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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 [Fee Required] for the fiscal year ended December 30, 1995 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
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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 15, 1996, the aggregate market value of the Common Stock held by
non-affiliates of the registrant was $14,730,950. 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 beneficial owners of more than ten
percent of the Common Stock of the Company other than the Estate of Dr. Mario
Gallo.
As of March 15, 1996, there were 3,112,635 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 documents are incorporated herein by reference:
Annual Report to Shareholders for the fiscal year ended December 30,
1995.
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.
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PART I
Item 1. Business.
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 and
Switzerland, and its equipment is sold throughout the world.
K-Tron feeders control by weight or volume the rate at which
ingredients are fed into the manufacturing processes of numerous products,
primarily in the plastics, food, chemical, cement, glass and aluminum
industries. In addition, the Company designs, produces and sells electronic
assemblies and controls, and it provides customer and employee training through
its K-Tron Institute.
In June 1995, the Company sold its Colortronic GmbH subsidiary and
discontinued its other Colortronic business. The Colortronic brand of products
served plastics extrusion, blow molding and injection molding manufacturers
with gravimetric and volumetric feeders, blending equipment, pneumatic
conveyers, dryers and other related plastic auxiliary equipment. In the fourth
quarter of 1995, the Company sold its Hasler France and Brazilian businesses
(collectively with the Colortronic business, the "Discontinued Businesses").
See Note 12 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
two brand names: K-Tron Soder (feeders for other than heavy industries) and
Hasler (feeders for heavy industries). The Company sells these brands on both
an equipment and total system 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
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flow 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.
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. K-Tron Soder feeders, including loss-in-weight feeders,
weigh belt feeders, volumetric feeders and related controls, are assembled at
Company facilities in Switzerland and the United States in a complete range of
feeding equipment types and sizes for industries other than heavy industries.
The plastics compounding, food, chemical, detergent and pharmaceutical
industries are among those served by K-Tron Soder feeders.
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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 requiring high rates of material flow in rugged industrial
environments such as cement mills, mines and quarries and in the fertilizer,
aluminum, coal, glass and steel industries. Hasler feeders are assembled at
Company facilities in Switzerland and the United States.
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 electronics 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.
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 1995, and its five largest customers accounted for
approximately 11.3% of total revenues in that year (without the Discontinued
Businesses).
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.
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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 United States patents have expired and others expire at various
dates through 2012. 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 two product brands.
R&D focuses on new products as well as on refinements to existing
products. Current development efforts are aimed at shortening the development
cycle of new products, recycling existing products by using lower cost designs
and becoming more sensitive to the most optimal price/performance relationship
for both new and existing products.
A centralized electronic R&D department also facilitates the
development of common or compatible controls. The Company now utilizes a
common weighing technology for both of its brands.
The Company's research and development expenses were $3,135,000,
$4,439,000 and $4,938,000 in fiscal years 1995, 1994 and 1993, 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
innovative 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 with 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 or divisions of large
multinationals with a broad line of products to regional organizations which
often specialize in a limited range of products.
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Backlog
At the end of fiscal year 1995, the Company's backlog of unfilled
orders was approximately $25,488,000, compared to a backlog of approximately
$19,981,000 a year earlier without the Discontinued Businesses, an increase of
approximately 28%. Using the December 30, 1995 exchange rate, last year's
backlog without the Discontinued Businesses was approximately $21,027,000, and
the increase approximately 21%. The backlog of orders increased in 1995
primarily due to strong bookings in the United States and the effect of a
weaker United States dollar relative to the Swiss franc and the Deutsche mark.
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 1995 will be shipped prior to April 30, 1996.
Employees
At the end of fiscal 1995, the Company had 466 employees, of which 286
were located in Europe, 169 in the United States and 11 in Singapore.
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, which
houses its U.S. subsidiary's former sheet metal shop, is leased to a third
party. The Company also has leased facilities in Blackwood, New Jersey where
it assembles electronic circuit boards.
In Niederlenz, Switzerland, the Company owns a 60,000 square foot
building where it has manufacturing facilities and a tech center for product
demonstration, 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 a third
party. The Company also has 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.
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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 1995 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.
Item 4. Submission of Matters to a Vote of Security Holders.
On October 6, 1995, the Company held its 1995 annual meeting of
shareholders. The shareholders reelected one nominee, Mr. Johannes Wirth,
from the existing Board of Directors to a four-year term expiring in 1999. No
other matters were considered at the meeting. The number of votes cast for and
withheld from the election of Mr. Wirth is set forth below. There were no
votes against, abstentions or broker non-votes in the election of the director.
Election of Director: For Withheld
--- --------
Johannes Wirth 2,547,378 20,053
Executive Officers of the Registrant
The current executive officers of the Company are as follows:
Name Age Position
---- --- --------
Leo C. Beebe 78 Chief Executive Officer and
Chairman of the Board of
Directors
Robert L. Weinberg 59 Senior Executive Vice President,
Chief Financial Officer and
Treasurer
Leo C. Beebe has been a director since June 1976 and Chairman of the
Board and of the Executive Committee since January 1985, and he was most
recently reelected as a
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director at the 1993 annual meeting of shareholders. Mr. Beebe has been Chief
Executive Officer of the Company since June 30, 1995 and also served as Chief
Executive Officer from July 1985 until August 1992. He was Dean of the School
of Business Administration of Glassboro State College, Glassboro, New Jersey
from July 1977 to July 1985 and a professor of Marketing at Glassboro State
College from 1972 to July 1985. Prior to that time, Mr. Beebe served at Ford
Motor Company for 27 years in various capacities in the United States and
foreign countries, including as General Marketing Manager of Ford's
Lincoln-Mercury Division, Vice President of Marketing and Planning and a
director of Ford Motor Company of Canada, and Executive Vice President and
General Manager of the Consumer Products Division and a director of Philco Ford
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 various executive positions with
marketing and strategic planning responsibilities at RCA Corporation and Philco
Ford Corporation from 1962 until 1986.
The executive officers are elected or appointed by the Board of
Directors to serve until the appointment or election and qualification of their
successors or their earlier death, resignation or removal.
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 1994 and 1995 as quoted
on The Nasdaq Stock Market.
Fiscal Year 1994 High Low
---------------- ---- ---
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.25 $ 8.25
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 12.00 8.25
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.50 9.75
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 12.25 10.50
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Fiscal Year 1995 High Low
---------------- ---- ---
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.50 $ 5.625
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 7.00 4.50
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.25 5.25
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 7.25 5.375
On March 15, 1996, the closing sale price for a share of Common Stock
as reported by The Nasdaq Stock Market was $6.25.
The number of record holders of the Company's Common Stock as of March
15, 1996 was 383.
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. At the current time, the Company's U.S. loan agreement prohibits
payment of dividends by the Company.
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 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 each of the three fiscal years in the
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.
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FISCAL YEAR ENDED
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PRO FORMA DEC. 30 DEC. 31 JAN. 1 JAN. 2 JAN. 4
1995(1) 1995 1994 1994 1993(2) 1992(3)
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FINANCIAL SUMMARY($000):
Revenues $89,640 $110,394 $104,772 $107,966 $118,859 $81,520
Income (loss) before loss on disposition
of businesses, cumulative effect of
accounting changes 2,717 834 (6,200) (1,784) 6,170 5,250
and taxes
Income (loss) on disposition of businesses
and cumulative effect of accounting
changes (4) (11,278) (852) 854 --- ---
Net income (loss) 1,408 (9,294) (6,826) (1,065) 3,870 3,653
Total assets 69,296 109,950 101,296 114,891 71,022
Working capital 23,114 (549) 17,216 5,432 19,547
Additions to property, plant and equipment 370 2,467 3,062 5,901 1,278
Depreciation and amortization 4,844 6,314 6,562 5,991 3,519
PER SHARE ($):
Income (loss) before cumulative effect of
accounting changes $.45 $(3.00) $(2.22) $(0.62) $1.27 $1.23
Net earnings (loss) .45 (3.00) (2.22) (0.35) 1.27 1.23
Book value 3.03 6.00 8.08 8.71 8.24
CAPITALIZATION ($000):
Shareholders' equity $9,421 $18,521 $24,694 $26,424 $24,619
Long-term debt 35,004 27,413 38,571 29,566 21,399
Short-term debt (5) 2,133 32,512 14,565 27,109 5,513
RATIOS:
Return on average shareholders' equity (%) 10.1 N/A N/A N/A 15.1 15.9
Return on revenues (%) 1.6 N/A N/A N/A 3.3 4.5
Long-term debt to shareholders' equity (%) 371.6 148.0 156.2 111.9 87.0
Current assets to current liabilities 2.05 .99 1.53 1.10 1.96
Average inventory turnover 2.9 2.9 3.0 2.8 2.6
Average accounts receivable turnover 4.3 3.8 3.8 4.3 4.1
OTHER DATA:
Shares outstanding (000) (6) 3,113 3,088 3,056 3,035 2,986
Shareholders of record (7) 383 423 437 449 547
Number of employees 466 683 724 804 573
(1) Reflects pro forma adjustments for loss on disposition of businesses
described in (4) and the discontinuance of the Company's other
Colortronic brand business, all as more fully explained in Note 3 of
the Company's 1995 consolidated financial statements as if such
dispositions and discontinuances were consummated as of the
beginning of the 1995 fiscal year.
