##### 



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended April 1, 2006
 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 þ
 o þ




---



##### 



INDEX
 Page No.PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements.Consolidated Balance Sheets April 1, 2006 (Unaudited) and December 31, 2005
    
    
    1Consolidated Statements of Income and Retained Earnings (Unaudited) for the Three Months Ended April 1, 2006 and April 2, 2005
    
    
    2Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended April 1, 2006 and April 2, 2005
    
    
    3Notes to Consolidated Financial Statements (Unaudited)
    
    
    4  12Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    

13  19Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    
    19  20Item 4.
    
    Controls and Procedures.
    
    
    20PART II.
    
    OTHER INFORMATIONItem 6.
    
    Exhibits.
    
    
    21SIGNATURES
    
    
    
    
    22




---



##### 



PART I. FINANCIAL INFORMATION
 Item 1 . Financial Statements .
 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS
 (Unaudited)April 1,
    
    
    December 31,2006
    
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    5,499
    
    
    $
    15,051Restricted cash
    
    
    269
    
    
    
    Accounts receivable, net of allowance for
doubtful accounts of $862 and $682
    
    
    21,385
    
    
    
    18,168Inventories, net
    
    
    18,523
    
    
    
    15,235Deferred income taxes
    
    
    1,403
    
    
    
    1,033Prepaid expenses and other current assets
    
    
    2,423
    
    
    
    2,019Total current assets
    
    
    49,502
    
    
    
    51,506PROPERTY, PLANT AND EQUIPMENT, net
    
    
    25,934
    
    
    
    22,271PATENTS, net
    
    
    1,532
    
    
    
    1,577GOODWILL
    
    
    3,779
    
    
    
    2,053OTHER INTANGIBLES, net
    
    
    13,315
    
    
    
    9,739NOTES RECEIVABLE AND OTHER ASSETS
    
    
    1,667
    
    
    
    1,852DEFERRED INCOME TAXES
    
    
    423
    
    
    
    112Total assets
    
    $
    96,152
    
    
    $
    89,110LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current portion of long-term debt
    
    $
    4,283
    
    
    $
    4,316Accounts payable
    
    
    8,076
    
    
    
    6,025Accrued expenses and other current liabilities
    
    
    4,511
    
    
    
    6,526Accrued commissions
    
    
    2,435
    
    
    
    2,297Customer advances
    
    
    3,363
    
    
    
    1,704Income taxes payable
    
    
    3,604
    
    
    
    3,421Deferred income taxes
    
    
    1,652
    
    
    
    1,652Total current liabilities
    
    
    27,924
    
    
    
    25,941LONG-TERM DEBT, net of current portion
    
    
    12,648
    
    
    
    12,675DEFERRED INCOME TAXES
    
    
    3,418
    
    
    
    974SERIES 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 4,582,333 shares and 4,578,166 shares
    
    
    46
    
    
    
    46Paid-in capital
    
    
    19,174
    
    
    
    19,082Retained earnings
    
    
    58,700
    
    
    
    56,383Accumulated other comprehensive income
    
    
    1,756
    
    
    
    1,52379,676
    
    
    
    77,034Treasury stock, 2,002,574 shares  at cost
    
    
    (27,514
    )
    
    
    (27,514
    )Total shareholders equity
    
    
    52,162
    
    
    
    49,520Total liabilities and shareholders equity
    
    $
    96,152
    
    
    $
    89,110
  -1-




---



##### 



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
 Three Months EndedApril 1,
    
    
    April 2,2006
    
    
    2005REVENUES:Equipment and parts
    
    $
    30,178
    
    
    $
    26,959Services and freight
    
    
    1,936
    
    
    
    1,893Total revenues
    
    
    32,114
    
    
    
    28,552COST OF REVENUES:Equipment and parts
    
    
    17,037
    
    
    
    14,729Services and freight
    
    
    1,926
    
    
    
    1,872Total cost of revenues
    
    
    18,963
    
    
    
    16,601Gross profit
    
    
    13,151
    
    
    
    11,951OPERATING EXPENSES:Selling, general and administrative
    
    
    8,870
    
    
    
    8,495Research and development
    
    
    585
    
    
    
    6659,455
    
    
    
    9,160Operating income
    
    
    3,696
    
    
    
    2,791INTEREST (EXPENSE)
    
    
    (156
    )
    
    
    (263
    )Income before income taxes
    
    
    3,540
    
    
    
