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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   FORM 10-K FOR ANNUAL REPORT AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Mark One)  þ
    Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934For the fiscal year ended January 1, 2005 OR  o
    Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934For 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)
 Registrants telephone number, including area code: (856) 589-0500 Securities registered pursuant to Section 12(b) of the Act: Title of each class
    
    Name of each exchange on which registeredNone
    
    None
 Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share
(Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Act) during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the Registrants knowledge,
in the definitive proxy statement incorporated by reference in Part III of this annual report on
Form 10-K or any amendment to this annual report on Form 10-K. þ Indicate by check mark whether the Registrant is an accelerated filer (as defined in
Rule 12b-2 of the Act). Yes o No þ




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 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 and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesItem 15. Exhibits, Financial Statement Schedules and Reports on Form 8-KSIGNATURESReport of Independent Registered Public Accounting FirmReport of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of IncomeConsolidated Statements of Changes in Shareholders EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial StatementsValuation and Qualifying AccountsEXHIBIT INDEXLIST OF SUBSIDIARIESCONSENT OF GRANT THORNTON LLPCONSENT OF KPMG LLPCEO CERTIFICATION PURSUANT TO RULE 13A-14(A)CFO CERTIFICATION PURSUANT TO RULE 13A-14(A)CEO AND CFO CERTIFICATIONS PURSUANT TO SECTION 1350    Table of Contents  As of July 2, 2004, which was the last business day of the Registrants most recently
completed second fiscal quarter, the aggregate market value of the Common Stock held by
non-affiliates of the Registrant was $49,083,595. Such aggregate market value was computed by
reference to the closing sale price of the Registrants Common Stock as quoted on the Nasdaq
National Market on such date. For purposes of making this calculation only, the Registrant has
defined affiliates as including all directors and executive officers, but excluding any
shareholders (other than directors and executive officers) owning more than ten percent of the
Registrants Common Stock. In making such calculation, the Registrant is not making a
determination of the affiliate or non-affiliate status of any holders of shares of Common Stock. As of March 18, 2005, there were 2,539,442 shares of the Registrants Common Stock
outstanding. DOCUMENTS INCORPORATED BY REFERENCE As stated in Part III of this annual report on Form 10-K, portions of the Registrants
definitive proxy statement to be filed within 120 days after the end of the fiscal year covered by
this annual report on Form 10-K are incorporated herein by reference. CERTAIN DEFINITIONS Unless the context indicates otherwise, the terms K-Tron, the Company, we, our and
us refer to K-Tron International, Inc. and, where appropriate, one or more of its subsidiaries.
The term Registrant means K-Tron International, Inc. - 2 -




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PART I 
 Item 1.Business. General K-Tron International, Inc. is a New Jersey corporation founded in 1964, and our Common Stock
trades on the Nasdaq National Market under the symbol KTII. We are engaged in one principal
business segment, which is material handling equipment and systems, and our operations are
conducted largely through subsidiary companies. We have manufacturing facilities in the United
States, Switzerland, the United Kingdom and Canada, and our equipment is sold and supported
throughout the world. On January 2, 2003, we purchased all of the outstanding stock of
Pennsylvania Crusher Corporation (Penn Crusher). As result of this acquisition, we now also own
Jeffrey Specialty Equipment Corporation (Jeffrey), which is a wholly-owned subsidiary of Penn
Crusher. We serve the bulk solids material handling markets through three separate business or product
lines (business lines). These three business lines focus primarily on feeding equipment (our
K-Tron Feeder Group), pneumatic conveying equipment (our pneumatic conveying group) and size
reduction equipment (our size reduction group). Our material handling equipment is used in a
wide variety of manufacturing and other industrial processes, particularly in the plastics, food,
chemical, detergent, pharmaceutical, electric utility and pulp and paper industries. We design,
engineer, produce, market and service this equipment, and we sell it both on a stand alone basis
and as part of a larger system that we may design and sell. Replacement parts are an important
aspect of all of our businesses, and they comprise a significant majority of the sales of our size
reduction group. Available Information We maintain a website at http://www.ktron.com. We make available free of charge through the
Investor Relations/Corporate Governance section of our website our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as
soon as reasonably practicable after such material is electronically filed with or furnished to the
Securities and Exchange Commission. We include our website address in this annual report on Form
10-K only as an inactive textural reference and do not intend it to be an active link to our
website. The material on our website is not part of our annual report on Form 10-K. You may also
obtain a free copy of these reports and amendments by contacting Ronald R. Remick, Senior Vice
President and Chief Financial Officer, at K-Tron International, Inc., Routes 55 and 553, P.O. Box
888, Pitman, New Jersey 08071-0888. Feeding Equipment Our K-Tron Feeder Group, which consists of several K-Tron companies operating in the United
States, Europe and Asia, produces feeders that control the flow of materials into a manufacturing
process by weight (known as gravimetric feeding) or by volume (known as volumetric feeding). The
manufacturing process then transforms these materials into an end product. Our feeders are used in
many different industries worldwide, including the plastics compounding, food, chemical, detergent
and pharmaceutical industries. We believe that we are the global leader in the production and sale
of feeders for the handling of bulk solids in a manufacturing process. - 3 -




