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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 June 29, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-9576
K-TRON INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 22-1759452
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification #)
of 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 Registrant had 2,432,092 shares of Common Stock outstanding as of June 29,
2002.
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets 1
June 29, 2002 and December 29, 2001
Consolidated Statements of Income 2
& Retained Earnings for the Three and Six Months
Ended June 29, 2002 and June 30, 2001
Consolidated Statements of Cash Flows 3
for the Six Months Ended June 29, 2002
and June 30, 2001
Notes to Consolidated Financial Statements 4 - 8
Item 2. Management's Discussion and Analysis 9 - 14
of Financial Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. 15
Item 6. Exhibits and Reports on Form 8-K. 15
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands except Share Data)
(Unaudited)
June 29, December 29,
2002 2001
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,444 $ 2,214
Accounts receivable, net of allowance for
doubtful accounts of $761 and $687 15,349 14,723
Inventories 9,681 10,212
Deferred income taxes 326 326
Prepaid expenses and other current assets 1,786 1,293
-------- --------
Total current assets 32,586 28,768
PROPERTY, PLANT AND EQUIPMENT, net 14,349 13,848
PATENTS, net 785 799
GOODWILL, net 2,053 2,053
NOTES RECEIVABLE AND OTHER ASSETS 2,652 2,176
-------- --------
Total assets $ 52,425 $ 47,644
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,651 $ 2,186
Accounts payable 4,914 4,218
Accrued expenses and other current liabilities 5,761 4,547
Accrued commissions 1,304 1,220
Customer advances 821 1,032
-------- --------
Total current liabilities 15,451 13,203
LONG-TERM DEBT, net of current portion 11,371 12,499
DEFERRED INCOME TAXES 381 381
COMMITMENTS AND CONTINGENCIES
SERIES B JUNIOR PARTICIPATING PREFERRED SHARES,
$.01 par value - authorized 50,000 shares; none issued -- --
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value - authorized 950,000 shares; none issued -- --
Common stock, $.01 par value - authorized 50,000,000 shares;
issued 4,433,342 shares and 4,432,742 shares 44 44
Paid-in capital 16,701 16,697
Retained earnings 37,049 35,484
Cumulative translation adjustments (1,075) (3,167)
-------- --------
52,719 49,058
-------- --------
Treasury stock, 2,001,250 and 2,001,250 shares - at cost (27,497) (27,497)
-------- --------
Total shareholders' equity 25,222 21,561
-------- --------
Total liabilities and shareholders' equity $ 52,425 $ 47,644
======== ========
See Notes to Consolidated Financial Statements
-1-
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME & RETAINED EARNINGS
(Dollars in Thousands except Share Data)
(Unaudited)
Three Months Ended Six Months Ended
---------------------- ----------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
------- ------- ------- -------
REVENUES $16,877 $19,318 $33,655 $40,876
COST OF REVENUES 9,683 11,635 19,325 24,293
------- ------- ------- -------
Gross Profit 7,194 7,683 14,330 16,583
OPERATING EXPENSES:
Selling, general and administrative 5,301 5,859 10,553 12,355
Research and development 586 772 1,292 1,521
------- ------- ------- -------
5,887 6,631 11,845 13,876
------- ------- ------- -------
Operating Income 1,307 1,052 2,485 2,707
INTEREST EXPENSE 129 275 302 586
------- ------- ------- -------
Income before income taxes 1,178 777 2,183 2,121
INCOME TAX PROVISION 364 167 618 536
------- ------- ------- -------
Net Income 814 610 1,565 1,585
RETAINED EARNINGS
Beginning of period 36,235 35,411 35,484 34,436
------- ------- ------- -------
End of period $37,049 $36,021 $37,049 $36,021
======= ======= ======= =======
EARNINGS PER SHARE
Basic $ 0.33 $ 0.25 $ 0.64 $ 0.65
======= ======= ======= =======
Diluted $ 0.33 $ 0.25 $ 0.64 $ 0.64
======= ======= ======= =======
See Notes to Consolidated Financial Statements
-2-
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Six Months Ended
-----------------------
June 29, June 30,
2002 2001
------- -------
OPERATING ACTIVITIES:
Net income $ 1,565 $ 1,585
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,290 1,629
Changes in assets and liabilities:
