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 July 4, 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)
 
 
  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 Statements.Consolidated Balance Sheets as of
July 4, 2009 (Unaudited) and January 3, 2009
    
    
    1Consolidated Statements of Income and Retained
Earnings (Unaudited) for the Three and Six Months Ended
July 4, 2009 and June 28, 2008
    
    
    2Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended July 4, 2009 and
June 28, 2008
    
    
    3Notes to Consolidated Financial Statements (Unaudited)
    
    
    4  13Item 2.
    
    Managements Discussion and Analysis
of Financial Condition and Results of Operations.
    
    
    14  22Item 3.
    
    Quantitative and Qualitative Disclosures About
Market Risk.
    
    
    22  23Item 4.
    
    Controls and Procedures.
    
    
    23PART II.
    
    OTHER INFORMATIONItem 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    24Item 6.
    
    Exhibits.
    
    
    24SIGNATURES
    
    
    
    
    25




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##### 



PART I. FINANCIAL INFORMATION
 
 Item 1 . Consolidated Financial Statements .
 
 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS
 (Unaudited)July 4,
    
    
    January 3,2009
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    49,159
    
    
    $
    41,623Restricted cash
    
    
    485
    
    
    
    530Accounts receivable, net of allowance for
doubtful accounts of $1,321 and $1,214
    
    
    30,532
    
    
    
    36,625Inventories, net
    
    
    25,580
    
    
    
    28,776Deferred income taxes
    
    
    2,371
    
    
    
    2,371Prepaid expenses and other current assets
    
    
    4,959
    
    
    
    4,498Total current assets
    
    
    113,086
    
    
    
    114,423Property, plant and equipment, net
    
    
    24,940
    
    
    
    26,701Patents, net
    
    
    1,336
    
    
    
    1,381Goodwill
    
    
    29,279
    
    
    
    29,059Other intangibles, net
    
    
    20,900
    
    
    
    21,366Other assets
    
    
    6,724
    
    
    
    6,438Deferred income taxes
    
    
    347
    
    
    
    76Total assets
    
    $
    196,612
    
    
    $
    199,444LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    1,000
    
    
    $
    1,662Accounts payable
    
    
    9,443
    
    
    
    13,156Accrued expenses and other current liabilities
    
    
    7,216
    
    
    
    11,198Accrued commissions
    
    
    4,572
    
    
    
    5,285Customer advances
    
    
    7,795
    
    
    
    7,828Income taxes payable
    
    
    2,173
    
    
    
    4,170Deferred income taxes
    
    
    3,430
    
    
    
    3,430Total current liabilities
    
    
    35,629
    
    
    
    46,729Long-term debt, net of current portion
    
    
    19,000
    
    
    
    22,000Deferred income taxes
    
    
    4,177
    
    
    
    3,771Other non-current liabilities
    
    
    555
    
    
    
    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 4,836,980 shares and 4,800,139 shares
    
    
    48
    
    
    
    48Paid-in capital
    
    
    30,491
    
    
    
    28,455Retained earnings
    
    
    126,054
    
    
    
    116,349Accumulated other comprehensive income
    
    
    9,716
    
    
    
    9,483166,309
    
    
    
    154,335Treasury stock, 2,017,338 shares and 2,008,192 shares, at cost
    
    
    (29,058
    )
    
    
    (28,283
    )Total shareholders equity
    
    
    137,251
    
    
    
    126,052Total liabilities and shareholders equity
    
    $
    196,612
    
    
    $
    199,444
  -1-




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CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
 Three Months Ended
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Equipment and parts
    
    $
    47,347
    
    
    $
    56,947
    
    
    $
    95,197
    
    
    $
    111,423Services and freight
    
    
    2,690
    
    
    
    3,263
    
    
    
    4,526
    
    
    
    6,185Total revenues
    
    
    50,037
    
    
    
    60,210
    
    
    
    99,723
    
    
    
    117,608Cost of revenues:Equipment and parts
    
    
    26,772
    
    
    
    32,302
    
    
    
    54,705
    
    
    
    63,090Services and freight
    
    
    2,260
    
    
    
    2,406
    
    
    
    3,855
    
    
    
    4,767Total cost of revenues
    
    
    29,032
    
    
    
    34,708
    
    
    
    58,560
    
    
    