(2) The 1992 consolidated financial statements include the acquisition of
Colortronic GmbH and Colortronic, Inc. from April 30, 1992.
(3) 1991 was a 53-week year.
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(4) 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 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.
(5) Including current portion of long-term debt.
(6) Net of treasury stock of 1,063 shares.
(7) 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 1995, the Company reported a pre-tax loss of $10,444,000. The
principal components of this 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 transactions, and the discontinuance of the Company's other
Colortronic brand business, had occurred at the beginning of the 1995 fiscal
year, the Company had 1995 pre-tax income of $2,717,000 and net income of
$1,408,000.
As reported in Item 7 of the Company's annual report on Form 10-K for
the fiscal year ended December 31, 1994, and in subsequent Form 10-Q filings,
the Company and its U.S. manufacturing subsidiary are in default under several
financial covenants contained in their loan agreement with three U.S. banks.
These defaults are continuing and have not been waived. On April 28, 1995, the
Company and its several U.S. subsidiaries entered into a forbearance agreement
with the U.S. banks in which such banks agreed to forbear for a period of time
in the exercise of their rights and remedies under the loan documents. On June
22, 1995, this forbearance agreement was amended and extended through the
earlier of February 28, 1996 or the occurrence of a new event of default
thereunder. The forbearance agreement also modified the loan documents in
certain respects, including the granting of additional collateral. On February
28, 1996, this forbearance agreement was further amended and extended until
January 31, 1997. Certain terms of the current U.S. bank forbearance agreement
are described in more detail below under "Liquidity and Capital Resources." At
February 29, 1996, the principal amount outstanding under the Company's U.S.
loan agreement was $7,680,000.
On June 23, 1995, subsidiaries of K-Tron sold Colortronic and rights
to several related patents and patent applications to an investment group for
$9,000,000. As noted above, this divestiture generated a pre-tax loss of
$10,529,000, representing primarily a non-cash write-off of goodwill. As a
result of the sale of Colortronic, K-Tron's bank debt decreased by $24,200,000
as of July 1, 1995.
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The loss on the sale of Colortronic caused the equity of K-Tron's
principal Swiss subsidiary to fall below certain equity guarantees contained in
its loan agreements with several Swiss lenders, resulting in a default under
those loan agreements. In early 1996, an agreement was entered into among the
Company's Swiss subsidiary, several other K-Tron companies and the lenders to
the Swiss subsidiary under which such lenders have agreed to defer until March
31, 1997 the repayment of credit lines and the principal payments on fixed
loans that become due prior to that date. Certain other terms of that
agreement are described in more detail below under "Liquidity and Capital
Resources." At February 29, 1996, the principal amount outstanding under the
Swiss loan agreements was $27,364,000.
The Company is seeking alternative debt or equity financing and has
received written proposals from other financial institutions to replace its
U.S. bank debt. Due diligence has begun with two prospective new lenders, but
there can be no assurance that this will result in new U.S. borrowing
arrangements. The Company is also exploring ways to reduce its bank
indebtedness in Switzerland.
The Company's results have improved significantly since the sale of
Colortronic, and it reported net income of $375,000 and $561,000 for the third
and fourth quarters of 1995, respectively. Cash flow from operations has also
improved, enabling the Company to reduce bank debt in the second half of 1995
by $5,368,000.
While the Company has no borrowing availability under its U.S. loan
agreement and only very modest availability under certain of its Swiss loan
agreements, management believes that cash flow will be sufficient in 1996 to
sustain the business and further that the Company and its subsidiaries will be
able to comply with all of the covenants and payment provisions contained in
the both the U.S. and Swiss forbearance agreements. Management further
believes that through the successful completion of new financings in 1996 and
operating performance, the Company will be able to either refinance or extend
the maturities of the two forbearance agreements before they expire in 1997,
but there can be no assurance that this will happen.
K-Tron is an international company with more than 70 percent of its
business arising from sources 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 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
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France businesses noted above, and the discontinuance of the Company's other
Colortronic brand businesses, as if the dispositions and discontinuance
(previously defined as "Discontinued Businesses") were consummated as of the
beginning of the 1995 fiscal year:
Fiscal Year
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Pro Forma
---------
1995 1995 1994 1993
---- ---- ---- ----
Total Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Revenues 58.9 61.3 64.1 61.9
------ ------ ------ ------
Gross Profit 41.1 38.7 35.9 38.1
Selling, General and
Administrative 32.1 31.4 33.3 31.3
Research and Development 2.8 2.8 4.2 4.6
Loss on disposition of
businesses -- 10.2 0.8 --
Interest 3.2 3.7 4.3 3.9
------ ------ ------ ------
Income (loss) before income taxes and
accounting changes 3.0% (9.4%) (6.7%) (1.7%)
===== ======= ======= =======
Year-end backlog after excluding the
Discontinued Businesses (at a
constant foreign exchange rate in
thousands) $25,500 $25,500 $21,000 $15,500
======= ======= ======= =======
Translation of the Company's foreign revenues and earnings into U.S.
dollars is affected by changes in foreign exchange rates, particularly with
respect to the Swiss franc and the Deutsche mark. Revenues and earnings in
1995 were affected by changes in the average U.S. dollar/Swiss franc exchange
rate, which increased 16% to $.848 per Swiss franc in 1995 from $.730 in 1994
after an 8% increase from $.676 in 1993, and by a change in the U.S.
dollar/Deutsche mark exchange rate, which increased 14% to $.699 per Deutsche
mark in 1995 from $.615 in 1994 after a 2% increase from $.604 in 1993.
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Total revenues increased by $5,600,000 or 5.4% (while decreasing by
4.6% when using a constant foreign exchange rate) in 1995 as compared to 1994.
Total revenues increased in 1995 compared to 1994 due to the strong European
and United States backlog at the end of 1994, continued strong 1995 order
in-flow and the effect of a weaker U.S. dollar relative to the Swiss franc and
Deutsche mark, offset in part by the effect on revenues in the second half of
1995 of the June 1995 sale of Colortronic. Total revenues in 1995 and 1994
without the Discontinued Businesses would have been $89,600,000 and
$69,500,000, respectively, an increase of $20,100,000 or 28.9% (a $13,000,000
increase or 16.9% when using a constant foreign exchange rate).
Total revenues decreased $3,200,000 or 3% (8% when using a constant
foreign exchange rate) in 1994 as compared to 1993. Total revenues decreased
in 1994 compared to 1993 primarily due to the continuing effects of the
European recession, which lasted until 1994, offset in part by the decline in
the U.S. dollar which increased the translation of foreign revenues.
Gross margin as a percent of revenues improved to 38.7% (41.1% after
excluding the Discontinued Businesses) in 1995 as compared to 35.9% in 1994 and
38.1% in 1993. The improvement in gross margin in 1995 was due to volume and
price increases and cost reductions in the United States as well as the sale
and discontinuance of the Colortronic business which had low margins, offset in
part by an increase in warranty costs and the inability to pass on increased
costs caused by the appreciation of the Swiss franc to customers in certain
European countries. In addition, the 1995 margins were negatively affected by
heavily discounted orders booked in 1994 but not shipped until 1995. The
decline in 1994 was primarily attributable to the significant fourth quarter
loss which was due to strong competitive pressure which reduced selling prices,
higher-than-forecasted production and materials costs and the delayed
introduction of several important new products. In addition, increased
material costs due to the appreciation of the Swiss franc versus other European
currencies also substantially lowered the profit margins of products
manufactured in Switzerland to fill orders sold in other currencies. Partially
offsetting the impact of these items was the effect of actions taken in 1993 to
reduce annual fixed costs by more than 15%, including reducing the European
work force by more than 13%, divesting the Company's Spanish subsidiary and
consolidating or combining operations in France, Germany, Switzerland,
Singapore and the United States.
Selling, general and administrative (SG&A) expense decreased by
$300,000 or 0.1% in 1995 as compared to 1994 after a $1,100,000 or 3% increase
in 1994 as compared to 1993. The marginal reduction in SG&A expenditures was
due to the business dispositions that took place in 1995, offset in part by
higher foreign exchange translation rates, higher commissions and selling
expenses related to the increased sales volume and costs incurred related to
the U.S. and Swiss forbearance agreements. As a percent of sales, SG&A was
31.4% in 1995 (32.1% after excluding the Discontinued Businesses) compared to
33.3% in 1994 and 31.3% in 1993. The 1994 increase over 1993 was primarily due
to higher than anticipated commission expense in the United States.