Accounts receivable, net 601 1,239
Inventories 1,131 (499)
Prepaid expenses and other current assets (407) 225
Other assets (220) 10
Accounts payable 301 (2,597)
Accrued expenses and other current liabilities 659 874
------- -------
Net cash provided by operating activities 4,920 2,466
------- -------
INVESTING ACTIVITIES:
Capital expenditures (743) (1,432)
Investment in patents (34) (47)
------- -------
Net cash used in investing activities (777) (1,479)
------- -------
FINANCING ACTIVITIES:
Net (repayments) borrowing under notes payable to banks (1,108) 67
Proceeds from issuance of long-term debt 752 851
Principal payments on long-term debt (1,103) (995)
Purchase of treasury stock -- (408)
Proceeds from issuance of common stock 4 254
------- -------
Net cash used in financing activities (1,455) (231)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 542 (102)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,230 654
------- -------
CASH AND CASH EQUIVALENTS
Beginning of period 2,214 553
------- -------
End of period $ 5,444 $ 1,207
======= =======
See Notes to Consolidated Financial Statements
-3-
K-TRON INTERNATIONAL, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002
(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 an interim period are not necessarily indicative of
the results for a full year.
Certain reclassifications were made to the first quarter of 2002 and prior
year's consolidated financial statements to conform to the current period
presentation.
The unaudited financial statements herein should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 29, 2001 which
was previously filed with the Securities and Exchange Commission.
2. Supplemental Disclosures of Cash Flow Information
The Company considers all highly liquid short-term investments purchased with an
original maturity of three months or less to be cash equivalents.
Cash paid in the first six months of 2002 and 2001 for interest was $352
thousand and $532 thousand, respectively, and for income taxes the Company
received a net refund of $121 thousand and made a cash payment of $246 thousand,
respectively.
3. Inventories
Inventories consist of the following:
June 29, December 29,
2002 2001
------- -------
(in thousands)
Components $ 8,187 $ 8,416
Work-in-process 1,360 1,692
Finished goods 134 104
------- -------
$ 9,681 $10,212
======= =======
-4-
4. Earnings Per Share
The Company's Basic and Diluted Earnings Per Share are calculated as follows:
For the Three Months Ended June 29, 2002
----------------------------------------
(Dollars and Shares in Thousands
except Per Share Data) Net Income Available
To Common Earnings
Shareholders Shares Per Share
------------ ------ ---------
Basic $814 2,432 $ 0.33
Common Share Equivalent
of Outstanding Options -- 36 (0.00)
---- ----- ------
Diluted $814 2,468 $ 0.33
==== ===== ======
For the Three Months Ended June 30, 2001
----------------------------------------
(Dollars and Shares in Thousands
except Per Share Data) Net Income Available
To Common Earnings
Shareholders Shares Per Share
------------ ------ ---------
Basic $610 2,430 $ 0.25
Common Share Equivalent
of Outstanding Options -- 39 (0.00)
---- ----- ------
Diluted $610 2,469 $ 0.25
==== ===== ======
For the Six Months Ended June 29, 2002
--------------------------------------
(Dollars and Shares in Thousands
except Per Share Data) Net Income Available
To Common Earnings
Shareholders Shares Per Share
----- ----- -----
Basic $1,565 2,432 $ 0.64
Common Share Equivalent
of Outstanding Options -- 28 (0.00)
------ ----- ------
Diluted $1,565 2,460 $ 0.64
====== ===== ======
-5-
For the Six Months Ended June 30, 2001
--------------------------------------------
(Dollars and Shares in Thousands
except Per Share Data) Net Income Available
To Common Earnings
Shareholders Shares Per Share
------ ----- -----
Basic $1,585 2,436 $ 0.65
Common Share Equivalent
of Outstanding Options -- 39 (0.01)
------ ----- ------
Diluted $1,585 2,475 $ 0.64
====== ===== ======
Diluted earnings per common share are based on the weighted average number of
common and common equivalent shares outstanding during a given time period. Such
average shares include the weighted average number of common shares outstanding
plus the shares issuable upon exercise of stock options after the assumed
repurchase of common shares with the related proceeds.
