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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 30, 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.
 (Exact name of registrant as specified in its charter)
 New Jersey
    
    22-1759452(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)Routes 55 and 553P.O. Box 888Pitman, New Jersey
    
    08071-0888(Address of principal executive offices)
    
    (Zip Code)
 (856) 589-0500
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  Common Stock, par value $.01 per share
 o þ
 o þ
 þ o
 þ
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
  CERTAIN DEFINITIONS




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity and Related Shareholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Change In and Disagreements with Accountants on Accounting and Financial DisclosuresItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESAMENDMENT TO 2007-1 SUPPLEMENTAL EXECUTIVE RETIREMENT PLANSubsidiariesConsent of Grant Thornton LLPCEO Certification pursuant to Rule 13a-14(a) or 15d-14(a)CFO Certification pursuant to Rule 13a-14(a) or 15d-14(a)CEO and CFO Certifications pursuant to 18 U.S.C Section 1350    Table of Contents  
 PART I
 
 Item 1 . Business .
 General
    Available Information
  Process Group
   - 2 -




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Process Equipment: Feeding
 Feeders.
  - 3 -




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Weight Sensors and Controls
 Manufacturing
 Competition.
 Process Equipment: Pneumatic Conveying
 Conveying Equipment.
 - 4 -




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Manufacturing.
 Competition.
 Process Equipment: Service and Parts
  Size Reduction Group
  - 5 -




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Penn Crusher Equipment.
   Jeffrey Equipment
   - 6 -




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Gundlach Equipment.
   Replacement Parts.
 Manufacturing.
 Competition.
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K-Tron Electronics
  Customers
  Suppliers
  Patents
  Research and Development
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Backlog
   Employees
  Executive Officers of the Registrant
  Name
    
    Age
    
    PositionEdward B. Cloues, II
    
    
    59
    
    
    Chairman of the Board of Directors and Chief Executive OfficerKevin C. Bowen
    
    
    55
    
    
    Senior Vice President, Process Group and President and Chief
Executive Officer of K-Tron America, Inc.Lukas Guenthardt
    
    
    48
    
    
    Senior Vice President, Corporate DevelopmentDonald W. Melchiorre
    
    
    58
    
    
    Senior Vice President, Size Reduction Group and President and
Chief Executive Officer of Pennsylvania Crusher CorporationRonald R. Remick
    
    
    60
    
    
    Senior Vice President, Chief Financial Officer and Treasurer
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Item 1A . Risk Factors .
 Our businesses and operations are subject to a number of risks and uncertainties as described
below, but these risks and uncertainties are not the only ones we face. Additional risks and
uncertainties that we are unaware of, or that we may currently deem immaterial, may become
important factors that harm our business. If any of the following risks actually occurs, our
business, financial condition or results of operations could suffer.
 Competition could adversely affect our business and results of operations.
  Our substantial sales abroad subject us to the risk of adverse foreign currency fluctuations
which could negatively impact our results of operations.
  We operate in cyclical industries.
  The loss of a large customer could have an adverse effect on our operating results.
  We are dependent on our key personnel.
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We are dependent on some of our suppliers.
  We engage in acquisitions, and we may encounter difficulties in integrating these businesses
and, therefore, may not realize the anticipated benefits of the acquisitions.
  Our business and operating results depend in part on continued successful research,
development and marketing of new or improved products, and there can be no assurance that we will
continue successfully to introduce new or improved products on a timely and cost-effective basis.
  Protection and validity of our patents and intellectual property rights, or the efforts of
third parties to enforce their own intellectual property rights against us, may in the future
result in costly and time-consuming litigation.
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We may be subject to other costly litigation and governmental proceedings which could
adversely affect our business or results of operations.
  Our indebtedness may affect our business and may restrict our operating flexibility.
  
    
    limit our flexibility in planning for, or reacting to, changes in our business or in
the markets in which we compete;
    
    place us at a competitive disadvantage relative to our competitors, some of which
may have lower debt service obligations and greater financial resources than we do;
    
    limit our ability to borrow additional funds;
    
    limit our ability to make future acquisitions;
    
    limit our ability to make capital expenditures;
    
    limit our ability to conduct research and development; and
    
    increase our vulnerability to adverse economic, financial market and industry
conditions, including recessions and higher interest rates.
  Political and economic instability and health issues in the United States or abroad may have
an adverse effect on our operating results.
  Terrorist attacks and threats may disrupt our operations and negatively impact our business,
revenues, costs and stock price.
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Extensive environmental laws and regulations affecting the production of electric power could
result in electric power generators shifting from coal to natural gas-fired power plants, which
would adversely affect our size reduction business.
  
 Item 1B . Unresolved Staff Comments .
  
 Item 2 . Properties .
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Item 3 . Legal Proceedings .
  
 Item 4 . Submission of Matters to a Vote of Security Holders .
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PART II
 
 Item 5 . Market for Registrants Common Equity and Related Shareholder Matters and
Issuer Purchases of Equity Securities .
 Market Information
  High
    
    LowFiscal Year 2005First Quarter
    
    $
    31.50
    
    
    $
    24.99Second Quarter
    
    $
    33.01
    
    
    $
    27.12Third Quarter
    
    $
    35.15
    
    
    $
    27.52Fourth Quarter
    
    $
    38.50
    
    
    $
    31.75Fiscal Year 2006First Quarter
    
    $
    48.68
    
    
    $
    35.95Second Quarter
    
    $
    52.85
    
    
    $
    46.81Third Quarter
    
    $
    66.00
    
    
    $
    49.70Fourth Quarter
    
    $
    76.46
    
    
    $
    60.86
  Equity Holders
  Dividend Policy
  
 Item 6 . Selected Financial Data .
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Fiscal Year EndedDec. 30
    
    
    Dec. 31
    
    
    Jan. 1
    
    
    Jan. 3
    
    
    Dec. 282006(1)
    
    
    2005
    
    
    2005
    
    
    2004(2)
    
    
    2002FINANCIAL SUMMARY ($000s):Revenues
    
    $
    148,127
    
    
    $
    118,940
    
    
    $
    112,494
    
    
    $
    94,676
    
    
    $
    68,231Income before taxes
    
    
    19,381
    
    
    
    12,201
    
    
    
    8,732
    
    
    
    5,243
    
    
    
    4,396Net income
    
    
    12,872
    
    
    
    7,282
    
    
    
    6,610
    
    
    
    3,723
    
    
    
    3,284Total assets
    
    
    140,996
    
    
    
    89,110
    
    
    
    93,665
    
    
    
    83,081
    
    
    
    50,459Working capital
    
    
    28,962
    
    
    
    25,565
    
    
    
    23,778
    
    
    
    17,121
    
    
    
    14,106Additions to property, plant, and equipment
    
    
    2,604
    
    
    
    2,206
    
    
    
    1,601
    
    
    
    3,311
    
    
    
    2,967Depreciation and amortization
    
    
    4,634
    
    
    
    3,868
    
    
    
    4,062
    
    
    
    2,873
    
    
    
    2,499PER SHARE ($):Basic net earnings
    
    $
    4.95
    
    
    $
    2.85
    
    
    $
    2.65
    
    
    $
    1.53
    
    
    $
    1.35Diluted net earnings
    
    
    4.59
    
    
    
    2.68
    
    
    
    2.53
    
    
    
    1.49
    
    
    
    1.33Book value
    
    
    25.02
    
    
    
    19.23
    
    
    
    18.02
    
    
    
    14.35
    
    
    
    11.69CAPITALIZATION ($000s):Shareholders equity
    
    $
    65,381
    
    
    $
    49,520
    
    
    $
    45,559
    
    
    $
    35,114
    
    
    $
    28,419Long-term debt
    
    
    34,364
    
    
    
    12,675
    
    
    
    18,598
    
    
    
    24,574
    
    
    
    6,499Short-term debt (3)
    
    
    404
    
    
    
    4,316
    
    
    
    4,185
    
    
    
    3,541
    
    
    
    2,005Total debt
    
    
    34,768
    
    
    
    16,991
    
    
    
    22,783
    
    
    
    28,115
    
    
    
    8,504RATIOS:Return on average shareholders equity (%)
    
    
    22.4
    
    
    
    15.3
    
    
    
    16.4
    
    
    
    11.7
    
    
    
    13.1Return on revenues (%)
    
    
    8.7
    
    
    
    6.1
    
    
    
    5.9
    
    
    
    3.9
    
    
    
    4.8Long-term debt to shareholders equity (%)
    
    
    52.6
    
    
    
    25.6
    
    
    
    40.8
    
    
    
    70.0
    
    
    
    22.9Current assets to current liabilities
    
    
    1.8
    
    
    
    2.0
    
    
    
    1.9
    
    
    
    1.8
    
    
    
    1.9Average inventory turnover
    
    
    4.6
    
    
    
    4.6
    
    
    
    4.6
    
    
    
    4.1
    
    
    
    4.0Average accounts receivable turnover
    
    
    7.3
    
    
    
    6.0
    
    
    
    5.6
    
    
    
    5.0
    
    
    
    4.6OTHER DATA:Shares outstanding (000s) (4)
    
    
    2,613
    
    
    
    2,576
    
    
    
    2,528
    
    
    
    2,447
    
    
    
    2,431Shareholders of record
    
    
    193
    
    
    
    207
    
    
    
    221
    
    
    
    224
    
    
    
    235Number of employees
    
    
    625
    
    
    
    460
    
    
    
    467
    
    
    
    474
    
    
    
    361
 
 (1)
    
    The 2006 consolidated financial statements include the acquisitions of J.M.J.
Industries, Inc., operating under the tradename Gundlach, from March 4, 2006, and Premier
Pneumatics, Inc. from October 6, 2006.(2)
    
    The 2003 consolidated financial statements include the acquisition of Pennsylvania
Crusher Corporation and its subsidiary from January 2, 2003. Fiscal 2003 was a 53-week
year; all other years in this table were 52-week years.(3)
    
    Including current portion of long-term debt.(4)
    
    Net of treasury stock of 2,003 shares as of the closing of each fiscal year. - 17 -




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Item 7 . Managements Discussion and Analysis of Financial Condition and Results
of Operations .
 Overview of Business
       - 18 -




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Critical Accounting Assumptions and Estimates
    Depreciable Lives of Plant and Equipment
   - 19 -




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Allowance for Doubtful Accounts
   Asset Impairment Determinations
    
    
    The intended use of assets and the expected cash flows resulting directly from such use;
    
    Industry specific economic conditions;
    
    Customer preferences and behavior patterns; and
    
    The impact of applicable regulatory initiatives, if any.
  - 20 -




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Income Taxes
     Inventory Obsolescence
  - 21 -




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Warranty Reserve
  Legal Contingencies
  Results of Operations
 Overview
    - 22 -




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Acquisitions
     - 23 -




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Foreign Exchange Rates
   - 24 -




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2006
    
    
    
    
    
    2005
    
    
    
    
    
    2004Average U.S. dollar equivalent of
one Swiss franc
    
    
    0.799
    
    
    
    
    
    
    
    0.803
    
    
    
    
    
    
    
    0.807% change vs. prior year
    
    
    
    
    
    
    -0.5
    %
    
    
    
    
    
    
    -0.5
    %Average U.S. dollar equivalent of
one euro
    
    
    1.258
    
    
    
    
    
    
    
    1.244
    
    
    
    
    
    
    
    1.246% change vs. prior year
    
    
    
    
    
