuance of common stock offset by the purchase of 116,400 shares from two shareholders. -11- 14 Changes in foreign exchange rates, particularly with respect to the Swiss franc and German mark, caused a translation adjustment decrease in shareholders' equity of $1.6 million in the first six months of 1999. Readiness for Year 2000 - ----------------------- The Company has substantially completed an evaluation of its information technology infrastructure for Year 2000 compliance and has substantially implemented its Year 2000 compliance strategy. The cost to modify its information technology infrastructure to be Year 2000 compliant has not been and is not expected to be material to its financial condition or results of operations. The Company does not anticipate any material disruptions in its business as a result of any failure by the Company to be Year 2000 compliant. The Company anticipates having all systems Year 2000 compliant no later than September 30, 1999 and has not developed a contingency plan. If Year 2000 compliance issues are discovered, the Company then will evaluate the need for a contingency plan relative to those issues. The Company is also in the process of obtaining information concerning the Year 2000 compliance status of its significant suppliers, customers and business partners to determine the extent to which the Company is vulnerable to these third parties' failure to remedy their Year 2000 problems. There can be no assurance that such suppliers, customers and business partners are or will be Year 2000 compliant. The risk to the Company resulting from the failure of third parties in the public and private sector to attain Year 2000 readiness is the same as for other firms in the Company's industry or other business enterprises generally and could involve many different types of disruption to the Company's business. The costs to complete the Company's Year 2000 evaluation and to secure Year 2000 compliance are based on management's best estimates. These estimates were derived using numerous assumptions, including continued availability of resources, third party contingency plans and other factors. However, there can be no assurance that these estimates will be achieved and actual results could differ materially from those anticipated. The following are representative of the types of risks that could result in the event a critical component of the Company's information systems, factories or facilities fails to be Year 2000 ready, or there is a similar failure by one or more major third party suppliers to the Company: (i) information systems--could include interruptions or disruptions of business and transaction processing such as customer billing, payroll, accounts payable and other operating and information processes, until systems can be remedied or replaced; (ii) factories and facilities--could include interruptions or disruptions of manufacturing processes and facilities with delays in delivery of products, until non-compliant conditions or components can be remedied or replaced; and (iii) major suppliers to the Company--could include interruptions or disruptions of the supply of materials and supplies which could cause interruptions or disruptions of manufacturing and delays in delivery of products, until the third party supplier can remedy the problem or contingency measures can be implemented. -12- 15 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ---------------------------------------------------- (a) The Annual Meeting of the shareholders of the Company was held on May 7, 1999. (b) Not applicable. (c) Shareholders of the Company were asked to vote on a proposal to elect one Class II director. The Board of Directors, acting on the recommendation of its Nominating Committee, nominated Robert A. Engel as the Class II director. There were no other nominations. Mr. Engel was then elected with the result of the vote taken at the Annual Meeting being as follows: Number of Votes --------------- FOR WITHHELD --- -------- Robert A. Engel 2,224,209 14,464 Directors are elected by a plurality of the votes cast; therefore, votes cast in the election could not be recorded against or as an abstention, nor could a broker non-vote be recorded. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. --------------------------------- (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K for the six months ended July 3, 1999. -13- 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. K-TRON INTERNATIONAL, INC. Date: July 28, 1999 By: /s/ RONALD R. REMICK -------------------------------------- Ronald R. Remick Senior Vice President & Chief Financial Officer (Duly authorized officer and principal financial officer of the registrant) By: /s/ ALAN R. SUKONECK -------------------------------------- Vice President, Chief Accounting & Tax Officer (Duly authorized officer and principal accounting officer of the registrant) -14- 17 EXHIBIT INDEX Exhibit Number Description -------------- ----------- 27.1 Financial Data Schedule EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JAN-01-2000 JUL-03-1999 1,498 0 21,241 1,166 11,034 35,195 41,640 26,384 55,143 23,293 8,658 0 0 44 22,257 55,143 42,457 42,457 23,309 23,309 15,040 0 256 3,852 673 3,179 0 0 0 3,179 1.07 1.04
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