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Research and development (R&D) expenditures in 1995 decreased
$1,300,000 or 29% from 1994 levels due to the elimination of Colortronic
expenses in the second half of 1995, offset in part by using for other purposes
certain resources previously allocated to Colortronic and higher foreign
exchange translation rates. R&D expenditures in 1994 decreased $500,000 from
1993 levels due to synergies realized from the integration of the Company's R&D
efforts, offset in part by the higher foreign exchange translation rate. R&D
expense as a percent of revenues was 2.8% in 1995 (2.8% excluding Colortronic
for 1995), 4.2% in 1994 and 4.6% in 1993.
The loss on the disposition of businesses includes 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. The $852,000 loss incurred in 1994 related to reserves established
in connection with the anticipated sales of the Brazilian and Hasler France
operations. The 1994 losses were previously included in SG&A.
Interest expense in 1995 decreased by $300,000 from 1994 due to lower
debt levels following the sale of Colortronic offset in part by increased
interest rates in the United States and higher foreign exchange translation
rates. Interest expense increased in 1994 as compared to 1993 primarily due to
increased European borrowings and higher interest rates in the United States
offset in part by reduced interest rates in Europe. Interest expense as a
percent of sales was 3.7% in 1995 (3.2% after excluding the Discontinued
Businesses), 4.3% in 1994 and 3.9% in 1993.
The loss before income taxes and accounting changes was $10,444,000,
$7,052,000 and $1,784,000 in 1995, 1994 and 1993, respectively. The increased
losses during the periods was the result of the items discussed above.
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's income tax benefit in 1994 was
primarily due to the results of the United States operations as no tax benefit
was recognized for the European losses, since realization was not assured. The
Company has available New Jersey state and foreign tax loss carry forwards that
total $5,400,000 and $20,800,000, respectively, which have estimated future
benefits of $300,000 and $5,200,000, respectively.
The Company was required to adopt Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes," which was effective
January 3, 1993 and was recorded in the three months ended April 3, 1993. The
cumulative effect of this adoption was to increase 1993 income by $350,000
($0.11 per share). (See Note 2 Summary of Significant Accounting Policies --
Income Taxes, to the accompanying consolidated financial statements.)
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Effective for the fiscal year beginning January 3, 1993, the Company
also modified its method of accounting for certain costs of inventory by its
European subsidiaries by capitalizing certain inventory procurement and other
indirect production costs. The cumulative effect of this change increased
income by $504,000 ($0.16 per share) but also increased 1993 cost of sales
which resulted in a reduction in income of $113,000 ($.04 per share). This
change, which was reflected in adjusted 1993 first quarter results, was made so
that the Company would have a uniform method of accounting for material
handling costs in valuing its inventory for all of its operations which would
result in a better matching of costs with related revenues. (See Note 2
Summary of Significant Accounting Policies -- Inventory, to the accompanying
consolidated financial statements.)
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 (excluding the Discontinued Businesses and at a
constant foreign exchange rate) increased in 1995 primarily due to strong
bookings in the United States. The backlog increased in 1994 primarily due to
the beginning of the European economic recovery and strong bookings in the
United States.
Liquidity and Capital Resources
In the fourth quarter of 1994, the Company reported a net loss of
$6,261,000. As a result of this loss, at December 31, 1994 the Company was in
default under several financial covenants contained in its U.S. loan agreement
with three banks. As noted earlier under "Overview," these defaults are
continuing and have not been waived; however, the Company and its U.S.
subsidiaries are parties to a forbearance agreement with the U.S. banks which
continues until January 31, 1997, subject to certain financial covenants,
restrictions on intercompany transactions with K-Tron's foreign subsidiaries
and an obligation to pursue a refinancing of the U.S. bank debt, including a
requirement, which has been satisfied, that on or before March 15, 1996, the
Company shall enter into an agreement with a financial institution pursuant to
which such entity shall commence due diligence to determine whether to issue a
commitment for a refinancing of the U.S. bank debt. The U.S. forbearance
agreement calls for monthly payments of principal, as follows: $100,000 in
each of March, April, May, June and July 1996; $225,000 in each of August,
September and October 1996; and $275,000 in each of November and December 1996
and January 1997. The balance of the U.S. bank debt is due on January 31,
1997. In addition, if the Company and its U.S. subsidiaries have cash flow
during this period which constitutes excess cash flow as defined in the
forbearance agreement, then the U.S. banks are also entitled to receive a
substantial portion of this excess cash flow. Interest is payable monthly at
prime plus 1.5% through February 29, 1996; prime plus 1.75% from March 1
through June 14, 1996; prime plus 2.5% from June 15 through July 14, 1996;
prime plus 3% from July 15 through October 14, 1996; and prime plus 3.5% from
October 15, 1996 through January 31, 1997. At February 29, 1996, the principal
amount outstanding under the Company's U.S. loan agreement was $7,680,000.
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As a result of the second quarter loss of $10,529,000 recorded in
connection with the sale of Colortronic and certain related assets, the equity
of the Company's principal Swiss subsidiary fell below certain equity
guarantees contained in its loan agreements with several Swiss lenders,
resulting in a default under those loan agreements. In early 1996, a
forbearance agreement was entered into among the Company's Swiss subsidiary,
several other K-Tron companies and the lenders to the Swiss subsidiary under
which such lenders have agreed to defer until March 31, 1997 the repayment of
credit lines and the principal payments on fixed loans that become due prior to
that date. As part of that agreement, the board of directors of the Swiss
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 have 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. While the Company expects to be able to
operate within the constraints of this forbearance agreement, under certain
circumstances they might make it more difficult for the Company to operate in a
unified manner throughout the world. At February 29, 1996, the principal
amount outstanding under the Swiss loan agreements was $27,364,000.
The Company is seeking alternative debt or equity financing and has
received written proposals from other financial institutions to replace its
U.S. bank debt. Due diligence has begun with two prospective new lenders, but
there can be no assurance that this will result in new U.S. borrowing
arrangements. The Company is also exploring ways to reduce its bank
indebtedness in Switzerland.
While the Company has no borrowing availability under its U.S. loan
agreement and only very modest availability under certain of its Swiss loan
agreements, management believes that cash flow will be sufficient in 1996 to
sustain the business and further that the Company and its subsidiaries will be
able to comply with all of the covenants and payment provisions contained in
the both the U.S. and Swiss forbearance agreements. Management further
believes that through the successful completion of new financings in 1996 and
operating performance, the Company will be able to refinance or extend the
maturities of the two forbearance agreements before they expire in 1997, but
there can be no assurance that this will happen.
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The Company's capitalization as of the end of fiscal years 1995, 1994
and 1993 is set forth below:
($'s in thousands)
1995 1994 1993
- -----------------------------------------------------------------------------------------------
Short-term debt including current
portion of long-term debt $ 2,133 $32,512 $14,565
Long-term debt 35,004 27,413 38,571
------- ------- -------
Total debt 37,137 59,925 53,136
Shareholders' equity 9,421 18,521 24,694
----- ------- -------
Total debt and shareholders' equity $46,558 $78,446 $77,830
======= ======= =======
Percent debt to total capitalization 80% 76% 68%
Percent long-term debt to equity 372% 148% 156%
Total debt decreased in 1995 by $22,788,000, of which $22,928,000
(from the beginning of the year) was due to the sale of Colortronic and
$4,359,000 was from cash provided by operations, offset by a $4,499,000
increase due to the effect of foreign exchange translation. Total debt without
the effect of the foreign exchange translation decreased by $27,287,000. Total
debt increased in 1994 by $6,789,000, of which $5,016,000 was due to the effect
of foreign exchange translation. Total debt without the effect of the foreign
exchange translation increased in 1994 by $1,773,000. The increase, primarily
in Europe, supported 1994 working capital needs.
The decrease in short-term debt of $30,379,000 in 1995 is primarily
due to the reclassification of the U.S. and Swiss bank debt to long-term as a
result of the maturity in the first quarter of 1997 of the debt in accordance
with the forbearance agreements discussed above.
At the end of 1995 and 1994, working capital was $23,114,000 and
($549,000), respectively, and the ratio of current assets to current
liabilities was 2.05 and .99, respectively. Working capital increased in 1995
primarily due to the reclassification of short-term debt to long-term debt as
discussed above.
In 1995, the Company utilized internally generated funds to meet its
working capital needs. In 1994, the Company met its working capital needs by
utilizing short and long-term borrowings as well as by increasing the aging of
accounts payable.
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Net cash provided by operating activities was $6,111,000 in 1995,
$82,000 in 1994, and $3,501,000 in 1993. The increase in operating cash flow
was primarily the result of operating profits generated in the second half of
1995 and reduction of accounts receivable and inventory levels, offset in part
by a reduction in accounts payable and accrued expenses. The significant loss
in 1995 was offset by the noncash loss on the sale of the Discontinued
Businesses.