5. Comprehensive Income
(Dollars in Thousands) Three Months Ended Six Months Ended
----------------------- -------------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
------ ----- ------ -------
Net Income $ 814 $ 610 $1,565 $ 1,585
Translation Adjustments 2,181 (262) 2,092 (1,415)
------ ----- ------ -------
Comprehensive Income $2,995 $ 348 $3,657 $ 170
====== ===== ====== =======
-6-
6. Management Segment Information
The Company is engaged in one principal business segment, material handling
equipment and systems. The Company operates in two primary geographic locations,
North and South America (the "Americas") and Europe, the Middle East, Africa and
Asia ("EMEA/Asia"). For the three and six months ended June 29, 2002 and June
30, 2001, the following tables set forth the Company"s segment information:
(Dollars in Thousands) EMEA/ Elimi- Consoli-
Americas Asia nations dated
------- ------- ------- -------
THREE MONTHS ENDED June 29, 2002:
Revenues-
Sales to unaffiliated customers $ 6,968 $ 9,909 $ -- $16,877
Sales to affiliates 964 493 (1,457) --
------- ------- ------- -------
Total sales $ 7,932 $10,402 $(1,457) $16,877
======= ======= ======= =======
Operating income $ 631 $ 676 $ -- $ 1,307
======= ======= =======
Interest expense (129)
-------
Income before income taxes $ 1,178
=======
(Dollars in Thousands) EMEA/ Elimi- Consoli-
Americas Asia nations dated
-------- ------- -------- -------
THREE MONTHS ENDED June 30, 2001:
Revenues-
Sales to unaffiliated customers $ 7,423 $11,895 $ -- $19,318
Sales to affiliates 1,268 507 (1,775) --
------- ------- -------- -------
Total sales $ 8,691 $12,402 $ (1,775) $19,318
======= ======= ======== =======
Operating income $ 151 $ 926 $ (25) $ 1,052
======= ======= ========
Interest expense (275)
-------
Income before income taxes $ 777
=======
-7-
(Dollars in Thousands) EMEA/ Elimi- Consoli-
Americas Asia nations dated
-------- ------- ------- -------
SIX MONTHS ENDED June 29, 2002:
Revenues-
Sales to unaffiliated customers $ 14,540 $19,115 $ -- $33,655
Sales to affiliates 1,912 798 (2,710) --
-------- ------- ------- -------
Total sales $ 16,452 $19,913 $(2,710) $33,655
======== ======= ======= =======
Operating income $ 1,275 $ 1,210 $ -- $ 2,485
======== ======= =======
Interest expense (302)
-------
Income before income taxes $ 2,183
=======
(Dollars in Thousands) EMEA/ Elimi- Consoli-
Americas Asia nations dated
-------- ------- ------- -------
SIX MONTHS ENDED June 30, 2001:
Revenues-
Sales to unaffiliated customers $ 16,492 $24,384 $ -- $40,876
Sales to affiliates 2,548 1,088 (3,636) --
-------- ------- ------- -------
Total sales $ 19,040 $25,472 $(3,636) $40,876
======== ======= ======= =======
Operating income $ 1,219 $ 1,513 $ (25) $ 2,707
======== ======= =======
Interest expense (586)
-------
Income before income taxes $ 2,121
=======
7. Goodwill
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets," on December 30, 2001. As required by
SFAS 142, the Company has completed the transitional impairment test on
goodwill, which resulted in no impairment charge.
