##### 



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF
1934
 For
the quarterly period ended July 2, 2005OR
 o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THESECURITIES 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)
  
   
   þ o
  o þ




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##### 



INDEX
 Page No.PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements.Consolidated Balance Sheets July 2, 2005 (Unaudited) and January 1, 2005
    
    
    1Consolidated Statements of Income and Retained Earnings (Unaudited) for the Three and Six Months Ended July 2, 2005 and July 3, 2004
    
    
    2Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended July 2, 2005 and July 3, 2004
    
    
    3Notes to Consolidated Financial Statements (Unaudited)
    
    
    4  12Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    13 - 20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    
    20 - 21Item 4.
    
    Controls and Procedures.
    
    
    21PART II.
    
    OTHER INFORMATIONItem 4.
    
    Submission of Matters to a Vote of Security Holders.
    
    
    22Item 6.
    
    Exhibits.
    
    
    22SIGNATURES
    
    
    
    
    23




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##### 



PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements .
 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)July 2,
    
    January 1,2005
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    10,904
    
    
    $
    12,443Accounts receivable, net of allowance for
doubtful accounts of $690 and $751
    
    
    18,044
    
    
    
    21,234Inventories, net
    
    
    16,370
    
    
    
    15,096Deferred income taxes
    
    
    938
    
    
    
    938Prepaid expenses and other current assets
    
    
    1,782
    
    
    
    1,779Total current assets
    
    
    48,038
    
    
    
    51,490PROPERTY, PLANT AND EQUIPMENT, net
    
    
    22,704
    
    
    
    25,075PATENTS, net
    
    
    1,662
    
    
    
    1,737GOODWILL
    
    
    2,053
    
    
    
    2,053OTHER INTANGIBLES, net
    
    
    9,858
    
    
    
    9,978NOTES RECEIVABLE AND OTHER ASSETS
    
    
    2,168
    
    
    
    2,353DEFERRED INCOME TAXES
    
    
    315
    
    
    
    330Total assets
    
    $
    86,798
    
    
    $
    93,016LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current portion of long-term debt
    
    $
    4,203
    
    
    $
    4,185Accounts payable
    
    
    5,672
    
    
    
    6,351Accrued expenses and other current liabilities
    
    
    5,867
    
    
    
    7,782Accrued commissions
    
    
    2,170
    
    
    
    2,169Customer advances
    
    
    2,614
    
    
    
    2,536Income taxes payable
    
    
    2,802
    
    
    
    3,477Deferred income taxes
    
    
    1,212
    
    
    
    1,212Total current liabilities
    
    
    24,540
    
    
    
    27,712LONG-TERM DEBT, net of current portion
    
    
    15,335
    
    
    
    18,598DEFERRED INCOME TAXES
    
    
    1,147
    
    
    
    1,147SERIES B JUNIOR PARTICIPATING PREFERRED SHARES,
$.01 par value  authorized 50,000 shares; none issued
    
    
    
    
    
    
    SHAREHOLDERS EQUITY:Preferred stock, $.01 par value  authorized 950,000 shares; none issued
    
    
    
    
    
    
    Common stock, $.01 par value  authorized 50,000,000 shares;
issued 4,566,666 shares and 4,530,416 shares
    
    
    46
    
    
    
    45Paid-in capital
    
    
    18,788
    
    
    
    18,204Retained earnings
    
    
    52,660
    
    
    
    49,101Accumulated other comprehensive income
    
    
    1,796
    
    
    
    5,72373,290
    
    
    
    73,073Treasury stock, 2,002,574 shares  at cost
    
    
    (27,514
    )
    
    
    (27,514
    )Total shareholders equity
    
    
    45,776
    
    
    
    45,559Total liabilities and shareholders equity
    
    $
    86,798
    
    
    $
    93,016
  -1-




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##### 



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
 Three Months Ended
    
    Six Months EndedJuly 2,
    
    July 3,
    
    July 2,
    
    July 3,2005
    
    2004
    
    2005
    
    2004REVENUES:Equipment and parts
    
    $
    28,182
    
    
    $
    25,199
    
    
    $
    54,841
    
    
    $
    49,703Services and freight
    
    
    2,042
    
    
    