Excluding the effect of foreign currency translation and the
disposition of businesses, receivables and inventory provided cash of
$3,155,000 while payables and accrued expenses decreased $2,121,000 during
1995. Improved asset management enabled the Company to reduce accounts
receivable and inventory thereby allowing it to reduce accounts payable and
accrued expenses.
The average number of days to convert accounts receivable to cash was
84 days in 1995 compared to 95 days in each of 1994 and 1993. The average
number of days to convert inventory into accounts receivable was 126 days in
each of 1995 and 1994 and 122 days in 1993.
Net cash provided by (used in) investing activities was $8,943,000,
($2,578,000) and ($1,814,000) in 1995, 1994 and 1993, respectively. 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. Capital expenditures were $370,000, $2,467,000 and
$3,062,000 in 1995, 1994 and 1993, 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.
Proceeds from the sale of property were $1,329,000 in 1993.
Cash used in financing activities in 1995, which was primarily used
for the reductions of debt, was obtained from the proceeds from the disposition
of businesses discussed above as well as from the strong cash flow provided by
operations. Cash provided by or used in financing activities in 1994 and 1993
was primarily the result of changes required to support working capital needs.
Cash and short-term investments increased to $3,239,000 at the end of fiscal
1995 from $1,086,000 a year earlier.
Changes in foreign exchange rates, particularly with respect to the
Swiss franc and Deutsche mark, caused translation adjustment increases in
shareholders' equity of $78,000 in 1995 and $377,000 in 1994, following a
decrease of $872,000 in 1993.
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.
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Item 9. Changes 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 called for by Item 10 of Form
10-K will be set forth under the captions "Election of Directors" and "Other
Matters" 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 information concerning executive officers called for by Item 10 of
Form 10-K is set forth in Item 4 of this annual report on Form 10-K.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Item 13. Certain Relationships and Related Transactions.
The information called for by Items 11, 12 and 13 of Form 10-K will be
set forth under the captions "Executive Compensation", "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Relationships and
Related Transactions", 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.
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).
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(b) Reports on Form 8-K.
The Company did not file a report on Form 8-K during the
quarter ended December 30, 1995.
(c) Exhibits, Including Those Incorporated by Reference.
The following is a list of exhibits filed as part of this
annual report on Form 10-K. Where so indicated by footnote, 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.
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 (12) (Exhibit 2.1)
3.1 Restated Certificate of Incorporation (7) (Exhibit 3.1)
3.2 By-Laws, as amended (8) (Exhibit 3.2)
4.1 Form of Certificate for Shares of Common Stock (8) (Exhibit
4.1)
4.2 Rights Agreement dated as of October 3, 1991 with First
Interstate Bank of Arizona, N.A., as Rights Agent (6)
(Exhibit 1)
10.1.1 Revolving Credit and Term Loan Agreement, dated June 28, 1993,
between K-Tron North America, Inc. and K-Tron International,
Inc. and First Fidelity Bank, N.A., New Jersey (9) (Exhibit
10.1.1)
10.1.2 First Amendment to Loan Agreement dated as of June 30, 1994,
to Revolving Credit and Term Loan Agreement dated as of June
28, 1993 by and among K-Tron International, Inc. and K-Tron
America, Inc., First Fidelity Bank, N.A., PNC Bank, National
Association and United Jersey Bank/South N.A. (10) (Exhibit
10.1)
10.1.3 Forbearance Agreement and Second Amendment to Revolving Credit
and Term Loan Agreement dated April 28, 1995 by and among
K-Tron International, Inc., K-Tron America, Inc., K-Tron
Technologies, Inc., K-Tron Investment Co., K-Tron Patent,
Inc., First Fidelity Bank, N.A., PNC Bank, N.A. and United
Jersey Bank (11) (Exhibit 10.1)
10.1.4 Forbearance Agreement and Third Amendment to Revolving Credit
and Term Loan Agreement dated June 22, 1995 by and among
K-Tron International, Inc., K-Tron America, Inc., K-Tron
Technologies, Inc., K-Tron Investment
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Co., K-Tron Patent, Inc., First Fidelity Bank, N.A., PNC Bank,
N.A. and United Jersey Bank/South, N.A. (12) (Exhibit 10.1)
10.1.5 Forbearance Agreement and Fourth Amendment to Revolving Credit
and Term Loan Agreement dated February 28, 1996 by and among
K-Tron International, Inc., K-Tron America, Inc., K-Tron
Technologies, Inc., K-Tron Investment Co., K-Tron Patent,
Inc., First Union National Bank, PNC Bank, N.A. and United
Jersey Bank*
10.1.6 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.*
10.2.1 1986 Stock Option Plan, as amended and restated (7) (Exhibit
10.2.1)**
10.2.2 1988 Stock Option Plan for Non-Employee Directors (2) (Exhibit
10.2.4)**
10.2.3 K-Tron International, Inc. 1996 Equity Compensation Plan* **
10.2.4 K-Tron International, Inc. Employee Stock Purchase Plan, as
amended and restated* **
10.2.5 K-Tron International, Inc. Profit-Sharing and Thrift Plan, as
amended and restated (3) (Exhibit 10.2.5)**
10.2.6 Amendment No. 1992-1 to K-Tron International, Inc.
Profit-Sharing and Thrift Plan (7) (Exhibit 10.2.6)**
10.2.7 K-Tron International, Inc. Supplemental Executive Retirement
Plan (7) (Exhibit 10.2.7)**
10.2.8 Employment Agreement with Ronald G. Larson, dated as of
January 1, 1992, and Schedule 10.2.13 listing other employment
agreements which are identical in all material respects except
for the employee and the amount of salary to be paid (7)
(Exhibit 10.2.13)**
10.2.9 First Amendment to Employment Agreement with Ronald G. Larson,
dated as of February 11, 1992, and Schedule 10.2.14 listing
other first amendments to employment agreements which are
identical in all material respects except for the employee (7)
(Exhibit 10.2.14)**
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24
10.2.10 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 (1)
(Exhibit 10.2.9)**
10.2.11 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 10.2.14 except for the director or officer who is a
party thereto (2) (Exhibit 10.2.11)**
10.2.12 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 (9)
(Exhibit 10.2.16)**
10.3.1 Leasing Agreement, dated October 30, 1990, between CS
Immobilien Leasing AG, Zurich and Hasler Freres SA, with
limited guaranty of K-Tron Soder AG (4) (Exhibit 10.1(b))
10.3.2 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 (5) (Exhibit 10.3.3)
11.1 Computation of (Loss) Earnings per Common and Common
Equivalent Share*
21.1 Subsidiaries*
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Deloitte & Touche LLP*
24.1 Power of Attorney (Included on Signature Page)
- --------------------
* Filed herewith
** Management contract or compensatory plan or arrangement required to be
filed or incorporated as an exhibit
(1) Filed as an exhibit to annual report on Form 10-K for the year ended
January 2, 1988 File No. 0-9576 and incorporated herein by reference.
(2) Filed as an exhibit to annual report on Form 10-K for the year ended
December 31, 1988 File No. 0-9576 and incorporated herein by
reference.
-24-
25
(3) Filed as an exhibit to annual report on Form 10-K for the year ended
December 30, 1989 File No. 0-9576 and incorporated herein by
reference.
(4) Filed as an exhibit to report on Form 8-K dated October 30, 1990 File
No. 0-9576 and incorporated herein by reference.
(5) Filed as an exhibit to annual report on Form 10-K for the year ended
December 29, 1990 File No. 0-9576 and incorporated herein by
reference.
(6) Filed as an exhibit to report on Form 8-K dated October 3, 1991 File
No. 0-9576 and incorporated herein by reference.
(7) Filed as an exhibit to annual report on Form 10-K for the year ended
January 4, 1992 File No. 0-9576 and incorporated herein by reference.
(8) Filed as an exhibit to annual report on Form 10-K for the year ended
January 2, 1993 File No. 0-9576 and incorporated herein by reference.
(9) Filed as an exhibit to annual report on Form 10-K for the year ended
January 1, 1994 File No. 0-9576 and incorporated herein by reference.
(10) Filed as an exhibit to quarterly report on Form 10-Q for the fiscal
quarter ended October 1, 1994 File No. 0-9576 and incorporated herein
by reference.
(11) Filed as an exhibit to quarterly report on Form 10-Q for the fiscal
quarter ended April 1, 1995 File No. 0-9576 and incorporated herein by
reference.
(12) Filed as an exhibit to report on Form 8-K dated June 23, 1995 File No.
0-9576 and incorporated herein by reference.
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.
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26
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 28, 1996 By /s/ Leo C. Beebe
--------------------------------
Leo C. Beebe
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 Leo C.