The Company has reassessed the balance sheet classification, useful lives and
residual values of all acquired intangible assets. No adjustments or
reclassifications were required by this reassessment, and only goodwill was
determined to have an indefinite life. Goodwill amortization in fiscal 2001 was
$345 thousand on an after-tax basis, or $0.14 per share. Goodwill amortization
for the three months and six months ended June 30, 2001 was $123 thousand and
$255 thousand, respectively, on an after-tax basis, or $0.05 per share and $0.10
per share, respectively. Based upon these amounts, the as adjusted net income
and diluted earnings per share for the three months and six months ended June
30, 2001 was $0.733 million and $0.30 and $1.840 million and $0.74,
respectively.
-8-
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 2002, K-Tron reported
net income of $ 0.814 million and $1.565 million, respectively, compared to
$0.610 million and $1.585 million for the same periods in 2001. On July 31,
2001, we sold our Hasler heavy feeder business ("Hasler"), and on November 30,
2001 we acquired Pneumatic Conveying Systems Limited ("PCS") in the United
Kingdom, which transactions are more fully discussed in our Annual Report on
Form 10-K for the year ended December 29, 2001.
We are an international company and derived approximately 57% and 60%
of our revenues for the first six months of 2002 and 2001, respectively, from
products manufactured in, and services performed from, our facilities located
outside the United States, primarily in Europe. Since we operate globally, we
are sensitive to changes in foreign currency exchange rates ("foreign exchange
rates"), which can affect both the translation of financial statement items of
foreign subsidiaries into U.S. dollars as well as transactions where the
revenues and related expenses may initially be accounted for in different
currencies, such as sales made from our Swiss manufacturing facility in
currencies other than the Swiss franc.
The following table sets forth our results of operations expressed as a
percentage of total revenues for the periods indicated:
Three Months Ended Six Months Ended
---------------------- ----------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 57.4 60.2 57.4 59.4
----- ----- ----- -----
Gross profit 42.6 39.8 42.6 40.6
Selling, general & administrative 31.4 30.4 31.4 30.3
Research & development 3.5 4.0 3.8 3.7
----- ----- ----- -----
Operating income 7.7 5.4 7.4 6.6
Interest 0.7 1.4 0.9 1.4
----- ----- ----- -----
Income before income taxes 7.0% 4.0% 6.5 5.2%
===== ===== ===== =====
The following table summarizes our order backlog as of the dates
indicated, all adjusted to June 29, 2002 foreign exchange rates:
(Dollars in Thousands) June 29, 2002 December 29, 2001 June 30, 2001
------------- ----------------- -------------
Order backlog including Hasler business $10,841 $12,965 $16,619
Order backlog excluding Hasler
business (sold July 31, 2001) $10,841 $12,965 $13,486
-9-
As previously noted, more than half of our revenues are normally
derived from activities in foreign jurisdictions. Consequently, our results can
be significantly affected by changes in foreign exchange rates, particularly in
U.S. dollar exchange rates with respect to the Swiss franc, euro and British
pound sterling and, to a lesser degree, the Singapore dollar and other
currencies. When the U.S. dollar strengthens against these currencies, the U.S.
dollar value of non-U.S. dollar-based sales decreases. When the U.S. dollar
weakens against these currencies, the U.S. dollar value of non-U.S. dollar-based
sales increases. Correspondingly, the U.S. dollar value of non-U.S. dollar-based
costs increases when the U.S. dollar weakens and decreases when the U.S. dollar
strengthens. Overall, since we typically receive a majority of our revenues in
currencies other than the U.S. dollar, we generally benefit from a weaker dollar
and are adversely affected by a stronger dollar relative to major currencies
worldwide, especially those identified above. In particular, a general weakening
of the U.S. dollar against other currencies may positively affect our total
revenues, gross profit and operating income as expressed in U.S. dollars,
whereas a general strengthening of the U.S. dollar against such currencies would
have the opposite effect.