    67,857Gross profit
    
    
    21,005
    
    
    
    25,502
    
    
    
    41,163
    
    
    
    49,751Operating expenses:Selling, general and administrative
    
    
    12,182
    
    
    
    14,615
    
    
    
    24,804
    
    
    
    29,676Research and development
    
    
    387
    
    
    
    631
    
    
    
    950
    
    
    
    1,284Total operating expenses
    
    
    12,569
    
    
    
    15,246
    
    
    
    25,754
    
    
    
    30,960Operating income
    
    
    8,436
    
    
    
    10,256
    
    
    
    15,409
    
    
    
    18,791Interest expense, net
    
    
    282
    
    
    
    246
    
    
    
    594
    
    
    
    625Income before income taxes
    
    
    8,154
    
    
    
    10,010
    
    
    
    14,815
    
    
    
    18,166Income tax provision
    
    
    2,896
    
    
    
    2,852
    
    
    
    5,110
    
    
    
    5,357Net income
    
    
    5,258
    
    
    
    7,158
    
    
    
    9,705
    
    
    
    12,809Retained earnings:Beginning of period
    
    
    120,796
    
    
    
    96,227
    
    
    
    116,349
    
    
    
    90,576End of period
    
    $
    126,054
    
    
    $
    103,385
    
    
    $
    126,054
    
    
    $
    103,385Earnings per share:Basic
    
    $
    1.87
    
    
    $
    2.62
    
    
    $
    3.46
    
    
    $
    4.70Diluted
    
    $
    1.82
    
    
    $
    2.49
    
    
    $
    3.37
    
    
    $
    4.47Weighted average common shares
outstanding (basic)
    
    
    2,816,000
    
    
    
    2,733,000
    
    
    
    2,808,000
    
    
    
    2,725,000Weighted average common and
common equivalent shares
outstanding (diluted)
    
    
    2,891,000
    
    
    
    2,877,000
    
    
    
    2,879,000
    
    
    
    2,868,000
  -2-




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJuly 4,
    
    
    June 28,2009
    
    
    2008Operating activities:Net income
    
    $
    9,705
    
    
    $
    12,809Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    3,073
    
    
    
    3,091Non-cash compensation
    
    
    374
    
    
    
    248Deferred income taxes
    
    
    135
    
    
    
    (44
    )Changes in assets and liabilities, net of business acquired:Accounts receivable, net
    
    
    6,068
    
    
    
    (5,034
    )Inventories, net
    
    
    3,187
    
    
    
    (1,713
    )Prepaid expenses and other current assets
    
    
    (291
    )
    
    
    939Other assets
    
    
    (20
    )
    
    
    (12
    )Accounts payable
    
    
    (3,709
    )
    
    
    2,690Accrued expenses and other current liabilities
    
    
    (6,732
    )
    
    
    746Net cash provided by operating activities
    
    
    11,790
    
    
    
    13,720Investing activities:Businesses acquired, net of cash received
    
    
    
    
    
    
    (500
    )Capital expenditures
    
    
    (805
    )
    
    
    (1,811
    )Restricted cash
    
    
    45
    
    
    
    602Other
    
    
    (41
    )
    
    
    (18
    )Net cash used in investing activities
    
    
    (801
    )
    
    
    (1,727
    )Financing activities:Proceeds from issuance of long-term debt
    
    
    
    
    
    
    8,250Principal payments on long-term debt
    
    
    (3,662
    )
    
    
    (18,441
    )Purchase of common stock
    
    
    (775
    )
    
    
    (769
    )Tax benefit from stock option exercises
    
    
    528
    
    
    
    1,022Proceeds from issuance of common stock
    
    
    490
    
    
    
    118Net cash used in financing activities
    
    
    (3,419
    )
    
    
    (9,820
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (34
    )
    
    
    3,118Net increase in cash and cash equivalents
    
    
    7,536
    
    
    
    5,291Cash and cash equivalents:Beginning of period
    
    
    41,623
    
    
    
    30,853End of period
    
    $
    49,159
    
    
    $
    36,144Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    718
    
    
    $
    1,017Income taxes
    
    $
    5,253
    
    
    $
    3,536
  -3-




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  July 4, 2009
 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. Material subsequent events are evaluated and disclosed through
the report issuance date, August 10, 2009. All references to the second quarter or
first six months of 2009 or 2008 mean the 13-week or 26-week period ended July 4, 2009
or June 28, 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.
    
