##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended October 3, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-9576
 K-TRON INTERNATIONAL, INC.
  New Jersey
    
    22-1759452(State or Other Jurisdiction of Incorporation 
or Organization)
    
    (I.R.S. Employer Identification No.)Routes 55 & 553, P.O. Box 888, Pitman, New Jersey
    
    08071-0888(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants Telephone Number, Including Area Code
 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Balance Sheets as of
October 3, 2009 (Unaudited) and January 3, 2009
    
    
    1Consolidated Statements of Income and Retained
Earnings (Unaudited) for the Three and Nine Months Ended
October 3, 2009 and September 27, 2008
    
    
    2Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended October 3, 2009 and
September 27, 2008
    
    
    3Consolidated Statements of Changes in Shareholders Equity
(Unaudited) for the Nine Months Ended October 3, 2009
    
    
    4Notes to Consolidated Financial Statements (Unaudited)
    
    
    5   15Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations
    
    
    16  23Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    25PART II. OTHER INFORMATIONItem 6. Exhibits
    
    
    26SIGNATURES
    
    
    27




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1 . Consolidated Financial Statements .
 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  (Unaudited)October 3,
    
    
    January 3,2009
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    62,548
    
    
    $
    41,623Restricted cash
    
    
    453
    
    
    
    530Accounts receivable, net of allowance for
doubtful accounts of $1,372 and $1,214
    
    
    26,735
    
    
    
    36,625Inventories, net
    
    
    23,678
    
    
    
    28,776Deferred income taxes
    
    
    2,371
    
    
    
    2,371Prepaid expenses and other current assets
    
    
    7,596
    
    
    
    4,498Total current assets
    
    
    123,381
    
    
    
    114,423Property, plant and equipment, net
    
    
    24,799
    
    
    
    26,701Patents, net
    
    
    1,311
    
    
    
    1,381Goodwill
    
    
    30,279
    
    
    
    29,059Other intangibles, net
    
    
    20,666
    
    
    
    21,366Other assets
    
    
    5,103
    
    
    
    6,438Deferred income taxes
    
    
    347
    
    
    
    76Total assets
    
    $
    205,886
    
    
    $
    199,444LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    1,000
    
    
    $
    1,662Accounts payable
    
    
    9,883
    
    
    
    13,156Accrued expenses and other current liabilities
    
    
    8,407
    
    
    
    11,198Accrued commissions
    
    
    4,258
    
    
    
    5,285Customer advances
    
    
    8,230
    
    
    
    7,828Income taxes payable
    
    
    2,271
    
    
    
    4,170Deferred income taxes
    
    
    3,430
    
    
    
    3,430Total current liabilities
    
    
    37,479
    
    
    
    46,729Long-term debt, net of current portion
    
    
    17,000
    
    
    
    22,000Deferred income taxes
    
    
    4,254
    
    
    
    3,771Other non-current liabilities
    
    
    364
    
    
    
    892Series B Junior Participating Preferred Shares,
$.01 par value. Authorized 50,000 shares; issued none
    
    
    
    
    
    
    Shareholders equity:Preferred stock, $.01 par value. Authorized 950,000 shares; issued none
    
    
    
    
    
    
    Common stock, $.01 par value. Authorized 50,000,000 shares;
issued 4,866,980 shares and 4,800,139 shares
    
    
    49
    
    
    
    48Paid-in capital
    
    
    31,130
    
    
    
    28,455Retained earnings
    
    
    132,822
    
    
    
    116,349Accumulated other comprehensive income
    
    
    12,863
    
    
    
    9,483176,864
    
    
    
    154,335Treasury stock, 2,028,297 shares and 2,008,192 shares, at cost
    
    
    (30,075
    )
    
    
    (28,283
    )Total shareholders equity
    
    
    146,789
    
    
    
    126,052Total liabilities and shareholders equity
    
    $
    205,886
    
    
    $
    199,444
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CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
   Three Months Ended
    
    
    Nine Months EndedOctober 3,
    
    
    September 27,
    
    
    October 3,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Equipment and parts
    
    $
    44,561
    
    
    $
    56,418
    
    
    $
    139,758
    
    
    $
    167,841Services and freight
    
    
    2,760
    
    
    
    3,213
    
    
    
    7,286
    
    
    
    9,398Total revenues
    
    
    47,321
    
    
    
    59,631
    
    
    
    147,044
    
    
    
    177,239Cost of revenues:Equipment and parts
    
    
    25,182
    
    
    
    32,300
    
    
    
    79,887
    
    
    
    95,247Services and freight
    
    
    2,256
    
    
    
    2,547
    
    
    
    6,111
    
    
    
    7,457Total cost of revenues
    
    
    27,438
    
    
    
    34,847
    
    
    
    85,998
    
    
    
    102,704Gross profit
    
    
    19,883
    
    
    
    24,784
    
    
    
    61,046
    
    
    
    74,535Operating expenses:Selling, general and administrative
    
    
    11,756
    
    
    
    14,689
    
    
    
    36,560
    
    
    