    2,528INCOME TAX PROVISION
    
    
    1,223
    
    
    
    885NET INCOME
    
    
    2,317
    
    
    
    1,643RETAINED EARNINGS:Beginning of period
    
    
    56,383
    
    
    
    49,101End of period
    
    $
    58,700
    
    
    $
    50,744EARNINGS PER SHARE:Basic
    
    $
    0.90
    
    
    $
    0.65Diluted
    
    $
    0.84
    
    
    $
    0.61Weighted average common shares outstanding
    
    
    2,578,000
    
    
    
    2,535,000Weighted average common and common equivalent
shares outstanding
    
    
    2,771,000
    
    
    
    2,693,000
  -2-




---



##### 



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedApril 1,
    
    
    April 2,2006
    
    
    2005OPERATING ACTIVITIES:Net income
    
    $
    2,317
    
    
    $
    1,643Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    1,045
    
    
    
    1,045Amortization of non-cash compensation
    
    
    49
    
    
    
    32Deferred income taxes
    
    
    (87
    )
    
    
    Changes in assets and liabilities, net of business acquired:Accounts receivable, net
    
    
    (671
    )
    
    
    3,097Inventories, net
    
    
    (935
    )
    
    
    (982
    )Prepaid expenses and other current assets
    
    
    (218
    )
    
    
    (329
    )Other assets
    
    
    230
    
    
    
    58Accounts payable
    
    
    627
    
    
    
    791Accrued expenses and other current liabilities
    
    
    (1,354
    )
    
    
    (3,797
    )Net cash provided by operating activities
    
    
    1,003
    
    
    
    1,558INVESTING ACTIVITIES:Business acquired net of cash received
    
    
    (7,116
    )
    
    
    Capital expenditures
    
    
    (229
    )
    
    
    (474
    )Other
    
    
    
    
    
    
    (13
    )Net cash used in investing activities
    
    
    (7,345
    )
    
    
    (487
    )FINANCING ACTIVITIES:Net (repayments) borrowings under lines of credit
    
    
    (355
    )
    
    
    95Principal payments on long-term debt
    
    
    (2,707
    )
    
    
    (1,540
    )Proceeds from issuance of common stock
    
    
    92
    
    
    
    169Net cash used in financing activities
    
    
    (2,970
    )
    
    
    (1,276
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
    
    
    29
    
    
    
    (554
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (9,283
    )
    
    
    (759
    )CASH, CASH EQUIVALENTS AND RESTRICTED CASH:Beginning of period
    
    
    15,051
    
    
    
    12,443End of period
    
    $
    5,768
    
    
    $
    11,684
  -3-




---



##### 



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  April 1, 2006
 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. All references to the first quarter or
first three months of 2006 or 2005 mean the fiscal quarter or thirteen-week period
ended April 1, 2006 or April 2, 2005.The unaudited financial statements herein should be read in conjunction with the
Companys annual report on Form 10-K for the year ended December 31, 2005 which was
previously filed with the Securities and Exchange Commission (the SEC).Certain reclassifications were made to the prior years consolidated financial
statements to conform them to the current year presentation.2.
    
    AcquisitionOn March 3, 2006, the Company purchased all of the outstanding stock of J.M.J.
Industries, Inc., which operates its business under the tradename Gundlach, and the
results of that company (now known as Gundlach Equipment Corporation) have been
included in the Companys consolidated financial statements since that date. The
purchase price was $9,154,500, of which $6,154,500 was paid in cash and $3,000,000
by delivery of an unsecured promissory note bearing interest at 5% per annum and
payable in three equal, annual installments of $1,000,000 on March 3 in each of
2008, 2009 and 2010. The Company also paid off all of the acquired companys bank
debt, which amounted to approximately $1,347,000. The Company did not borrow any
money in connection with either the acquisition or the payoff of the bank debt. The
excess of the purchase price over the carrying value of the identifiable net assets
acquired was $6,723,000, which was allocated as follows:
 -4-




---



##### 



Intangible Useful Life
    
    April 1, 2006(in thousands)Property, plant and equipment
    
    
    
    $
    1,347Goodwill
    
    Indefinite
    
    
    1,726Customer relationships
    
    15 Years
    
    
    1,500Drawings
    
    25 Years
    
    
    1,430Tradenames
    
    Indefinite
    
    
    720$
    6,723
  (in thousands)Cash
    
    $
    389Accounts receivable
    
    
    2,476Inventories
    
    
    2,313Other current assets
    
    
    175Property, plant and equipment
    
    
    4,287Goodwill
    
    
    1,726Customer relationships
    
    
    1,500Drawings
    
    
    1,430Tradenames
    
    
    720Accounts payable
    
    
    (502
    )Accrued expenses and other current liabilities
    
    
    (2,248
    )Deferred taxes
    
    
    (1,764
    )$
    10,502
  Customer relationships, drawings and tradenames are included in other intangibles in
the consolidated balance sheet.3.
    