In addition, our revenues and income with respect to particular
transactions may be affected by changes in foreign exchange rates where sales
are made in currencies other than the functional currency of the facility
manufacturing the product subject to the sale, including in particular the U.S.
dollar/Swiss franc (for inter-company transactions) and the Swiss franc/euro and
Swiss franc/British pound sterling (for sales from the Company"s Swiss
manufacturing facility) exchange rates.
For the second quarter and first six months of 2002 and 2001, the
changes in certain key exchange rates were as follows:
Three Months Ended Six Months Ended
-------------------------- ---------------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
----- ----- ----- -----
Average U.S. dollar equivalent of
one Swiss franc 0.631 0.570 0.613 0.586
% change vs. prior year +10.7% +4.6%
Average U.S. dollar equivalent of
one euro 0.924 0.872 0.900 0.898
% change vs. prior year +6.0% +0.2%
Average U.S. dollar equivalent of
one British pound sterling 1.465 1.423 1.446 1.440
% change vs. prior year +3.0% +0.4%
Average Swiss franc equivalent of
one euro 1.464 1.530 1.468 1.532
% change vs. prior year -4.3% -4.2%
Average Swiss franc equivalent of
one British pound sterling 2.322 2.494 2.360 2.457
% change vs. prior year -6.9% -3.9%
-10-
Total revenues decreased by $2.4 million or 12.6% in the second quarter
of 2002 and by $7.2 million or 17.7% in the first six months of 2002 compared to
the same periods in 2001. Without Hasler, revenues decreased by $0.8 million or
4.6% in the second quarter of 2002 and by $3.7 million or 9.8% in the first six
months of 2002 compared to the same periods in 2001, driven by declines in
EMEA/Asia and to a lesser extent in the Americas, due to a weaker global economy
with reduced capital spending in the process industries we serve, partially
offset by two full quarters of revenues from the November 30, 2001 PCS
acquisition and the positive effect of a weaker U.S. dollar when translating the
results of foreign operations. If the average foreign exchange rates for the
second quarter and first six months of 2001 were applied to the same periods of
2002, total revenues for 2002 (excluding Hasler) would have decreased by $1.7
million or 9.4% for the second quarter and by $4.4 million or 11.8% for the
first six months versus the same periods in 2001.
Gross profit as a percent of revenues increased to 42.6% for the second
quarter and first six months of 2002 compared to 39.8% and 40.6% for the same
periods in 2001. The improvement in gross profit was primarily due to the change
in sales mix as a result of the July 31, 2001 sale of the Hasler business and a
reduction in fixed costs, including the elimination of goodwill expense as the
Company adopted SFAS No. 142 on December 30, 2001. Goodwill amortization for the
three months and six months ended June 30, 2001 was $123 thousand and $255
thousand, respectively.
Selling, general and administrative (SG&A) expense decreased by $0.6
million or 9.5% (same SG&A level without Hasler) for the second quarter of 2002
and decreased by $1.8 million or 14.6% ($0.6 million or 5.1% without Hasler) for
the first six months of 2002 compared to the same periods in 2001. The decrease
in 2002 SG&A was primarily due to lower commissions on the reduced revenues,
fewer employees and the elimination of Hasler SG&A, offset in part by higher
foreign exchange translation rates (weaker U.S. dollar). As a percent of total
revenues, SG&A for the second quarter and first six months of 2002 was 31.4%
compared to 30.4% and 30.3% for the same periods in 2001.