    
    +1.1
    %
    
    
    
    
    
    
    -0.2
    %Average U.S. dollar equivalent of
one British pound sterling
    
    
    1.846
    
    
    
    
    
    
    
    1.818
    
    
    
    
    
    
    
    1.835% change vs. prior year
    
    
    
    
    
    
    +1.5
    %
    
    
    
    
    
    
    -0.9
    %Average Swiss franc equivalent of
one euro
    
    
    1.574
    
    
    
    
    
    
    
    1.549
    
    
    
    
    
    
    
    1.543% change vs. prior year
    
    
    
    
    
    
    +1.6
    %
    
    
    
    
    
    
    +0.4
    %Average Swiss franc equivalent of
one British pound sterling
    
    
    2.310
    
    
    
    
    
    
    
    2.264
    
    
    
    
    
    
    
    2.273% change vs. prior year
    
    
    
    
    
    
    +2.0
    %
    
    
    
    
    
    
    -0.4
    %
 Presentation of Results and Analysis
  2006
    
    
    2005
    
    
    2004Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    57.9
    
    
    
    58.0
    
    
    
    58.8Gross profit
    
    
    42.1
    
    
    
    42.0
    
    
    
    41.2Selling, general and administrative
    
    
    26.8
    
    
    
    28.9
    
    
    
    30.1Research and development
    
    
    1.5
    
    
    
    2.0
    
    
    
    2.3Operating income
    
    
    13.8
    
    
    
    11.1
    
    
    
    8.8Interest (expense), net
    
    
    (0.7
    )
    
    
    (0.8
    )
    
    
    (1.2
    )Gain on sale of office building
    
    
    
    
    
    
    
    
    
    
    0.2Income before income taxes
    
    
    13.1
    
    
    
    10.3
    
    
    
    7.8Income tax provision
    
    
    (4.4
    )
    
    
    (4.2
    )
    
    
    (1.9
    )Net income
    
    
    8.7
    %
    
    
    6.1
    %
    
    
    5.9
    %Year-end backlog (at year-end 2006
foreign exchange rates, in thousands
of dollars)
    
    $
    49,908
    
    
    $
    25,561
    
    
    $
    21,440
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Liquidity and Capital Resources
 Revolving Credit Debt
  - 27 -




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Expiration ofInterest RatePeriod
    
    
    Per Annum RatePrime rate loan
    
    $
    500,000
    
    
    
    
    
    
    
    7.250
    %One month LIBOR loan
    
    
    1,500,000
    
    
    
    1/31/2007
    
    
    
    6.445
    %Three month LIBOR loan
    
    
    8,000,000
    
    
    
    3/30/2007
    
    
    
    6.495
    %Six month LIBOR loan
    
    
    10,000,000
    
    
    
    3/30/2007
    
    
    
    6.515
    %Three-year interest rate swap
    
    
    5,000,000
    
    
    
    10/13/2009
    
    
    
    6.335
    %Four-year interest rate swap
    
    
    5,000,000
    
    
    
    10/13/2010
    
    
    
    6.345
    %$
    30,000,000
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Gundlach Acquisition Debt
  Other Bank Debt
   Future Payments Under Contractual Obligations
  (Dollars in thousands)
    
    Payment due by PeriodLess than
    
    
    1-3
    
    
    3-5
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsLong-term debt
obligationsDebt maturities
    
    $
    34,768
    
    
    
    404
    
    
    
    3,364
    
    
    
    31,000
    
    
    
    Contractual interest
    
    
    9,496
    
    
    
    2,139
    
    
    
    4,060
    
    
    
    3,297
    
    
    
    Operating lease obligations
    
    
    2,821
    
    
    
    1,180
    
    
    
    1,382
    
    
    
    242
    
    
    
    17Purchase obligations
    
    
    10,664
    
    
    
    10,018
    
    
    
    646
    
    
    
    
    
    
    
    Total
    
    $
    57,749
    
    
    $
    13,741
    
    
    $
    9,452
    
    
    $
    34,539
    
    
    $
    17
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Capitalization
  (Dollars in thousands)
 2006
    
    
    2005
    
    
    2004Short-term debt, including current
portion of long-term debt
    
    $
    404
    
    
    $
    4,316
    
    
    $
    4,185Long-term debt
    
    
    34,364
    
    
    
    12,675
    
    
    
    18,598Total debt
    
    
    34,768
    
    
    
    16,991
    
    
    
    22,783Shareholders equity
    
    
    65,381
    
    
    
    49,520
    
    
    
    45,559Total debt and shareholders equity
(total capitalization)
    
    $
    100,149
    
    
    $
    66,511
    
    
    $
    68,342Percent total debt to total capitalization
    
    
    35
    %
    
    
    26
    %
    
    
    33
    %Percent long-term debt to equity
    
    
    53
    %
    
    
    26
    %
    
    
    41
    %Percent total debt to equity
    
    
    53
    %
    
    
    34
    %
    
    
    50
    %
  Other Items
     - 30 -




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Forward-Looking Statements
  - 31 -




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Item 7A . Quantitative and Qualitative Disclosures About Market Risk .
  Foreign Exchange Rate Risk
    Interest Rate Risk
  
 Item 8 . Financial Statements and Supplementary Data .
  
 Item 9 . Change In and Disagreements with Accountants on Accounting and Financial Disclosures .
  - 32 -




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Item 9A . Controls and Procedures .
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
   Internal Control -
Integrated Framework
  - 33 -




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Changes in Internal Control over Financial Reporting
  - 34 -




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Report of Independent Registered Public Accounting Firm
 
      .
 - 35 -




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Item 9B . Other Information .
  - 37 -




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PART III
 
 Item 10 . Directors, Executive Officers and Corporate Governance .
   
 Item 11 . Executive Compensation .
  
 Item 12 . Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters .
  
 Item 13 Certain Relationships and Related Transactions, and Director Independence
  
 Item 14 . Principal Accountant Fees and Services .
  - 38 -




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PART IV
 
 Item 15 . Exhibits and Financial Statement Schedules .
 Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 30, 2006 and December 31, 2005
    
    
    F-2Consolidated Statements of Income for the Fiscal Years Ended
December 30, 2006, December 31, 2005 and January 1, 2005
    
    
    F-3Consolidated Statements of Changes in Shareholders Equity for the Fiscal
Years Ended December 30, 2006, December 31, 2005 and January 1, 2005
    
    
    F-4Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 30, 2006, December 31, 2005 and January 1, 2005
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6
 Financial Statement Schedule
 PageSchedule II  Valuation and Qualifying Accounts for the Fiscal
Years Ended December 30, 2006, December 31, 2005 and January 1, 2005
    
    
    S-1
 Exhibits
 ExhibitNumber
    
    Description2.1
    
    Basic Agreement regarding the Assignment of Assets of the Hasler Division between K-Tron (Suisse) SA and MJ Entreprises SA dated July 31, 2001 (Filed as
Exhibit 2.1 to our report on Form 10-Q for the quarterly period ended September 29, 2001 and incorporated herein by reference)2.2
    
    Stock Purchase Agreement, dated as of October 5, 2006, by and among Robert B. Korbelik, individually, The Robert B. Korbelik Trust dated December 14, 1995, as
amended July 20, 2000, and Premier Pneumatics, Inc., a Delaware corporation (Filed as Exhibit 2.1 to our report on Form 8-K dated September 29, 2006 and filed
with the Securities and Exchange Commission on October 5, 2006 (October 2006 Form 8-K) and incorporated herein by reference)
 - 39 -




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ExhibitNumber
    
    Description3.1
    
    Restated Certificate of Incorporation, as amended (Filed as Exhibit 3.1 to our annual report on Form 10-K for the year ended January 2, 1999 (1998 Form 10-K)
and incorporated herein by reference)3.2
    
    By-laws, as amended (Filed as Exhibit 3.2 to our annual report on Form 10-K for the year ended December 29, 2001 (2001 Form 10-K) and incorporated herein by
reference)4.1
    
    Form of Certificate for Shares of Common Stock (Filed as Exhibit 4.1 to the 1998 Form 10-K and incorporated herein by reference)4.2
    
    Rights Agreement dated as of October 16, 2001 with American Stock Transfer & Trust Company, as Rights Agent (Filed as Exhibit 4.1 to our report on Form 8-K
dated October 16, 2001 and incorporated herein by reference)10.1
    
    K-Tron International, Inc. 2006 Equity Compensation Plan (Filed as Exhibit 10.1 to our report on Form 8-K dated June 20, 2006 and incorporated herein by
reference)**10.2
    
    K-Tron International, Inc. 1996 Equity Compensation Plan, as amended (Filed as Exhibit 10.3 to the 1998 Form 10-K and incorporated herein by reference)**10.3
    
    Amendment 2001-1 to the Amended and Restated K-Tron International, Inc. 1996 Equity Compensation Plan (Filed as Exhibit 10.4 to the 2001 Form 10-K and
incorporated herein by reference)**10.4
    
    K-Tron International, Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.2.7 to the annual report on Form 10-K for the year ended January 4, 1992
and incorporated herein by reference)**10.4A
    
    Amendment 2007-1 to the K-Tron International, Inc. Supplemental Executive Retirement Plan* **10.5
    
    Employment Agreement dated as of October 6, 1997 by and between K-Tron International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to our report on
Form 10-Q for the quarterly period ended September 27, 1997 and incorporated herein by reference)**10.6
    
    Amendment No. 1 to Employment Agreement dated October 5, 1998 by and between K-Tron International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to our
report on Form 10-Q for the quarterly period ended October 3, 1998 and incorporated herein by reference)**10.7
    
    Employment Agreement dated as of May 7, 1999 by and between K-Tron International, Inc. and Ronald R. Remick (Filed as Exhibit 10.9 to our annual report on Form
10-K for the year ended January 1, 2000 (1999 Form 10-K) and incorporated herein by reference)**
 - 40 -




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##### Table of Contents



ExhibitNumber
    
    Description10.8
    
    Form of Employment Agreement with certain of our employees listed on Schedule 10.12, which are identical in all material respects except for the employee,
amount of salary to be paid and date of execution (Filed as Exhibit 10.12 to our annual report on Form 10-K for the year ended January 3, 1998 and incorporated
herein by reference)**10.9
    
    Form of Indemnification Agreement with certain of our directors and officers listed on Schedule 10.11, which are identical in all material respects except for
the director or officer who is a party thereto and the date of execution (Filed as Exhibit 10.11 to the 1999 Form 10-K and incorporated herein by reference)**10.9A
    
    Supplement to Schedule 10.11, listing additional directors and officers who are parties to an Indemnification Agreement referenced in Exhibit 10.9. (Filed as
Exhibit 10.11A to the 2001 Form 10-K and incorporated herein by reference)10.10
    
    Mortgage Note dated June 11, 1996 from K-Tron America, Inc. in favor of The Bank of Gloucester County (Filed as Exhibit 10.15 to the 1999 Form 10-K and
incorporated herein by reference)10.11
    
    Loan Modification Agreement dated June 24, 1998 between K-Tron America, Inc. and The Bank of Gloucester County (Filed as Exhibit 10.16 to the 1999 Form 10-K
and incorporated herein by reference)10.12
    
    Note dated June 24, 1998 from K-Tron America, Inc. in favor of The Bank of Gloucester County (Filed as Exhibit 10.17 to the 1999 Form 10-K and incorporated
herein by reference)10.13
    