    AcquisitionsOn 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 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 acquisition 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
 -4-




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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.The purchase price of $17,632,000, after being reduced by the $257,000 payment
received as part of the inventory valuation settlement, has become 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 $300,000.3.
    
    New Accounting PronouncementsIn December 2007, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141(R) (revised 2007),
Business Combinations. SFAS No. 141(R) 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. SFAS No. 141(R) also changes
the accounting for contingent consideration, in process research and development, and
restructuring costs. In addition, after SFAS No. 141(R) is adopted, 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. SFAS No. 141(R) is effective for fiscal years
beginning after December 15, 2008 and is to be applied prospectively. The Company
will prospectively apply SFAS No.141(R) to all business combinations occurring after
January 3, 2009. The Company did not enter into any business combinations in the
first six months of 2009.In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative
Instruments
and Hedging Activities, an Amendment to FASB Statement No. 133. SFAS No. 161 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. SFAS No. 161 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 SFAS No. 161 applies. The adoption of SFAS No. 161 by the Company effective
January 4, 2009 did not have a material impact on the Companys consolidated financial
statements.In April 2008, the FASB issued Staff Position No. FAS 142-3, Determination of
the
Useful Life of Intangible Assets (FSP FAS 142-3), which amends SFAS No. 142,
Goodwill and Other Intangible Assets. This pronouncement 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. FSP FAS 142-3 is effective for financial statements issued for
fiscal years and interim periods beginning after December 15, 2008, and must be
applied prospectively
 -5-




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to intangible assets acquired after the effective date. The Company will prospectively
apply FSP FAS 142-3 to all intangible assets acquired after January 3, 2009.In May 2009, the FASB issued SFAS No. 165, Subsequent Events. The
objective of SFAS
No. 165 is to establish 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. SFAS No. 165 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. SFAS No. 165 is effective for interim or annual periods
ending after June 15, 2009. The Company implemented SFAS No. 165 during the quarter
ended July 4, 2009 and evaluated for subsequent events through August 10, 2009, the
filing date of this quarterly report on Form 10-Q. There were no subsequent events
required to be recognized or disclosed in the financial statements.In June 2009, the FASB issued 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, which modifies structure hierarchy and referencing of financial
standards, is effective 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.4.
    
    InventoriesInventories consist of the following:
 July 4,
    
    
    January 3,2009
    
    
    2009(in thousands)Components
    
    $
    19,526
    
    
    $
    22,434Work-in-process
    
    
    6,880
    
    
    
    6,647Finished goods
    
    
    873
    
    
    
    1,085Inventory reserves
    
    
    (1,699
    )
    
    
    (1,390
    )$
    25,580
    
    
    $
    28,776
 -6-




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5.
    
    Intangible AssetsIntangible assets consist of the following:
 July 4, 2009
    
    
    January 3, 2009Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(in thousands)Amortized intangible assets:Patents
    
    $
    3,094
    
    
    $
    1,758
    
    
    $
    3,054
    
    
    $
    1,673Drawings
    
    
    6,140
    
    
    
    1,128
    
    
    
    6,140
    
    
    
    1,005Customer relationships
    
    
    11,299
    
    
    
    2,021
    
    
    
    11,299
    
    
    
    1,678$
    20,533
    
    
    $
    4,907
    
    
    $
    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 26 years (15 years for patents, 25 years for drawings
and 29 years for customer relationships). The amortization expense of intangible
assets for the six-month periods ended July 4, 2009 and June 28, 2008 was $551,000 and
$579,000.Future annual amortization of intangible assets is as follows:
 Amount(in thousands)Last two quarters fiscal year 2009
    
    $
    564Fiscal year 2010
    
    
    1,106Fiscal year 2011
    
    
    1,106Fiscal year 2012
    
    
    1,106Fiscal year 2013
    
    
    1,105Fiscal year 2014
    
    
    1,023Thereafter
    
    
    9,616$
    15,626
 Goodwill increased by $220,000 during the first six months of 2009, solely as a result
of the acquisition of certain assets of Wuxi Chenghao.
 -7-




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6.
    