Beebe, 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/ Leo C. Beebe March 28, 1996 Chief Executive Officer (principal
--------------------------------- executive officer) and Chairman of the
Leo C. Beebe Board of Directors
/s/ Robert L. Weinberg March 28, 1996 Senior Executive Vice President, Chief
--------------------------------- Financial Officer and Treasurer
Robert L. Weinberg (principal financial officer)
/s/ Alan R. Sukoneck March 28, 1996 Vice President and Controller
--------------------------------- (principal accounting officer)
Alan R. Sukoneck
/s/ Edward B.Cloues, II March 28, 1996 Director
---------------------------------
Edward B. Cloues, II
27
/s/ Norman Cohen March 28, 1996 Director
---------------------------------
Norman Cohen
/s/ Richard J. Pinola March 28, 1996 Director
-----------------------------------
Richard J. Pinola
/s/ Hans-Jurg Schurmann March 28, 1996 Director
--------------------------------
Hans-Jurg Schurmann
/s/ Jean Head Sisco March 28, 1996 Director
-----------------------------------
Jean Head Sisco
/s/ Johannes Wirth March 28, 1996 Director
-----------------------------------
Johannes Wirth
28
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
29
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - ARTHUR ANDERSEN LLP F-2
INDEPENDENT AUDITORS' REPORT - DELOITTE & TOUCHE LLP F-3
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES:
Consolidated Balance Sheets--December 30, 1995 and December 31, 1994 F-4
Consolidated Statements of Operations for the fiscal years ended
December 30, 1995, December 31, 1994 and January 1, 1994 F-6
Consolidated Statements of Changes in Shareholders' Equity for the
fiscal years ended December 30, 1995, December 31, 1994 and January 1, 1994 F-7
Consolidated Statements of Cash Flows for the fiscal years ended
December 30, 1995, December 31, 1994 and January 1, 1994 F-8
Notes to Consolidated Financial Statements F-10
Independent Auditors' Report on Schedules -- Deloitte & Touche LLP S-1
Schedule I--Condensed Financial Information of Registrant S-2
Schedule II--Valuation Reserves S-6
F-1
30
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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 December
30, 1995 and December 31, 1994, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for the years then
ended. 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 December 30, 1995 and December 31,
1994, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Our audit was 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 December 30, 1995 and December 31, 1994, and for the years
then ended 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.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 28, 1996
F-2
31
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
K-Tron International, Inc.
Cherry Hill, New Jersey
We have audited the accompanying consolidated statements of operations, changes
in shareholders' equity, and cash flows of K-Tron International, Inc. and
subsidiaries (the "Company") for the fiscal year ended January 1, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of K-Tron
International, Inc. and subsidiaries for the fiscal year ended January 1, 1994
in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in the fiscal
year ended January 1, 1994 the Company changed its method of accounting for
certain costs of inventory and for income taxes.
/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 11, 1994
F-3
32
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(dollars in thousands)
ASSETS
December 30, December 31,
1995 1994
---------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents $ 3,239 $ 1,086
Accounts receivable (less allowance for doubtful
accounts of $1,077 and $1,523) 20,849 29,214
Inventories 18,534 25,458
Income tax refund receivable -- 442
Deferred income taxes 1,088 328
Prepaid expenses and other current assets 1,512 1,145
------------- -------------
Total current assets 45,222 57,673
PROPERTY, PLANT AND EQUIPMENT, net
of accumulated depreciation of $26,756 and $32,097 17,595 31,673
PATENTS AND LICENSES, net of accumulated
amortization of $4,644 and $7,657 480 908
EXCESS OF COST OVER NET ASSETS ACQUIRED, net
of accumulated amortization of $3,009 and $4,888 5,597 18,661
OTHER ASSETS 402 650
DEFERRED INCOME TAXES -- 385
------------- -------------
Total assets $ 69,296 $ 109,950
============= =============
The accompanying notes are an integral part of these financial statements.
F-4
33
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(dollars in thousands except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 30, December 31,
1995 1994
----------------- -----------------
CURRENT LIABILITIES:
Notes payable to banks $ -- $ 31,175
Current portion of long-term debt 2,133 1,337
Accounts payable 9,250 12,251
Accrued expenses and other current liabilities 2,558 2,469
Accrued payroll 1,459 2,211
Accrued commissions 2,523 3,039
Customer advances 2,612 2,720
Accrued warranty 893 930
Income taxes payable 680 1,241
Deferred income taxes -- 849
------------- --------------
Total current liabilities 22,108 58,222
------------- --------------
LONG-TERM DEBT, net of current portion 35,004 27,413
------------- --------------
DEFERRED INCOME TAXES 466 399
------------- --------------
OTHER NONCURRENT LIABILITIES 2,297 5,395
------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 11)
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 15,000,000
shares; issued 4,175,585 shares and 4,150,887 shares 42 41
Paid-in capital 13,980 13,865
Retained earnings 5,776 15,070
Cumulative translation adjustments 187 109
------------- --------------
19,985 29,085
Treasury stock, 1,062,950 shares, at cost (10,564) (10,564)
------------- --------------
Total shareholders' equity 9,421 18,521
------------- --------------
Total liabilities and shareholders' equity $ 69,296 $ 109,950
============= ==============
The accompanying notes are an integral part of these financial statements.
F-5
34
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except share data)
Fiscal Year Ended
---------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
------------- ------------- -------------
REVENUES $ 110,394 $ 104,772 $ 107,966
COST OF REVENUES 67,658 67,145 66,846
------------- ------------- -------------
Gross profit 42,736 37,627 41,120
OPERATING EXPENSES:
Selling, general and administrative 34,625 34,916 33,774
Research and development 3,135 4,439 4,938
Loss on disposition of businesses 11,278 852 --
------------- ------------- ----------
49,038 40,207 38,712
------------- ------------- -------------
OPERATING (LOSS) PROFIT (6,302) (2,580) 2,408
INTEREST EXPENSE 4,142 4,472 4,192
------------- ------------- -------------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES (10,444) (7,052) (1,784)
INCOME TAX (BENEFIT) PROVISION (1,150) (226) 135
------------- ------------- -------------
LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES (9,294) (6,826) (1,919)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- 854
------------- ------------- -------------
Net loss $ (9,294) $ (6,826) $ (1,065)
============= ============= =============
LOSS PER SHARE BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGES $ (3.00) $ (2.22) $ (0.62)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- 0.27
------------- ------------- -------------
LOSS PER SHARE $ (3.00) $ (2.22) $ (0.35)
============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 3,096,000 3,079,000 3,075,000
============= ============= =============
The accompanying notes are an integral part of these financial statements.
F-6
35
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 Adjustments Shares Amount Total
--------- ------- --------- -------- ----------- -------- -------- --------
BALANCE,
JANUARY 2, 1993 4,097,923 $ 41 $ 13,382 $ 22,961 $ 604 1,062,950 $(10,564) $ 26,424
Issuance of common
stock 21,305 -- 207 -- -- -- -- 207
Net loss -- -- -- (1,065) -- -- -- (1,065)
Translation
adjustments -- -- -- -- (872) -- -- (872)
--------- ------- -------- -------- ---------- -------- -------- --------
BALANCE,
JANUARY 1, 1994 4,119,228 41 13,589 21,896 (268) 1,062,950 (10,564) 24,694
Issuance of
common stock 31,659 -- 276 -- -- -- -- 276
Net loss -- -- -- (6,826) -- -- -- (6,826)
Translation
adjustments -- -- -- -- 377 -- -- 377
--------- ------- -------- -------- ----------- -------- -------- --------
BALANCE,
DECEMBER 31, 1994 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
========= ======= ======== ======== ========== ========= ======== ========
The accompanying notes are an integral part of these financial statements.
F-7
36
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Fiscal Year Ended
----------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
------------- ------------- -------------
OPERATING ACTIVITIES:
Net loss $ (9,294) $ (6,826) $ (1,065)
Adjustments to reconcile net loss to net cash
provided by operating activities-
Loss on disposition of businesses 11,278 852 --
Depreciation and amortization 4,844 6,314 6,562
Amortization of deferred gain on
sale/leaseback transaction (468) (403) (379)
Deferred income taxes (1,651) (14) (292)
Gain on sale of property, plant and
equipment -- -- (231)
Cumulative effect of accounting changes -- -- (854)
Changes in assets and liabilities excluding
effects of dispositions-
Accounts receivable, net 1,802 (1,965) 4,136
Inventories 1,353 (2,709) 2,951
Prepaid expenses and other current
assets (678) 284 143
Other assets 739 (194) (526)
Accounts payable (5) 4,074 (1,030)
Accrued expenses and other current
liabilities (2,317) 1,993 (5,009)
Accrued warranty 201 (124) (496)
Income taxes 307 (1,200) (409)
------------- ------------- -------------
Net cash provided by
operating activities 6,111 82 3,501
------------- ------------- -------------
INVESTING ACTIVITIES:
Proceeds from disposition of businesses 9,320 -- --
Capital expenditures (370) (2,467) (3,062)
Proceeds from the sale of property, plant
and equipment -- -- 1,329
Investment in patents and licenses (7) (111) (81)
------------- ------------- -------------
Net cash provided by (used in)
investing activities 8,943 (2,578) (1,814)
------------- ------------- -------------
(continued)
F-8
37
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(dollars in thousands)
Fiscal Year Ended
-------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
------------- ------------- -------------
FINANCING ACTIVITIES:
Net (re-payments) borrowings under notes payable to
banks (12,224) 4,176 (12,897)
Net borrowings under long-term lines
of credit -- -- 8,558
Proceeds from issuance of long-term debt -- -- 5,508
Principal payments on long-term debt (1,013) (2,403) (3,381)
Proceeds from issuance of common stock 116 276 207
------------- ------------- -------------
Net cash (used in) provided by
financing activities (13,121) 2,049 (2,005)
------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS 220 (110) (27)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,153 (557) (345)
CASH AND CASH EQUIVALENTS:
Beginning of year 1,086 1,643 1,988
------------- ------------- -------------
End of year $ 3,239 $ 1,086 $ 1,643
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 3,597 $ 4,412 $ 4,033
============= ============= =============
Income taxes $ 345 $ 575 $ 823
============= ============= =============
The accompanying notes are an integral part of these financial statements.