    Loan Modification Agreement dated July 9, 2002 between K-Tron America, Inc. and The Bank (formerly The Bank of Gloucester County) (Filed as Exhibit 10.14 to
our annual report on Form 10-K for the year ended December 28, 2002 and incorporated herein by reference)10.14
    
    Note dated December 20, 2002 from K-Tron America, Inc. in favor of The Bank (Filed as Exhibit 10.3 to our report on Form 8-K dated January 12, 2003 and filed
with the Securities and Exchange Commission on January 15, 2003 (January 2003 Form 8-K) and incorporated herein by reference)10.15
    
    Loan Modification Agreement dated December 20, 2002 between K-Tron America, Inc. and The Bank (Filed as Exhibit 10.4 to the January 2003 Form 8-K and
incorporated herein by reference)10.16
    
    Loan Modification Agreement dated July 9, 2003 between K-Tron America, Inc. and The Bank (Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly
period ended September 27, 2003 and incorporated herein by reference)10.17
    
    Loan Modification Agreement dated December 31, 2003 between K-Tron America, Inc. and The Bank (Filed as Exhibit 10.17 to our annual report on Form 10-K for the
year ended January 3, 2004 and incorporated herein by reference)10.18
    
    Note dated June 9, 2004 from K-Tron International, Inc. in favor of The Bank (Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly period ended
July 3, 2004 (July 2004 Form 10-Q) and incorporated herein by reference)
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##### Table of Contents



ExhibitNumber
    
    Description10.19
    
    Loan Modification/Renewal Agreement dated June 9, 2004 between K-Tron America, Inc. and The Bank (Filed as Exhibit 10.2 to the July 2004 Form 10-Q and
incorporated herein by reference)10.20
    
    Loan Modification Agreement dated July 5, 2005 between K-Tron America, Inc. and The Bank (Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly
period ended October 1, 2005 and incorporated herein by reference)10.21
    
    Credit Agreement dated January 3, 2003 among Pennsylvania Crusher Corporation, the Lenders party to that Credit Agreement and National City Bank, as Agent
(Filed as Exhibit 10.1 to the January 2003 Form 8-K and incorporated herein by reference)10.22
    
    Amendment No. 1 dated May 12, 2003 to Credit Agreement dated January 3, 2003 among Pennsylvania Crusher Corporation, the Lenders party to that Credit Agreement
and National City Bank, as Agent (Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly period ended June 28, 2003 and incorporated herein by
reference)10.23
    
    Amendment No. 2 dated as of June 28, 2005 to Credit Agreement dated January 3, 2003 among Pennsylvania Crusher Corporation, the Lenders party to that Credit
Agreement and National City Bank, as Agent (Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly period ended July 2, 2005 and incorporated
herein by reference)10.24
    
    Loan Agreement, dated as of September 29, 2006, among K-Tron International, Inc., K-Tron Investment Co., K-Tron Technologies, Inc., K-Tron America, Inc.,
Gundlach Equipment Corporation, Pennsylvania Crusher Corporation and Jeffrey Specialty Equipment Corporation, as Borrowers and the Financial Institutions
referred to on the signature pages as Lenders and Citizens Bank of Pennsylvania, individually as a Lender and as Agent (Filed as Exhibit 10.1 to the
October 2006 Form 8-K and incorporated herein by reference)21.1
    
    Subsidiaries*23.1
    
    Consent of Grant Thornton LLP*31.1
    
    Chief Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934*31.2
    
    Chief Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934*32
    
    Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350*
 
 *
    
    Filed herewith**
    
    Management contract or compensatory plan or arrangement required to be filed or incorporated
as an exhibit (b)
    
    Exhibits. See (a) 3 above.(c)
    
    Financial Statement Schedules. See (a) 2 above.
 - 42 -




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##### Table of Contents



SIGNATURES
  K-TRON INTERNATIONAL, INC.Date:
March 9, 2007
    
    By
    
    EDWARD B. CLOUES, IIEdward B. Cloues, IIChief Executive Officer
  Signature
    
    Date
    
    CapacityEDWARD B. CLOUES, II
    
    March 9, 2007
    
    Chief Executive Officer
(principal executive officer)
and Chairman of the Board of DirectorsEdward B. Cloues, IIRONALD R. REMICK
    
    March 9, 2007
    
    Senior Vice President, Chief
Financial Officer and Treasurer
(principal financial officer)Ronald R. RemickALAN R. SUKONECK
    
    March 9, 2007
    
    Vice President, Chief
Accounting and Tax Officer
(principal accounting officer)Alan R. SukoneckNORMAN COHEN
    
    March 9, 2007
    
    DirectorNorman CohenROBERT A. ENGEL
    
    March 9, 2007
    
    DirectorRobert A. EngelEDWARD T. HURD
    
    March 9, 2007
    
    DirectorEdward T. HurdRICHARD J. PINOLA
    
    March 9, 2007
    
    DirectorRichard J. Pinola




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
 Index to Consolidated Financial Statements and Financial Statement Schedule
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 30, 2006 and December 31, 2005
    
    
    F-2Consolidated Statements of Income for the Fiscal Years Ended December 30, 2006,
December 31, 2005 and January 1, 2005
    
    
    F-3Consolidated Statements of Changes in Shareholders Equity for the Fiscal Years Ended
December 30, 2006, December 31, 2005 and January 1, 2005
    
    
    F-4Consolidated Statements of Cash Flows for the
Fiscal Years Ended December 30, 2006, December 31, 2005 and January 1, 2005
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6Schedule:Schedule II  Valuation and Qualifying Accounts for the Fiscal Years Ended
December 30, 2006, December 31, 2005 and January 1, 2005
    
    
    S-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Share-Based Payment
   
 F-1




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   December 30,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    14,038
    
    
    $
    15,051Restricted cash
    
    
    420
    
    
    
    Accounts receivable, net of allowance for doubtful accounts
of $852 and $682
    
    
    23,364
    
    
    
    18,168Inventories, net
    
    
    23,467
    
    
    
    15,235Deferred income taxes
    
    
    1,617
    
    
    
    1,033Prepaid expenses and other current assets
    
    
    3,649
    
    
    
    2,019Total current assets
    
    
    66,555
    
    
    
    51,506Property, plant and equipment, net of accumulated depreciation
of $36,115 and $30,947
    
    
    29,316
    
    
    
    22,271Patents, net of accumulated amortization of $1,398 and $1,238
    
    
    1,457
    
    
    
    1,577Goodwill
    
    
    24,094
    
    
    
    2,053Other intangibles, net of accumulated amortization of $1,026 and $599
    
    
    17,762
    
    
    
    9,739Notes receivable and other assets
    
    
    1,665
    
    
    
    1,852Deferred income taxes
    
    
    147
    
    
    
    112Total assets
    
    $
    140,996
    
    
    $
    89,110Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    404
    
    
    $
    4,316Accounts payable
    
    
    8,397
    
    
    
    6,025Accrued expenses and other current liabilities
    
    
    11,618
    
    
    
    6,526Accrued commissions
    
    
    3,009
    
    
    
    2,297Customer advances
    
    
    8,233
    
    
    
    1,704Income taxes payable
    
    
    4,270
    
    
    
    3,421Deferred income taxes
    
    
    1,662
    
    
    
    1,652Total current liabilities
    
    
    37,593
    
    
    
    25,941Long-term debt, net of current portion
    
    
    34,364
    
    
    
    12,675Deferred income taxes
    
    
    3,583
    
    
    
    974Other non-current liabilities
    
    
    75
    
    
    
    Series B Junior Participating Preferred Shares, $0.01 par value.
Authorized 50,000 shares; issued none
    
    
    
    
    
    
    Shareholders equity:Preferred stock, $0.01 par value. Authorized 950,000 shares;
issued none
    
    
    
    
    
    
    Common stock, $0.01 par value. Authorized 50,000,000 shares;
issued 4,615,623 and 4,578,166 shares
    
    
    46
    
    
    
    46Paid-in capital
    
    
    20,319
    
    
    
    19,082Retained earnings
    
    
    69,255
    
    
    
    56,383Accumulated other comprehensive income
    
    
    3,275
    
    
    
    1,52392,895
    
    
    
    77,034Treasury stock, 2,002,574 shares, at cost
    
    
    (27,514
    )
    
    
    (27,514
    )Total shareholders equity
    
    
    65,381
    
    
    
    49,520Total liabilities and shareholders equity
    
    $
    140,996
    
    
    $
    89,110
  F-2




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   For the Fiscal Year EndedDecember 30,
    
    
    December 31,
    
    
    January 1,2006
    
    
    2005
    
    
    2005Revenues:Equipment and parts
    
    $
    139,174
    
    
    $
    111,342
    
    
    $
    105,165Services and freight
    
    
    8,953
    
    
    
    7,598
    
    
    
    7,329Total revenues
    
    
    148,127
    
    
    
    118,940
    
    
    
    112,494Cost of revenues:Equipment and parts
    
    
    77,592
    
    
    
    61,923
    
    
    
    59,740Services and freight
    
    
    8,229
    
    
    
    7,021
    
    
    
    6,355Total cost of revenues
    
    
    85,821
    
    
    
    68,944
    
    
    
    66,095Gross profit
    
    
    62,306
    
    
    
    49,996
    
    
    
    46,399Operating expenses:Selling, general, and administrative
    
    
    39,614
    
    
    
    34,330
    
    
    
    33,846Research and development
    
    
    2,262
    
    
    
    2,449
    
    
    
    2,66941,876
    
    
    
    36,779
    
    
    
    36,515Operating income
    
    
    20,430
    
    
    
    13,217
    
    
    
    9,884Interest (expense), net
    
    
    (1,049
    )
    
    
    (1,016
    )
    
    
    (1,316
    )Gain on sale of office building
    
    
    
    
    
    
    
    
    
    
    164Income before income taxes
    
    
    19,381
    
    
    
    12,201
    
    
    
    8,732Income tax provision
    
    
    6,509
    
    
    
    4,919
    
    
    
    2,122Net income
    
    $
    12,872
    
    
    $
    7,282
    
    
    $
    6,610Basic earnings per share
    
    $
    4.95
    
    
    $
    2.85
    
    
    $
    2.65Diluted earnings per share
    
    
    4.59
    
    
    
    2.68
    
    
    
    2.53Weighted average common shares outstanding
    
    
    2,600,000
    
    
    
    2,555,000
    
    
    
    2,497,000Weighted average common and common
equivalents shares outstanding
    
    
    2,804,000
    
    
    
    2,719,000
    
    
    
    2,613,000
  F-3




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
    AccumulatedotherCommon stock
    
    
    Paid-in
    
    
    Retained
    
    
    comprehensive
    
    
    Treasury stockShares
    
    
    Amount
    
    
    capital
    
    
    earnings
    
    
    income (loss)
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance,
January 4, 2004
    
    
    4,449,928
    
    
    $
    44
    
    
    $
    16,922
    
    
    $
    42,491
    
    
    $
    3,171
    
    
    
    2,002,574
    
    
    $
    (27,514
    )
    
    $
    35,114Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,610Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,486
    
    
    
    
    
    
    
    
    
    
    
    2,486Unrealized gain
on interest rate
swap, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    66Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,162Issuance of stock
    
    
    80,488
    
    
    
    1
    
    
    
    1,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,283Balance,
January 1, 2005
    
    
    4,530,416
    
    
    
    45
    
    
    
    18,204
    
    
    
    49,101
    
    
    
    5,723
    
    
    
    2,002,574
    
    
    