    Accrued WarrantyThe 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 six-month periods ended July 4, 2009 and June
28, 2008:
 Six Months EndedJuly 4,
    
    
    June 28,2009
    
    
    2008(in thousands)Beginning balance
    
    $
    2,231
    
    
    $
    2,194Accrual of warranty expense
    
    
    755
    
    
    
    1,339Warranty costs incurred
    
    
    (751
    )
    
    
    (1,136
    )Foreign exchange adjustment
    
    
    (1
    )
    
    
    104Ending balance
    
    $
    2,234
    
    
    $
    2,501
 7.
    
    Long-Term DebtLong-term debt consists of the following, with the annual interest rates shown:
 July 4,
    
    
    January 3,2009
    
    
    2009(in thousands)U.S. revolving line of credit
    
    $
    19,000
    
    
    $
    21,000U.S. mortgage, interest at 6.45%
    
    
    
    
    
    
    662U.S. term note, interest at 5.00%
    
    
    1,000
    
    
    
    2,00020,000
    
    
    
    23,662Less current portion
    
    
    (1,000
    )
    
    
    (1,662
    )$
    19,000
    
    
    $
    22,000
 All amounts borrowed under the U.S. revolving line of credit are due on
September 29, 2011. As of July 4, 2009, interest on the $19,000,000 borrowed
under the U.S. revolving line of credit was payable at the following rates on the
following principal amounts for the periods ending on the dates indicated:
 Principal
    
    
    Expiration ofAmount
    
    
    Interest Rate Period
    
    
    Per Annum RateTwo-year interest rate swap
    
    
    2,000,000
    
    
    
    09/24/2009
    
    
    
    5.605
    %Three-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
    
    
    
    09/24/2010
    
    
    
    5.665
    %Four-year interest rate swap
    
    
    5,000,000
    
    
    
    10/13/2010
    
    
    
    6.095
    %$
    19,000,000
 -8-




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##### 



Upon 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 ShareBasic 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 July 4,
2009Net Income Available(Dollars and Shares in Thousands
    
    To Common
    
    
    
    
    
    
    Earningsexcept Per Share Data)
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    5,258
    
    
    
    2,816
    
    
    $
    1.87Common share equivalent
of outstanding options
and restricted stock units
    
    
    
    
    
    
    75
    
    
    
    (0.05
    )Diluted
    
    $
    5,258
    
    
    
    2,891
    
    
    $
    1.82
 For the Three Months Ended June 28,
2008Net Income Available(Dollars and Shares in Thousands
    
    To Common
    
    
    
    
    
    
    Earningsexcept Per Share Data)
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    7,158
    
    
    
    2,733
    
    
    $
    2.62Common share equivalent
of outstanding options
    
    
    
    
    
    
    144
    
    
    
    (0.13
    )Diluted
    
    $
    7,158
    
    
    
    2,877
    
    
    $
    2.49
 For the Six Months Ended July 4,
2009Net Income Available(Dollars and Shares in Thousands
    
    To Common
    
    
    
    
    
    
    Earningsexcept Per Share Data)
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    9,705
    
    
    
    2,808
    
    
    $
    3.46Common share equivalent
of outstanding options
and restricted stock units
    
    
    
    
    
    
    71
    
    
    
    (0.09
    )Diluted
    
    $
    9,705
    
    
    
    2,879
    
    
    $
    3.37
 -9-




---



##### 



For the Six Months Ended June 28,
2008Net Income Available(Dollars and Shares in Thousands
    
    To Common
    
    
    
    
    
    
    Earningsexcept Per Share Data)
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    12,809
    
    
    
    2,725
    
    
    $
    4.70Common share equivalent
of outstanding options
    
    
    
    
    
    
    143
    
    
    
    (0.23
    )Diluted
    
    $
    12,809
    
    
    
    2,868
    
    
    $
    4.47
 9.
    