    44,365Research and development
    
    
    439
    
    
    
    633
    
    
    
    1,389
    
    
    
    1,917Total operating expenses
    
    
    12,195
    
    
    
    15,322
    
    
    
    37,949
    
    
    
    46,282Operating income
    
    
    7,688
    
    
    
    9,462
    
    
    
    23,097
    
    
    
    28,253Other income (expense):Interest expense, net
    
    
    (252
    )
    
    
    (179
    )
    
    
    (846
    )
    
    
    (804
    )Gain on sale of investment
    
    
    2,972
    
    
    
    
    
    
    
    2,972
    
    
    
    Income before income taxes
    
    
    10,408
    
    
    
    9,283
    
    
    
    25,223
    
    
    
    27,449Income tax provision
    
    
    3,640
    
    
    
    2,516
    
    
    
    8,750
    
    
    
    7,873Net income
    
    
    6,768
    
    
    
    6,767
    
    
    
    16,473
    
    
    
    19,576Retained earnings:Beginning of period
    
    
    126,054
    
    
    
    103,385
    
    
    
    116,349
    
    
    
    90,576End of period
    
    $
    132,822
    
    
    $
    110,152
    
    
    $
    132,822
    
    
    $
    110,152Earnings per share:Basic
    
    $
    2.39
    
    
    $
    2.44
    
    
    $
    5.85
    
    
    $
    7.14Diluted
    
    $
    2.34
    
    
    $
    2.34
    
    
    $
    5.75
    
    
    $
    6.84Weighted average common shares
outstanding (basic)
    
    
    2,831,000
    
    
    
    2,769,000
    
    
    
    2,816,000
    
    
    
    2,740,000Weighted average common and
common equivalent shares
outstanding (diluted)
    
    
    2,887,000
    
    
    
    2,891,000
    
    
    
    2,865,000
    
    
    
    2,860,000
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine Months EndedOctober 3,
    
    
    September 27,2009
    
    
    2008Operating activities:Net income
    
    $
    16,473
    
    
    $
    19,576Adjustments to reconcile net income to net cash provided by operating activities:Gain on sale of investment
    
    
    (2,972
    )
    
    
    Depreciation and amortization
    
    
    4,615
    
    
    
    4,567Non-cash compensation
    
    
    424
    
    
    
    431Deferred income taxes
    
    
    212
    
    
    
    (12
    )Changes in assets and liabilities, net of business acquired:Accounts receivable, net
    
    
    10,435
    
    
    
    (7,352
    )Inventories, net
    
    
    5,498
    
    
    
    (3,356
    )Prepaid expenses and other current assets
    
    
    706
    
    
    
    (50
    )Other assets
    
    
    (97
    )
    
    
    78Accounts payable
    
    
    (3,659
    )
    
    
    1,925Accrued expenses and other current liabilities
    
    
    (5,979
    )
    
    
    (113
    )Net cash provided by operating activities
    
    
    25,656
    
    
    
    15,694Investing activities:Business acquired, net of cash received
    
    
    
    
    
    
    (400
    )Capital expenditures
    
    
    (1,556
    )
    
    
    (2,573
    )Restricted cash
    
    
    77
    
    
    
    653Other
    
    
    (59
    )
    
    
    (37
    )Net cash used in investing activities
    
    
    (1,538
    )
    
    
    (2,357
    )Financing activities:Proceeds from issuance of long-term debt
    
    
    
    
    
    
    10,900Principal payments on long-term debt
    
    
    (5,662
    )
    
    
    (23,292
    )Purchase of common stock
    
    
    (1,379
    )
    
    
    (769
    )Tax benefit from stock option exercises
    
    
    803
    
    
    
    1,047Proceeds from issuance of common stock
    
    
    855
    
    
    
    145Net cash used in financing activities
    
    
    (5,383
    )
    
    
    (11,969
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    2,190
    
    
    
    1,012Net increase in cash and cash equivalents
    
    
    20,925
    
    
    
    2,380Cash and cash equivalents:Beginning of period
    
    
    41,623
    
    
    
    30,853End of period
    
    $
    62,548
    
    
    $
    33,233Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    1,085
    
    
    $
    1,393Income taxes
    
    $
    9,122
    
    
    $
    6,052
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
    AccumulatedOtherCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury StockShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance,
January 3, 2009
    
    
    4,800,139
    
    
    $
    48
    
    
    $
    28,455
    
    
    $
    116,349
    
    
    $
    9,483
    
    
    
    2,008,192
    
    
    $
    (28,283
    )
    
    $
    126,052Comprehensive
Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,473
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,473Translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,063
    
    
    
    
    
    
    
    
    
    
    
    3,063Unrealized gain
on interest rate
swap, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    317Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,853Issuance of stock
    
    
    66,841
    
    
    
    1
    
    
    
    2,675
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,676Purchase of treasury
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,105
    
    
    
    (1,792
    )
    
    
    (1,792
    )Balance,
October 3, 2009
    
    
    4,866,980
    
    
    $
    49
    
    
    $
    31,130
    
    
    $
    132,822
    
    
    $
    12,863
    
    
    
    2,028,297
    
    
    $
    (30,075
    )
    
    $
    146,789
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 October 3, 2009
  1.
    