    (27,514
    )
    
    
    45,559Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,282Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,235
    )
    
    
    
    
    
    
    
    
    
    
    (4,235
    )Unrealized gain
on interest rate
swap, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    35Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,082Issuance of stock
    
    
    47,750
    
    
    
    1
    
    
    
    878
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    879Balance,
December 31, 2005
    
    
    4,578,166
    
    
    
    46
    
    
    
    19,082
    
    
    
    56,383
    
    
    
    1,523
    
    
    
    2,002,574
    
    
    
    (27,514
    )
    
    
    49,520Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,872Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,849
    
    
    
    
    
    
    
    
    
    
    
    1,849Unrealized loss
on interest rate
swap, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    (97
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,624Issuance of stock
    
    
    37,457
    
    
    
    
    
    
    
    1,237
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,237Balance,
December 30, 2006
    
    
    4,615,623
    
    
    $
    46
    
    
    $
    20,319
    
    
    $
    69,255
    
    
    $
    3,275
    
    
    
    2,002,574
    
    
    $
    (27,514
    )
    
    $
    65,381
  F-4




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   For the Fiscal Year EndedDecember 30,
    
    
    December 31,
    
    
    January 1,2006
    
    
    2005
    
    
    2005Operating activities:Net income
    
    $
    12,872
    
    
    $
    7,282
    
    
    $
    6,610Adjustments to reconcile net income to net
cash provided by operating activities:Gain on disposition of assets
    
    
    
    
    
    
    
    
    
    
    (164
    )Depreciation and amortization
    
    
    4,634
    
    
    
    3,868
    
    
    
    4,062Non-cash compensation
    
    
    337
    
    
    
    175
    
    
    
    94Deferred income taxes
    
    
    240
    
    
    
    390
    
    
    
    176Changes in assets and liabilities:Accounts receivable, net
    
    
    468
    
    
    
    1,794
    
    
    
    (1,036
    )Inventories, net
    
    
    (3,184
    )
    
    
    (925
    )
    
    
    (1,014
    )Prepaid expenses and other current assets
    
    
    (1,177
    )
    
    
    (291
    )
    
    
    115Other assets
    
    
    275
    
    
    
    341
    
    
    
    286Accounts payable
    
    
    699
    
    
    
    273
    
    
    
    501Accrued expenses and other current liabilities
    
    
    3,824
    
    
    
    (2,399
    )
    
    
    2,918Net cash provided by operating activities
    
    
    18,988
    
    
    
    10,508
    
    
    
    12,548Investing activities:Proceeds from disposition of assets
    
    
    
    
    
    
    
    
    
    
    996Businesses acquired, net of cash acquired
    
    
    (32,975
    )
    
    
    
    
    
    
    Capital expenditures
    
    
    (2,604
    )
    
    
    (2,206
    )
    
    
    (1,601
    )Restricted cash
    
    
    (420
    )
    
    
    
    
    
    
    Other
    
    
    (43
    )
    
    
    (14
    )
    
    
    (61
    )Net cash used in investing activities
    
    
    (36,042
    )
    
    
    (2,220
    )
    
    
    (666
    )Financing activities:Net (repayments) borrowings under notes payable to banks
    
    
    (804
    )
    
    
    (1,296
    )
    
    
    213Proceeds from issuance of long-term debt
    
    
    38,065
    
    
    
    
    
    
    
    4,000Principal payments on long-term debt
    
    
    (22,510
    )
    
    
    (4,476
    )
    
    
    (9,587
    )Proceeds from issuance of common stock
    
    
    422
    
    
    
    606
    
    
    
    599Net cash provided by (used in) financing activities
    
    
    15,173
    
    
    
    (5,166
    )
    
    
    (4,775
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    868
    
    
    
    (514
    )
    
    
    830Net (decrease) increase in cash and cash equivalents
    
    
    (1,013
    )
    
    
    2,608
    
    
    
    7,937Cash and cash equivalents:Beginning of year
    
    
    15,051
    
    
    
    12,443
    
    
    
    4,506End of year
    
    $
    14,038
    
    
    $
    15,051
    
    
    $
    12,443Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    937
    
    
    $
    1,097
    
    
    $
    1,364Income taxes
    
    
    5,858
    
    
    
    4,240
    
    
    
    1,432Business acquired through buyer notes
    
    $
    3,000
    
    
    $
    
    
    
    $
    
  F-5




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   (1)
    
    Nature of OperationsK-Tron International, Inc. and its subsidiaries (K-Tron or the Company) design, produce,
market and service material handling equipment and systems for a wide variety of industrial
markets. The Company has manufacturing facilities in the United States, Switzerland and the
United Kingdom, and its equipment is sold throughout the world.(2)
    
    Summary of Significant Accounting Policies
 (a)
    
    Principles of ConsolidationThe consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned. All material intercompany accounts and
transactions have been eliminated.Certain reclassifications were made to the prior years consolidated financial statements
to conform them to the current year presentation.(b)
    
    Fiscal YearThe Companys fiscal year is reported on a fifty-two/fifty-three week period. Each of the
fiscal years ended December 30, 2006 (referred to herein as 2006), December 31, 2005
(referred to herein as 2005) and January 1, 2005 (referred to herein as 2004) was a
fifty-two week period.(c)
    
    Cash and Cash Equivalents and Restricted CashAll cash equivalents represent highly liquid, interest-bearing investments purchased with
original maturities of three months or less. Restricted cash represents cash reserves
that secure outstanding letters of credit.(d)
    
    InventoriesInventories are stated at the lower of cost or market and are accounted for using the
first-in, first-out method. The Company monitors inventory values and writes down its
inventories for estimated obsolescence based upon analysis of historical data, product
changes, market conditions and assumptions about future product demand.(e)
    
    Property, Plant and EquipmentProperty, plant and equipment is carried at cost and is depreciated on a straight-line
basis over the following estimated useful lives: buildings and improvements, 7 to 50
years; automotive equipment, 3 years; machinery and equipment, 3 to 12 years; and
furniture and equipment, including computer equipment and software, 3 to 7 years.
Leasehold improvements are amortized over the shorter of their estimated useful lives or
the remaining terms of the applicable leases.
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   (f)
    
    PatentsPatents are stated at cost less accumulated amortization. The costs of patents are
amortized on a straight-line basis over their remaining economic lives, but in no event
longer than their remaining legal lives, the longest of which is 17 years.(g)
    
    Goodwill and Other Intangible AssetsWhen a company is acquired, the excess of the purchase price over the fair value of its
net assets, including identifiable intangibles, is goodwill. Goodwill is recorded as an
asset on the balance sheet.Goodwill and other intangible assets are accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.
The statement provides that goodwill and intangible assets with indefinite lives are no
longer amortized on a recurring basis, but instead are subject to impairment testing at
least annually. The Company does not amortize goodwill, and it amortizes the cost of
other intangibles over their estimated useful lives unless such lives are deemed
indefinite. Intangible assets which do not have indefinite lives are amortized on a
straight-line basis over the expected periods of benefit, which range from 10 to 50
years. In accordance with the provisions of SFAS No. 142, the Company performed
impairment tests on goodwill and other intangible assets with indefinite lives, which
indicated no impairment in all periods presented.(h)
    
    Income TaxesIncome taxes are accounted for in accordance with SFAS No. 109, Accounting for Income
Taxes. Deferred income taxes are provided for differences between amounts shown for
financial reporting purposes and those included with tax return filings that will reverse
in future periods. Additionally, the effects of income taxes are measured based upon
enacted tax laws and rates.(i)
    
    Revenue RecognitionThe Company generally recognizes revenue when the following criteria are met:
 
    
    Persuasive evidence of an arrangement exists.
    
    Delivery has occurred or services have been rendered.
    
    The sellers price to the buyer is fixed or determinable.
    
    Collectibility is reasonably assured.
 Equipment sales generally start with selection by a customer from a series of standard
products which are then either slightly modified or combined with other standard or
slightly modified products and parts in order to meet the customers specific needs.
Sales orders may include post-shipment start-up assistance or training, which is not
recorded as revenue until the service is performed. Revenue from equipment and parts
sales is recognized at the point where risk of ownership and title to the product
transfers upon shipment except in those few cases where customer inspection is still
required. In those cases, revenue is not recorded until acceptance is obtained. Cost of
revenues is recorded in the period in which the related revenue is recognized. There are
certain transactions where revenue is recognized prior to shipment in accordance with SEC
Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, corrected copy.
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   (j)
    
    Research and DevelopmentExpenditures for research, development and engineering of products are expensed as
incurred.(k)
    
    Foreign CurrencyAssets and liabilities denominated in foreign currencies are translated into U.S. dollars
at current rates of exchange at year-end. Revenues and expenses are translated at average
rates prevailing during the year. The Company recognized foreign currency transaction
gains of approximately $43,000 in each of 2006 and 2005, and a loss of approximately
$135,000 in 2004. These transaction gains or losses are recorded within selling, general
and administrative expense in the Companys income statement.Translation gains and losses are recorded as a separate component of shareholders
equity.(l)
    
    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, including employee and director stock grants and
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, Accounting for Stock Issued to
Employees, and it did not recognize compensation expense in its income statement for
options granted that had an exercise price equal to or greater than 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
common stock at the date of grant and the vesting period of the grant. As required by
SFAS No. 123, Accounting for Stock-Based Compensation, 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 applies the provisions of SFAS No. 123(R) 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 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).
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   For 2006, the pre-tax cost for stock option employee compensation was approximately
$62,000. 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:
 2006(in thousands, except per share)Income from continuing operations
before income taxes
    
    $
    62Net income
    
    $
    38Basic earnings per share
    
    $
    0.01Diluted earnings per share
    
    $
    0.01
 As of December 30, 2006, the Company did not have any remaining prospective pre-tax
cost of unvested stock option employee or director compensation to be expensed.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 and director compensation. There were no employee or director stock
options granted in 2006.
 2005
    
    
    2004(In thousands, except per share)Net income  as reported
    
    $
    7,282
    
    
    $
    6,610Deduct stock option employee and director
compensation expense determined, net of
related tax effect
    
    
    (126
    )
    
    
    (151
    )Net income  pro forma
    
    
    7,156
    
    
    
    6,459Basic earnings per share  as reported
    
    
    2.85
    
    
    
    2.65Basic earnings per share  pro forma
    
    
    2.80
    
    
    
    2.59Diluted earnings per share  as reported
    
    
    2.68
    
    
    
    2.53Diluted earnings per share  pro forma
    
    
    2.63
    
    
    
    2.47
 For pro forma disclosure purposes, the fair value of each stock option granted was
estimated on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions: 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
for grants in 2005 and 2004.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.
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   (m)
    
    Fair Value of Financial InstrumentsThe carrying value of financial instruments such as cash, accounts receivable and
payable, and other current assets and liabilities approximates their fair value, based on
the short-term nature of these instruments. The carrying amount of the Companys
long-term debt and notes payable approximates their fair value. Their fair value is
estimated based on the current rates offered to the Company for debt and notes payable of
the same remaining maturities.(n)
    
    Use of EstimatesThe preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
assumptions and estimates that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Judgments and estimates of
uncertainties are required in applying the Companys accounting policies in certain
areas. The following are some of the areas requiring significant judgments and
estimates: determination of an assets useful life, estimates of allowances for doubtful
accounts, cash flow and valuation assumptions in performing asset impairment tests of
long-lived assets, estimates of the realizability of deferred tax assets, inventory
reserves, warranty reserves and legal contingencies.(o)
    