    Share-Based CompensationThe Company adopted SFAS No. 123(R), Share-Based Payment, effective
January 1, 2006.
SFAS No. 123(R) requires the Company to recognize expense related to the fair value
of share-based compensation awards.There was no prospective cost of stock option compensation expensed in the first six
months of 2009 or 2008. There were no stock options granted in the first six months
of 2009 or in fiscal year 2008.The following table provides a summary of the Companys stock option activity for the
six months ended July 4, 2009:
 Weighted averageremaining optionShares
    
    
    Weighted average
    
    
    
    
    
    
    term (in years)under
    
    
    option exercise
    
    
    Aggregate intrinsic
    
    
    Options
    
    
    Optionsoption
    
    
    price per share
    
    
    value ($000)
    
    
    outstanding
    
    
    exercisableBalance, January 3, 2009
    
    
    117,000
    
    
    $
    13.72
    
    
    
    
    
    
    
    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
    
    
    
    2.31
 The aggregate intrinsic value at July 4, 2009 represents (i) the difference between
the Companys closing stock price of $79.75 at July 4, 2009 and the weighted average
option exercise price per share on that date of $13.44 multiplied by (ii) the number
of shares underlying outstanding options on that date.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
the
 -10-




---



##### 



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.
 10.
    
    Comprehensive IncomeFor the three and six-month periods ended July 4, 2009 and June 28, 2008, the
following table sets forth the Companys comprehensive income:
 Three Months Ended
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Net income
    
    $
    5,258
    
    
    $
    7,158
    
    
    $
    9,705
    
    
    $
    12,809Unrealized gain (loss) on interest rate
swaps, net of tax
    
    
    104
    
    
    
    237
    
    
    
    202
    
    
    
    (67
    )Foreign currency translation gain (loss)
    
    
    2,224
    
    
    
    (1,026
    )
    
    
    31
    
    
    
    4,215Comprehensive income
    
    $
    7,586
    
    
    $
    6,369
    
    
    $
    9,938
    
    
    $
    16,957
 11.
    
    Management Geographic InformationThe 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 4, 2009 and June 28, 2008, the following
table sets forth the Companys geographic information:
 EMEA/Americas
    
    
    Asia
    
    
    Eliminations
    
    
    Consolidated(in thousands)THREE MONTHS ENDEDJuly 4, 2009RevenuesSales to unaffiliated
customers
    
    $
    38,939
    
    
    $
    11,098
    
    
    $
    
    
    
    $
    50,037Sales to affiliates
    
    
    2,424
    
    
    
    1,097
    
    
    
    (3,521
    )
    
    
    Total sales
    
    $
    41,363
    
    
    $
    12,195
    
    
    $
    (3,521
    )
    
    $
    50,037Operating income
    
    $
    7,814
    
    
    $
    556
    
    
    $
    66
    
    
    $
    8,436Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    282Income before income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,154
 -11-




---



##### 



EMEA/Americas
    
    
    Asia
    
    
    Eliminations
    
    
    Consolidated(in thousands)THREE MONTHS ENDEDJune 28, 2008RevenuesSales to unaffiliated customers
    
    $
    40,572
    
    
    $
    19,638
    
    
    $
    
    
    
    $
    60,210Sales to affiliates
    
    
    2,910
    
    
    
    1,627
    
    
    
    (4,537
    )
    
    
    Total sales
    
    $
    43,482
    
    
    $
    21,265
    
    
    $
    (4,537
    )
    
    $
    60,210Operating income
    
    $
    6,390
    
    
    $
    3,839
    
    
    $
    27
    
    
    $
    10,256Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    246Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,010
 EMEA/Americas
    
    
    Asia
    
    
    Eliminations
    
    
    Consolidated(in thousands)SIX MONTHS ENDEDJuly 4, 2009RevenuesSales to unaffiliated
customers
    
    $
    74,778
    
    
    $
    24,945
    
    
    $
    
    
    
    $
    99,723Sales to affiliates
    
    
    3,696
    
    
    
    2,026
    
    
    
    (5,722
    )
    
    
    Total sales
    
    $
    78,474
    
    
    $
    26,971
    
    
    $
    (5,722
    )
    
    $
    99,723Operating income
    
    $
    13,399
    
    
    $
    1,950
    
    
    $
    60
    
    
    $
    15,409Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    594Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,815
 EMEA/Americas
    
    
    Asia
    
    
    Eliminations
    
    
    Consolidated(in thousands)SIX MONTHS ENDEDJune 28, 2008RevenuesSales to unaffiliated customers
    
    $
    77,871
    
    
    $
    39,737
    
    
    $
    
    
    
    $
    117,608Sales to affiliates
    
    
    4,627
    
    
    
    2,640
    
    
    
    (7,267
    )
    
    
    Total sales
    
    $
    82,498
    
    
    $
    42,377
    
    
    $
    (7,267
    )
    
    $
    117,608Operating income
    
    $
    11,542
    
    
    $
    7,288
    
    
    $
    (39
    )
    
    $
    18,791Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    625Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,166
 -12-




---



##### 



For the three and six-month periods ended July 4, 2009 and June 28, 2008, the
following table sets forth revenues from external customers:
 Three Months Ended
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)AmericasU.S.
    