    Basis of Presentation
 The accompanying unaudited consolidated financial statements have been prepared in
accordance with the instructions for Form 10-Q and do not include all of the
information and footnotes required by accounting principles generally accepted in the
United States of America for complete financial statements. The consolidated financial
statements include the accounts of K-Tron International, Inc. and its subsidiaries
(K-Tron or the Company). All intercompany transactions have been eliminated in
consolidation. In the opinion of management, all adjustments (consisting of a normal
recurring nature) considered necessary for a fair presentation of results for interim
periods have been made. Material subsequent events are evaluated and disclosed through
the report issuance date, November 10, 2009. All references to the third quarter or
first nine months of 2009 or 2008 mean the 13-week or 39-week period ended October 3,
2009 or September 27, 2008.
 The unaudited financial statements herein should be read in conjunction with the
Companys annual report on Form 10-K for the fiscal year ended January 3, 2009 which
was filed with the Securities and Exchange Commission on March 13, 2009.
 Certain reclassifications were made to the prior years consolidated financial
statements to conform them to the current year presentation.
 2.
    
    Acquisitions and Divestments
 On March 27, 2007, the Company purchased certain assets of Wuxi Chenghao Machinery
Co., Ltd. (Wuxi Chenghao), a privately-owned company in the Peoples Republic of
China. The total cost of the transaction over a five-year period, including the
$1,000,000 purchase price and other possible contingent payments under certain
arrangements with one of Wuxi Chenghaos owners, could be as much as approximately
$3,500,000.
 On September 14, 2007, the Company purchased all of the outstanding stock of Rader
Companies, Inc. (Rader). The preliminary purchase price was $15,945,000, all of
which was paid in cash, including $2,300,000 deposited in escrow to satisfy any
potential indemnification claims made by the Company. Following the closing, this
purchase price was adjusted upward to $17,632,000 to reflect a $1,687,000 increase in
Raders net working capital between January 1, 2007 and the September 14, 2007 closing
date, which adjustment was paid in cash to the sellers on February 5, 2008.
 In the third quarter of 2008, the Company completed the valuation of the assets and
liabilities of Rader as of the September 14, 2007 closing date. On September 12,
2008, the Company filed an indemnification claim against the sellers related to the
valuation of Raders inventory on the closing date, which was settled on October 9,
2008. As part of the settlement, the sellers agreed to reduce the purchase price by
approximately $257,000, with payments to the Company from the escrow fund of
approximately $117,000 on September 26, 2008 and $140,000 on October 10, 2008. Due to
these payments of $257,000 and the release of $743,000 from the escrow fund to the sellers pursuant to
the terms of the escrow agreement, the escrow fund was reduced to $1,300,000 plus
accrued interest at the end of fiscal year 2008. The purchase price allocation was
updated at the end of fiscal year 2008 to record this settlement as well as the final
inventory valuation and related deferred taxes as of the date of the acquisition,
resulting in a net increase in goodwill of $1,320,000 in fiscal year 2008.
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The purchase price of $17,632,000, after being reduced by the $257,000 payment
received as part of the inventory valuation settlement, became an adjusted purchase
price of $17,375,000, including the $1,300,000 held in escrow. Of this $1,300,000, an
additional $1,000,000 was released to the sellers in July 2009, leaving an escrow
balance of $300,000.
 On September 14, 2009, the Company sold its 19.9% investment in Hasler International,
SA (Hasler) for euro 2,425,000 ($3,544,000). The Company previously recorded this
investment as an other asset in the consolidated balance sheet and recognized a gain
of $2,972,000 on the sale. The Company received a note from the buyer for the entire
sale price, which was paid in full in October 2009.
 3.
    