    New Accounting PronouncementsIn December 2004, the Financial Accounting Standards Board (the FASB) issued the
final revised version of Statement of Financial Accounting Standards (SFAS) No.
123(R), Share-Based Payment, which requires companies to recognize in the income
statement the grant-date fair value of stock options and other equity-based
compensation issued to employees. In March 2005, the SEC issued Staff Accounting
Bulletin (SAB) No. 107, Share-Based Payment, regarding the interaction between
SFAS No. 123(R) and certain SEC rules and regulations. Effective January 1, 2006,
the Company adopted SFAS No. 123(R). Beginning January 1, 2006, the Company
recognizes compensation expense related to share-based payments on a straight-line
basis over the requisite service period for share-based payment awards granted on or
after January 1, 2006. For unvested awards granted prior to the effective date of
the Companys adoption of SFAS No. 123(R), the Company recognizes compensation
expense in the same manner as was used in its income statement or for pro forma
disclosures prior to the effective date of its adoption of SFAS No. 123(R). See
Note 10 for more information regarding the adoption of SFAS
No. 123(R). -5-




---



##### 



In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of
Accounting Research Bulletin (ARB) No. 43, Chapter 4. SFAS No. 151 clarifies the
accounting for abnormal amounts 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 ARB
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. The Company adopted
SFAS No. 151 effective January 1, 2006. The adoption did not have a material impact
on the consolidated financial statements.In December 2004, the FASB issued SFAS No. 153,
Exchanges of Nonmonetary Assets 
an amendment of APB Opinion No. 29. Accounting Principles Board (APB) Opinion No.
29 requires a nonmonetary exchange of assets to be accounted for at fair value,
recognizing any gain or loss, if the exchange meets a commercial substance criterion
and fair value is determinable. The commercial substance criterion is assessed by
comparing the entitys expected cash flows immediately before and after the
exchange. SFAS No. 153 eliminates the similar productive assets exception, which
accounts for the exchange of assets at book value with no recognition of gain or
loss. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. The Company adopted SFAS No. 153 effective
January 1, 2006. The adoption did not have a material impact on the consolidated
financial statements.In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections- a replacement of APB Opinion No. 20 and FASB Statement No. 3, which
replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting
Accounting Changes in Interim Financial Statements, and changes the requirements
for the accounting for and reporting of a change in accounting principle. SFAS No.
154 applies to all voluntary changes in accounting principle, and also applies to
changes required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. SFAS No. 154 is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. SFAS No. 154 does not change the transition
provisions of any existing accounting pronouncements, including those that are in a
transition phase as of the effective date of SFAS No. 154. The Company adopted SFAS
No.154 effective January 1, 2006. The adoption did not have a material impact on
the consolidated financial statements.4.
    
    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 three-month periods ended April 1, 2006 and April 2,
2005 was $213,000 and $284,000 and for income taxes was $1,346,000 and $1,428,000.
 -6-




---



##### 



As part of the acquisition discussed in Note 2 above, the Company issued $3,000,000
in an unsecured promissory note for the benefit of the sellers of the stock of
J.M.J. Industries, Inc.5.
    
    InventoriesInventories consist of the following:
 April 1,
    
    
    December 31,2006
    
    
    2005(in thousands)Components
    
    $
    15,472
    
    
    $
    13,216Work-in-process
    
    
    4,218
    
    
    
    2,850Finished goods
    
    
    
    
    
    
    81Inventory reserves
    
    
    (1,167
    )
    
    
    (912
    )$
    18,523
    
    
    $
    15,235
 6.
    