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K-Tron Soder Brand. The feeding equipment sold by the K-Tron Feeder Group is offered
throughout the world under the K-Tron Soder brand name by approximately 60 independent sales
representative organizations with exclusive territories, by Company-owned sales companies in
France, Germany, the United Kingdom and Singapore and directly from the factory in other locations
which are not covered by either of these distribution channels. The independent sales
representatives are under contractual agreements which provide for specific commission rates to be
paid to the representative based on the type of product sold. A portion of any discounting
provided to the end customer is normally deducted from the representatives commission. Revenue is
recorded after subtracting what, if any, discount is provided. The K-Tron Feeder Group markets and
sells both stand alone units and engineered systems where one or more feeders are combined with
other complementary material handling equipment. Feeders.The K-Tron Feeder Group markets conventional single and twin screw feeders, belt
feeders and vibratory feeders. We offer these feeder types in a number of different designs, sizes
and finishes to meet the requirements of a given material handling application and to assure
compliance with applicable industry codes and specifications. In addition, these feeders are
available in both a volumetric mode, where the flow of material is controlled by volume, and a
gravimetric mode, where the flow of material is controlled either by weight or loss of weight over
a defined time period. Gravimetric feeders, which represent the majority of our feeding equipment
sales, are typically used in premium applications where short-term accuracy in feeding the raw
materials is essential to produce a high-quality end product. The K-Tron Feeder Group also recently introduced a new type of feeder, which we refer to as
the BSP or Bulk Solids Pump, that is based on a patented technology which we have licensed on a
worldwide exclusive basis in the fields of use relevant for our feeder business. The BSP feeder
does not utilize the usual screws, belts or vibratory trays to convey material but instead relies
upon positive displacement action to feed accurately free-flowing materials, offering uniform
discharge, consistent volume and gentle handling. It achieves this result by using vertical
rotating discs that create a product lock-up zone which then conveys the material smoothly from
storage hopper to discharge outlet. In addition to feeders, we also produce mass flow meters which measure and control the flow of
materials from a storage vessel. Our flow meters have no moving parts and therefore require little
maintenance, and they do not need to be calibrated to a specific mass flow range. All of our feeding equipment models have been developed by our own internal research and
development group. Weight Sensors and Controls. The performance of gravimetric feeders depends to a great
extent on the weighing and control systems being used. Our proprietary weight sensors, known as
Smart Force Transducers, are based on a vibrating wire technology. These load cells have evolved
over more than 30 years into todays rugged and drift-free weighing systems. When combined with our
proprietary control system, known as SmartConnex, they constitute what we believe to be one of the
most accurate systems generally available for gravimetric feeding. Vacuum Conveying. The K-Tron Feeder Group also markets vacuum loaders for the refilling of
feeders and for use in other material handling applications. These loaders are manufactured by our
pneumatic conveying group whose business is described below, and the K-Tron Feeder Group sells them
under the Hurricane product name. We believe that we are the only company offering integrated
feeder and vacuum loader controls to the process industries. - 4 -




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Service, Parts and Training. The K-Tron Feeder Group has a global service network that
enables us to respond to customer calls within 24 hours almost anywhere in the world. We also sell
parts to our customers, and our service and parts business is an important source of revenue for
us. In addition to equipment, service and parts, we offer training to our customers, employees and
sales representatives with respect to our feeding and pneumatic conveying equipment at our K-Tron
Institute, which is based at our facilities in Pitman, New Jersey and Niederlenz, Switzerland, and
through courses offered by the Institute in other locations, including at customer sites. Manufacturing. The K-Tron Feeder Group produces a number of feeder designs which are then
adapted to meet a customers specifications. Customization generally is limited to combining
standard mechanical and electrical modules to meet the process and regulatory requirements of the
customer. The primary manufacturing activities consist of the assembly and final testing of feeders
and related equipment. We assemble a number of components used in our
feeder products that are manufactured by others to our specifications. These outsourced components include sheet metal
parts, feeder screws, castings, electric motors and electronic assemblies. We also manufacture the
load cells that are used in our gravimetric feeders. K-Tron Soder feeders and systems are
assembled and tested at our facilities in Pitman, New Jersey and Niederlenz, Switzerland. Competition.Based on market studies, we believe that the K-Tron Feeder Group is the leading
worldwide producer of feeders and related equipment for the handling of bulk solids in
manufacturing processes, and we believe that we have reached this position primarily because of our
use of digital control technology and digital weighing technology, our development of mechanical
design improvements to our products and our extensive knowledge of material handling applications.
We also rely on our global service network and on our reputation and many years of experience in
serving the needs of our large customer base to maintain a competitive advantage. Strong
competition exists in every major geographic and industrial market that we serve. Competitors
range in size from a subsidiary of a large foreign corporation with a broad line of products to
smaller companies with a global presence and regional firms that often specialize in a limited
range of products. Pneumatic Conveying and Ancillary Equipment Our pneumatic conveying group, which consists of two companies in the United Kingdom and one
in Canada, integrates two brands, Colormax and PCS, together with the manufacturing of our
Hurricane product line for the K-Tron Feeder Group into one business unit that is capable of
addressing a broad range of pneumatic conveying applications. The groups products are distributed
through the K-Tron Feeder Groups distribution channels under the Hurricane product name and
through the pneumatic conveying groups distribution channels under the PCS and Colormax brand
names. We believe that PCS and Colormax are among the leaders in the United Kingdom in their
respective markets. Colormax Equipment.The Colormax brand is used for pneumatic conveying equipment and material
handling systems sold by the pneumatic conveying group primarily to customers in the plastics
injection molding industry. Colormax products are assembled by our Colormax Limited subsidiary in
Telford, England and marketed directly to end users and also through a small number of independent
sales representatives. The Colormax product line includes self-contained and central vacuum
systems, dryers, volumetric and gravimetric blenders, material storage bins and feeders for
handling various resin materials in the molding or extrusion of consumer plastic products.
Colormax equipment sold by the K-Tron Feeder Group is generally labeled with the Hurricane product
name. - 5 -




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PCS Equipment.The PCS brand is used for pneumatic conveying equipment and material handling
systems sold by the pneumatic conveying group into the food, pharmaceutical, plastics and chemical
industries. PCS products and material handling systems are engineered and assembled by our
Pneumatic Conveying Systems Limited subsidiary in Stockport, England. PCS products include
standard vacuum conveyors for hard-to-handle materials, an all stainless steel pharmaceutical line
of equipment and a variety of ancillary equipment. PCS also has expertise in conveying fragile
products without degradation and in designing dense phase vacuum conveying systems for the
transport of products without segregation. PCS equipment sold by the K-Tron Feeder Group is
generally labeled with the Hurricane product name. Canadian Facility. We have a small facility in Canada in Brantford, Ontario, where we
manufacture pneumatic conveying equipment for the K-Tron Feeder Group under the Hurricane product
name as well as some Colormax equipment. Manufacturing. The pneumatic conveying group produces a number of basic loader and ancillary
equipment models that are then adapted to a customers specifications. Customization generally is
limited to combining standard mechanical and electrical modules to meet a customers process and
regulatory requirements. The primary manufacturing activities of the pneumatic conveying group
consist of assembly and final testing of individual loaders and ancillary equipment as well as
engineered systems. We assemble a number of components used in our products that are manufactured
by others to our specifications. These outsourced components include sheet metal parts, castings,
electric motors and electronic assemblies. Competition.Colormax and PCS pneumatic conveying equipment is sold primarily in the United
Kingdom, where Colormax and PCS are among the leaders in their respective markets, and Hurricane
equipment is sold by the K-Tron Feeder Group throughout the world. Strong competition exists in
every major geographic and industrial market that we serve. Competitors of our pneumatic conveying
group are generally small companies with a limited line of products that operate in a specific
geographic area. Size Reduction Equipment Our size reduction group, which is comprised of our U.S.-based Penn Crusher and Jeffrey
businesses, designs, engineers, manufactures, markets, sells and services primarily size reduction
equipment, such as hammermills and wood hogs. This equipment is used to resize various materials
to a given smaller size, and the principal industries served are the electric utility, mining, pulp
and paper, and wood and forest products industries. While both companies offer their equipment in
many parts of the world, we believe that Penn Crusher is the leader in the United States in selling
size reduction equipment to the electric utility industry and that Jeffrey is one of the leaders in
producing such equipment for the U.S. pulp and paper industry. Penn Crusher Equipment.Penn Crusher manufactures size reduction and related equipment for
the electric utility industry to crush coal before it is used as fuel in the steam furnaces of
power generation plants, and it also serves other industries such as mining, quarrying and glass
making. Penn Crusher sells its equipment and services worldwide through more than 50 independent
sales representatives, with a focus on the United States market and with a growing presence in
China. The independent sales representatives are under contractual agreements which provide for
specific commission rates to be paid to the representative based on the type of product sold.
Discounting is uncommon, but when it occurs, a representative may be asked to share the cost. - 6 -