    New Accounting Pronouncements
 In June 2009, the Financial Accounting Standards Board (the FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles  a
replacement of FASB Statement No. 162. SFAS No. 168 replaces SFAS No. 162, and
establishes the FASB Accounting Standards Codification (the Codification) as the
source of authoritative U.S. generally accepted accounting principles (U.S. GAAP).
The Codification supersedes all existing U.S. accounting standards; all other
accounting literature not included in the Codification (other than Securities and
Exchange Commission guidance for publicly-traded companies) is considered
non-authoritative. The Codification, which modifies structure hierarchy and
referencing of financial standards, was effective on a prospective basis for interim
and annual financial periods ending after September 15, 2009. The Codification is not
intended to change or alter existing U.S. GAAP, and will not have a material impact on
the Companys consolidated financial statements other than to change references to
accounting standards.
 In May 2009, the FASB issued new guidance for accounting for subsequent events. The
new guidance, which is now part of Accounting Standards Codification (ASC) 855
Subsequent Events, establishes general standards of accounting for, and disclosure
of, events that occur after the balance sheet date but before financial statements are
issued or are available to be issued. The new guidance sets forth the period after the
balance sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the financial
statements, the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements, and
the disclosures that an entity should make about events or transactions that occurred
after the balance sheet date. The new guidance is effective for interim or annual
periods ending after June 15, 2009.
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In April 2008, the FASB issued revised guidance on determining the useful lives of
intangible assets. The revised guidance, which is now part of ASC 350 Intangibles-Goodwill and Other, requires that companies estimating the useful life of a recognized
intangible asset consider their historical experience in renewing or extending similar
arrangements or, in the absence of historical experience, to consider assumptions that
market participants would use about renewal or extension. The revised guidance is
effective for financial statements issued for fiscal years and interim periods
beginning after December 15, 2008, and must be applied prospectively to intangible
assets acquired after the effective date. The Company will prospectively apply the
revised guidance to all intangible assets acquired after January 3, 2009.
 In March 2008, the FASB issued new guidance on the disclosure of derivative
instruments and hedging activities. The new guidance, which is now part of ASC 815
Derivatives and Hedging Activities, is intended to improve financial reporting with
respect to derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand the effects of these instruments
and activities on an entitys financial position, financial performance and cash
flows. The revised guidance is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. The Company has interest
rate swaps that are derivative instruments to which the revised guidance applies.
The adoption of the revised guidance by the Company effective January 4, 2009 did not
have a material impact on the Companys consolidated financial statement disclosures.
 In December 2007, the FASB issued revised guidance for the accounting for business
combinations. The revised guidance, which is now part of ASC 805 Business
Combinations, requires the acquiring entity in a business combination to recognize,
at full fair value, all the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement objective
for all assets acquired and liabilities assumed; and requires the acquiring entity to
disclose information needed to evaluate and understand the nature and financial effect
of the business combination. The revised guidance also changes the accounting for
contingent consideration, in process research and development, and restructuring
costs. In addition, changes in uncertain tax positions or valuation allowances for
deferred tax assets acquired in a business combination are recognized as adjustments
to income tax expense or contributed capital, as appropriate. The revised guidance is
effective for fiscal years beginning after December 15, 2008 and is to be applied
prospectively. The Company will prospectively apply the revised guidance to all
business combinations occurring after January 3, 2009. The Company did not enter into
any business combinations in the first nine months of 2009.
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4.
    
    InventoriesInventories consist of the following:
 October 3,
    
    
    January 3,2009
    
    
    2009(in thousands)Components
    
    $
    19,804
    
    
    $
    22,434Work-in-process
    
    
    4,850
    
    
    
    6,647Finished goods
    
    
    900
    
    
    
    1,085Inventory reserves
    
    
    (1,876
    )
    
    
    (1,390
    )$
    23,678
    
    
    $
    28,776
 5.
    
    Patents and Other Intangible Assets
 Patents and other intangible assets consist of the following:
 October 3, 2009
    
    
    January 3, 2009Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(in thousands)Amortized intangible assets:Patents
    
    $
    3,113
    
    
    $
    1,802
    
    
    $
    3,054
    
    
    $
    1,673Drawings
    
    
    6,140
    
    
    
    1,189
    
    
    
    6,140
    
    
    
    1,005Customer relationships
    
    
    11,299
    
    
    
    2,194
    
    
    
    11,299
    
    
    
    1,678$
    20,552
    
    
    $
    5,185
    
    
    $
    20,493
    
    
    $
    4,356Unamortized intangible assets:Trademarks and tradenames
    
    $
    6,610
    
    
    
    
    
    
    $
    6,610
 The amortized intangible assets are being amortized on the straight-line basis
(half-year expense in the year of issuance of a patent) over the expected periods of
benefit, which range from 10 to 50 years. The weighted average life of the
amortizable intangible assets is 27 years (15 years for patents, 25 years for drawings
and 29 years for customer relationships). The amortization expense of intangible
assets for the nine-month periods ended October 3, 2009 and September 27, 2008 was
$829,000 and $857,000.
 Future annual amortization of intangible assets is as follows:
 Amount(in thousands)Fourth quarter fiscal year 2009
    
    $
    277Fiscal year 2010
    
    
    1,106Fiscal year 2011
    
    
    1,106Fiscal year 2012
    
    
    1,105Fiscal year 2013
    
    
    1,044Fiscal year 2014
    
    
    1,023Thereafter
    
    
    9,706$
    15,367
  -8-




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##### Table of Contents



Goodwill increased by $1,220,000 during the first nine months of 2009, $220,000 of
which related to the acquisition of certain assets of Wuxi Chenghao and $1,000,000 of
which resulted from the release of escrow funds held in connection with the
acquisition of the outstanding stock of Rader, as discussed in Note 2.
 6.
    