    New Accounting PronouncementsIn December 2004, the FASB issued the final revised version of 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 and directors. In March 2005, the SEC issued 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). Since
January 1, 2006, the Company has recognized 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 has
recognized compensation expense in the same manner as it did in its income statement or
for pro forma disclosures prior to the effective date of its adoption of SFAS No. 123(R).
See Note (2)(l), Share-Based Compensation, for more information regarding the adoption
of SFAS No. 123(R).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 of this standard did not have a material impact on its consolidated
financial statements.
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets  an
amendment of APB Opinion No. 29. APB 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 of this standard did not have a material impact on its
consolidated financial statements.In December 2004, the FASB issued Staff Position No. FAS 109-2 (FAS 109-2), Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004. The American Jobs Creation Act (AJCA) introduced
a limited time 85% dividends received deduction on the repatriation of certain foreign
earnings to a U.S. taxpayer (repatriation provision), provided certain criteria are met.
FAS 109-2 provides accounting and disclosure guidance for the repatriation provision.
The Company repatriated $10,000,000 of foreign earnings in the fourth quarter of 2005
pursuant to the AJCA. A charge of $891,000 related to the repatriation was accrued in
the fourth quarter of 2005 and is included in the income tax provision for 2005 in the
accompanying consolidated statements of income.In July 2006, the FASB issued FASB Interpretation 48, Accounting for Uncertainty in
Income Taxes: an interpretation of FASB Statement No. 109. Interpretation 48, which
clarifies Statement 109, Accounting for Income Taxes, establishes the criterion that an
individual tax position has to meet for some or all of the benefits of that position to
be recognized in the Companys financial statements. On initial application,
Interpretation 48 will be applied to all tax positions for which the statute of
limitations remains open. Only tax positions that meet the more-likely-than-not
recognition threshold at the adoption date will be recognized or continue to be
recognized. The cumulative effect of applying Interpretation 48 will be reported as an
adjustment to retained earnings at the beginning of the period in which it is adopted.
Interpretation 48 is effective for fiscal years beginning after December 15, 2006, and
was adopted by the Company effective December 31, 2006. The adoption of Interpretation 48
is not expected to have a material impact on the Companys consolidated financial
statements.In September 2006, the SEC staff issued SAB No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.
SAB No. 108 expresses the SEC staffs views regarding the process of quantifying
financial statement misstatements. The SEC staff believes registrants should quantify
errors using both a balance sheet and an income statement approach and evaluate whether
either approach results in quantifying a misstatement that, when all relevant
quantitative and qualitative factors are considered, is material. The SEC staff will not
object if a registrant records a one-time cumulative effect adjustment to correct errors
existing in prior years that previously had been considered immaterial, quantitatively
and qualitatively, based on appropriate use of the registrants approach. SAB No. 108
describes the circumstances where this would be appropriate as well as required
disclosures to investors. SAB No. 108 is effective for fiscal years ending on or after
November 15, 2006. The Company adopted SAB
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   No. 108 effective December 31, 2006. The adoption is not expected to have a material
impact on the Companys consolidated financial statements.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, a standard
that provides enhanced guidance for using fair value to measure assets and liabilities.
SFAS No. 157 also responds to investors requests for expanded information about the
extent to which companies measure assets and liabilities at fair value, the information
used to measure fair value and the effect of fair value measurements on earnings. SFAS
No. 157 applies whenever other standards require (or permit) assets or liabilities to be
measured at fair value. SFAS No. 157 does not expand the use of fair value in any new
circumstances. SFAS No. 157 establishes a fair value hierarchy that prioritizes the
information used to develop fair value assumptions. SFAS No. 157 is effective for fiscal
years and interim periods beginning after November 15, 2007. The Company has not yet
determined the impact on its financial statements of adopting SFAS No. 157 effective
December 30, 2007.
 (3)
    
    AcquisitionsOn March 3, 2006, the Company purchased all of the outstanding stock of J.M.J. Industries,
Inc., which operated its business under the Gundlach tradename, and the financial results of
that company, now known as Gundlach Equipment Corporation (Gundlach), 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 $6,874,000, which was allocated as follows:
 Useful Life
    
    2006(in thousands)Property, plant and equipment
    
    Various
    
    $
    1,347Goodwill
    
    Indefinite
    
    
    1,877Customer relationships
    
    15 years
    
    
    1,500Drawings
    
    25 years
    
    
    1,430Tradenames
    
    Indefinite
    
    
    720$
    6,874
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   The purchase price of $9,154,500 plus the payoff of bank debt of $1,347,000, which
totaled $10,501,500, was allocated as follows:
 2006(in thousands)Cash
    
    $
    389Accounts receivable
    
    
    2,597Inventories
    
    
    2,151Other current assets
    
    
    175Property, plant and equipment
    
    
    4,267Goodwill
    
    
    1,877Customer relationships
    
    
    1,500Drawings
    
    
    1,430Tradenames
    
    
    720Accounts payable
    
    
    (502
    )Accrued expenses and other current liabilities
    
    
    (2,338
    )Deferred tax liabilities
    
    
    (1,764
    )$
    10,502
 Customer relationships, drawings and tradenames are included in other intangibles in
the consolidated balance sheet.On October 5, 2006, the Company purchased all of the outstanding stock of Premier
Pneumatics, Inc. (Premier), and the financial results of that company have been
included in the Companys consolidated financial statements since that date. The
adjusted purchase price was $27,453,000, all of which was paid in cash, including a
$2,000,000 escrow. An additional $1,567,000 was paid to the seller in February 2007
in connection with the Companys Internal Revenue Code section 338(h)(10) election
related to such acquisition. The Company borrowed the full purchase price (see Note 8
 Notes Payable to Banks and Other Long-Term Debt). Premier did not have any bank
debt at the time of purchase.The excess of the purchase price over the carrying value of the identifiable net
assets acquired was $27,291,000, which was allocated as follows:
 Useful Life
    
    2006(in thousands)Property, plant and equipment
    
    Various
    
    $
    2,327Goodwill
    
    Indefinite
    
    
    20,164Customer relationships
    
    10 years
    
    
    2,200Tradenames
    
    Indefinite
    
    
    2,600$
    27,291
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   The adjusted purchase price of $27,453,000 was allocated as follows:
 2006(in thousands)Cash
    
    $
    1,595Accounts receivable
    
    
    2,291Inventories
    
    
    2,266Other current assets
    
    
    47Property, plant and equipment
    
    
    3,455Goodwill
    
    
    20,164Customer relationships
    
    
    2,200Tradenames
    
    
    2,600Accounts payable
    
    
    (833
    )Accrued expenses and other current liabilities
    
    
    (6,332
    )$
    27,453
 Customer relationships and tradenames are included in other intangibles in the
consolidated balance sheet.The above allocations for Premier are based on a preliminary valuation and may change
when the final valuation is completed.If the acquisition of Premier had occurred at the beginning of 2005, pro forma K-Tron
revenues, net income and diluted earnings per share for 2006 and 2005 would have been
as follows:
 2006
    
    2005(In thousands, except per share)(Unaudited)Revenues
    
    $
    166,307
    
    
    $
    139,837Net Income
    
    
    13,460
    
    
    
    7,521Diluted earnings per share
    
    
    4.80
    
    
    
    2.77
 (4)
    
    InventoriesInventories consist of the following:
 2006
    
    
    2005(In thousands)Components
    
    $
    18,697
    
    
    $
    13,216Work-in-process
    
    
    5,580
    
    
    
    2,850Finished goods
    
    
    739
    
    
    
    81Inventory reserves
    
    
    (1,549
    )
    
    
    (912
    )$
    23,467
    
    
    $
    15,235
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   Fixed production overheads are allocated to inventory based on normal capacity of the
production facility. Unallocated overheads are recognized as an expense in the period
incurred.(5)
    
    Property, Plant and EquipmentProperty, plant and equipment consists of the following:
 2006
    
    
    2005(In thousands)Land
    
    $
    1,946
    
    
    $
    1,423Buildings and improvements
    
    
    27,161
    
    
    
    21,109Automotive equipment
    
    
    400
    
    
    
    312Machinery and equipment
    
    
    18,685
    
    
    
    14,566Furniture and equipment, including computer
equipment
and software
    
    
    17,239
    
    
    
    15,80865,431
    
    
    
    53,218Less accumulated depreciation and amortization
    
    
    (36,115
    )
    
    
    (30,947
    )$
    29,316
    
    
    $
    22,271
 Depreciation of property, plant and equipment for 2006, 2005 and 2004 was $4,047,000,
$3,453,000 and $3,644,000.(6)
    
    Intangible AssetsIntangible assets consist of the following (in thousands):
 2006
    
    
    2005Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortized intangible assetsPatents
    
    $
    2,855
    
    
    $
    1,398
    
    
    $
    2,815
    
    
    $
    1,238Drawings
    
    
    4,980
    
    
    
    545
    
    
    
    3,550
    
    
    
    355Customer relationships
    
    
    8,598
    
    
    
    481
    
    
    
    4,898
    
    
    
    244$
    16,433
    
    
    $
    2,424
    
    
    $
    11,263
    
    
    $
    1,837Unamortized intangible assetsTrademarks and tradenames
    
    $
    5,210
    
    
    
    
    
    
    $
    1,890
 The amortized intangible assets are being amortized on the straight-line basis (half-year
expense in the year of acquisition for patents) over the expected periods of benefit, which
range from 10 to 50 years. The weighted average life of the amortizable intangible assets is
29 years. The amortization expense of intangible assets was $587,000 for 2006 and $415,000 for
2005.
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   Future annual amortization of intangible assets is as follows:
 Amount(In thousands)Fiscal year:2007
    
    $
    7802008
    
    
    7802009
    
    
    7802010
    
    
    7802011
    
    
    780Thereafter
    
    
    10,109$
    14,009
 (7)
    
    Accrued WarrantyThe Company offers a one-year product 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 2006 and 2005.
 2006
    
    
    2005(In thousands)Beginning balance
    
    $
    989
    
    
    $
    1,257Accrued warranty of acquired businesses
    
    
    265
    
    
    
    Accrual of warranty expense
    
    
    1,439
    
    
    
    833Warranty costs incurred
    
    
    (1,187
    )
    
    
    (1,040
    )Foreign exchange adjustment
    
    
    32
    
    
    
    (61
    )Ending balance
    
    $
    1,538
    
    
    $
    989
 (8)
    