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The crushers most commonly sold by Penn Crusher are hammermills, in which the material is
broken by impact from hammers and then scrubbed against a screen for desired size. Penn Crusher
manufactures a number of different hammermill designs, such as granulators, that use rows of ring
hammers to crush with a slow, positive rolling action, and Bradford breakers, in which the material
is crushed by gravity impact only. Crushers come in a wide variety of sizes and configurations,
and each machine is built-to-order to meet customer specifications. Penn Crusher also manufactures and markets a positive displacement action feeder using the
same licensed technology that is the basis of the K-Tron Feeder Groups Bulk Solids Pump. Penn
Crusher owns the exclusive rights to utilize this technology in feeders of 24-inch diameter and
larger in low pressure applications for markets in the United States, Canada and Mexico. These
feeders are used primarily to feed coal into pulverizers in coal-fired power plants, and they also
feed limestone into raw mills in the cement industry. Feeders normally account for a major part of
Penn Crushers new equipment sales. Penn Crusher Replacement Parts.A significant portion of Penn Crushers revenues is derived
from the sale of replacement parts. Penn Crusher has a large installed base of long-lived
equipment, and every machine and part sold, including specifications and drawings, is registered in
a digital database to enable Penn Crusher to provide customers with fast and efficient support. Jeffrey Equipment. Jeffrey produces wood hogs, other size reduction equipment and related
items for use primarily in the pulp and paper and wood and forest products industries. Jeffrey
hammermills are also sold to the mining industry to resize chunks of coal, which come directly out
of the mine, into smaller pieces. Jeffrey markets its equipment through a combination of
independent sales representatives and distributors, with a focus on the United States market. The Jeffrey brand encompasses a number of basic crusher designs that are available in varying
sizes and configurations to meet specific customer needs. Wood and bark hogs are used in the pulp
and paper and wood and forest products industries to produce mulch, boiler fuel, chips for
composite wood products and compost. Jeffrey also sells a chip sizer that is marketed to the pulp
and paper industry to resize chips too large for use in a pulp digester and another crusher that is
marketed to the mining industry to reduce coal chunks from the mine-mouth for further processing. Jeffrey also sells a line of electromechanical and electromagnetic vibratory feeders that are
used primarily in the aggregates, coal, mineral, chemical and other industries to feed bulk solid
materials into processes. Applications range from reclaiming aggregates from stockpiles to feeding
coal in a potentially explosive environment. Jeffrey Replacement Parts. A significant portion of Jeffreys revenues is derived from
replacement part sales. Jeffrey has an installed base of long-lived equipment, and every machine
and part sold, including specifications and drawings, is registered in a digital database to enable
Jeffrey to provide customers with fast and efficient support. Manufacturing.The manufacturing activities of both Penn Crusher and Jeffrey consist of
machining and welding raw materials and castings into machined parts, and assembling these parts
together with components purchased from outside suppliers into size reduction and other equipment.
The equipment is then balanced and tested before being shipped to a customers site. Machine
parts, such as frames and rotors, are built individually to order with no parts stocked in
inventory. Certain higher volume parts, such as hammers, which are also marketed as replacement
parts, are produced to inventory or purchased in volume from outside suppliers. - 7 -




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Competition.We believe that Penn Crusher is the leading U.S. producer of hammermills and
related equipment for the size reduction of steam coal, that Jeffrey is among the U.S. market
leaders in resizing wood chips for pulp and paper applications and that both Penn Crusher and
Jeffrey have reached these positions primarily because of superior machine design and quality.
Penn Crusher and Jeffrey also rely on their reputation and many years of experience in serving the
needs of their customers to maintain a competitive advantage. Competition exists in every market
that Penn Crusher and Jeffrey serve. Competitors are generally smaller companies with a limited
line of products competing in specific geographic markets and applications. K-Tron Electronics K-Tron Electronics designs, produces and tests electronic assemblies for use by us and also to
sell to third parties, generally focusing on small production runs for customers in New Jersey,
eastern Pennsylvania and Delaware. Its facilities, which are located in Pitman, New Jersey, provide
both automated surface mount and through-hole assembly capabilities, as well as testing equipment.
 The regional market for electronic assemblies is large, and K-Tron Electronics is one of many
suppliers to this market. Customers We sell our material handling equipment throughout the world to a wide variety of customers in
the various industrial markets which we serve, ranging from large, global companies to regional and
local businesses. No single customer accounted for more than 10% of our total revenues in fiscal
2004. Suppliers Although certain components of our products are currently purchased from sole sources, we
believe that comparable components can be obtained from alternative suppliers at prices competitive
with those of our current suppliers. We have never experienced a significant production delay that
was primarily attributable to an outside supplier. Patents Our technology is protected by numerous patents in the United States and in other major
countries that offer patent protection. Certain of our patents have expired and others will expire
at various future dates. The loss of such patent protection is not expected to have a significant
adverse effect on our business. Research and Development We invest in research and development (R&D) to maintain a technological leadership position
in our feeding and pneumatic conveying equipment businesses. R&D in these areas focuses on new
products as well as on improvements to existing products, with particular emphasis on the
application of weighing and control technologies and mechanical design improvements. Current
efforts are aimed at developing new products, shortening the time spent in the development of such
products, modifying existing product designs to provide lower cost or higher performance products
and analyzing the price/performance relationship for both new and existing products. We spend a
minor amount on development work in our size reduction equipment business either at a customers
request or to produce an improved product to better fit a customers needs. The cost of such work
is - 8 -