    1,863
    
    
    
    3,935
    
    
    
    3,680Total revenues
    
    
    30,224
    
    
    
    27,062
    
    
    
    58,776
    
    
    
    53,383COST OF REVENUES:Equipment and parts
    
    
    15,558
    
    
    
    14,252
    
    
    
    30,287
    
    
    
    27,850Services and freight
    
    
    1,830
    
    
    
    1,460
    
    
    
    3,702
    
    
    
    2,999Total cost of revenues
    
    
    17,388
    
    
    
    15,712
    
    
    
    33,989
    
    
    
    30,849Gross profit
    
    
    12,836
    
    
    
    11,350
    
    
    
    24,787
    
    
    
    22,534OPERATING EXPENSES:Selling, general and administrative
    
    
    8,908
    
    
    
    8,462
    
    
    
    17,403
    
    
    
    16,734Research and development
    
    
    686
    
    
    
    588
    
    
    
    1,351
    
    
    
    1,2379,594
    
    
    
    9,050
    
    
    
    18,754
    
    
    
    17,971Operating income
    
    
    3,242
    
    
    
    2,300
    
    
    
    6,033
    
    
    
    4,563INTEREST (EXPENSE)
    
    
    (259
    )
    
    
    (348
    )
    
    
    (522
    )
    
    
    (714
    )GAIN ON SALE OF OFFICE BUILDING
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164Income before income taxes
    
    
    2,983
    
    
    
    1,952
    
    
    
    5,511
    
    
    
    4,013INCOME TAX PROVISION
    
    
    1,067
    
    
    
    563
    
    
    
    1,952
    
    
    
    1,202NET INCOME
    
    
    1,916
    
    
    
    1,389
    
    
    
    3,559
    
    
    
    2,811RETAINED EARNINGS:Beginning of period
    
    
    50,744
    
    
    
    43,913
    
    
    
    49,101
    
    
    
    42,491End of period
    
    $
    52,660
    
    
    $
    45,302
    
    
    $
    52,660
    
    
    $
    45,302EARNINGS PER SHARE:Basic
    
    $
    0.75
    
    
    $
    0.56
    
    
    $
    1.40
    
    
    $
    1.13Diluted
    
    $
    0.71
    
    
    $
    0.53
    
    
    $
    1.32
    
    
    $
    1.08Weighted average common shares
outstanding
    
    
    2,550,000
    
    
    
    2,491,000
    
    
    
    2,543,000
    
    
    
    2,477,000Weighted average common and
common equivalents shares
outstanding
    
    
    2,714,000
    
    
    
    2,617,000
    
    
    
    2,699,000
    
    
    
    2,599,000
  -2-




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##### 



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJuly 2,
    
    July 3,2005
    
    2004OPERATING ACTIVITIES:Net income
    
    $
    3,559
    
    
    $
    2,811Adjustments to reconcile net income to net cash provided by operating activities:Gain on disposition of asset
    
    
    
    
    
    
    (164
    )Depreciation and amortization
    
    
    2,084
    
    
    
    2,021Changes in assets and liabilities:Accounts receivable, net
    
    
    1,926
    
    
    
    (246
    )Inventories, net
    
    
    (2,060
    )
    
    
    (1,773
    )Prepaid expenses and other current assets
    
    
    (45
    )
    
    
    (334
    )Other assets
    
    
    192
    
    
    
    122Accounts payable
    
    
    (229
    )
    
    
    258Accrued expenses and other current liabilities
    
    
    (1,830
    )
    
    
    1,697Net cash provided by operating activities
    
    
    3,597
    
    
    
    4,392INVESTING ACTIVITIES:Proceeds from disposition of assets
    
    
    
    
    
    
    996Capital expenditures
    
    
    (861
    )
    
    
    (712
    )Other
    
    
    (14
    )
    
    
    (49
    )Net cash (used in) provided by investing activities
    
    
    (875
    )
    
    
    235FINANCING ACTIVITIES:Net (repayments) borrowings under lines of credit
    
    
    (700
    )
    
    
    1,856Proceeds from issuance of long-term debt
    
    
    
    
    
    
    4,000Principal payments on long-term debt
    
    
    (2,531
    )
    
    
    (6,873
    )Proceeds from issuance of common stock
    
    
    312
    
    
    
    352Net cash used in financing activities
    
    
    (2,919
    )
    
    
    (665
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
    
    
    (1,342
    )
    
    
    42NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,539
    )
    
    
    4,004CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    12,443
    
    
    
    4,506End of period
    
    $
    10,904
    
    
    $
    8,510
  -3-




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##### 



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  July 2, 2005
 1.
    