F-9
38
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEAR ENDED DECEMBER 30, 1995
1. NATURE OF OPERATIONS AND MATURITY OF DEBT:
Nature of Operations
K-Tron International, Inc. (the "Company") and its subsidiaries 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 and
Switzerland and its equipment is sold throughout the world.
Maturity of Debt
As discussed in Note 6, the Company is currently operating under the U.S. and
Swiss forbearance agreements. These forbearance agreements are scheduled to
expire in the first quarter of fiscal 1997. Management's current projections
indicate that there will not be sufficient cash flow from operations to fund
these obligations when they come due in 1997. As a result, the Company will
need to refinance the outstanding debt that is covered by these forbearance
agreements or extend the term of these agreements. Management continues to hold
discussions with various financial institutions and equity investors to
refinance the Company's debt.
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 in consolidation.
Fiscal Year
The Company's fiscal year is reported on a fifty-two/fifty-three week period.
The fiscal years ended December 30, 1995 (referred to herein as "1995"),
December 31, 1994 (referred to herein as "1994"), and January 1, 1994 (referred
to herein as "1993") each include fifty-two weeks.
F-10
39
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. Effective January 3, 1993, the Company, to be consistent with the
United States policy, changed its method of accounting for the nonperiod cost
of inventory at its European manufacturing facilities by capitalizing certain
inventory procurement and other indirect production costs which were previously
charged to expense. The Company believes that it is preferable because it
provides a better matching of costs with related revenues and will result in a
consistent use of the same method of valuation. The cumulative effect of this
change for the periods prior to January 3, 1993, which amounted to $504,000
($.16 per share), net of applicable income taxes of $68,000, is included in the
Cumulative Effect of Accounting Changes in the statement of operations.
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, 30 to 50 years; automotive equipment, 3 years;
machinery and equipment, 3 to 10 years; 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.
Patents and Licenses
Patents and license agreements are stated at cost less accumulated
amortization. The costs of patents and license agreements 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.
Excess of Cost Over Net Assets Acquired
Excess of cost over net assets acquired is being amortized on a straight-line
basis over 15 years. Subsequent to its 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. When factors indicate that this
asset should be evaluated for possible impairment, the Company uses an estimate
of fair market value in measuring whether the asset is recoverable.
F-11
40
Income Taxes
Beginning in 1993, 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 effective tax laws and rates. The cumulative effect of
adopting SFAS No. 109 on the Company's financial statements was to increase
income by $350,000 ($.11 per share) for the year ended January 1, 1994.
Deferred income taxes are provided for temporary differences between financial
and tax reporting.
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 foreign
currency losses amounting to approximately $1,279,000, $324,000, and $82,000,
for 1995, 1994 and 1993, respectively. Translation gains and losses are
recorded as a separate component of shareholders' equity.
Earnings (Loss) Per Share
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.
Fair Value Disclosures
The carrying value of financial instruments such as cash, accounts receivables
and payables and other current assets and liabilities approximate 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 its 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.
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.
F-12
41
New Accounting Pronouncements
In 1996 the Company is required to adopt the provisions of Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company
does not anticipate that the adoption will have a material impact on the
consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
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 $9,000,000, resulting in a pre-tax loss of
$10,529,000 on the sale. The sale reduced consolidated debt by the amount of
Colortronic bank debt which was $15,154,000. 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
pretax loss of $749,000 in 1995. The loss of $852,000 incurred in 1994 related
to reserves established in connection with the anticipated sales of the French
and Brazilian operations.
The following unaudited pro forma consolidated statement of operations for 1995
illustrate the estimated effects 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
==============
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-13
42
4. INVENTORIES:
Inventories consist of the following:
December 30, December 31,
1995 1994
--------------- ----------------
(in thousands)
Components $ 13,527 $ 20,315
Work-in-process 4,135 3,920
Finished goods 872 1,223
------------- -------------
$ 18,534 $ 25,458
============= =============
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
December 30, December 31,
1995 1994
--------------- ----------------
(in thousands)
Land $ 1,414 $ 2,025
Buildings and improvements 18,637 30,490
Automotive equipment 736 1,347
Machinery and equipment 11,390 13,555
Furniture and fixtures 12,174 16,353
------------- -------------
44,351 63,770
Less- Accumulated depreciation
and amortization (26,756) (32,097)
------------- -------------
$ 17,595 $ 31,673
============= =============
Property includes assets acquired under capital leases, principally furniture
and fixtures in 1995 and a building and furniture and fixtures in 1994, of
$583,000 and $3,002,000 at December 30, 1995 and December 31, 1994,
respectively. Related accumulated depreciation and amortization was $409,000
and $1,648,000, respectively.
Depreciation of property, plant and equipment for 1995, 1994, and 1993 was
$3,521,000, $4,088,000, and $4,284,000, respectively.
6. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT:
Notes Payable to Banks
Loan arrangements have been established with banks outside the United States
under which the Company's foreign subsidiaries are able to borrow up to
$21,121,000 under unsecured and secured short-term lines of credit. At
December 30, 1995, the Company had borrowed $18,030,000 from these banks at
rates ranging from 4.25% to 7.25%. At December 31, 1994, the Company had
borrowed $16,897,000 at rates ranging from 5.38% to 10.25%.
F-14
43
In the United States, at December 30, 1995, the Company has a line-of-credit
arrangement aggregating $5,005,000 and, as of December 30, 1995, $5,005,000 was
outstanding. Borrowings are secured by substantially all assets of a United
States subsidiary, totaling $17,888,000. In 1994, the United States banks
notified the Company that they would not extend the line of credit beyond its
July 31, 1995 expiration (see below). Effective September 1, 1994, the
interest rates on the line of credit and mortgage (see below) were increased to
prime plus 3/4% (9.25% at December 31, 1994) and prime plus 1% (9.5% at
December 31, 1994), respectively. Effective June 23, 1995, the interest rates
on the line of credit and the mortgage were increased to prime plus 2% and
subsequently reduced at the end of 1995 to prime plus 1.5% (10% at December 30,
1995).
As a result of the losses incurred in 1994, the Company was in violation of
certain financial covenants under the U.S. credit agreements as of December 31,
1994. The sale of Colortronic in June 1995, at a significant loss (see Note 3),
caused the Company to be in violation of the non-U.S. credit agreements. As a
result of these violations, the Company was in default of the credit agreements
in 1995. During 1995 and early 1996, the Company negotiated forbearance
agreements with both the U.S. and non-U.S. banks expiring in January 1997 and
March 1997, respectively. These forbearance agreements subject the Company to
certain financial covenants including levels of net worth and restrictions on
intercompany transactions. The U.S. forbearance agreement also requires the
Company to pursue alternative replacement financing during 1996 but does not
require the Company to consummate a refinancing. The non-U.S. credit agreement
also requires the streamlining of the organization, the addition of a new Swiss
Board member, the prohibition of the payment of the management fees from the
subsidiaries to K-Tron International, Inc. after March 1, 1996, and other
covenants. Management believes they will be able to comply with these
covenants.
The U.S. forbearance agreement requires monthly principal payments ranging from
$50,000 in January 1996 to $275,000 in December 1996, with the remaining
balance due at January 1997. Total required principal payments in fiscal 1996
under the U.S. agreement are $1,825,000. Interest is payable monthly at prime
plus 1.5% through February 29, 1996, prime plus 1.75% through June 14, 1996,
prime plus 2.5% through July 14, 1996, prime plus 3% through October 14, 1996,
and prime plus 3.5% through January 1997. The non-U.S. forbearance agreement
does not require any principal payments until March 1997. As a result of the
defaults under the U.S. credit agreement as of December 31, 1994, $10,850,000
outstanding under the U.S. credit agreement and $3,428,000 of U.S mortgages
were classified as short-term.