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not categorized as R&D expense and is not capitalized, but rather it is charged as an
engineering expense within cost of revenues. Our research and development expenses were $2,669,000, $2,695,000 and $2,429,000 in fiscal
2004, 2003 and 2002. Backlog At the end of fiscal 2004, our backlog of unfilled orders was approximately $21,887,000,
compared to a backlog of approximately $17,956,000 at the end of fiscal 2003, an increase of 21.9%
(at constant foreign exchange rates). The backlog of orders at the end of fiscal 2004 was greater
than the 2003 year-end backlog due to improved business conditions in all three of our business
lines. A significant part of our 2004 year-end backlog represented orders that will be ready for
shipment to customers in less than 120 days from the end of fiscal 2004. Thus, except for
deliveries to be made later in the year in accordance with customer requests, it is expected that
much of our backlog at the end of fiscal 2004 will be shipped prior to April 30, 2005. Employees At the end of fiscal 2004, we had 467 employees, of which 278 were located in the United
States, 169 in Europe, 10 in Singapore, 5 in China, 4 in Canada and 1 in Mexico. None of our employees are represented by labor unions. We consider relations with our
employees to be good. Executive Officers of the Registrant Our current executive officers are as follows: Name
    
    Age
    
    PositionEdward B. Cloues, II
    
    
    57
    
    
    Chairman of the Board of Directors
and Chief Executive OfficerKevin C. Bowen
    
    
    53
    
    
    Senior Vice President, Feeder Group
and President and Chief Executive
Officer of K-Tron America, Inc.Lukas Guenthardt
    
    
    46
    
    
    Senior Vice President,
Pneumatic Conveying Group
and Chief Strategy OfficerDonald W. Melchiorre
    
    
    56
    
    
    President and Chief Executive
Officer of Pennsylvania Crusher
CorporationRonald R. Remick
    
    
    58
    
    
    Senior Vice President,
Chief Financial Officer and Treasurer
 - 9 -




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Edward B. Cloues, II has been a director since July 1985 and was most recently reelected at
the 2001 annual meeting of shareholders. He became Chairman of the Board of Directors and Chief
Executive Officer of the Company on January 5, 1998. Prior to joining the Company at that time,
Mr. Cloues was a partner in the law firm of Morgan, Lewis & Bockius LLP, which is the Companys
principal outside counsel. He is also a director and non-executive Chairman of the Board of AMREP
Corporation and a director of Penn Virginia Corporation and of Penn Virginia Resource GP, LLC, the
general partner of Penn Virginia Resource Partners, L.P. Kevin C. Bowen has been Senior Vice President, Feeder Group of the Company since June 2000 and
President and Chief Executive Officer of K-Tron America, Inc. since March 1995. From March 1994 to
March 1995, Mr. Bowen was President of K-Tron North America, the North American sales division of
K-Tron America. Mr. Bowen served as President of K-Tron America from May 1990 to March 1994 and
has been with the Company in various other capacities since 1979. Lukas Guenthardt has been Senior Vice President, Pneumatic Conveying Group and Chief Strategy
Officer of the Company since February 2002. Prior to that, he was Senior Vice President, New
Businesses and Chief Strategy Officer from June 2000 to February 2002 and Senior Vice President 
Strategic Planning, Product Development and Marketing from June 1998 to June 2000. Mr. Guenthardt
was Managing Director of K-Tron (Schweiz) AG (K-Tron Switzerland) from July 1995 to June 1998,
Managing Director of the Soder Division of K-Tron Switzerland from March 1994 to July 1995, and
Director of International Research and Development of the Company from July 1992, when he joined
K-Tron, until March 1994. Donald W. Melchiorre has been President and Chief Executive Officer of Penn Crusher and
Jeffrey since October 4, 2004. From December 30, 1996 until October 4, 2004, he was President and
Chief Operating Officer of Penn Crusher, and from August 2002 to October 4, 2004 he held the same
position at Jeffrey. From 1982 to 1987, Mr. Melchiorre worked at Penn Crusher as a Regional Sales
Manager and left the company in 1987 to become a Regional Sales Manager, and subsequently North
American Sales and Marketing Manager and then Director for Sales and Marketing-European Operations,
for K-Trons United States and Swiss manufacturing subsidiaries. In 1992, he left K-Tron to
establish EPI Technical Sales, Inc., an independent sales representative organization selling bulk
material handling equipment, including both the K-Tron Soder and Penn Crusher lines of equipment.
He returned to Penn Crusher in 1996. Ronald R. Remick has been Senior Vice President, Chief Financial Officer and Treasurer of the
Company since May 10, 1999. Prior to joining K-Tron, Mr. Remick was Vice President of Planning and
Treasury of ARCO Chemical Company from 1995 to 1998 and Vice President of Planning and Control of
ARCO Chemical Company from 1993 to 1995. The executive officers are elected or appointed by the Board of Directors of the Company or by
an appropriate subsidiary board of directors to serve until the election or appointment and
qualification of their successors or their earlier death, resignation or removal. 
 Item 2.Properties. We own a 92,000 square foot building in Pitman, New Jersey where the K-Tron Feeder Group
conducts manufacturing operations and also has sales, service, research and development and
administrative offices, a technical center for product demonstrations and training facilities for
employees, customers and sales representatives. Our worldwide corporate headquarters are also
located at this site. In October 2003, our K-Tron Electronics business relocated into this
building - 10 -




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from leased facilities several miles away. A portion (approximately 10,000 square feet) of
our Pitman facility is leased to an unrelated sheet metal business that is a major supplier to us. In Niederlenz, Switzerland, we own a 65,000 square foot building where the K-Tron Feeder Group
has manufacturing facilities and a technical center for product demonstrations, and there is an
adjacent five-floor, 40,000 square foot office building. These buildings also house sales,
service, research and development and other administrative functions, as well as training
facilities. In 2004, approximately one-half of one floor of the office building was leased to an
unrelated third party. Certain K-Tron Feeder Group sales and service activities are also conducted in leased office
space in France, Germany, Singapore and China (service only). An owned facility in the United
Kingdom was sold on March 31, 2004, and the K-Tron Feeder Group operations conducted there were
moved to leased space in Stockport, England that is described below. In Lengerich, Germany, we own an 8,000 square foot building that has been leased to a third
party in which the Company has a 19.9% equity interest since July 31, 2001. In Brantford, Ontario, we assemble pneumatic conveying equipment in a 5,000 square foot leased
facility. We lease 6,700 square feet in a facility in Telford, England, where we assemble Colormax
products and have office space for that brand. We also lease 10,800 square feet in a facility in Stockport, England, where we design
customized solutions for a broad range of pneumatic conveying problems, assemble PCS products and
have office space for that brand. Part of this space is now occupied by the K-Tron Feeder Group
which moved from an owned facility in the United Kingdom that was sold on March 31, 2004. Penn Crusher has offices and a test lab in a 24,000 square foot leased facility in Broomall,
Pennsylvania and conducts manufacturing operations at a 70,000 square foot leased building in
Cuyahoga Falls, Ohio. Jeffrey is located in a 145,000 square foot owned manufacturing and office facility in
Woodruff, South Carolina. A small, adjacent building, also owned, accommodates a test lab. We believe that our current facilities will be sufficient to meet our needs for the
foreseeable future. 
 Item 3.Legal Proceedings. We are involved in various legal proceedings arising in the ordinary course of business.
While the ultimate results of these cases cannot be predicted with certainty, management believes
that these matters will not have a material adverse effect on our financial position, liquidity or
operations. 
 Item 4.Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of security holders during the fourth quarter of
2004. - 11 -