    Notes Payable to Banks and Other Long-Term DebtOn September 29, 2006, in connection with the anticipated October 5, 2006 Premier acquisition,
the Company, along with certain of its subsidiaries (the Borrowers), entered into a Loan
Agreement (the New Loan Agreement) with Citizens Bank of Pennsylvania (Citizens).The New Loan Agreement provides the Borrowers with a 5-year $50,000,000 unsecured revolving
line of credit facility (the Revolving Credit Facility), of which up to an aggregate of
$10,000,000 may be used for letters of credit. The New Loan Agreement terminates on September
29, 2011. The Borrowers entered into the New Loan Agreement to (i) refinance certain
indebtedness of the Borrowers to two other banks, (ii) provide for future working capital
requirements and other general corporate purposes and (iii) fund permitted acquisitions,
including the acquisition of Premier.The interest rate on revolving loans under the New Loan Agreement can be based on either the
prime rate or 1, 2, 3 or 6-month LIBOR, as selected by the Borrowers. Prime rate loans bear
interest at a fluctuating
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   rate per annum equal to the prime rate of interest announced by
Citizens from time to time less a percentage ranging from 0.25% to 1.00%, depending on the
level of the ratio of funded debt to adjusted earnings before interest expense, tax expense,
and depreciation and amortization expenses for the most recent measurement period (the Debt
Ratio). LIBOR loans bear interest at a fluctuating rate per annum equal to LIBOR for the
selected interest rate period plus a percentage ranging from 0.875% to 1.625%, depending on
the level of the Debt Ratio.The Borrowers are obligated to pay a fee for any unused borrowings with respect to the
Revolving Credit Facility equal to (i) a percentage ranging from 0.125% to 0.20%, depending on
the level of the Debt Ratio, times (ii) the average unused portion of the Revolving Credit
Facility.The New Loan Agreement is unsecured, except that the lenders have been given a pledge of 65%
of the equity interests of the following foreign subsidiaries of the Company: K-Tron
(Schweiz) AG, K-Tron Colormax Limited and K-Tron PCS Limited. The New Loan Agreement contains
financial and other covenants, such as a minimum fixed charge coverage ratio and net worth and
a maximum Debt Ratio, and includes limitations on, among other things, liens, acquisitions,
consolidations, sales of assets, incurrences of debt and capital expenditures. If an event of
default, such as non-payment or failure to comply with
specific covenants, were to occur under the New Loan Agreement, and subject to any applicable
grace period, the lenders would be entitled to declare all amounts outstanding under the
facility immediately due and payable.On September 29, 2006, the Company borrowed $9,801,000 under the Revolving Credit
Facility to pay off existing credit facilities with two other banks and to pay certain fees in
connection with the New Loan Agreement. In connection with the payoff of one of these credit
facilities, the Company terminated an interest rate swap entered into in January 2003,
resulting in a $60,000 gain. On October 5, 2006, the Company borrowed $27,565,000 under the
Revolving Credit Facility to purchase Premier. Between September 29 and October 5, 2006, the
Company repaid $4,000,000 of the $9,801,000 borrowed on September 29 so that at October 5,
2006 the total borrowing was $33,366,000. As of December 30, 2006, the total borrowing under
the Revolving Credit Facility was $30,000,000, with interest payable at the following rates
for the periods ending on the dates indicated:
 Expiration ofInterest Rate
    
    
    Per AnnumPeriod
    
    
    RatePrime rate loan
    
    $
    500,000
    
    
    
    
    
    
    
    7.250
    %One month LIBOR loan
    
    
    1,500,000
    
    
    
    1/31/2007
    
    
    
    6.445
    %Three month LIBOR loan
    
    
    8,000,000
    
    
    
    3/30/2007
    
    
    
    6.495
    %Six month LIBOR loan
    
    
    10,000,000
    
    
    
    3/30/2007
    
    
    
    6.515
    %Three-year interest rate swap
    
    
    5,000,000
    
    
    
    10/13/2009
    
    
    
    6.335
    %Four-year interest rate swap
    
    
    5,000,000
    
    
    
    10/13/2010
    
    
    
    6.345
    %$
    30,000,000
 On October 13, 2006, the Company entered into two interest rate swaps with Citizens. Each of
the swaps fixes the payments on a notional amount of $5,000,000, with fixed rates of 6.335%
and 6.345%. The swaps expire on October 13, 2009 and 2010. The Company entered into the
swaps in order to minimize its risk of exposure to interest rate changes. As of December 30,
2006, a swap liability of $75,000 is included
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   in other non-current liabilities. The net
unrealized loss on the interest rate swaps was $45,000 at December 30, 2006 and is reflected
in accumulated other comprehensive income.
 In connection with the March 3, 2006 acquisition of Gundlach, the Company issued as part of
the purchase price a $3,000,000 unsecured, promissory note bearing interest payable quarterly
at 5% per annum and with the principal payable in three equal installments of $1,000,000 on
March 3 in each of 2008, 2009 and 2010.
 At December 30, 2006, the Companys Swiss subsidiary had separate credit facilities totaling
15,100,000 Swiss francs (approximately $12,391,000) with three Swiss banks. The Companys
real property in Switzerland, with a book value of $5,899,000, is pledged as collateral. As
of December 30, 2006, there were no borrowings under any of these credit facilities while
4,413,000 Swiss francs (approximately $3,621,000) of availability was utilized for bank
guarantees related to customer orders.
 As of December 30, 2006, one of the Companys U.S. subsidiaries had a mortgage loan with an
outstanding balance of $1,553,000. Annual interest is 6.45%, and the loan is payable in equal
monthly principal and interest installments of $23,784, with a final payment of $1,038,000
plus interest due on
August 1, 2009. Fixed assets with a book value of $1,541,000 as of December 30, 2006 are
pledged as collateral.
 Long-term debt consists of the following:
 2006
    
    
    2005(In thousands)U.S. revolving line of credit
    
    $
    30,000
    
    
    $
    U.S. mortgage
    
    
    1,553
    
    
    
    1,731U.S. line of credit
    
    
    
    
    
    
    805U.S. term notes
    
    
    3,000
    
    
    
    14,266Other
    
    
    215
    
    
    
    18934,768
    
    
    
    16,991Less current portion
    
    
    (404
    )
    
    
    (4,316
    )Total long-term debt, net of current portion
    
    $
    34,364
    
    
    $
    12,675
 Future annual principal payments required on long-term debt are as follows:
 Amount(In thousands)Fiscal year:2007
    
    $
    4042008
    
    
    1,2192009
    
    
    2,1452010
    
    
    1,0002011
    
    
    30,000$
    34,768
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   (9)
    
    Employee Benefit PlansThe Company has thrift plans for all U.S. employees except for those of Premier and Gundlach,
which have profit sharing and thrift plans. The Company made matching contributions to
employee accounts in these thrift plans equal to 100% of each employee participants
contributions up to a maximum of 4% to 6% of such employees compensation for each of 2006,
2005 and 2004, depending on the plan and subject to any applicable legal maximums, with
Company contributions being vested when made. The Company expense associated with the thrift
and profit sharing plans for U.S. employees for 2006, 2005 and 2004 was $1,139,000, $681,000
and $657,000.As of January 1, 2007, the Gundlach profit sharing and thrift plan was terminated, and all of
the employees became fully vested in their fund balances which were transferred to one of the
two K-Tron thrift plans.Substantially all foreign employees participated in defined contribution group pension plans
for 2006, 2005 and 2004. Contributions were paid by the employee and employer at percentages
that varied according to age and other factors. The foreign pension expense for 2006, 2005
and 2004 was $983,000, $1,037,000 and $1,077,000.(10)
    
    Shareholders Equity and Share Compensation PlansIn 2001, the board of directors determined the rights on 50,000 shares of the authorized
preferred stock as the Series B Junior Participating Preferred Shares (the Series B Preferred
Shares). Each one one-hundredth of a share of the Series B Preferred Shares carries voting
and dividend rights that are equivalent to one share of the common stock. The voting and
dividend rights are subject to adjustment in the event of a dividend on the common stock that
is payable in common stock or any subdivisions or combinations with respect to the outstanding
 shares of common stock. The board of directors had not determined the rights on the remaining
950,000 shares of the authorized preferred stock as of December 30, 2006.The Company had a stock option plan for nonemployee directors that expired in November 1998,
and the last outstanding option grant under that plan was exercised in 2004. The Companys
1986 Stock Option Plan, as amended, expired in January 1996, and the last outstanding option
grant under that plan was exercised in 2005. The Companys 1996 Equity Compensation Plan, as
amended (the 1996 plan), expired on May 9, 2006. As of December 30, 2006, twenty employees
and four nonemployee directors held outstanding options under the 1996 plan for an aggregate
of 285,210 shares of common stock at exercise prices per share ranging from $12.20 to $30.34
and with a weighted average exercise price per share of $15.20. These options expire at
varying times through 2015. Of the 285,210 shares subject to outstanding options as of
December 30, 2006, 275,210 shares were exercisable and had a weighted average exercise price
per share of $15.06. Options for an aggregate of 3,710 shares were incentive stock options,
and options for a total of 281,500 shares were nonqualified stock options. All stock options
under the 1996 plan were issued with an exercise price per share equal to the fair market
value of a share of common stock on the date that the option was granted.During 2006, 2005 and 2004, the Company issued 9,000, 9,000 and 24,000 shares of restricted
common stock under the 1996 plan. Each of these restricted stock grants vests 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 value of the shares at date of grant,
which was $51.50 per share in 2006, $30.34 per share in 2005 and $21.53 per share in 2004.
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   The Compensation and Human Resources Committee of the Companys board of directors serves as
the committee that administers the 1996 plan. That committee determined the recipient and
term of each option and restricted stock grant awarded under the 1996 plan as well as the
exercise price of all options, but no option could be exercisable more than ten years from the
date of grant.A summary of the Companys stock option activity for the plans referred to above for 2004,
2005 and 2006 is as follows:
 Weighted averageShares
    
    
    option
    
    
    Weighted averageunder
    
    
    exercise price
    
    
    remaining contractualoption
    
    
    per share
    
    
    terms (in years)Options
    
    
    Optionsoutstanding
    
    
    exercisableBalance, January 3, 2004
    
    
    403,017
    
    
    $
    14.05Granted
    
    
    4,000
    
    
    
    21.39Exercised
    
    
    (57,850
    )
    
    
    10.89Balance, January 1, 2005
    
    
    349,167
    
    
    
    14.66
    
    
    
    4.60
    
    
    
    3.79Granted
    
    
    4,000
    
    
    
    30.34Cancelled/Forfeited
    
    
    (750
    )
    
    
    12.20Exercised
    
    
    (38,750
    )
    
    
    12.21Balance, December 31, 2005
    
    
    313,667
    
    
    
    15.17
    
    
    
    3.79
    
    
    
    3.00Exercised
    
    
    (28,457
    )
    
    
    14.89Balance, December 30, 2006
    
    
    285,210
    
    
    $
    15.20
    
    
    
    2.96
    
    
    
    3.01
 On May 12, 2006, the shareholders of the Company approved a new 2006 Equity Compensation Plan
(the 2006 plan). The 2006 plan provides that grants may be made in any of the following
forms: (i) incentive stock options, (ii) nonqualified stock options, (iii) stock awards, (iv)
stock units, (v) stock appreciation rights (SARs), (vi) dividend equivalents and (vii) other
stock-based awards. The 2006 plan authorizes up to 200,000 shares of common stock for
issuance, subject to adjustment in certain circumstances. If and to the extent options and
SARs granted under the 2006 plan terminate, expire or are cancelled, forfeited, exchanged or
surrendered without being exercised or if any stock awards, stock units or other stock-based
awards are forfeited or terminated, the shares subject to such grants will become available
again for purposes of the plan. The 2006 plan is administered by the Compensation and Human
Resources Committee of the Companys board of directors. However, the board will approve and
administer all grants, if any, made to non-employee directors. The committee has the
authority to (i) determine the individuals to whom grants will be made under the 2006 plan,
(ii) determine the type, size, terms and conditions of the grants, (iii) determine when grants
will be made and the duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv) amend the terms and
conditions of any previously issued grant, subject to certain limitations, and (v) deal with
any other matters arising under the plan. All employees of the Company and its subsidiaries
and all non-employee directors of the Company are eligible to receive grants under the 2006
plan. As of December 30, 2006, no awards of any type had been made under the 2006 plan.
 F-20