    Accrued Warranty
 The Company offers a one-year warranty on a majority of its products. Warranty is
accrued as a percentage of sales, based upon historical experience, on a monthly basis
and is included in accrued expenses and other current liabilities. The following is
an analysis of accrued warranty for the nine-month periods ended October 3, 2009 and
September 27, 2008:
 Nine Months EndedOctober 3,
    
    
    September 27,2009
    
    
    2008(in thousands)Beginning balance
    
    $
    2,230
    
    
    $
    2,194Accrual of warranty expense
    
    
    1,364
    
    
    
    1,854Warranty costs incurred
    
    
    (1,201
    )
    
    
    (1,511
    )Ending balance
    
    $
    2,393
    
    
    $
    2,537
 7.
    
    Long-Term Debt
 Long-term debt consists of the following, with the annual interest rates shown:
 October 3,
    
    
    January 3,2009
    
    
    2009(in thousands)U.S. revolving line of credit
    
    $
    17,000
    
    
    $
    21,000U.S. mortgage, interest at 6.45%
    
    
    
    
    
    
    662U.S. term note, interest at 5.00%
    
    
    1,000
    
    
    
    2,00018,000
    
    
    
    23,662Less current portion
    
    
    (1,000
    )
    
    
    (1,662
    )$
    17,000
    
    
    $
    22,000
  -9-




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##### Table of Contents



All amounts borrowed under the U.S. revolving line of credit are due on
September 29, 2011. As of October 3, 2009, interest on the $17,000,000 borrowed
under the U.S. revolving line of credit was payable at the following interest
rates on the following principal amounts for the periods ending on the dates
indicated:
 Principal
    
    
    Expiration of
    
    
    Per AnnumAmount
    
    
    Interest Rate Period
    
    
    RateThree-year interest rate swap
    
    $
    5,000,000
    *
    
    
    10/13/2009
    
    
    
    6.085
    %Two-year interest rate swap
    
    
    3,000,000
    **
    
    
    10/31/2009
    
    
    
    5.385
    %Two-year interest rate swap
    
    
    2,000,000
    
    
    
    11/30/2009
    
    
    
    4.925
    %Three-year interest rate swap
    
    
    2,000,000
    
    
    
    9/24/2010
    
    
    
    5.665
    %Four-year interest rate swap
    
    
    5,000,000
    
    
    
    10/13/2010
    
    
    
    6.095
    %$
    17,000,000
 
 *
    
    Paid in full on October 13, 2009.**
    
    Paid in full on October 30, 2009. Following the expiration of each interest rate swap agreement, the applicable unpaid
principal will bear interest at a variable rate based upon either the lenders prime
rate or on 1, 2, 3 or 6 month LIBOR, at the option of the Company.
 8.
    
    Earnings Per Share
 Basic earnings per share represents net income divided by the weighted average number
of common shares outstanding. Diluted earnings per share is calculated similarly,
except that the denominator includes the weighted average number of common shares
outstanding plus the dilutive effect of stock options and restricted stock units.
 The Companys basic and diluted earnings per share are calculated as follows:
 For the Three Months Ended October 3, 2009Net IncomeAvailableTo Common
    
    
    
    
    
    
    Earnings(Dollars and Shares in Thousands except Per Share Data)
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    6,768
    
    
    
    2,831
    
    
    $
    2.39Common share equivalent
of outstanding options
and restricted stock units
    
    
    
    
    
    
    56
    
    
    
    (0.05
    )Diluted
    
    $
    6,768
    
    
    
    2,887
    
    
    $
    2.34
  -10-




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##### Table of Contents



For the Three Months Ended September 27, 2008Net IncomeAvailableTo Common
    
    
    
    
    
    
    Earnings(Dollars and Shares in Thousands except Per Share Data)
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    6,767
    
    
    
    2,769
    
    
    $
    2.44Common share equivalent
of outstanding options
    
    
    
    
    
    
    122
    
    
    
    (0.10
    )Diluted
    
    $
    6,767
    
    
    
    2,891
    
    
    $
    2.34
 For the Nine Months Ended October 3, 2009Net IncomeAvailableTo Common
    
    
    
    
    
    
    Earnings(Dollars and Shares in Thousands except Per Share Data)
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    16,473
    
    
    
    2,816
    
    
    $
    5.85Common share equivalent
of outstanding options and restricted stock units
    
    
    
    
    
    
    49
    
    
    
    (0.10
    )Diluted
    
    $
    16,473
    
    
    
    2,865
    
    
    $
    5.75
 For the Nine Months Ended September 27, 2008Net IncomeAvailableTo Common
    
    
    
    
    
    
    Earnings(Dollars and Shares in Thousands except Per Share Data)
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    19,576
    
    
    
    2,740
    
    
    $
    7.14Common share equivalent
of outstanding options
    
    
    
    
    
    
    120
    
    
    
    (0.30
    )Diluted
    
    $
    19,576
    
    
    
    2,860
    
    
    $
    6.84
 9.
    