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PART II 
  Item 5.  Market for Registrants Common Equity and Related Shareholder Matters and
Issuer Purchases of Equity Securities. Our Common Stock trades on the Nasdaq National Market under the symbol KTII. The following
table sets forth the high and low sales prices per share for each quarter in fiscal 2003 and 2004
as quoted on the Nasdaq National Market. Fiscal Year 2003
    
    High
    
    
    LowFirst Quarter
    
    $
    16.03
    
    
    $
    13.00Second Quarter
    
    $
    17.83
    
    
    $
    14.33Third Quarter
    
    $
    18.99
    
    
    $
    13.30Fourth Quarter
    
    $
    19.20
    
    
    $
    16.51
 Fiscal Year 2004First Quarter
    
    $
    22.50
    
    
    $
    17.45Second Quarter
    
    $
    22.20
    
    
    $
    19.62Third Quarter
    
    $
    23.50
    
    
    $
    19.95Fourth Quarter
    
    $
    26.59
    
    
    $
    20.10
 On March 18, 2005, the closing price of a share of K-Tron Common Stock as quoted on the Nasdaq
National Market was $30.20. There were 219 record holders of our Common Stock on March 18, 2005. Dividend Policy We have never paid a cash dividend on our Common Stock, and we currently intend to retain all
future earnings for use in our business. The declaration and payment of dividends in the future
will be determined by our Board of Directors in light of conditions then existing, including our
earnings, financial condition, capital requirements and other factors. In addition, certain of our
credit facilities contain restrictions on the transfer of funds that may limit our ability to
declare and pay dividends. 
 Item 6.Selected Financial Data. The selected consolidated financial data presented below for, and as of the end of, each of
our last five fiscal years has been derived from and is qualified by reference to our consolidated
financial statements. Our consolidated financial statements for the fiscal years ended January 1,
2005 and January 3, 2004 have been audited by Grant Thornton LLP, independent registered public
accounting firm; our consolidated financial statements for the fiscal year ended December 28, 2002
have been audited by KPMG LLP, independent registered public accounting firm; and our consolidated
financial statements for the fiscal years ended December 29, 2001 and December 30, 2000 have been
audited by Arthur Andersen LLP, independent public accountants, who have since ceased operations. This information should be read in conjunction with our consolidated financial statements and
the related notes thereto and Managements Discussion and Analysis of Financial Condition and
Results of Operations which is Item 7 of Part II of this annual report on Form 10-K. - 12 -




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We have not paid any cash dividends on our shares of Common Stock during the periods
presented. Fiscal Year EndedJan. 1
    
    
    Jan. 3
    
    
    Dec. 28
    
    
    Dec. 29
    
    
    Dec. 302005
    
    
    2004(1)
    
    
    2002(2)
    
    
    2001
    
    
    2000FINANCIAL SUMMARY ($000s):Revenues
    
    $
    112,494
    
    
    $
    94,676
    
    
    $
    68,231
    
    
    $
    71,819
    
    
    $
    84,912Income before taxes
    
    
    8,732
    
    
    
    5,243
    
    
    
    4,396
    
    
    
    1,279
    
    
    
    8,008Net income
    
    
    6,610
    
    
    
    3,723
    
    
    
    3,284
    
    
    
    1,048
    
    
    
    5,838Total assets
    
    
    93,016
    
    
    
    83,081
    
    
    
    50,459
    
    
    
    47,644
    
    
    
    54,421Working capital
    
    
    23,778
    
    
    
    17,121
    
    
    
    14,106
    
    
    
    15,565
    
    
    
    13,770Additions to property, plant, and equipment
    
    
    1,601
    
    
    
    3,311
    
    
    
    2,967
    
    
    
    2,144
    
    
    
    3,699Depreciation and amortization
    
    
    4,156
    
    
    
    2,873
    
    
    
    2,499
    
    
    
    2,921
    
    
    
    3,138PER SHARE ($):Basic net earnings
    
    $
    2.65
    
    
    $
    1.53
    
    
    $
    1.35
    
    
    $
    0.43
    
    
    $
    2.30Diluted net earnings
    
    
    2.53
    
    
    
    1.49
    
    
    
    1.33
    
    
    
    0.43
    
    
    
    2.25Book value
    
    
    18.02
    
    
    
    14.35
    
    
    
    11.69
    
    
    
    8.87
    
    
    
    8.75CAPITALIZATION ($000s):Shareholders equity
    
    $
    45,559
    
    
    $
    35,114
    
    
    $
    28,419
    
    
    $
    21,561
    
    
    $
    21,311Long-term debt
    
    
    18,598
    
    
    
    24,574
    
    
    
    6,499
    
    
    
    12,499
    
    
    
    12,390Short-term debt (3)
    
    
    4,185
    
    
    
    3,541
    
    
    
    2,005
    
    
    
    2,186
    
    
    
    3,595Total debt
    
    
    22,783
    
    
    
    28,115
    
    
    
    8,504
    
    
    
    14,685
    
    
    
    15,985RATIOS:Return on average shareholders equity (%)
    
    
    16.4
    
    
    
    11.7
    
    
    
    13.1
    
    
    
    4.9
    
    
    
    25.1Return on revenues (%)
    
    
    5.9
    
    
    
    3.9
    
    
    
    4.8
    
    
    
    1.5
    
    
    
    6.9Long-term debt to shareholders equity (%)
    
    
    40.8
    
    
    
    70.0
    
    
    
    22.9
    
    
    
    58.0
    
    
    
    58.1Current assets to current liabilities
    
    
    1.9
    
    
    
    1.8
    
    
    
    1.9
    
    
    
    2.2
    
    
    
    1.7Average inventory turnover
    
    
    4.6
    
    
    
    4.1
    
    
    
    4.0
    
    
    
    3.8
    
    
    