    Basis of PresentationThe 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.The unaudited financial statements herein should be read in conjunction with the
Companys annual report on Form 10-K for the year ended January 1, 2005 which was
previously filed with the Securities and Exchange Commission.Certain reclassifications were made to the prior periods consolidated financial
statements to conform them to the current period presentation.2.
    
    New Accounting PronouncementsIn December 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment. This
statement requires all entities to recognize compensation expense for all
share-based payments granted to employees in an amount equal to their fair value. On
April 14, 2005, the Securities and Exchange Commission adopted a new rule amending
the effective date for SFAS No. 123(R). The new rule allows registrants to
implement SFAS No. 123(R) at the beginning of their next fiscal year, instead of the
next interim period, that begins after June 15, 2005. None of the accounting
provisions of SFAS No. 123(R) are affected by the new rule. The new standard allows
two different methods of transition. Note 9 contains pro forma disclosures regarding
the effect on net income and earnings per share as if the Company had applied the
fair value method of accounting for stock-based compensation. Depending on the
model used to calculate stock-based compensation expense in the future and other
requirements of SFAS No. 123(R), the pro forma disclosure may not be indicative of
the stock-based compensation expense that will be recognized in the Companys future
financial statements. The Company expects to implement the new standard in the
first quarter of fiscal year 2006 which will begin January 1, 2006, and it is
currently evaluating the new standard and models which may be used to calculate
future stock-based compensation expense. The Company is currently unable to
determine what the impact of the new standard will be on its results of operations
or financial position.In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of
ARB No. 43, Chapter 4. SFAS No. 151 clarifies the accounting for abnormal amounts
 -4-




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##### 



of idle facility expense, freight, handling costs and wasted material and requires
that such items be recognized as current-period charges regardless of whether they
meet the so abnormal criterion outlined in Accounting Research Bulletin No. 43.
SFAS No. 151 also introduces the concept of normal capacity and requires the
allocation of fixed production overheads to inventory based on the normal capacity
of the production facilities. Unallocated overheads must be recognized as an
expense in the period incurred. SFAS No. 151 is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. While still evaluating
the impact of this statement, the Company does not currently believe that it will
have a material impact on its consolidated financial statements.In October 2004, the American Jobs Creation Act of 2004 (the Jobs Act) was signed
into law, allowing U.S. companies to repatriate accumulated income from abroad by
providing a one-time deduction of 85% for certain dividends from controlled foreign
corporations. This deduction is subject to certain limitations, and numerous
provisions of the Jobs Act contain uncertainties that require interpretation and
evaluation. The Company is currently evaluating whether, and to what extent, to
repatriate accumulated income from abroad under the provisions of the Jobs Act. Until
such evaluation is complete, the Company will not accrue income taxes on the
accumulated undistributed earnings of its foreign subsidiaries, as these earnings are
currently expected to be reinvested indefinitely.3.
    
    Supplemental Disclosures of Cash Flow InformationThe Company considers all highly liquid short-term investments purchased with an
original maturity of three months or less to be cash equivalents.Cash paid for interest in the six-month periods ended July 2, 2005 and July 3, 2004
was $575,000 and $712,000 and for income taxes was $2,524,000 and $568,000.4.
    
    InventoriesInventories consist of the following:
 July 2,
    
    January 1,2005
    
    2005(in thousands)Components
    
    $
    13,882
    
    
    $
    14,275Work-in-process
    
    
    3,666
    
    
    
    2,217Finished goods
    
    
    78
    
    
    
    79Inventory reserves
    
    
    (1,256
    )
    
    
    (1,475
    )$
    16,370
    
    
    $
    15,096
 -5-




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##### 



5.
    