    Share-Based Compensation
 There was no prospective cost of stock option compensation expensed in the first nine
months of 2009 or 2008, and there were no stock options granted in the first nine
months of 2009 or in fiscal year 2008.
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##### Table of Contents



The following table provides a summary of the Companys stock option activity for the
nine months ended October 3, 2009:
 Weightedaverageoption
    
    
    AggregateShares
    
    
    exercise
    
    
    Intrinsic
    
    
    Weighted averageunder
    
    
    price per
    
    
    value
    
    
    remaining optionoption
    
    
    share
    
    
    ($000)
    
    
    term (in years)Options
    
    
    Optionsoutstanding
    
    
    exercisableBalance, January 3, 2009
    
    
    117,000
    
    
    $
    13.72
    
    
    $
    8,176
    
    
    
    2.48
    
    
    
    2.48Exercised
    
    
    (17,000
    )
    
    
    15.90Balance, April 4, 2009
    
    
    100,000
    
    
    
    13.35
    
    
    $
    5,519
    
    
    
    2.47
    
    
    
    2.47Exercised
    
    
    (17,000
    )
    
    
    12.93Balance, July 4, 2009
    
    
    83,000
    
    
    
    13.44
    
    
    $
    5,504
    
    
    
    2.31
    
    
    
    2.31Exercised
    
    
    (30,000
    )
    
    
    12.20Balance, October 3, 2009
    
    
    53,000
    
    
    $
    14.15
    
    
    $
    4,232
    
    
    
    2.22
    
    
    
    2.22
 The aggregate intrinsic value at October 3, 2009 represents (i) the difference between
the Companys closing stock price of $93.99 at October 3, 2009 and the weighted
average option exercise price per share on that date of $14.15 multiplied by (ii) the
number of shares underlying outstanding options on that date. The aggregate intrinsic
value at the other dates above was computed in a similar fashion, using the
appropriate information as of those dates.
 The Company issued 2,500 shares of restricted common stock in February 2008 and 9,000
shares of restricted common stock in July 2008, with each grant vesting on the
four-year anniversary of the date of grant. Compensation expense related to this
restricted stock is recognized ratably over the four years based on the fair values of
the shares at their respective grant dates, which were $117.00 per share in February
2008 and $130.66 per share in July 2008.
 The Company issued 11,550 shares of restricted common stock units in May 2009 which
vest on the four-year anniversary of the date of grant. Compensation expense related to
these restricted stock units is recognized ratably over the four years based on the
fair value of the underlying shares at the date of grant, which was $70.81 per share.
  -12-




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##### Table of Contents



10.
    
    Comprehensive Income
 For the three and nine-month periods ended October 3, 2009 and September 27,
2008, the following table sets forth the Companys comprehensive income:
 Three Months Ended
    
    
    Nine Months EndedOctober 3,
    
    
    September 27,
    
    
    October 3,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Net income
    
    $
    6,768
    
    
    $
    6,767
    
    
    $
    16,473
    
    
    $
    19,576Unrealized gain (loss) on interest rate
swaps, net of tax
    
    
    115
    
    
    
    (48
    )
    
    
    317
    
    
    
    (19
    )Foreign currency translation gain (loss)
    
    
    3,032
    
    
    
    (3,458
    )
    
    
    3,063
    
    
    
    757Comprehensive income
    
    $
    9,915
    
    
    $
    3,261
    
    
    $
    19,853
    
    
    $
    20,314
 11.
    
    Management Geographic Information
 The Company is engaged in one business segment  material handling equipment and
systems. The Company operates in two primary geographic locations  North and South
America (the Americas) and Europe, the Middle East, Africa and Asia (EMEA/Asia).
For the three and nine-month periods ended October 3, 2009 and September 27, 2008, the
following table sets forth the Companys geographic information:
 EMEA/Americas
    
    
    Asia
    
    
    Eliminations
    
    
    Consolidated(in thousands)THREE MONTHS ENDEDOctober 3, 2009RevenuesSales to unaffiliated customers
    
    $
    34,245
    
    
    $
    13,076
    
    
    $
    
    
    
    $
    47,321Sales to affiliates
    
    
    2,631
    
    
    
    1,291
    
    
    
    (3,922
    )
    
    
    Total sales
    
    $
    36,876
    
    
    $
    14,367
    
    
    $
    (3,922
    )
    
    $
    47,321Operating income
    
    $
    6,516
    
    
    $
    1,139
    
    
    $
    33
    
    
    $
    7,688Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (252
    )Gain on sale of investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,972Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,408
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##### Table of Contents



EMEA/Americas
    
    
    Asia
    
    
    Eliminations
    
    
    Consolidated(in thousands)THREE MONTHS ENDEDSeptember 27, 2008RevenuesSales to unaffiliated customers
    
    $
    37,047
    
    
    $
    22,584
    
    
    $
    
    
    
    $
    59,631Sales to affiliates
    
    
    2,430
    
    
    
    1,117
    
    
    
    (3,547
    )
    
    
    Total sales
    
    $
    39,477
    
    
    $
    23,701
    
    
    $
    (3,547
    )
    
    $
    59,631Operating income
    
    $
    4,925
    
    
    $
    4,487
    
    
    $
    50
    
    
    $
    9,462Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (179
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,283
 EMEA/Americas
    