    4.2Average accounts receivable turnover
    
    
    5.6
    
    
    
    5.0
    
    
    
    4.6
    
    
    
    4.2
    
    
    
    4.3OTHER DATA:Shares outstanding (000s) (4)
    
    
    2,528
    
    
    
    2,447
    
    
    
    2,431
    
    
    
    2,431
    
    
    
    2,436Shareholders of record
    
    
    221
    
    
    
    224
    
    
    
    235
    
    
    
    251
    
    
    
    258Number of employees
    
    
    467
    
    
    
    474
    
    
    
    361
    
    
    
    379
    
    
    
    522
   (1)
    
    The 2003 consolidated financial statements include the acquisition of Pennsylvania Crusher
Corporation and its subsidiary from January 2, 2003. Fiscal year 2003 is a 53-week year.(2)
    
    On December 30, 2001, we adopted Statement of Financial Accounting Standards No. 142 and
ceased to amortize goodwill at the end of fiscal year 2001.(3)
    
    Including current portion of long-term debt.(4)
    
    Net of treasury stock of 1,968 shares for fiscal year 2000, 2,001 shares for fiscal year 2001
and 2,003 shares for fiscal years 2002, 2003 and 2004. - 13 -




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Item 7.
    Managements Discussion and Analysis of Financial Condition and Results
of Operations. Introduction For a description of K-Trons business, refer to Item 1 of Part I of this annual report on
Form 10-K. As indicated in Item 1, we are engaged in one principal business segment  material handling
equipment and systems. We operate in two primary geographic locations  North and South America
(the Americas) and Europe, the Middle East, Africa and Asia (EMEA/Asia). We have three main business or product lines (business lines) within the material handling
equipment and systems segment. They are, in descending order of revenues in 2004, our feeding,
size reduction and pneumatic conveying business lines. During 2004, our customers increased capital equipment spending following 2003 spending that
had been depressed due to the global economic slowdown and excess manufacturing capacity built up
in the late 1990s, particularly in the U.S. processing industries. Bookings increased in 2004
versus 2003 in all three of our business lines as a result of improved economic conditions. Management looks at trends in what it believes to be relevant indicators, such as the PMI
Index for manufacturing published by the Institute of Supply Management and similar foreign
indices, to help it better understand the prospects for capital equipment spending, particularly as
it may affect our feeder and pneumatic conveying equipment business lines. These indicators began
to show improvement in the latter part of 2003, and this was reflected in higher bookings by our
K-Tron Feeder Group beginning in the fourth quarter of 2003 and continuing throughout 2004.
Historically, increases in our feeding equipment sales generally lag improvements in these
indicators, in some cases by as much as six to twelve months. We believe that our K-Tron Feeder Group is the global leader in the design, production,
marketing and servicing of high-quality industrial feeders for the handling of bulk solids in a
wide variety of manufacturing processes. The majority of the revenues and profits of our K-Tron
Feeder Group is generated by equipment and systems sales, with a lesser amount attributable to
service, parts and repairs. New product innovation is a major objective of the R&D efforts of this
business. Our K-Tron Feeder Group has the ability to serve nearly all geographic regions of the
world from its two assembly-and-test facilities in Pitman, New Jersey and Niederlenz, Switzerland. Our size reduction business line was added with the purchase of Penn Crusher and Jeffrey on
January 2, 2003. In contrast to our feeding line, Penn Crusher and Jeffrey sell equipment
primarily into the U.S. market, with some sales into China and other foreign countries. The main
industries served are the electric utility, mining, pulp and paper and wood and forest products
industries, and a majority of revenues and profits are generated from replacement part sales
instead of new equipment. Both Penn Crusher and Jeffrey maintain an extensive digital database of
previously sold equipment, including equipment specifications and drawings, which enables them to
respond quickly and efficiently to fill customers spare parts orders. Our size reduction business
line saw an increase in bookings in 2004 following a modest decline in 2003 that resulted from
lower economic activity, excess plant capacity and financial restructuring and credit issues in the
power industry. Significant indicators that management uses to judge prospects for this business
line in the United States include the level of electricity consumption, the financial health of the
electric utility industry and the demand for paper and forest products. - 14 -




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Our pneumatic conveying line comprises a relatively small portion of our overall revenues.
This equipment is sometimes sold through the K-Tron Feeder Group in conjunction with feeder
equipment as a means of transporting a dry material from one part of a plant to the inlet of a
feeder, and the companies in the pneumatic conveying group also sell equipment and complete systems
in applications which do not necessarily incorporate feeders, primarily in the United Kingdom.
Aside from selling into markets common to the feeder line, the pneumatic conveying group also sells
into the plastics injection molding market. Most of the revenues and profits of this line are
generated from equipment and systems sales. Factors affecting the pneumatic conveying line are
similar to those which affect the feeder line but also include factors that may affect the
secondary plastics market generally. In 2004, the pneumatic conveying business line benefited from
a large order from a customer for a specially-designed piece of equipment. The following provides information that management believes is relevant to an assessment and
understanding of our consolidated results of operations and financial condition. The discussion
should be read in conjunction with our consolidated financial statements and accompanying notes.
All references in this Item 7 to 2004, 2003 and 2002 mean the fiscal years ended January 1, 2005,
January 3, 2004 and December 28, 2002. Critical Accounting Policies and Estimates This discussion and analysis of our financial condition and results of operations is based on
our financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. We describe our significant accounting policies in the notes to our audited consolidated
financial statements. Judgments and estimates of uncertainties are required in applying our accounting policies in
certain areas. Areas that require significant judgments and estimates to be made include
determinations of the useful life of assets, estimates of allowances for doubtful accounts,
valuation assumptions in performing asset impairment tests of long-lived assets, estimates of the
realizability of deferred tax assets, determinations of the adequacy of reserves for inventory
obsolescence and warranty costs, and legal contingencies. There are a number of critical assumptions that may influence accounting estimates in these
and other areas. We base our critical assumptions on historical experience, third-party data and
other factors we believe to be reasonable under the circumstances. We believe that the most
critical assumptions made in arriving at our accounting estimates are the following: Depreciable Lives of Plant and Equipment Each asset included in plant and equipment is recorded at cost and depreciated using the
straight-line method, which deducts equal amounts of the cost of such asset from earnings every
year over such assets estimated economic useful life. Net plant and equipment at year-end 2004
totaled $25,075,000, which represented 27% of total assets. Depreciation expense during 2004
totaled $3,644,000, which represented 3.9% of total operating expenses. Given the significance of
plant and equipment and associated depreciation to our financial statements, the determination of
an assets economic useful life is considered to be a critical accounting estimate. - 15 -