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   (11)
    
    Shareholder Rights PlanThe Company has a Shareholder Rights Plan (the Rights Plan) that was adopted by the board of
directors on October 16, 2001. The Rights Plan provides for the distribution as a dividend of
one preferred stock purchase right (a Right) on each share of the Companys common stock
outstanding as of the close of business on October 29, 2001, and thereafter each share of the
Companys common stock will have a Right associated with it. The Rights expire on October 29,
2011, and each Right entitles a shareholder to purchase one one-hundredth of a share of Series
B Junior Participating Preferred Stock upon the terms specified in the Rights Plan. The Rights
generally will be exercisable only if a person or group acquires beneficial ownership of 15%
or more of the Companys common stock or commences a tender or exchange offer upon
consummation of which such person or group would beneficially own 15% or more of the Companys
common stock, in each case without the approval of the Companys board of directors.(12)
    
    Income TaxesFollowing are the domestic and foreign components of income before income taxes:
 2006
    
    
    2005
    
    
    2004(In thousands)United States
    
    $
    12,756
    
    
    $
    8,456
    
    
    $
    4,832Foreign
    
    
    6,625
    
    
    
    3,745
    
    
    
    3,900Income before income tax
    
    $
    19,381
    
    
    $
    12,201
    
    
    $
    8,732
 The income tax provision consists of the following:
 2006
    
    
    2005
    
    
    2004(In thousands)Current:Federal and state
    
    $
    4,638
    
    
    $
    3,259
    
    
    $
    1,085Foreign
    
    
    1,635
    
    
    
    1,292
    
    
    
    861Total current
    
    
    6,273
    
    
    
    4,551
    
    
    
    1,946Deferred:Federal and state
    
    
    124
    
    
    
    247
    
    
    
    211Foreign
    
    
    112
    
    
    
    121
    
    
    
    (35
    )Total deferred
    
    
    236
    
    
    
    368
    
    
    
    176Total income tax provision
    
    $
    6,509
    
    
    $
    4,919
    
    
    $
    2,122
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   Significant components of the deferred tax assets and liabilities at December 30, 2006 and
December 31, 2005 are as follows:
 2006
    
    
    2005(In thousands)Deferred tax assetsFixed assets and intangibles
    
    $
    26
    
    
    $
    25Accrued liabilities
    
    
    763
    
    
    
    511Net operating loss carryforwards
    
    
    430
    
    
    
    503Inventory basis differences
    
    
    661
    
    
    
    435Foreign tax credit carryforwards
    
    
    216
    
    
    
    177Other
    
    
    282
    
    
    
    1162,378
    
    
    
    1,767Valuation allowance
    
    
    (614
    )
    
    
    (622
    )Total assets
    
    
    1,764
    
    
    
    1,145Deferred tax liabilitiesDepreciation
    
    
    (4,141
    )
    
    
    (1,950
    )Other
    
    
    (1,104
    )
    
    
    (676
    )Total liabilities
    
    
    (5,245
    )
    
    
    (2,626
    )Net deferred tax liability
    
    $
    (3,481
    )
    
    $
    (1,481
    )
 Foreign and U.S. state operating loss carryforwards as of December 30, 2006 were $512,000 and
$3,489,000. Foreign operating losses have an unlimited carryforward period. U.S. state
operating losses expire at various times through 2013.
 A valuation allowance is provided when it is more likely than not that some portion or all of
a deferred tax asset will not be realized. The Company has established valuation allowances
for all foreign and state net operating loss carryforwards and certain other deferred tax
assets for which realization is dependent on future taxable earnings.
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   A reconciliation of the provision for income taxes and the amounts that would be computed
using the statutory federal income tax rates is set forth below:
 2006
    
    
    2005
    
    
    2004(In thousands)Income tax provision on income before
income tax at statutory federal
income tax rates
    
    $
    6,783
    
    
    $
    4,148
    
    
    $
    2,969Increase in incremental tax rate to 35%
    
    
    69
    
    
    
    
    
    
    
    Foreign tax rate differential
    
    
    (598
    )
    
    
    (304
    )
    
    
    (294
    )State tax net of federal benefit
    
    
    454
    
    
    
    340
    
    
    
    186U.S. and foreign permanent tax differences
    
    
    (195
    )
    
    
    (250
    )
    
    
    6Changes in valuation allowance
    
    
    (29
    )
    
    
    (96
    )
    
    
    (256
    )Increase (decrease) in tax reserve, net
    
    
    25
    
    
    
    190
    
    
    
    (489
    )Foreign cash repatriation rate differential
    
    
    
    
    
    
    891
    
    
    
    Income tax provision
    
    $
    6,509
    
    
    $
    4,919
    
    
    $
    2,122
 The Company repatriated $10,000,000 of foreign earnings in the fourth quarter of 2005. A
charge of $891,000 related to the repatriation was accrued in the fourth quarter of 2005 and
is included in the income tax provision in the accompanying consolidated statement of income
for 2005.The Company reduced its tax reserve in 2004 following the settlement and closure of a tax
audit in Germany and increased its tax reserve in 2005 primarily due to an increase in the
provision for state tax audits.(13)
    
    Related Party TransactionsDuring 2006, 2005 and 2004, the Company sold equipment to two entities in which it has a cost
method investment. Sales to these two entities during 2006, 2005 and 2004 were $1,755,000,
$1,839,000 and $1,581,000, with $314,000, $348,000 and $457,000 in accounts receivable from
these entities at December 30, 2006, December 31, 2005 and January 1, 2005.(14)
    
    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.
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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   The Companys Basic and Diluted Earnings per Share are calculated as follows:
 Net incomeavailableto common
    
    
    
    
    
    
    Earningsshareholders
    
    
    Shares
    
    
    per share2006:Basic
    
    $
    12,872,000
    
    
    
    2,600,000
    
    
    $
    4.95Common share equivalent
of options outstanding
    
    
    
    
    
    
    204,000
    
    
    
    (0.36
    )Diluted
    
    $
    12,872,000
    
    
    
    2,804,000
    
    
    $
    4.592005:Basic
    
    $
    7,282,000
    
    
    
    2,555,000
    
    
    $
    2.85Common share equivalent
of options outstanding
    
    
    
    
    
    
    164,000
    
    
    
    (0.17
    )Diluted
    
    $
    7,282,000
    
    
    
    2,719,000
    
    
    $
    2.682004:Basic
    
    $
    6,610,000
    
    
    
    2,497,000
    
    
    $
    2.65Common share equivalent
of options outstanding
    
    
    
    
    
    
    116,000
    
    
    
    (0.12
    )Diluted
    
    $
    6,610,000
    
    
    
    2,613,000
    
    
    $
    2.53
 Diluted earnings per common share are based on the weighted average number of common and
common equivalent shares outstanding during each year. Such average number includes 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.(15)
    
    Commitments and ContingenciesThe Company leases certain office and plant facilities and equipment under noncancellable
leases. These leases expire in periods ranging from one to six years and, in certain
instances, provide for purchase options.
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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   As of December 30, 2006, future minimum payments under operating leases having noncancellable
terms in excess of one year are summarized below (in thousands):
 Operatingleases2007
    
    $
    1,1802008
    
    
    8022009
    
    
    5802010
    
    
    1522011
    
    
    90Thereafter
    
    
    17$
    2,821
 Rent expense for 2006, 2005 and 2004 was $1,265,000, $1,242,000 and $1,187,000.The Company has employment contracts with seven executives. Except in one case when two years
advance notice is required, these contracts may be terminated by the Company with one years
advance notice. Under the agreements, each individual is guaranteed minimum compensation over
the contract period. As of December 30, 2006, the estimated future obligation under these
contracts if all of them were to be terminated on that date was $2,112,000.The Company in the normal course of business has commitments, lawsuits, contingent liabilities
and claims. The Company does not expect that any sum it may have to pay in connection with
these matters will have a material adverse effect on its consolidated financial position or
results of operations.(16)
    
    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).
 F-25




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   For 2006, 2005 and 2004, the following table sets forth the Companys geographic information:
 Americas
    
    
    EMEA/Asia
    
    
    Eliminations
    
    
    Consolidated(In thousands)2006:Revenues:Sales to unaffiliated customers
    
    $
    97,138
    
    
    $
    50,989
    
    
    $
    
    
    
    $
    148,127Sales to affiliates
    
    
    3,338
    
    
    
    3,503
    
    
    
    (6,841
    )
    
    
    Total sales
    
    
    100,476
    
    
    
    54,492
    
    
    
    (6,841
    )
    
    
    148,127Operating income
    
    
    13,967
    
    
    
    6,547
    
    
    
    (84
    )
    
    
    20,430Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,049
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,381Capital expenditures
    
    
    2,129
    
    
    
    475
    
    
    
    
    
    
    
    2,604Depreciation and amortization expense
    
    
    3,135
    
    
    
    1,499
    
    
    
    
    
    
    
    4,634Total assets
    
    
    98,616
    
    
    
    42,380
    
    
    
    
    
    
    
    140,9962005:Revenues:Sales to unaffiliated customers
    
    
    73,748
    
    
    
    45,192
    
    
    
    
    
    
    
    118,940Sales to affiliates
    
    
    2,606
    
    
    
    3,040
    
    
    
    (5,646
    )
    
    
    Total sales
    
    
    76,354
    
    
    
    48,232
    
    
    
    (5,646
    )
    
    
    118,940Operating income
    
    
    9,682
    
    
    
    3,461
    
    
    
    74
    
    
    
    13,217Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,016
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,201Capital expenditures
    
    
    1,239
    
    
    
    967
    
    
    
    
    
    
    
    2,206Depreciation and amortization expense
    
    
    2,426
    
    
    
    1,442
    
    
    
    
    
    
    
    3,868Total assets
    
    
    59,902
    
    
    
    29,208
    
    
    
    
    
    
    
    89,1102004:Revenues:Sales to unaffiliated customers
    
    
    63,922
    
    
    
    48,572
    
    
    
    
    
    
    
    112,494Sales to affiliates
    
    
    3,406
    
    
    
    3,281
    
    
    
    (6,687
    )
    
    
    Total sales
    
    
    67,328
    
    
    
    51,853
    
    
    
    (6,687
    )
    
    
    112,494Operating income
    
    
    6,271
    
    
    
    3,669
    
    
    
    (56
    )
    
    
    9,884Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,316
    )Gain on sale of office building
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,732Capital expenditures
    
    
    1,083
    
    
    
    518
    
    
    
    
    
    
    
    1,601Depreciation and amortization expense
    
    
    2,446
    
    
    
    1,616
    
    
    
    
    
    
    
    4,062Total assets
    
    
    49,744
    
    
    
    43,272
    
    
    
    
    
    
    
    93,016
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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   For 2006, 2005 and 2004, the following table sets forth revenues from external customers:
 2006
    
    
    2005
    
    
    2004(In thousands)AmericasU.S.
    