    
    Asia
    
    
    Eliminations
    
    
    Consolidated(in thousands)NINE MONTHS ENDEDOctober 3, 2009RevenuesSales to unaffiliated customers
    
    $
    109,023
    
    
    $
    38,021
    
    
    $
    
    
    
    $
    147,044Sales to affiliates
    
    
    6,327
    
    
    
    3,317
    
    
    
    (9,644
    )
    
    
    Total sales
    
    $
    115,350
    
    
    $
    41,338
    
    
    $
    (9,644
    )
    
    $
    147,044Operating income
    
    $
    19,915
    
    
    $
    3,089
    
    
    $
    93
    
    
    $
    23,097Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (846
    )Gain on sale of investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,972Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    25,223
 EMEA/Americas
    
    
    Asia
    
    
    Eliminations
    
    
    Consolidated(in thousands)NINE MONTHS ENDEDSeptember 27, 2008RevenuesSales to unaffiliated customers
    
    $
    114,918
    
    
    $
    62,321
    
    
    $
    
    
    
    $
    177,239Sales to affiliates
    
    
    7,057
    
    
    
    3,757
    
    
    
    (10,814
    )
    
    
    Total sales
    
    $
    121,975
    
    
    $
    66,078
    
    
    $
    (10,814
    )
    
    $
    177,239Operating income
    
    $
    16,467
    
    
    $
    11,775
    
    
    $
    11
    
    
    $
    28,253Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (804
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    27,449
  -14-




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##### Table of Contents



For the three and nine-month periods ended October 3, 2009 and September 27, 2008, the
following table sets forth revenues from external customers:
 Three Months Ended
    
    
    Nine Months EndedOctober 3,
    
    
    September 27,
    
    
    October 3,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)AmericasU.S.
    
    $
    26,744
    
    
    $
    28,302
    
    
    $
    85,647
    
    
    $
    83,296Canada
    
    
    1,498
    
    
    
    3,022
    
    
    
    6,767
    
    
    
    13,547All others
    
    
    6,003
    
    
    
    5,723
    
    
    
    16,609
    
    
    
    18,075Total
    
    
    34,245
    
    
    
    37,047
    
    
    
    109,023
    
    
    
    114,918EMEA/AsiaChina
    
    
    1,627
    
    
    
    1,765
    
    
    
    3,943
    
    
    
    4,263Germany
    
    
    1,746
    
    
    
    3,130
    
    
    
    5,223
    
    
    
    10,136South Korea
    
    
    1,034
    
    
    
    5,224
    
    
    
    1,882
    
    
    
    6,694United Kingdom
    
    
    1,784
    
    
    
    967
    
    
    
    5,784
    
    
    
    5,324All others
    
    
    6,885
    
    
    
    11,498
    
    
    
    21,189
    
    
    
    35,904Total
    
    
    13,076
    
    
    
    22,584
    
    
    
    38,021
    
    
    
    62,321$
    47,321
    
    
    $
    59,631
    
    
    $
    147,044
    
    
    $
    177,239
  -15-




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Introduction
       -16-




---



##### Table of Contents



Critical Accounting Assumptions, Estimates and Policies; Recent Pronouncements
    Results of Operations
 Overview
   -17-




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##### Table of Contents



Foreign Exchange Rates
    -18-




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedOctober 3,
    
    
    
    
    
    
    September 27,
    
    
    October 3,
    
    
    
    
    
    
    September 27,2009
    
    
    
    
    
    
    2008
    
    
    2009
    
    
    
    
    
    
    2008Average U.S. dollar equivalent of
one Swiss franc
    
    
    0.945
    
    
    
    
    
    
    
    0.932
    
    
    
    0.906
    
    
    
    
    
    
    
    0.948% change vs. prior year
    
    
    
    
    
    
    +1.4
    %
    
    
    
    
    
    
    
    
    
    
    -4.4
    %Average U.S. dollar equivalent of
one euro
    
    
    1.434
    
    
    
    
    
    
    
    1.503
    
    
    
    1.369
    
    
    
    
    
    
    
    1.523% change vs. prior year
    
    
    
    
    
    
    -4.6
    %
    
    
    
    
    
    
    
    
    
    
    -10.1
    %Average U.S. dollar equivalent of
one British pound sterling
    
    
    1.637
    
    
    
    
    
    
    
    1.894
    
    
    
    1.548
    
    
    
    
    
    
    
    1.949% change vs. prior year
    
    
    
    
    
    
    -13.6
    %
    
    
    
    
    
    
    
    
    
    
    -20.6
    %Average U.S. dollar equivalent of
one Canadian dollar
    
    
    0.916
    
    
    
    
    
    
    
    0.962
    
    
    
    0.861
    
    
    
    
    
    
    
    0.982% change vs. prior year
    
    
    
    
    
    
    -4.8
    %
    
    
    
    
    
    
    
    
    
    
    -12.3
    %Average U.S. dollar equivalent of
one Swedish krona
    
    
    0.139
    
    
    
    
    
    
    
    0.159
    
    
    
    0.128
    
    
    
    
    
    
    