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Economic useful life is the duration of time the asset is expected to be productively employed
by the Company, which may be less than its physical life. Managements assumptions regarding the
following factors, among others, affect the determination of estimated economic useful life:
changes in technology, wear and tear and changes in market demand. The estimated economic useful life of an asset is monitored to determine its continued
appropriateness, especially in light of changed business circumstances. For example, technological
advances, excessive wear and tear or reduced estimates of future demand for a product may result in
a shorter estimated useful life for an asset than originally anticipated. In such a case, we would
depreciate the remaining net book value of the asset over the new estimated remaining life, thereby
increasing depreciation expense per year on a prospective basis. Conversely, if the estimated
useful life is increased, the adjustment to the useful life would decrease depreciation expense per
year on a prospective basis. Over the past three years, changes in economic useful life
assumptions have not had a material impact on our reported results. Allowance for Doubtful Accounts We encounter risks associated with sales and the collection of the associated accounts
receivable. We record a provision for accounts receivable that are considered to be uncollectible.
In order to calculate the appropriate provision, management analyzes the creditworthiness of
specific customers and the aging of customer balances. Management also considers contractual
rights and obligations and general and industry specific economic conditions. Management believes that the accounting estimate related to the allowance for doubtful
accounts is a critical accounting estimate because the underlying assumptions used to establish the
allowance can change from time to time, and uncollectible accounts could potentially have a
material impact on our results of operations. Asset Impairment Determinations As a result of the adoption of Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets, goodwill is no longer amortized. Under this accounting standard,
goodwill is subject to an impairment test that we conduct at least annually using a discounted cash
flow technique. The impairment test done in 2004 indicated that the fair value of the business
with goodwill exceeded its carrying value and, therefore, the goodwill amount was not impaired. With respect to our other long-lived assets, we are required to test for asset impairment
whenever events or circumstances indicate that the carrying value of an asset may not be
recoverable. We apply Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, in order to determine whether or not an asset has
been impaired. This standard requires an impairment analysis when indicators of impairment are
present. If such indicators are present, the standard indicates that if the sum of the future
expected cash flows from the asset, undiscounted and without interest charges, is less than the
carrying value, an asset impairment must be recognized in the financial statements. The amount of
the impairment is the difference between the fair value of the asset and the carrying value of the
asset. In analyzing the future cash flows of various assets, the assumptions we make include the
following:  
    The intended use of assets and the expected cash flows resulting directly from such use
    Industry specific economic conditions - 16 -




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
    Customer preferences and behavior patterns
    The impact of applicable regulatory initiatives, if any We believe that an accounting estimate relating to asset impairment is a critical accounting
estimate because the assumptions underlying future cash flow estimates are subject to change from
time to time and the recognition of an impairment could have a significant impact on our income
statement. Over the past three years, we have not recognized any asset impairments. Income Taxes We use the liability method to account for income taxes. Under this method, deferred tax
liabilities and assets are recognized for the tax effects of temporary differences between the
financial reporting and tax bases of liabilities and assets measured using the enacted tax rate.
Income tax expense was $2,122,000 for the year ended 2004. Significant management judgment is
required in determining income tax expense and the related balance sheet amounts. Judgments are
required concerning the ultimate outcome of tax contingencies and the realization of deferred tax
assets. We have accrued our estimate of the probable tax contingency in accordance with Statement
of Accounting Standards No. 5, Accounting for Contingencies. The 2004 utilization of part of the
contingency is discussed later in this Item 7 in Results of Operations. Actual income taxes paid may vary from estimates depending upon changes in income tax laws,
actual results of operations and the final audit of tax returns by taxing authorities. Tax
assessments may arise several years after tax returns have been filed. We believe that our
recorded tax liabilities adequately provide for the probable outcome of these assessments.
Deferred tax assets are recorded for deductible temporary differences, operating losses and tax
credit carryforwards. However, when there are insufficient sources of future taxable income to
realize the benefit of these items, these deferred tax assets are reduced by a valuation allowance.
A valuation allowance is recognized if, based on the weight of available evidence, it is
considered more likely than not that some portion or all of the deferred tax asset will not be
realized. The factors used to assess the likelihood of realization include forecasted future
taxable income and available tax planning strategies that could be implemented to realize or renew
net deferred tax assets in order to avoid the potential loss of future tax benefits. The effect of
a change in the valuation allowance is reported in the current period tax expense. A one percentage point increase in the Companys effective tax rate for 2004 from 24.3% to
25.3% would have decreased reported net income by approximately $87,000. Inventory Obsolescence We record an inventory obsolescence reserve for obsolete, excess and slow-moving inventory.
In calculating our inventory obsolescence reserve, management analyzes historical data regarding
customer demand, product changes, market conditions and assumptions about future product demand.
Management believes that its accounting estimate related to inventory obsolescence is a critical
accounting estimate because customer demand can be variable and changes in our reserve for
inventory obsolescence could materially affect our financial results. Warranty Reserve We provide for the estimated cost of product warranties at the time revenue is recognized.
Warranty expense is normally accrued as a percentage of sales on a monthly basis, and this
provision is included in accrued expenses and other liabilities. There is an exception to this for
certain products within the size reduction business for which we use a combination of historical
information and - 17 -