    Intangible AssetsIntangible assets consist of the following:
 April 1, 2006
    
    
    December 31, 2005Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(in thousands)Amortized intangible assetsPatents
    
    $
    2,815
    
    
    $
    1,283
    
    
    $
    2,815
    
    
    $
    1,238Drawings
    
    
    4,980
    
    
    
    395
    
    
    
    3,550
    
    
    
    355Customer relationships
    
    
    6,398
    
    
    
    278
    
    
    
    4,898
    
    
    
    244$
    14,193
    
    
    $
    1,956
    
    
    $
    11,263
    
    
    $
    1,837Unamortized intangible assetsTrademarks and tradenames
    
    $
    2,610
    
    
    
    
    
    
    $
    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 periods of benefit,
which range from 17 to 50 years. The weighted average life of the amortizable
assets is 32 years. The amortization expense of intangible assets for the
three-month periods ended April 1, 2006 and April 2, 2005 was $119,000 and $104,000.7.
    
    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 otherwise as believed
needed, and is included in accrued expenses and other current liabilities. The
following is an analysis of accrued warranty for the three-month periods ended April
1, 2006 and April 2, 2005.
 -7-




---



##### 



Three Months EndedApril 1,
    
    
    April 2,2006
    
    
    2005(in thousands)Beginning balance
    
    $
    989
    
    
    $
    1,257Accrued warranty of acquired business
    
    
    150
    
    
    
    Accrual of warranty expense
    
    
    276
    
    
    
    336Warranty costs incurred
    
    
    (223
    )
    
    
    (379
    )Foreign exchange adjustment
    
    
    3
    
    
    
    (24
    )Ending balance
    
    $
    1,195
    
    
    $
    1,190
 8.
    
    Long-Term DebtLong-term debt consists of the following, with the annual interest rates shown being
those in effect on April 1, 2006:
 April 1,
    
    
    December 31,2006
    
    
    2005(in thousands)U.S. mortgage, interest at 6.45%
    
    $
    1,687
    
    
    $
    1,731U.S. line of credit, interest at 7.00%
    
    
    450
    
    
    
    805U.S. term notes, interest at 5.00% to 6.48%
    
    
    14,603
    
    
    
    14,266Other
    
    
    191
    
    
    
    18916,931
    
    
    
    16,991Less current portion
    
    
    (4,283
    )
    
    
    (4,316
    )$
    12,648
    
    
    $
    12,675
 9.
    
    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.
 -8-




---



##### 



The Companys Basic and Diluted Earnings Per Share are calculated as follows:
 For the Three Months Ended April 1, 2006(Dollars and Shares in Thousandsexcept Per Share Data)
    
    Net Income AvailableTo Common
    
    
    
    
    
    
    EarningsShareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    2,317
    
    
    
    2,578
    
    
    $
    0.90Common Share Equivalent
of Outstanding Options
    
    
    
    
    
    
    193
    
    
    
    (0.06
    )Diluted
    
    $
    2,317
    
    
    
    2,771
    
    
    $
    0.84
 For the Three Months Ended April 2, 2005(Dollars and Shares in Thousandsexcept Per Share Data)
    
    Net Income AvailableTo Common
    
    
    
    
    
    
    EarningsShareholders
    
    
    Shares
    
    
    Per ShareBasic
    
    $
    1,643
    
    
    
    2,535
    
    
    $
    0.65Common Share Equivalent
of Outstanding Options
    
    
    
    
    
    
    158
    
    
    
    (0.04
    )Diluted
    
    $
    1,643
    
    
    
    2,693
    
    
    $
    0.61
 The Companys Diluted Earnings Per Share values shown in the preceding table are based
on the weighted average number of common and common equivalent shares outstanding
during a given time period. Such average shares include the weighted average number of
common shares outstanding plus the shares issuable upon the exercise of stock options
after the assumed repurchase of common shares with the related proceeds.10.
    
    Share-Based CompensationThe Company adopted SFAS No.123(R) effective January 1, 2006. SFAS No. 123(R)
requires the Company to recognize expense related to the fair value of stock-based
compensation awards, including employee stock options.Prior to the adoption of SFAS No. 123(R), the Company accounted for stock options
using the intrinsic value method of APB Opinion No. 25, and it did not recognize
compensation expense in its income statement for options granted that had an exercise
price equal to the market value of the underlying common stock on the date of grant.
However, the Company did record compensation expense related to restricted stock
grants based on the market value of its stock at the date of grant and the vesting
period of the grant. As required by SFAS No. 123, the Company also provided certain
pro forma disclosures for stock option awards as if the fair value-based approach of
SFAS No. 123 had been applied.The Company has elected to use the modified prospective transition method as permitted
by SFAS No. 123(R) and therefore has not restated its financial results for prior
periods. Under this transition method, the Company will apply the provisions of SFAS
No. 123(R)
 -9-