    $
    30,920
    
    
    $
    30,252
    
    
    $
    58,903
    
    
    $
    54,994Canada
    
    
    3,025
    
    
    
    4,750
    
    
    
    5,270
    
    
    
    10,525All others
    
    
    4,994
    
    
    
    5,570
    
    
    
    10,605
    
    
    
    12,352Total
    
    
    38,939
    
    
    
    40,572
    
    
    
    74,778
    
    
    
    77,871EMEA/AsiaGermany
    
    
    1,891
    
    
    
    3,915
    
    
    
    3,477
    
    
    
    7,006Italy
    
    
    613
    
    
    
    473
    
    
    
    2,520
    
    
    
    2,293Netherlands
    
    
    361
    
    
    
    569
    
    
    
    664
    
    
    
    1,725United Kingdom
    
    
    2,112
    
    
    
    2,143
    
    
    
    4,001
    
    
    
    4,357All others
    
    
    6,121
    
    
    
    12,538
    
    
    
    14,283
    
    
    
    24,356Total
    
    
    11,098
    
    
    
    19,638
    
    
    
    24,945
    
    
    
    39,737$
    50,037
    
    
    $
    60,210
    
    
    $
    99,723
    
    
    $
    117,608
 -13-




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Introduction
      Critical Accounting Assumptions, Estimates and Policies;
Recent Pronouncements
  -14-




---



##### 



Results of Operations
 Overview
  Foreign Exchange Rates
  -15-




---



##### 



-16-




---



##### 



Three Months Ended
    
    Six Months EndedJuly 4,
    
    
    
    
    
    June 28,
    
    July 4,
    
    
    
    
    
    June 28,2009
    
    
    
    
    
    2008
    
    2009
    
    
    
    
    
    2008Average U.S. dollar equivalent of
one Swiss franc
    
    
    0.903
    
    
    
    
    
    
    
    0.971
    
    
    
    0.887
    
    
    
    
    
    
    
    0.956% change vs. prior year
    
    
    
    
    
    
    -7.0
    %
    
    
    
    
    
    
    
    
    
    
    -7.2
    %Average U.S. dollar equivalent of
one euro
    
    
    1.368
    
    
    
    
    
    
    
    1.564
    
    
    
    1.337
    
    
    
    
    
    
    
    1.532% change vs. prior year
    
    
    
    
    
    
    -12.5
    %
    
    
    
    
    
    
    
    
    
    
    -12.7
    %Average U.S. dollar equivalent of
one British pound sterling
    
    
    1.563
    
    
    
    
    
    
    
    1.975
    
    
    
    1.504
    
    
    
    
    
    
    
    1.976% change vs. prior year
    
    
    
    
    
    
    -20.9
    %
    
    
    
    
    
    
    
    
    
    
    -23.9
    %Average U.S. dollar equivalent of
one Canadian dollar
    
    
    0.863
    
    
    
    
    
    
    
    0.990
    
    
    
    0.834
    
    
    
    
    
    
    
    0.992% change vs. prior year
    
    
    
    
    
    
    -12.8
    %
    
    
    
    
    
    
    
    
    
    
    -15.9
    %Average U.S. dollar equivalent of
one Swedish krona
    
    
    0.127
    
    
    
    
    
    
    
    0.167
    
    
    
    0.123
    
    
    
    
    
    
    
    0.163% change vs. prior year
    
    
    
    
    
    
    -24.0
    %
    
    
    
    
    
    
    
    
    
    
    -24.5
    %Average Swiss franc equivalent of
one euro
    
    
    1.515
    
    
    
    
    
    
    
    1.611
    
    
    
    1.507
    
    
    
    
    
    
    
    1.603% change vs. prior year
    
    
    
    
    
    
    -6.0
    %
    
    
    
    
    
    
    
    
    