Research and development (R&D) expenditures decreased by $186 thousand
or 4.1% for the second quarter of 2002 and by $229 thousand or 15.1% for the
first six months of 2002 compared to the same periods in 2001. R&D expenses
decreased due to lower staff costs, partially offset by an increase in tooling
costs and by higher foreign exchange translation rates (weaker U.S. dollar). R&D
expense as a percent of total revenues was 3.5% for the second quarter of 2002
and 3.8% for the first six months of 2002 compared to 4.0% and 3.7% for the same
periods in 2001.
Interest expense decreased by $146 thousand or 53.1% for the second
quarter of 2002 and by $284 thousand or 48.5% for the first six months of 2002
compared to the same periods in 2001, primarily due to lower interest rates and
debt reductions.
-11-
Income before income taxes was $1.178 million for the second quarter of
2002 and $2.183 million for the first six months of 2002 compared to $0.777
million and $2.121 million for the same periods in 2001. The changes during the
periods were the result of the items discussed above, with the second quarter
and first six months of 2002 income before income taxes improving versus a year
ago, despite lower revenues, primarily as a results of the Hasler sale and the
globalization and cost reduction initiatives which we implemented during 2001.
The effective tax rates for the second quarter and first six months of
2002 were 30.9% and 28.3% compared to 21.5% and 25.3% for the same periods in
2001. The higher effective tax rates in 2002 were primarily due to a higher
proportion of total taxable income being in the United States. On July 1, 2002,
New Jersey approved legislation for corporation income tax reform. There were
several changes made to the law that will likely increase the Company's
effective tax rate in the third quarter of 2002.
The order backlog of non-Hasler customer orders decreased by 16.4% at
the end of the second quarter of 2002 compared to year-end 2001 and by 19.6%
compared to the end of the second quarter in 2001, in each case at constant
foreign exchange rates. The decrease as compared to the end of 2001 was
primarily the result of lower orders received at our facility in Switzerland in
the first half of 2002, while the decrease as compared to the second quarter of
2001 was the result of lower orders received at our facilities in both
Switzerland and the United States, and also from the fact that the second
quarter 2001 numbers did not include orders received by PCS which was acquired
on November 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
Our capitalization as of the end of the second quarter of 2002 and as
of the end of fiscal years 2001 and 2000 is set forth below:
June 29, Dec. 29, Dec. 30,
(Dollars in Thousands) 2002 2001 2000
------- ------- -------
Short-term debt, including current
portion of long-term debt $ 2,651 $ 2,186 $ 3,595
Long-term debt 11,371 12,499 12,390
------- ------- -------
Total debt 14,022 14,685 15,985
Shareholders' equity 25,222 21,561 21,311
------- ------- -------
Total debt and shareholders' equity $39,244 $36,246 $37,296
======= ======= =======
(total capitalization)
Percent total debt to total capitalization 36% 41% 43%
Percent long-term debt to equity 45% 58% 58%
Percent total debt to equity 56% 68% 75%
-12-
Total debt decreased by $0.663 million in the first six months of 2002,
or by $1.46 million when adjusted to a constant foreign exchange rate, with U.S.
debt decreasing by $1.46 million. At June 29, 2002, we had $5.0 million of
unused borrowing availability under our U.S. revolving credit agreement and $1.8
million of unused borrowing availability under our foreign loan agreements. In
July 2002 the $5.0 million U.S. revolving credit agreement was extended through
July 2004.
At June 29, 2002, working capital was $17.1 million compared to $15.6
million at December 29, 2001, and the ratio of current assets to current
liabilities at those dates was 2.11 and 2.18, respectively.
In the first six months of 2002 and 2001, we utilized internally
generated funds to meet our working capital needs.
Net cash provided by operating activities was $4.9 million in the first
six months of 2002 compared to $2.5 million in the same period of 2001. The
increase in operating cash flow during the first six months of 2002 compared to
the same period in 2001 was primarily due to a reduction in inventory and an
increase in accounts payable partially offset by an increase in prepaid
expenses, a smaller reduction in accounts receivable and lower amortization.
Net cash used in investing activities in the first six months of 2002
and 2001 was primarily for capital additions.