    Intangible Assets
 July 2, 2005
    
    January 1, 2005Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    Amortization(in thousands)Amortized intangible assetsPatents
    
    $
    2,814
    
    
    $
    1,152
    
    
    $
    2,799
    
    
    $
    1,062Drawings
    
    
    3,550
    
    
    
    284
    
    
    
    3,550
    
    
    
    213Customer relationships
    
    
    4,898
    
    
    
    196
    
    
    
    4,898
    
    
    
    147$
    11,262
    
    
    $
    1,632
    
    
    $
    11,247
    
    
    $
    1,422Unamortized intangible assetsTrademarks and tradenames
    
    $
    1,890
    
    
    
    
    
    
    $
    1,890
 The amortized intangible assets are being amortized on the straight-line basis
(half-year expense in the year of acquisition) over the expected period of benefits,
which ranges from 17 to 50 years. The weighted average life of the amortizable
assets is 37 years. The amortization expense of intangible assets for the six-month
periods ended July 2, 2005 and July 3, 2004 was $210,000 and $210,000.6.
    
    Accrued WarrantyThe Company offers a one-year warranty on a majority of its products. Warranty is
accrued as a percentage of sales on a monthly basis and is included in accrued
expenses and other current liabilities. The following is an analysis of accrued
warranty for the six-month periods ended July 2, 2005 and July 3, 2004.
 Six Months EndedJuly 2,
    
    July 3,2005
    
    2004(in thousands)Beginning balance
    
    $
    1,257
    
    
    $
    967Accrual of warranty expense
    
    
    737
    
    
    
    753Warranty costs incurred
    
    
    (750
    )
    
    
    (770
    )Foreign exchange adjustment
    
    
    (56
    )
    
    
    3Ending balance
    
    $
    1,188
    
    
    $
    953
 -6-




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##### 



7.
    
    Long-Term DebtLong-term debt consists of the following, with the annual interest rates indicated
being those in effect at July 2, 2005:
 July 2,
    
    January 1,2005
    
    2005(in thousands)U.S. mortgage, interest at 6.45%
    
    $
    1,815
    
    
    $
    1,897U.S. line of credit, interest at 6.00%
    
    
    1,400
    
    
    
    2,100U.S. term facilities, interest at 5.11% to 6.16%
    
    
    16,117
    
    
    
    18,467Other
    
    
    206
    
    
    
    31919,538
    
    
    
    22,783Less current portion
    
    
    (4,203
    )
    
    
    (4,185
    )$
    15,335
    
    
    $
    18,598
 8.
    
    Earnings Per ShareThe Company previously adopted SFAS No. 128, Earnings Per Share, which requires
that the Company report Basic and Diluted Earnings Per Share. Basic Earnings Per
Share represents net income less preferred dividends divided by the weighted average
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 options, warrants, convertible
securities and other instruments with dilutive effects if exercised.
 -7-




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##### 



For the Three Months Ended July 2, 2005Net Income Available(Dollars and Shares in Thousands
    
    To Common
    
    
    
    
    
    Earningsexcept Per Share Data)
    
    Shareholders
    
    Shares
    
    Per ShareBasic
    
    $
    1,916
    
    
    
    2,550
    
    
    $
    0.75Common Share Equivalent
of Outstanding Options
    
    
    
    
    
    
    164
    
    
    
    (0.04
    )Diluted
    
    $
    1,916
    
    
    
    2,714
    
    
    $
    0.71
 For the Three Months Ended July 3, 2004Net Income Available(Dollars and Shares in Thousands
    
    To Common
    
    
    
    
    
    Earningsexcept Per Share Data)
    
    Shareholders
    
    Shares
    
    Per ShareBasic
    
    $
    1,389
    
    
    
    2,491
    
    
    $
    0.56Common Share Equivalent
of Outstanding Options
    
    
    
    
    
    
    126
    
    
    
    (0.03
    )Diluted
    
    $
    1,389
    
    
    
    2,617
    
    
    $
    0.53
 For the Six Months Ended July 2, 2005Net Income Available(Dollars and Shares in Thousands
    