    
    -6.0
    %Average Swiss franc equivalent of
one British pound sterling
    
    
    1.731
    
    
    
    
    
    
    
    2.035
    
    
    
    1.696
    
    
    
    
    
    
    
    2.067% change vs. prior year
    
    
    
    
    
    
    -14.9
    %
    
    
    
    
    
    
    
    
    
    
    -18.0
    %
 -17-




---



##### 



Presentation of Results and Analysis
  Three Months Ended
    
    Six Months EndedJuly 4,
    
    June 28,
    
    July 4,
    
    June 28,2009
    
    2008
    
    2009
    
    2008Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    58.0
    
    
    
    57.6
    
    
    
    58.7
    
    
    
    57.7Gross profit
    
    
    42.0
    
    
    
    42.4
    
    
    
    41.3
    
    
    
    42.3Selling, general and administrative
    
    
    24.2
    
    
    
    24.3
    
    
    
    24.9
    
    
    
    25.2Research and development
    
    
    0.9
    
    
    
    1.1
    
    
    
    1.0
    
    
    
    1.1Operating income
    
    
    16.9
    
    
    
    17.0
    
    
    
    15.4
    
    
    
    16.0Interest expense, net
    
    
    0.6
    
    
    
    0.4
    
    
    
    0.6
    
    
    
    0.5Income before income taxes
    
    
    16.3
    
    
    
    16.6
    
    
    
    14.8
    
    
    
    15.5Income tax provision
    
    
    5.8
    
    
    
    4.7
    
    
    
    5.1
    
    
    
    4.6Net income
    
    
    10.5
    %
    
    
    11.9
    %
    
    
    9.7
    %
    
    
    10.9
    %
    -18-




---



##### 



July 4, 2009
    
    
    January 3, 2009
    
    
    June 28, 2008Backlog (at July 4, 2009
foreign exchange rates, in
thousands of dollars)
    
    $
    53,889
    
    
    $
    67,784
    
    
    $
    72,743
  -19-




---



##### 



Liquidity and Capital Resources
 Capitalization
  July 4,
    
    
    January 3,(Dollars in Thousands)
    
    2009
    
    
    2009Short-term debt, including current
portion of long-term debt
    
    $
    1,000
    
    
    $
    1,662Long-term debt
    
    
    19,000
    
    
    
    22,000Total debt
    
    
    20,000
    
    
    
    23,662Shareholders equity
    
    
    137,251
    
    
    
    126,052Total debt and shareholders equity
(total capitalization)
    
    $
    157,251
    
    
    $
    149,714Percent total debt to total capitalization
    
    
    13%
    
    
    
    16%Percent long-term debt to equity
    
    
    14%
    
    
    
    17%Percent total debt to equity
    
    
    15%
    
    
    
    19%
   Other Items
     -20-




---



##### 



Future Payments Under Contractual Obligations
  Risk Factors
  Forward-Looking Statements
  -21-




---



##### 



Item 3 . Quantitative
and Qualitative Disclosures About Market Risk .
  Foreign Exchange Rate Risk
    Interest Rate Risk
  -22-




---



##### 



Item 4 . Controls and
Procedures .
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Control over Financial Reporting
  -23-




---



##### 



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 14,
2009.(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 its nominee for election 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
    
    
    2,112,696
    
    
    
    404,600
 Directors are elected by a plurality of the votes cast; therefore, votes cast in
the election were not recorded against or as an abstention, nor were broker
non-votes recorded.(d)
    
    Not applicable
 
 Item 6 . Exhibits .
 10.1
    
    List of current directors and officers with an Indemnification
Agreement in the form provided in Exhibit 10.8 to our annual report on Form
10-K for the year ended January 3, 200931.1
    
    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
 -24-




---



##### 



K-TRON INTERNATIONAL, INC.Date:  August 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:  August 10, 2009
    By:
    ANDREW T. BOYDAndrew T. BoydDirector of Corporate Accounting and Tax
(Duly authorized officer and principal
accounting officer of the Registrant) -25-




---



##### 



EXHIBIT INDEX
 ExhibitNumber
    
    Description10.1
    
    List of current directors and officers with an Indemnification
Agreement in the form provided in Exhibit 10.8 to our annual
report on Form 10-K for the year ended January 3, 200931.1
    
    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-