    0.162% change vs. prior year
    
    
    
    
    
    
    -12.6
    %
    
    
    
    
    
    
    
    
    
    
    -21.0
    %Average Swiss franc equivalent of
one euro
    
    
    1.517
    
    
    
    
    
    
    
    1.613
    
    
    
    1.511
    
    
    
    
    
    
    
    1.607% change vs. prior year
    
    
    
    
    
    
    -5.9
    %
    
    
    
    
    
    
    
    
    
    
    -5.9
    %Average Swiss franc equivalent of
one British pound sterling
    
    
    1.732
    
    
    
    
    
    
    
    2.032
    
    
    
    1.709
    
    
    
    
    
    
    
    2.056% change vs. prior year
    
    
    
    
    
    
    -14.8
    %
    
    
    
    
    
    
    
    
    
    
    -16.9
    %
  -19-




---



##### Table of Contents



Presentation of Results and Analysis
  Three Months Ended
    
    
    Nine Months EndedOctober 3,
    
    
    September 27,
    
    
    October 3,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    58.0
    
    
    
    58.4
    
    
    
    58.5
    
    
    
    57.9Gross profit
    
    
    42.0
    
    
    
    41.6
    
    
    
    41.5
    
    
    
    42.1Selling, general and administrative
    
    
    24.8
    
    
    
    24.6
    
    
    
    24.8
    
    
    
    25.0Research and development
    
    
    0.9
    
    
    
    1.1
    
    
    
    0.9
    
    
    
    1.1Operating income
    
    
    16.3
    
    
    
    15.9
    
    
    
    15.8
    
    
    
    16.0Interest expense, net
    
    
    (0.5
    )
    
    
    (0.3
    )
    
    
    (0.6
    )
    
    
    (0.5
    )Gain on sale of investment
    
    
    6.3
    
    
    
    
    
    
    
    2.0
    
    
    
    Income before income taxes
    
    
    22.1
    
    
    
    15.6
    
    
    
    17.2
    
    
    
    15.5Income tax provision
    
    
    7.8
    
    
    
    4.3
    
    
    
    6.0
    
    
    
    4.5Net income
    
    
    14.3
    %
    
    
    11.3
    %
    
    
    11.2
    %
    
    
    11.0
    %
     -20-




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##### Table of Contents



October 3, 2009
    
    
    January 3, 2009
    
    
    September 27, 2008Backlog (at October 3, 2009
foreign exchange rates, in
thousands of dollars)
    
    $
    50,076
    
    
    $
    69,179
    
    
    $
    74,959
   -21-




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##### Table of Contents



Liquidity and Capital Resources
 Capitalization
  October 3,
    
    
    January 3,(Dollars in Thousands)
    
    2009
    
    
    2009Short-term debt, including current
portion of long-term debt
    
    $
    1,000
    
    
    $
    1,662Long-term debt
    
    
    17,000
    
    
    
    22,000Total debt
    
    
    18,000
    
    
    
    23,662Shareholders equity
    
    
    146,789
    
    
    
    126,052Total debt and shareholders equity
(total capitalization)
    
    $
    164,789
    
    
    $
    149,714Percent total debt to total capitalization
    
    
    11
    %
    
    
    16
    %Percent long-term debt to equity
    
    
    12
    %
    
    
    17
    %Percent total debt to equity
    
    
    12
    %
    
    
    19
    %
   Other Items
     -22-




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##### Table of Contents



Future Payments Under Contractual Obligations
  Risk Factors
  Forward-Looking Statements
   -23-




---



##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  Foreign Exchange Rate Risk
    Interest Rate Risk
   -24-




---



##### Table of Contents



Item 4.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Control over Financial Reporting
   -25-




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 6.
    
    Exhibits.
 31.1
    
    
    Chief Executive Officer Certification pursuant to Rule 13a-14(a)
or 15d-14(a) of the Securities Exchange Act of 193431.2
    
    
    Chief Financial Officer Certification pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of 193432.1
    
    
    Chief Executive Officer and Chief Financial Officer
Certification pursuant to 18 U.S.C. Section 1350
  -26-




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##### Table of Contents



K-TRON INTERNATIONAL, INC.Date:  November 10, 2009
    By:
    ROBERT E. WISNIEWSKIRobert E. WisniewskiSenior Vice President,
Chief Financial Officer and Treasurer
(Duly authorized officer and principal
financial officer of the Registrant)Date:  November 10, 2009
    By:
    ANDREW T. BOYDAndrew T. BoydDirector of Corporate Accounting and Tax
(Duly authorized officer and principal
accounting officer of the Registrant)  -27-




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    
    Chief Executive Officer Certification pursuant to Rule 13a-14(a)
or 15d-14(a) of the Securities Exchange Act of 193431.2
    
    
    Chief Financial Officer Certification pursuant to Rule 13a-14(a)
or 15d-14(a) of the Securities Exchange Act of 193432.1
    
    
    Chief Executive Officer and Chief Financial Officer Certification
pursuant to 18 U.S.C. Section 1350
  -28-