As discussed above, a significant amount of debt will mature in the first
quarter of 1997. Management has begun to implement steps to address this
issue. Through the disposition of various businesses in 1995 (see Note 3), the
Company has returned to profitability and positive operating cash flow in the
last half of 1995. Management is currently holding discussions with various
parties to refinance the Company's U.S. debt and is continuing to evaluate
other debt and equity alternatives to further strengthen the Company's
financial position and comply with the provisions of both forbearance
agreements. Management believes that through the successful completion of new
financings in 1996 and operating performance, they will be able to refinance or
extend the maturities of the forbearance agreements as they occur in 1997.
F-15
44
Long-term debt consists of the following:
December 30, December 31,
1995 1994
-------------- -------------
(in thousands)
Non-US long-term lines of credit $ 18,030 $ 11,496
U.S. long-term line of credit 5,005 --
U.S. mortgage 2,828 --
European mortgages, interest at market rates (6.5% to 8.9% at
December 30, 1995 and 5.75% to 8.9% at December 31, 1994)
payable annually 10,173 14,535
Capital lease obligations, interest at 6.5% at December 30,
1995, and 6.5% to 8.5% at December 31, 1994, payable monthly
through 1998 174 1,879
Other 927 840
-------------- -------------
37,137 28,750
Less- Current portion (2,133) (1,337)
-------------- -------------
$ 35,004 $ 27,413
============== =============
Foreign fixed assets with a net book value of approximately $8,089,000 at
December 30, 1995, are pledged as collateral for the European mortgages. In
addition, foreign receivables of $7,913,000 are pledged as collateral under the
non-U.S. forbearance agreement. Domestic assets with a net book value of
approximately $3,665,000 at December 30, 1995, are pledged as collateral for
the U.S. mortgage.
Maturities of long-term debt will approximate $2,133,000 in 1996, $34,982,000
in 1997 and $22,000 in 1998.
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. The Board of Directors did not authorize any 1995, 1994 or 1993
contribution to the profit-sharing portion of the plan.
Substantially all foreign employees participate in defined-contribution insured
group pension plans. Contributions are paid by the employee and employer at a
percentage that varies according to age and other factors.
Colortronic GmbH employees participated in an unfunded defined benefit plan.
The net periodic pension cost for the unfunded defined benefit plan was
$177,000, $353,000 and $278,000 for 1995, 1994, and 1993 respectively.
F-16
45
The expense associated with the domestic profit-sharing and thrift plan for
1995, 1994 and 1993 was $225,000, $285,000, and $153,000, respectively. The
foreign pension expense for 1995, 1994 and 1993 was $1,402,000, $1,607,000, and
$1,221,000, respectively.
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. 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 24,698 shares of common stock at an
average price of $4.68 in 1995, 29,159 shares of common stock at an average
price of $8.75 in 1994, and 21,305 shares of common stock at an average price
of $9.69 in 1993.
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 December 30, 1995.
The Company has a stock option plan for nonemployee directors (the "1989
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.
Under the Company's 1986 Stock Option Plan, as amended (the "1986 plan"), key
employees of and consultants to the Company may be granted options to purchase
shares of the Company's common stock. Options granted under the 1986 plan may
be either incentive stock options or nonqualified stock options. The Stock
Option Committee (the "Committee") determines the term of each option, but no
option will be exercisable more than 10 years from the date the option is
granted. The Committee determines 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. The aggregate number of shares which may be issued under the plan is
600,000. This plan expired in January 1996.
F-17
46
A summary of the Company's stock option activity for its stock option plans for
the three years ended December 30, 1995, is as follows:
Options
--------------------------------------------
Average
Shares Price
Reserved Outstanding Per Share Available
------------ ----------- ------------ -------------
BALANCE,
JANUARY 2, 1993 555,815 193,409 362,406
Granted -- 55,000 $11.74 (55,000)
Canceled -- (12,450) 10.75 12,450
------------ ------------ -------------
BALANCE,
JANUARY 1, 1994 555,815 235,959 319,856
Granted -- 70,584 11.50 (70,584)
Canceled -- (16,500) 10.92 16,500
Exercised (2,500) (2,500) 8.50 --
------------ ------------ -------------
BALANCE,
DECEMBER 31, 1994 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
============ ============ =============
As of December 30, 1995, 62 employees held options under the 1986 plan for an
aggregate of 203,684 shares at exercise prices from $6.25 to $14.00 with a
weighted average option price of $8.77. These options expire in varying
amounts through the year 2005.
As of December 30, 1995, under the 1989 nonemployee directors' plan, five
directors held options for an aggregate of 50,000 shares at exercise prices
from $9.25 to $11.00 with a weighted average option price of $10.53. These
options expire in varying amounts through the year 2004.
As of December 30, 1995 and December 31, 1994, under all stock option plans,
options for 127,600 shares and 161,959 respectively were exercisable at prices
ranging from $6.25 to $14.00.
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 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
F-18
47
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
twentieth 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 loss before income
taxes and cumulative effect of accounting changes:
Fiscal Year Ended
---------------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
--------------- ------------ -----------
(in thousands)
United States $ 756 $ (994) $ 644
Foreign (11,200) (6,058) (2,428)
------------ ----------- --------
Loss before income taxes and
cumulative effect
of accounting change $ (10,444) $ (7,052) $ (1,784)
============ =========== ========
F-19
48
The income tax (benefit) provision consists of the following:
Fiscal Year Ended
---------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
--------------- ------------ -------------
(in thousands)
Current:
Federal $ 501 $ (374) $ 139
Foreign -- 136 144
------------- ----------- ---------
Total current 501 (238) 283
------------- ----------- ---------
Deferred:
Federal (106) 108 20
Foreign (526) (96) (168)
Benefit of foreign net operating
loss carryforwards (1,019) -- --
------------- ----------- ---------
Total deferred (benefit) (1,651) 12 (148)
------------- ----------- ---------
Total income tax (benefit) provision $ (1,150) $ (226) $ 135
============= =========== =========
Significant components of the deferred tax accounts at December 30, 1995 and
December 31, 1994, are as follows:
December 30, December 31,
1995 1994
---------------- --------------
Deferred tax assets:
Patent costs 44 175
Accrued liabilities 388 192
Net operating loss carryforwards 6,108 6,621
Other 210 755
----------- -----------
6,750 7,743
Valuation allowance (5,478) (6,613)
----------- -----------
Total assets 1,272 1,130
----------- -----------
Deferred tax liabilities:
Inventory basis differences -- (747)
Depreciation (280) (400)
Other (370) (518)
----------- -----------
Total liabilities (650) (1,665)
----------- -----------
Net deferred asset (liability) $ 622 $ (535)
=========== ===========
Foreign and U.S. state operating loss carryforwards as of December 30, 1995,
were $20.8 and $5.4 million, respectively. Of the $20.8 million of foreign
losses, $17.2 million are available to offset future income through 2002. The
balance of $3.6 million has an unlimited carryforward period. U.S. state
operating losses are available through 2002.
F-20
49
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 substantially all foreign and state
net operating loss carryforwards generated from losses prior to 1995 for which
realization is dependent on future taxable earnings. In 1995, the Company
decreased its valuation reserves on Swiss operating loss carryforwards that are
now expected to be realized based on the of improved earnings of the non-U.S.
operations.
At December 30, 1995, retained earnings include $4.2 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
-----------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
-------------- ------------ -------------
(in thousands)
Income tax benefit on loss before income tax at
statutory federal income tax rates $ (3,551) $ (2,376) $ (607)
Foreign tax rate differential 918 74 898
State tax, net of federal benefit (27) 6 --
Goodwill amortization 175 13 13
Change in valuation allowance 1,345 1,986 (158)
Other (10) 71 (11)
------------- ----------- -----------
Income tax (benefit) provision $ (1,150) $ (226) $ 135
============= =========== ===========
11. COMMITMENTS AND CONTINGENCIES:
The Company leases certain office and plant facilities and equipment under
non-cancelable 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, 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
1995, 1994 and 1993 was $468,000, $403,000, and $379,000, respectively.
F-21
50
As of December 30, 1995, future minimum payments under capital and operating
leases having noncancelable terms in excess of one year are summarized below.
Capital Operating
Leases Leases
-------------- --------------
(in thousands)
1996 $ 121 $ 971
1997 81 781
1998 -- 649
1999 -- 562
2000 -- 454
---------- -----------
202 $ 3,417
============
Less- Amount representing interest (28)
----------
Present value of net minimum lease payments $ 174
==========
Rent expense for 1995, 1994 and 1993 was $1,719,000, $1,551,000 and $1,300,000,
respectively.