---



##### 



to new awards and to awards modified, repurchased or cancelled after December 31,
2005. Additionally, for unvested awards granted prior to the effective date of the
Companys adoption of SFAS No. 123(R) which have not been fully expensed in prior
years, either in the Companys income statement or in pro forma disclosures in the
notes thereto, the Company will recognize compensation expense in the same manner as
was used in its income statement or for pro forma disclosures prior to the effective
date of its adoption of SFAS No. 123(R).The pre-tax cost for stock option employee compensation was approximately $31,000
($19,000 after tax) for the first three months of 2006. As a result of the adoption
of SFAS No. 123(R), the Companys financial results were lower than under the previous
accounting method for share-based compensation by the following amounts:
 Three Months EndedApril 1, 2006(in thousands, except per share)Income from continuing operations before income taxes
    
    $
    31Net income
    
    $
    19Basic earnings per share
    
    $
    0.01Diluted earnings per share
    
    $
    0.01
 As of April 1, 2006, the remaining prospective pre-tax cost of unvested stock option
employee compensation was approximately $31,000, which will be expensed in the second
quarter of 2006.The following table illustrates the effect on net income and net income per common
share as if the Company had applied the fair value recognition provisions of SFAS No.
123 to stock option employee compensation for the three-month period ended April 2,
2005:
 Three Months EndedApril 2,2005(in thousands, except per share)Net income  as reported
    
    $
    1,643Deduct stock option employee
compensation expense determined,
net of related tax effect
    
    
    (26
    )Net income  pro forma
    
    $
    1,617Basic earnings per share  as reported
    
    $
    0.65Basic earnings per share  pro forma
    
    
    0.64Diluted earnings per share  as reported
    
    
    0.61Diluted earnings per share  pro forma
    
    
    0.60
 -10-




---



##### 



There were no options granted for the three months ended April 1, 2006 and April 2, 2005.11.
    
    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-month periods ended April 1,
2006 and April 2, 2005, the following table sets forth the Companys
comprehensive income:
 Three Months EndedApril 1,
    
    
    April 2,2006
    
    
    2005(in thousands)Net income
    
    $
    2,317
    
    
    $
    1,643Unrealized gain on interest
rate swap, net of tax
    
    
    
    
    
    
    34Foreign currency translation gain (loss)
    
    
    233
    
    
    
    (1,676
    )Comprehensive income
    
    $
    2,550
    
    
    $
    1
 12.
    
    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-month periods ended April 1, 2006 and April 2, 2005, the following table
sets forth the Companys geographic information:
 EMEA/
    
    
    Elimi-
    
    
    Consoli-Americas
    
    
    Asia
    
    
    nations
    
    
    dated(in thousands)THREE MONTHS ENDED
April 1, 2006RevenuesSales to unaffiliated customers
    
    $
    20,889
    
    
    $
    11,225
    
    
    $
    
    
    
    $
    32,114Sales to affiliates
    
    
    678
    
    
    
    730
    
    
    
    (1,408
    )
    
    
    Total sales
    
    $
    21,567
    
    
    $
    11,955
    
    
    $
    (1,408
    )
    
    $
    32,114Operating income
    
    $
    2,886
    
    
    $
    840
    
    
    $
    (30
    )
    
    $
    3,696Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (156
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,540
 -11-




---



##### 



EMEA/
    
    
    Elimi-
    
    
    Consoli-Americas
    
    
    Asia
    
    
    nations
    
    
    dated(in thousands)THREE MONTHS ENDED
April 2, 2005RevenuesSales to unaffiliated customers
    
    $
    17,113
    
    
    $
    11,439
    
    
    $
    
    
    
    $
    28,552Sales to affiliates
    
    
    753
    
    
    
    755
    
    
    
    (1,508
    )
    
    
    Total sales
    
    $
    17,866
    
    
    $
    12,194
    
    
    $
    (1,508
    )
    
    $
    28,552Operating income
    
    $
    2,399
    
    
    $
    362
    
    
    $
    30
    
    
    $
    2,791Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (263
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,528
 For the three-month periods ended April 1, 2006 and April 2, 2005, the following table
sets forth revenues from external customers:
 Three Months EndedApril 1,
    
    
    April 2,2006
    
    
    2005(in thousands)AmericasU.S.
    