    To Common
    
    
    
    
    
    Earningsexcept Per Share Data)
    
    Shareholders
    
    Shares
    
    Per ShareBasic
    
    $
    3,559
    
    
    
    2,543
    
    
    $
    1.40Common Share Equivalent
of Outstanding Options
    
    
    
    
    
    
    156
    
    
    
    (0.08
    )Diluted
    
    $
    3,559
    
    
    
    2,699
    
    
    $
    1.32
 For the Six Months Ended July 3, 2004Net Income Available(Dollars and Shares in Thousands
    
    To Common
    
    
    
    
    
    Earningsexcept Per Share Data)
    
    Shareholders
    
    Shares
    
    Per ShareBasic
    
    $
    2,811
    
    
    
    2,477
    
    
    $
    1.13Common Share Equivalent
of Outstanding Options
    
    
    
    
    
    
    122
    
    
    
    (0.05
    )Diluted
    
    $
    2,811
    
    
    
    2,599
    
    
    $
    1.08
 The Companys Diluted Earnings Per Share shown in the table above are based on the
weighted average number of common and common equivalent shares outstanding during a
 -8-




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##### 



given time period. Such average shares include the weighted average number of common
shares outstanding plus the shares issuable upon exercise of stock options after the
assumed repurchase of common shares with the related proceeds.9.
    
    Stock-Based CompensationAs permitted under SFAS No. 123, Accounting for Stock-Based Compensation, as amended
by SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure,
an amendment of FASB Statement No. 123, the Company has elected to continue to
account for compensation cost using the intrinsic value-based method of accounting as
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees. SFAS No. 123 requires the Company to disclose pro forma net income and
pro forma earnings per share amounts, in each case as if compensation expense were
recognized for options granted after fiscal year 1994. Using this approach, net income
and earnings per share would have been reduced to the pro forma amounts indicated in
the following table:
 Three Months Ended
    
    Six Months EndedJuly 2,
    
    July 3,
    
    July 2,
    
    July 3,2005
    
    2004
    
    2005
    
    2004(in thousands, except per share)Net income  as reported
    
    $
    1,916
    
    
    $
    1,389
    
    
    $
    3,559
    
    
    $
    2,811Deduct stock option employee
compensation expense determined,
net of related tax effect
    
    
    (55
    )
    
    
    (52
    )
    
    
    (82
    )
    
    
    (83
    )Net income  pro forma
    
    $
    1,861
    
    
    $
    1,337
    
    
    $
    3,477
    
    
    $
    2,728Basic earnings per share  as reported
    
    $
    0.75
    
    
    $
    0.56
    
    
    $
    1.40
    
    
    $
    1.13Basic earnings per share  pro forma
    
    
    0.73
    
    
    
    0.54
    
    
    
    1.37
    
    
    
    1.10Diluted earnings per share  as reported
    
    
    0.71
    
    
    
    0.53
    
    
    
    1.32
    
    
    
    1.08Diluted earnings per share  pro forma
    
    
    0.69
    
    
    
    0.51
    
    
    
    1.29
    
    
    
    1.05
 This pro forma impact may not be representative of the effects for future years, and
could increase if additional options are granted and amortized over the vesting
period. For disclosure purposes, the fair value of each stock option granted is
estimated on the date of grant using the Black-Scholes option-pricing model. The
following were the weighted average assumptions for the grants in 2005 and 2004: no
dividend yield, expected volatility of 32.77% and 31.45%, risk-free interest rate of
3.77% and 4.15% and expected life of 6.00 years.The Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully transferable.
In addition, option-pricing models require the input of subjective assumptions,
including the expected stock price volatility.
 -9-




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##### 



10.
    