    $
    81,771
    
    
    $
    62,808
    
    
    $
    54,064All others
    
    
    15,367
    
    
    
    10,940
    
    
    
    9,858Total
    
    
    97,138
    
    
    
    73,748
    
    
    
    63,922EMEA/AsiaGreat Britain
    
    
    7,715
    
    
    
    7,186
    
    
    
    9,614France
    
    
    3,358
    
    
    
    4,525
    
    
    
    4,272Germany
    
    
    14,212
    
    
    
    8,728
    
    
    
    8,003All others
    
    
    25,704
    
    
    
    24,753
    
    
    
    26,683Total
    
    
    50,989
    
    
    
    45,192
    
    
    
    48,572$
    148,127
    
    
    $
    118,940
    
    
    $
    112,494
 (17)
    
    Quarterly Financial Information (Unaudited)The following table summarizes unaudited quarterly financial data for 2006 and 2005 (in
thousands, except per share data):
 2006 by quarterFirst
    
    Second
    
    Third
    
    FourthRevenues
    
    $
    32,114
    
    
    $
    36,761
    
    
    $
    34,886
    
    
    $
    44,366Gross profit
    
    
    13,151
    
    
    
    16,265
    
    
    
    13,919
    
    
    
    18,971Net income
    
    
    2,317
    
    
    
    3,356
    
    
    
    2,738
    
    
    
    4,461Basic earnings
per share
    
    
    0.90
    
    
    
    1.29
    
    
    
    1.05
    
    
    
    1.71Diluted earnings
per share
    
    
    0.84
    
    
    
    1.20
    
    
    
    0.97
    
    
    
    1.57
 2005 by quarterFirst
    
    Second
    
    Third
    
    FourthRevenues
    
    $
    28,552
    
    
    $
    30,224
    
    
    $
    30,803
    
    
    $
    29,361Gross profit
    
    
    11,951
    
    
    
    12,836
    
    
    
    12,555
    
    
    
    12,654Net income
    
    
    1,643
    
    
    
    1,916
    
    
    
    1,990
    
    
    
    1,733Basic earnings
per share
    
    
    0.65
    
    
    
    0.75
    
    
    
    0.77
    
    
    
    0.68Diluted earnings
per share
    
    
    0.61
    
    
    
    0.71
    
    
    
    0.73
    
    
    
    0.63
 F-27




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES




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##### Table of Contents



Schedule II
 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
   Balance at
    
    Additions
    
    
    
    
    
    Balancebeginning
    
    charged
    
    
    
    
    
    at endof period
    
    to income
    
    Deductions(1)
    
    of periodFiscal year ended
December 30, 2006Allowance for doubtful
accounts
    
    $
    682,000
    
    
    $
    305,000
    (2)
    
    $
    135,000
    
    
    $
    852,000Fiscal year ended
December 31, 2005Allowance for doubtful
accounts
    
    $
    751,000
    
    
    $
    121,000
    
    
    $
    190,000
    
    
    $
    682,000Fiscal year ended
January 1, 2005Allowance for doubtful
accounts
    
    $
    820,000
    
    
    $
    134,000
    
    
    $
    203,000
    
    
    $
    751,000
 
 (1)
    
    Accounts written off less recoveries, net of foreign exchange translation
adjustment.(2)
    
    $119,000 charged to income plus $186,000 allowance for doubtful accounts of acquired
businesses.  S-1




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description
 2.1
    
    Basic Agreement regarding the Assignment of Assets of the Hasler Division between K-Tron
(Suisse) SA and MJ Entreprises SA dated July 31, 2001 (Filed as Exhibit 2.1 to our report on
Form 10-Q for the quarterly period ended September 29, 2001 and incorporated herein by
reference)2.2
    
    Stock Purchase Agreement, dated as of October 5, 2006, by and among Robert B. Korbelik,
individually, The Robert B. Korbelik Trust dated December 14, 1995, as amended July 20, 2000,
and Premier Pneumatics, Inc., a Delaware corporation (Filed as Exhibit 2.1 to our report on
Form 8-K dated September 29, 2006 and filed with the Securities and Exchange Commission on
October 5, 2006 (October 2006 Form 8-K) and incorporated herein by reference)3.1
    
    Restated Certificate of Incorporation, as amended (Filed as Exhibit 3.1 to our annual report
on Form 10-K for the year ended January 2, 1999 (1998 Form 10-K) and incorporated herein by
reference)3.2
    
    By-laws, as amended (Filed as Exhibit 3.2 to our annual report on Form 10-K for the year
ended December 29, 2001 (2001 Form 10-K) and incorporated herein by reference)4.1
    
    Form of Certificate for Shares of Common Stock (Filed as Exhibit 4.1 to the 1998 Form 10-K
and incorporated herein by reference)4.2
    
    Rights Agreement dated as of October 16, 2001 with American Stock Transfer & Trust
Company, as Rights Agent (Filed as Exhibit 4.1 to our report on Form 8-K dated October 16,
2001 and incorporated herein by reference)10.1
    
    K-Tron International, Inc. 2006 Equity Compensation Plan (Filed as Exhibit 10.1 to our
current report on Form 8-K dated June 20, 2006 and incorporated herein by reference)**10.2
    
    K-Tron International, Inc. 1996 Equity Compensation Plan, as amended (Filed as Exhibit
10.3 to the 1998 Form 10-K and incorporated herein by reference)**10.3
    
    Amendment 2001-1 to the Amended and Restated K-Tron International, Inc. 1996 Equity
Compensation Plan (Filed as Exhibit 10.4 to the 2001 Form 10-K and incorporated herein by
reference)**10.4
    
    K-Tron International, Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.2.7 to
the annual report on Form 10-K for the year ended January 4, 1992 and incorporated herein by
reference)**10.4A
    
    Amendment 2007-1 to the K-Tron International, Inc. Supplemental Executive Retirement Plan*
**




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##### Table of Contents



ExhibitNumber
    
    Description
 10.5
    
    Employment Agreement dated as of October 6, 1997 by and between K-Tron International, Inc.
and Edward B. Cloues, II (Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly
period ended September 27, 1997 and incorporated herein by reference)**10.6
    
    Amendment No. 1 to Employment Agreement dated October 5, 1998 by and between K-Tron
International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to our report on Form 10-Q
for the quarterly period ended October 3, 1998 and incorporated herein by reference)**10.7
    
    Employment Agreement dated as of May 7, 1999 by and between K-Tron International, Inc. and
Ronald R. Remick (Filed as Exhibit 10.9 to our annual report on Form 10-K for the year ended
January 1, 2000 (1999 Form 10-K) and incorporated herein by reference)**10.8
    
    Form of Employment Agreement with certain of our employees listed on Schedule 10.12, which
are identical in all material respects except for the employee, amount of salary to be paid
and date of execution (Filed as Exhibit 10.12 to our annual report on Form 10-K for the year
ended January 3, 1998 and incorporated herein by reference)**10.9
    
    Form of Indemnification Agreement with certain of our directors and officers listed on
Schedule 10.11, which are identical in all material respects except for the director or
officer who is a party thereto and the date of execution (Filed as Exhibit 10.11 to the 1999
Form 10-K and incorporated herein by reference)**10.9A
    
    Supplement to Schedule 10.11, listing additional directors and officers who are parties to
an Indemnification Agreement referenced in Exhibit 10.9. (Filed as Exhibit 10.11A to the 2001
Form 10-K and incorporated herein by reference)10.10
    
    Mortgage Note dated June 11, 1996 from K-Tron America, Inc. in favor of The Bank of
Gloucester County (Filed as Exhibit 10.15 to the 1999 Form 10-K and incorporated herein by
reference)10.11
    
    Loan Modification Agreement dated June 24, 1998 between K-Tron America, Inc. and The Bank of
Gloucester County (Filed as Exhibit 10.16 to the 1999 Form 10-K and incorporated herein by
reference)10.12
    
    Note dated June 24, 1998 from K-Tron America, Inc. in favor of The Bank of Gloucester County
(Filed as Exhibit 10.17 to the 1999 Form 10-K and incorporated herein by reference)10.13
    
    Loan Modification Agreement dated July 9, 2002 between K-Tron America, Inc. and The Bank
(formerly The Bank of Gloucester County) (Filed as Exhibit 10.14 to our annual report on Form
10-K for the year ended December 28, 2002 and incorporated herein by reference)10.14
    
    Note dated December 20, 2002 from K-Tron America, Inc. in favor of The Bank (Filed as
Exhibit 10.3 to our report on Form 8-K dated January 2, 2003 and filed with




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##### Table of Contents



ExhibitNumber
    
    Description
 the Securities and
Exchange Commission on January 15, 2003 (January 2003 Form 8-K) and incorporated herein by
reference)10.15
    
    Loan Modification Agreement dated December 20, 2002 between K-Tron America, Inc. and The
Bank (Filed as Exhibit 10.4 to the January 2003 Form 8-K and incorporated herein by reference)10.16
    
    Loan Modification Agreement dated July 9, 2003 between K-Tron America, Inc. and The Bank
(Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly period ended September 27,
2003 and incorporated herein by reference)10.17
    
    Loan Modification Agreement dated December 31, 2003 between K-Tron America, Inc. and The
Bank (Filed as Exhibit 10.17 to our annual report on Form 10-K for the year ended January 3,
2004 and incorporated herein by reference)10.18
    
    Note dated June 9, 2004 from K-Tron International, Inc. in favor of The Bank (Filed as
Exhibit 10.1 to our report on Form 10-Q for the quarterly period ended July 3, 2004 (July
2004 Form 10-Q) and incorporated herein by reference)10.19
    
    Loan Modification/Renewal Agreement dated June 9, 2004 between K-Tron America, Inc. and The
Bank (Filed as Exhibit 10.2 to the July 2004 Form 10-Q and incorporated herein by reference)10.20
    
    Loan Modification Agreement dated July 5, 2005 between K-Tron America, Inc. and The Bank
(Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly period ended October 1,
2005 and incorporated herein by reference)10.21
    
    Credit Agreement dated January 3, 2003 among Pennsylvania Crusher Corporation, the Lenders
party to that Credit Agreement and National City Bank, as Agent (Filed as Exhibit 10.1 to the
January 2003 Form 8-K and incorporated herein by reference)10.22
    
    Amendment No. 1 dated May 12, 2003 to Credit Agreement dated January 3, 2003 among
Pennsylvania Crusher Corporation, the Lenders party to that Credit Agreement and National City
Bank, as Agent (Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly period
ended June 28, 2003 and incorporated herein by reference)10.23
    
    Amendment No. 2 dated as of June 28, 2005 to Credit Agreement dated January 3, 2003 among
Pennsylvania Crusher Corporation, the Lenders party to that Credit Agreement and National City
Bank, as Agent (Filed as Exhibit 10.1 to our report on Form 10-Q for the quarterly period
ended July 2, 2005 and incorporated herein by reference)10.24
    
    Loan Agreement, dated as of September 29, 2006, among K-Tron International, Inc., K-Tron
Investment Co., K-Tron Technologies, Inc., K-Tron America, Inc., Gundlach Equipment
Corporation, Pennsylvania Crusher Corporation and Jeffrey Specialty Equipment Corporation, as
Borrowers and the Financial Institutions referred to on the signature pages as Lenders and
Citizens Bank of Pennsylvania, individually as a




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##### Table of Contents



ExhibitNumber
    
    Description
 Lender and as Agent (Filed as Exhibit 10.1 to
the October 2006 Form 8-K and incorporated herein by reference)21.1
    
    Subsidiaries*23.1
    
    Consent of Grant Thornton LLP*31.1
    
    Chief Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of
the Securities Exchange Act of 1934*31.2
    
    Chief Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 1934*32
    
    Chief Executive Officer and Chief Financial Officer Certification pursuant to 18
U.S.C. Section 1350*
 
 *
    
    Filed herewith**
    
    Management contract or compensatory plan or arrangement required to be filed or
incorporated as an exhibit