    $
    17,712
    
    
    $
    14,694All others
    
    
    3,177
    
    
    
    2,419Total
    
    
    20,889
    
    
    
    17,113EMEA/AsiaChina
    
    
    1,228
    
    
    
    211Germany
    
    
    2,425
    
    
    
    1,820United Kingdom
    
    
    2,226
    
    
    
    2,421All others
    
    
    5,346
    
    
    
    6,987Total
    
    
    11,225
    
    
    
    11,439$
    32,114
    
    
    $
    28,552
 -12-




---



##### 



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




---



##### 



Results of Operations
 Overview
  Foreign Exchange Rates
   -14-




---



##### 



Three Months EndedApril 1,
    
    
    
    
    
    April 2,2006
    
    
    
    
    
    2005Average U.S. dollar equivalent of
one Swiss franc
    
    
    0.771
    
    
    
    
    
    
    0.845% change vs. prior year
    
    
    
    
    
    -8.8
    %Average U.S. dollar equivalent of
one euro
    
    
    1.204
    
    
    
    
    
    
    1.312% change vs. prior year
    
    
    
    
    
    -8.2
    %Average U.S. dollar equivalent of
one British pound sterling
    
    
    1.754
    
    
    
    
    
    
    1.891% change vs. prior year
    
    
    
    
    
    -7.2
    %Average Swiss franc equivalent of
one euro
    
    
    1.561
    
    
    
    
    
    
    1.553% change vs. prior year
    
    
    
    
    
    0.1
    %Average Swiss franc equivalent of
one British pound sterling
    
    
    2.275
    
    
    
    
    
    
    2.238% change vs. prior year
    
    
    
    
    
    1.7
    %
 Presentation of Results and Analysis
  Three Months EndedApril 1,
    
    
    April 2,2006
    
    
    2005Total revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    59.1
    
    
    
    58.1Gross profit
    
    
    40.9
    
    
    
    41.9Selling, general and administrative
    
    
    27.6
    
    
    
    29.8Research and development
    
    
    1.8
    
    
    
    2.3Operating income
    
    
    11.5
    
    
    
    9.8Interest income (expense)
    
    
    (0.5
    )
    
    
    (0.9
    )Income before income taxes
    
    
    11.0
    %
    
    
    8.9
    %
 -15-




---



##### 



April 1, 2006
    
    
    December 31, 2005
    
    
    April 2, 2005Backlog (at April 1, 2006
exchange rates, in thousands
of dollars)
    
    $
    40,250
    
    
    $
    25,023
    
    
    $
    25,148
         -16-




---



##### 



Liquidity and Capital Resources
 Capitalization
  April 1,
    
    
    December 31,
    
    
    January 1,(Dollars in Thousands)
    
    2006
    
    
    2005
    
    
    2005Short-term debt, including current
portion of long-term debt
    
    $
    4,283
    
    
    $
    4,316
    
    
    $
    4,185Long-term debt
    
    
    12,648
    
    
    
    12,675
    
    
    
    18,598Total debt
    
    
    16,931
    
    
    
    16,991
    
    
    
    22,783Shareholders equity
    
    
    52,162
    
    
    
    49,520
    
    
    
    45,559Total debt and shareholders equity
(total capitalization)
    
    $
    69,093
    
    
    $
    66,511
    
    
    $
    68,342Percent total debt to total
capitalization
    
    
    25
    %
    
    
    26
    %
    
    
    33
    %Percent long-term debt to equity
    
    
    24
    %
    
    
    26
    %
    
    
    41
    %Percent total debt to equity
    
    
    32
    %
    
    
    34
    %
    
    
    50
    %
   Other Items
    -17-




---



##### 



Future Payments Under Contractual Obligations
  Risk Factors
  Forward-Looking Statements
  -18-




---



##### 



Item 3 . Quantitative and Qualitative Disclosures About Market Risk .
  Foreign Exchange Rate Risk
    -19-




---



##### 



Interest Rate Risk
  Item 4 . Controls and Procedures .
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Control over Financial Reporting
  -20-




---



##### 



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
 -21-




---



##### 



K-TRON INTERNATIONAL, INC.Date: May 15, 2006
    
    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)
 -22-




---



##### 



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
 -23-