    Comprehensive IncomeComprehensive income is the total of net income, the change in the unrealized gain or
loss on the Companys interest rate swap, net of tax, and the change in foreign
currency translation adjustments, all for a given period, which are the Companys
only non-owner changes in equity. For the three and six-month periods ended July
2, 2005 and July 3, 2004, the following table sets forth the Companys
comprehensive income:
 Three Months Ended
    
    Six Months EndedJuly 2,
    
    July 3,
    
    July 2,
    
    July 3,2005
    
    2004
    
    2005
    
    2004(in thousands)Net income
    
    $
    1,916
    
    
    $
    1,389
    
    
    $
    3,559
    
    
    $
    2,811Unrealized gain (loss) on
interest rate swap, net of tax
    
    
    (10
    )
    
    
    61
    
    
    
    24
    
    
    
    45Foreign currency translation gain (loss)
    
    
    (2,275
    )
    
    
    1,266
    
    
    
    (3,951
    )
    
    
    240Comprehensive income (loss)
    
    $
    (369
    )
    
    $
    2,716
    
    
    $
    (368
    )
    
    $
    3,096
 11.
    
    Management Geographic InformationThe Company has adopted the provisions of SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information. SFAS No. 131 introduced a model for segment
reporting called the management approach. The management approach is based on the way
that the chief operating decision-maker organizes segments within a company for making
operating decisions and assessing performance. The Company is engaged in one business
segment, material handling equipment and systems. The Company operates in two primary
geographic locations, North and South America (the Americas) and Europe, the Middle
East, Africa and Asia (EMEA/Asia).For the three and six-month periods ended July 2, 2005 and July 3, 2004, the following
table sets forth the Companys geographic information:
 EMEA/
    
    Elimi-
    
    Consoli-Americas
    
    Asia
    
    nations
    
    dated(in thousands)THREE MONTHS ENDED
July 2, 2005RevenuesSales to unaffiliated customers
    
    $
    18,415
    
    
    $
    11,809
    
    
    $
    
    
    
    $
    30,224Sales to affiliates
    
    
    702
    
    
    
    893
    
    
    
    (1,595
    )
    
    
    Total sales
    
    $
    19,117
    
    
    $
    12,702
    
    
    $
    (1,595
    )
    
    $
    30,224Operating income
    
    $
    2,423
    
    
    $
    804
    
    
    $
    15
    
    
    $
    3,242Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (259
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,983
 -10-




---



##### 



EMEA/
    
    Elimi-
    
    Consoli-Americas
    
    Asia
    
    nations
    
    dated(in thousands)THREE MONTHS ENDED
July 3, 2004RevenuesSales to unaffiliated customers
    
    $
    15,098
    
    
    $
    11,964
    
    
    $
    
    
    
    $
    27,062Sales to affiliates
    
    
    965
    
    
    
    855
    
    
    
    (1,820
    )
    
    
    Total sales
    
    $
    16,063
    
    
    $
    12,819
    
    
    $
    (1,820
    )
    
    $
    27,062Operating income
    
    $
    1,164
    
    
    $
    1,173
    
    
    $
    (37
    )
    
    $
    2,300Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (348
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,952
 EMEA/
    
    Elimi-
    
    Consoli-Americas
    
    Asia
    
    nations
    
    dated(in thousands)SIX MONTHS ENDED
July 2, 2005RevenuesSales to unaffiliated customers
    
    $
    35,528
    
    
    $
    23,248
    
    
    $
    
    
    
    $
    58,776Sales to affiliates
    
    
    1,455
    
    
    
    1,648
    
    
    
    (3,103
    )
    
    
    Total sales
    
    $
    36,983
    
    
    $
    24,896
    
    
    $
    (3,103
    )
    
    $
    58,776Operating income
    
    $
    4,822
    
    
    $
    1,166
    
    
    $
    45
    
    
    $
    6,033Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (522
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,511
 EMEA/
    
    Elimi-
    
    Consoli-Americas
    
    Asia
    
    nations
    
    dated(in thousands)SIX MONTHS ENDED
July 3, 2004RevenuesSales to unaffiliated customers
    
    $
    29,891
    
    
    $
    23,492
    
    
    $
    
    
    
    $
    53,383Sales to affiliates
    
    
    1,660
    
    
    
    1,681
    
    
    
    (3,341
    )
    
    
    Total sales
    
    $
    31,551
    
    
    $
    25,173
    
    
    $
    (3,341
    )
    
    $
    53,383Operating income
    
    $
    2,528
    
    
    $
    2,106
    
    
    $
    (71
    )
    
    $
    4,563Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (714
    )Gain on sale of office building
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,013
 -11-




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##### 



For the three and six-month periods ended July 2, 2005 and July 3, 2004, the following
table sets forth revenues from external customers:
 Three Months Ended
    
    Six Months EndedJuly 2,
    
    July 3,
    
    July 2,
    
    July 3,2005
    
    2004
    
    2005
    
    2004(in thousands)AmericasU.S.
    