K-Tron America, Inc. (a wholly owned subsidiary of the Company) has entered
into an inventory purchase agreement with one of its major suppliers. Under
this agreement, K-Tron America, Inc., has committed to purchase component
inventory of $1,000,000 and $320,000 during 1996 and 1997, respectively.
The Company has one year employment agreements with six executives totaling
$642,000 for 1996.
F-22
51
12. GEOGRAPHIC AREA INFORMATION:
The Company is engaged in one business segment, the development, manufacturing
and marketing of gravimetric and volumetric feeders, blenders and related
industrial control equipment. No single customer accounted for more than 10%
of total sales.
United Western Elimi- Consoli-
States Europe nations dated
--------- --------- --------- --------
(in thousands)
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
======= ======= ======= ========
FISCAL YEAR ENDED DECEMBER 31, 1994:
Revenues-
Sales to unaffiliated customers $28,969 $75,803 $ -- $104,772
Sales to affiliates 3,995 4,833 (8,828) --
------- ------- ------- --------
Total sales $32,964 $80,636 $(8,828) $104,772
======= ======= ======= ========
Operating income (loss) $ 276 $(2,865) $ 9 $ (2,580)
======= ======= =======
Interest expense (4,472)
--------
Loss before income taxes $ (7,052)
========
Total assets $27,647 $82,315 $ (12) $109,950
======= ======= ======= ========
FISCAL YEAR ENDED JANUARY 1, 1994:
Revenues-
Sales to unaffiliated customers $30,399 $77,567 $ -- $107,966
Sales to affiliates 2,553 1,905 (4,458) --
------- ------- ------- --------
Total sales $32,952 $79,472 $(4,458) $107,966
======= ======= ======= ========
Operating income $ 1,737 $ 711 $ (40) $ 2,408
======= ======= =======
Interest expense (4,192)
--------
Loss before income taxes and cumulative effect of
accounting changes $ (1,784)
========
Total assets $27,945 $73,423 $ (72) $101,296
======= ======= ======= ========
F-23
52
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
K-Tron International, Inc.
Cherry Hill, New Jersey
We have audited the consolidated financial statements of K-Tron International,
Inc. and subsidiaries for the fiscal year ended January 1, 1994, and have
issued our report thereon dated March 11, 1994; such report is included
elsewhere in this Form 10-K. Our audit also included the financial statement
schedule of K-Tron International, Inc. and subsidiaries, listed in Item 14.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audit.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 11, 1994
S-1
53
SCHEDULE I
K-TRON INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF
REGISTRANT BALANCE SHEETS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(dollars in thousands except share data)
December 30, December 31,
ASSETS 1995 1994
---------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents $ 45 $ 8
Income tax receivable -- 442
Deferred income taxes 482 328
Prepaid expenses and other current assets 113 143
------------- -------------
Total current assets 640 921
PROPERTY, PLANT AND EQUIPMENT, NET 187 360
INVESTMENT IN SUBSIDIARIES 21,514 29,805
EXCESS OF COST OVER NET ASSETS ACQUIRED, NET -- 245
OTHER ASSETS -- 38
------------- -------------
Total assets $ 22,341 $ 31,369
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $ -- $ 10,850
Current portion of long-term debt -- 83
Accrued expenses and other current liabilities 1,189 801
Intercompany payables, net 6,491 788
------------- -------------
Total current liabilities 7,680 12,522
-------------
LONG-TERM DEBT, NET OF CURRENT PORTION 5,005 138
------------- -------------
DEFERRED INCOME TAXES 235 188
------------- -------------
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
15,000,000 shares; issued 4,175,585 shares
and 4,150,887 shares 42 41
Paid-in capital 13,980 13,865
Retained earnings 5,776 15,070
Cumulative translation adjustments 187 109
------------- -------------
Total 19,985 29,085
Treasury stock, 1,062,950 shares, at cost (10,564) (10,564)
------------- -------------
Total shareholders' equity 9,421 18,521
------------- -------------
Total liabilities and shareholders' equity $ 22,341 $ 31,369
============= =============
The accompanying note is an integral part of these financial statements.
S-2
54
SCHEDULE I
(Continued)
K-TRON INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT INCOME STATEMENT
DECEMBER 30, 1995, DECEMBER 31, 1994 AND JANUARY 1, 1994
(dollars in thousands except share data)
Fiscal Year Ended
----------------------------------------------------
December 30, December 31, January 1
1995 1994 1994
--------------- ----------------- ------------
REVENUES:
Management fees $ 4,393 $ 4,444 $ 5,055
Other income, net 10 24 43
------------- ------------- ------------
Total revenues 4,403 4,468 5,098
------------- ------------- ------------
OPERATING EXPENSES:
Selling, general and administrative 3,385 3,459 4,076
Research and development 95 194 195
Loss on disposition of business 1,045 -- --
------------- ------------- ------------
4,525 3,653 4,271
------------- ------------- ------------
OPERATING (LOSS) INCOME (122) 815 827
INTEREST EXPENSE 803 988 931
------------- ------------- ------------
Loss before income taxes and net
loss of subsidiaries and
cumulative effect of accounting changes (925) (173) (104)
INCOME TAX BENEFIT (314) (59) (35)
------------- ------------- ------------
Loss before net loss of subsidiaries
and cumulative
effect of accounting changes (611) (114) (69)
EQUITY IN NET LOSS OF SUBSIDIARIES (8,683) (6,712) (1,850)
------------- ------------- ------------
Loss before cumulative
effect of accounting changes (9,294) (6,826) (1,919)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- 854
------------- ------------- ------------
Net loss $ (9,294) $ (6,826) $ (1,065)
============= ============= ============
LOSS PER SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES $ (3.00) $ (2.22) $ (.62)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- .27
------------- ------------- ------------
LOSS PER SHARE $ (3.00) $ (2.22) $ (.35)
============= ============= ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING 3,096,000 3,079,000 3,075,000
============= ============= ============
The accompanying note is an integral part of these financial statements.
S-3
55
SCHEDULE I
(Continued)
K-TRON INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT CASH FLOWS
(dollars in thousands)
Fiscal Year Ended
----------------------------------------------------
December 30, December 31, January 1
1995 1994 1994
----------------- ----------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,294) $ (6,826) $ (1,065)
Equity in net loss of subsidiaries 8,683 6,712 1,850
Depreciation and amortization 129 579 625
Cumulative effect of accounting changes -- -- (854)
Other, primarily working capital changes 6,273 (1,483) 3,788
-------------- -------------- ------------
Net cash provided by (used in)
operating activities 5,791 (1,018) 4,344
-------------- -------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25) (43) (439)
-------------- -------------- ------------
Net cash used in investing activities (25) (43) (439)
-------------- -------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under
bank agreements (5,845) 1,495 (1,854)
Principal payments on long-term debt -- (811) (2,149)
Proceeds from issuance of common stock 116 276 207
-------------- -------------- ------------
Net cash (used in) provided by
investing activities (5,729) 960 (3,796)
-------------- -------------- ------------
Net increase (decrease) in cash
and cash equivalents 37 (101) 109
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 8 109 --
-------------- -------------- ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 45 $ 8 $ 109
============== ============== ============
The accompanying note is an integral part of these financial statements.
S-4
56
SCHEDULE I
(Continued)
K-TRON INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTE TO FINANCIAL STATEMENTS
DECEMBER 30, 1995
Note 1: These statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto beginning on
page F-4.
S-5
57
SCHEDULE II
K-TRON INTERNATIONAL, INC.
VALUATION RESERVES
Balance at Additions
Beginning Charged Balance at
of Period Disposed(2) to Income Deductions (1) End of Period
------------- ------------- ------------- ---------------- ----------------
Fiscal year ended 12/30/95:
Allowance for doubtful accounts $ 1,523,000 $ (956,000) $ 564,000 $ 54,000 $ 1,077,000
Fiscal year ended 12/31/94:
Allowance for doubtful accounts $ 1,342,000 -- 329,000 148,000 1,523,000
Fiscal year ended 1/1/94:
Allowance for doubtful accounts $ 1,406,000 -- 135,000 199,000 1,342,000
(1) Accounts written off less recoveries, net of foreign exchange translation
adjustment.
(2) Reduction due to sale of subsidiaries.
S-6
58
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
10.1.5 Forbearance Agreement and Fourth Amendment to Revolving Credit and Term Loan
Agreement dated February 28, 1996 by and among K-Tron International, Inc., K-Tron
America, Inc., K-Tron Technologies, Inc., K-Tron Investment Co., K-Tron Patent,
Inc., First Union National Bank, PNC Bank, N.A. and United Jersey Bank
10.1.6 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.
10.2.3 K-Tron International, Inc. 1996 Equity Compensation Plan
10.2.4 K-Tron International, Inc. Employee Stock Purchase Plan, as amended and restated
11.1 Computation of (Loss) Earnings per Common and Common Equivalent Share
21.1 Subsidiaries
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche LLP
27 Financial Data Schedule