Cash used in financing activities in the first six months of 2002 was
primarily for debt reduction.
Of the total increase in shareholders' equity of $3.7 million in the
first six months of 2002, $2.1 million was attributable to changes in foreign
exchange rates, particularly the strengthening of the Swiss franc and euro
compared to the U.S. dollar.
-13-
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a safe harbor for forward-looking statements made by us or on our
behalf. We and our representatives may from time to time make written or oral
statements that are "forward-looking," including statements contained in this
report and other filings with the Securities and Exchange Commission, reports to
our shareholders and news releases. All statements that express expectations,
estimates, forecasts or projections are forward-looking statements within the
meaning of the Act. In addition, other written or oral statements which
constitute forward-looking statements may be made by us or on our behalf. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," "projects," "forecasts," "may," "should," variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions which are difficult to
predict. Therefore, actual outcomes and results may differ materially from what
is expressed or forecasted in or suggested by such forward-looking statements.
The forward-looking statements contained in this report include statements
regarding the effect of changes in foreign exchange rates on our business and
the effect of recent New Jersey tax legislation. We undertake no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
A wide range of factors could materially affect our future performance
and financial and competitive position, including the following: (i) increasing
price and product/service competition by domestic and foreign competitors,
including new entrants; (ii) the mix of products/services sold by us; (iii)
rapid technological changes and developments and our ability to continue to
introduce competitive new products on a timely and cost-effective basis; (iv)
changes in U.S. and global financial and currency markets, including significant
interest rate and foreign currency exchange rate fluctuations; (v) protection
and validity of patent and other intellectual property rights held by us and our
competitors; (vi) the cyclical nature of our business as a capital goods
supplier; (vii) possible future litigation and governmental proceedings; (viii)
the availability of financing and financial resources in the amounts, at the
times and on the terms required to support our future business, including
capacity expansions and possible acquisitions; (ix) the loss of key customers,
employees or suppliers; (x) the failure to carry out marketing and sales plans;
(xi) the failure to integrate acquired businesses without substantial costs,
delays or other operational or financial problems; (xii) economic, business and
regulatory conditions and changes which may affect the level of new investments
and purchases made by customers, including general economic and business
conditions that are less favorable than expected; (xiii) domestic and
international political and economic conditions; and (xiv) the outcome of any
legal proceeding in which we are involved.
This list of factors that may affect our future performance and
financial and competitive position and also the accuracy of forward-looking
statements is illustrative, but it is by no means exhaustive. Accordingly, all
forward-looking statements should be evaluated with the understanding of their
inherent uncertainty.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Shareholders of the Company was held on May 17,
2002.
(b) Not applicable
(c) Shareholders of the Company were asked to vote on a proposal to elect
one Class I director. The Board of Directors nominated Edward T. Hurd
as the Class I director. There were no other nominations. Mr. Hurd was
then elected, with the result of the vote taken at the Annual Meeting
being as follows:
Numbers of Votes
--------------------------
For Withheld
--------- --------
Edward T. Hurd 1,785,851 19,902
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 broker non-votes be recorded.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
On June 26, 2002, the Registrant filed a Current Report on Form 8-K
dated June 22, 2002, reporting in Item 4 that effective June 22, 2002
the Registrant had dismissed Arthur Andersen LLP as the Registrant's
independent public accountants and had appointed KPMG LLP as the
Registrant's independent public accountants for the fiscal year ending
December 28, 2002.
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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: August 12, 2002 By: /s/ Ronald R. Remick
--------------------
Ronald R. Remick
Senior Vice President & Chief
Financial Officer
(Duly authorized officer and principal
financial officer of the Registrant)
By: /s/ Alan R. Sukoneck
--------------------
Alan R. Sukoneck
Vice President, Chief Accounting
& Tax Officer
(Duly authorized officer and principal
accounting officer of the Registrant)
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