    $
    15,258
    
    
    $
    12,330
    
    
    $
    29,952
    
    
    $
    25,073All others
    
    
    3,157
    
    
    
    2,768
    
    
    
    5,576
    
    
    
    4,818Total
    
    
    18,415
    
    
    
    15,098
    
    
    
    35,528
    
    
    
    29,891EMEA/AsiaFrance
    
    
    1,413
    
    
    
    1,134
    
    
    
    2,386
    
    
    
    2,087Germany
    
    
    1,898
    
    
    
    2,235
    
    
    
    3,718
    
    
    
    4,069All others
    
    
    8,498
    
    
    
    8,595
    
    
    
    17,144
    
    
    
    17,336Total
    
    
    11,809
    
    
    
    11,964
    
    
    
    23,248
    
    
    
    23,492$
    30,224
    
    
    $
    27,062
    
    
    $
    58,776
    
    
    $
    53,383
 -12-




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Introduction
    Critical Accounting Policies and Estimates
   -13-




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##### 



Results of Operations
 Overview
  Foreign Exchange Rates
   -14-




---



##### 



Three Months Ended
    
    Six Months EndedJuly 2,
    
    
    
    
    
    July 3,
    
    July 2,
    
    
    
    
    
    July 3,2005
    
    
    
    
    
    2004
    
    2005
    
    
    
    
    
    2004Average U.S. dollar equivalent of
one Swiss franc
    
    
    0.812
    
    
    
    
    
    
    
    0.787
    
    
    
    0.824
    
    
    
    
    
    
    
    0.790% change vs. prior year
    
    
    
    
    
    
    3.2
    %
    
    
    
    
    
    
    
    
    
    
    4.3
    %Average U.S. dollar equivalent of
one euro
    
    
    1.254
    
    
    
    
    
    
    
    1.207
    
    
    
    1.283
    
    
    
    
    
    
    
    1.226% change vs. prior year
    
    
    
    
    
    
    3.9
    %
    
    
    
    
    
    
    
    
    
    
    4.6
    %Average U.S. dollar equivalent of
one British pound sterling
    
    
    1.848
    
    
    
    
    
    
    
    1.809
    
    
    
    1.869
    
    
    
    
    
    
    
    1.823% change vs. prior year
    
    
    
    
    
    
    2.2
    %
    
    
    
    
    
    
    
    
    
    
    2.5
    %Average Swiss franc equivalent of
one euro
    
    
    1.544
    
    
    
    
    
    
    
    1.534
    
    
    
    1.557
    
    
    
    
    
    
    
    1.552% change vs. prior year
    
    
    
    
    
    
    0.7
    %
    
    
    
    
    
    
    
    
    
    
    0.3
    %Average Swiss franc equivalent of
one British pound sterling
    
    
    2.276
    
    
    
    
    
    
    
    2.299
    
    
    
    2.268
    
    
    
    
    
    
    
    2.308% change vs. prior year
    
    
    
    
    
    
    -1.0
    %
    
    
    
    
    
    
    
    
    
    
    -1.7
    %
 -15-




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##### 



Presentation of Results and Analysis
  Three Months Ended
    
    Six Months EndedJuly 2,
    
    July 3,
    
    July 2,
    
    July 3,2005
    
    2004
    
    2005
    
    2004Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    57.5
    
    
    
    58.1
    
    
    
    57.8
    
    
    
    57.8Gross profit
    
    
    42.5
    
    
    
    41.9
    
    
    
    42.2
    
    
    
    42.2Selling, general and administrative
    
    
    29.5
    
    
    
    31.2
    
    
    
    29.6
    
    
    
    31.4Research and development
    
    
    2.3
    
    
    
    2.2
    
    
    
    2.3
    
    
    
    2.3Operating income
    
    
    10.7
    
    
    
    8.5
    
    
    
    10.3
    
    
    
    8.5Interest (expense)
    
    
    (0.8
    )
    
    
    (1.3
    )
    
    
    (0.9
    )
    
    
    (1.3
    )Gain on sale of office building
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Income before income taxes
    
    
    9.9
    %
    
    
    7.2
    %
    
    
    9.4
    %
    
    
    7.5
    %
  July 2, 2005
    
    January 1, 2005
    
    July 3, 2004Backlog (at July 2, 2005
exchange rates, in thousands
of dollars)
    
    $
    23,827
    
    
    $
    20,947
    
    
    $
    20,973
   -16-




---



##### 



-17-




---



##### 



Liquidity and Capital Resources
 Capitalization
  July 2,
    
    January 1,
    
    January 3,(Dollars in Thousands)
    
    2005
    
    2005
    
    2004Short-term debt, including current
portion of long-term debt
    
    $
    4,203
    
    
    $
    4,185
    
    
    $
    3,541Long-term debt
    
    
    15,335
    
    
    
    18,598
    
    
    
    24,574Total debt
    
    
    19,538
    
    
    
    22,783
    
    
    
    28,115Shareholders equity
    
    
    45,776
    
    
    
    45,559
    
    
    
    35,114Total debt and shareholders equity (total capitalization)
    
    $
    65,314
    
    
    $
    68,342
    
    
    $
    63,229Percent total debt to total capitalization
    
    
    30
    %
    
    
    33
    %
    
    
    44
    %Percent long-term debt to equity
    
    
    34
    %
    
    
    41
    %
    
    
    70
    %Percent total debt to equity
    
    
    43
    %
    
    
    50
    %
    
    
    80
    %
   Other Items
     -18-




---



##### 



Future Payments Under Contractual Obligations
  Forward-Looking Statements and Risk Factors
   -19-




---



##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk .
  Foreign Exchange Rate Risk
    -20-




---



##### 



Interest Rate Risk
  Item 4. Controls and Procedures .
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Control over Financial Reporting
  -21-




---



##### 



PART II. OTHER INFORMATION
 Item 4. Submission of Matters to a Vote of Security Holders .
 (a)
    
    The Annual Meeting of Shareholders of the Company was held on May 13, 2005.(b)
    
    Not applicable(c)
    
    Shareholders of the Company were asked to vote on a proposal to elect
one Class IV director. The Board of Directors nominated Edward B. Cloues, II
as the Class IV director. There were no other nominations. Mr. Cloues was
elected as the Class IV director, with the result of the vote being as follows:
 Number of VotesFor
    
    WithheldEdward B. Cloues, II
    
    
    2,068,000
    
    
    
    141,618
 Directors are elected by a plurality of the votes cast; therefore, votes cast in
the election could not be recorded against or as an abstention, nor could broker
non-votes be recorded.(d)
    
    Not applicable
 Item 6. Exhibits .
 10.1
    
    Amendment No. 2 to the Credit Agreement, dated as of June 28,
2005, amending the Credit Agreement, dated as of January 3, 2003, as
previously amended, among Pennsylvania Crusher Corporation, the Lenders to
that Credit Agreement and National City Bank, as Agent31.1
    
    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
 -22-




---



##### 



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 K-TRON INTERNATIONAL, INC.Date: August 3, 2005
    
    By:
    
    RONALD R. REMICKRonald R. RemickSenior Vice President & Chief Financial Officer(Duly authorized officer and principal financial officer of the registrant)By:
    
    ALAN R. SUKONECKAlan R. SukoneckVice President, Chief Accounting & Tax Officer(Duly authorized officer and principal accounting officer of the registrant)
 -23-




---



##### 



EXHIBIT INDEX
 ExhibitNumber
    
    Description10.1
    
    Amendment No. 2 to the Credit Agreement, dated as of June 28, 2005, amending the Credit
Agreement, dated as of January 3, 2003, as previously amended, among Pennsylvania Crusher
Corporation, the Lenders to that Credit Agreement and National City Bank, as Agent31.1
    
    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