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management judgment. We offer a one-year product warranty on a majority of our products.
While we engage in extensive product quality programs and processes, including the active
monitoring and evaluation of the quality of our component suppliers, our warranty obligations are
affected by actual product failures and by material usage and service costs incurred in correcting
a product failure. Our warranty provision is established based upon our best estimates of the
amounts necessary to settle future and existing claims on products sold as of the balance sheet
date. While we believe that our warranty provisions are adequate and that the judgments applied
are appropriate, the ultimate cost of product warranty could differ materially from our estimates.
When the actual cost of warranty of our products is lower than we originally anticipated, we adjust
downward the recorded reserve, and if the cost of warranty repairs and service is higher than
anticipated, we increase the reserve. Legal Contingencies We are currently involved in certain legal proceedings. We have accrued our estimate of
the probable costs for the resolution of these claims in accordance with Statement of Financial
Accounting Standards No. 5, Accounting for Contingencies. This estimate has been developed by
management and may be made in consultation with outside counsel handling our defense in these
matters and also with our insurance consultant, and it is based upon an analysis of potential
results, including litigation and settlement strategies. We do not believe these proceedings will
have a material adverse effect on our consolidated financial position. It is possible, however,
that future results of operations for any particular quarterly or annual period could be materially
affected by litigation outcomes that are significantly different than our assumptions and
estimates. Results of Operations Overview Fiscal 2004 was a 52-week year, while fiscal 2003 was a 53-week year and fiscal 2002 was a
52-week year. In 2004, 2003 and 2002, we reported revenues of $112,494,000, $94,676,000 and
$68,231,000 and net income of $6,610,000, $3,723,000 and $3,284,000. We believe that the increases in our 2004 revenues and net income compared to 2003 were
primarily the result of improved business conditions and increased spending for capital equipment
by customers in many of the markets served by our business lines. An additional favorable factor
was the effect of the weaker U.S. dollar in 2004 versus 2003 on the translation of the revenues and
profits of our foreign operations into U.S. dollars. Our 2004 effective tax rate was 24.3%, down
from 29.0% in 2003 due primarily to the impact of a $540,000 fourth quarter 2004 tax benefit
resulting from the reduction of a previously established tax reserve following the settlement and
closure of a tax audit in Germany, partially offset by a higher proportion of U.S. income which is
taxed at higher rates. Net income for 2004 also benefited from a $164,000 pre-tax profit
contribution from the first quarter sale of an office building by one of our United Kingdom
subsidiaries. The significant 2003 revenue increase over 2002 was due to the January 2, 2003 acquisition of
Penn Crusher, partly offset by a decline in revenues from the other parts of our business
reflecting a poor global economy and weakness during much of 2003 in capital equipment spending in
the process industries we serve. The improvement in net income in 2003 versus 2002 was also due to
the acquisition of Penn Crusher, partly offset by lower profits in the K-Tron Feeder Group as a
result of the weak global economy and the reduced capital equipment spending previously mentioned. - 18 -




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Acquisitions On January 2, 2003, we acquired all of the outstanding capital stock of Penn Crusher. As a
result of this purchase, we also acquired Jeffrey, a wholly-owned subsidiary of Penn Crusher. The
purchase price for the Penn Crusher stock was $23,500,000 paid at closing, a post-closing
adjustment of $205,000 based on Penn Crushers consolidated stockholders equity at December 31,
2002 and $1,288,000 in the quarter ended January 3, 2004 in conjunction with the Companys IRS Code
section 338(h)(10) election relating to such acquisition. Of this amount, $20,993,000 was paid in
cash and $4,000,000 was in unsecured promissory notes which were payable in equal, annual
installments on January 2 of 2005, 2006 and 2007. With respect to the payment of the cash portion
of the purchase price and related acquisition costs other than the section 338(h)(10) election, we
financed $15,000,000 through a $17,000,000 secured credit facility with Penn Crusher as the
borrower and Jeffrey as the guarantor (with the additional $2,000,000 being available for working
capital and general corporate purposes, subject to certain limitations), and the lender has no
recourse against any other K-Tron company with respect to any amounts borrowed thereunder (except
by a non-recourse pledge of the stock of Penn Crusher). Additionally, we borrowed $5,000,000 from
a U.S. bank through the U.S. manufacturing subsidiary of the K-Tron Feeder Group and used these
funds to pay part of the purchase price. This obligation was guaranteed by K-Tron International,
and K-Tron International also issued the $4,000,000 of unsecured promissory notes. In June 2004,
K-Tron International, Inc. prepaid the $4,000,000 of unsecured promissory notes bearing interest at
6% per annum that were payable to the former Penn Crusher stockholders. The prepayment of the
notes was financed with a $4,000,000 term loan from a U.S. bank, repayable over 60 months, with 48
monthly principal payments of $50,000 which began in January 2005, 11 monthly principal payments of
$133,333 beginning January 2009 and a final principal payment of $133,337 in December 2009.
Interest is payable monthly at a fixed rate of 5.75% on principal of $1,600,000 and at a variable
rate of one-month LIBOR plus 1.85% (4.27% as of January 1, 2005) on the remaining principal of
$2,400,000. The term loan is guaranteed by the U.S. manufacturing subsidiary of the K-Tron Feeder
Group. As noted above, K-Tron and Penn Crusher incurred substantial debt as a result of the Penn
Crusher acquisition. This debt, including the amounts outstanding at the end of 2004, is described
in more detail in the Liquidity and Capital Resources section of this Item 7. K-Tron and Penn
Crusher have met all required principal and interest payments on this debt, and in 2004 Penn
Crusher also made a $1,000,000 principal prepayment on one of the term loans included as part of
its secured credit facility. Foreign Exchange Rates We are an international company, and we derived approximately 43%, 41% and 58% of our 2004,
2003 and 2002 revenues from products manufactured in, and services performed from, our facilities
located outside the United States, primarily in Europe. With our global operations, we are
sensitive to changes in foreign currency exchange rates (foreign exchange rates), which can
affect both the translation of financial statement items into U.S. dollars as well as transactions
where the revenues and related expenses may initially be accounted for in different currencies,
such as sales made from our Swiss manufacturing facility in currencies other than the Swiss franc.
With the acquisition of Penn Crusher and Jeffrey, we were less affected in 2004 and 2003 by foreign
exchange rates since most of their sales are in U.S. dollars. Nevertheless, we still derive
substantial revenues from products manufactured in, and services performed from, our facilities
outside the United States, so that we will continue to have significant sensitivity to foreign
exchange rate changes. - 19 -




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Since we have received substantial revenues in recent years from activities in foreign
jurisdictions, our results can be significantly affected by changes in foreign exchange rates,
particularly in U.S. dollar exchange rates with respect to the Swiss franc, euro and British pound
sterling and, to a lesser degree, the Singapore dollar and other currencies. When the U.S. dollar
weakens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales increases.
When the U.S. dollar strengthens against these currencies, the U.S. dollar value of non-U.S.
dollar-based sales decreases. Correspondingly, the U.S. dollar value of non-U.S. dollar-based
costs increases when the U.S. dollar weakens and decreases when the U.S. dollar strengthens.
Overall, our revenues in U.S. dollars generally benefit from a weaker dollar and are adversely
affected by a stronger dollar relative to major currencies worldwide, especially those identified
above. In particular, a general weakening of the U.S. dollar against other currencies would
positively affect our revenues, gross profit and operating income as expressed in U.S. dollars
(provided that the gross profit and operating income numbers from foreign operations are not
losses, since in the case of a loss, the effect would be to increase the loss), whereas a general
strengthening of the U.S. dollar against such currencies would have the opposite effect. In
addition, our revenues and income with respect to particular sales transactions may be affected by
changes in foreign exchange rates where sales are made in currencies other than the functional
currency of the facility manufacturing the product subject to the sale. For 2004, 2003 and 2002, the changes in certain key foreign exchange rates affecting the
Company were as follows: Fiscal Year2004
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    2002Average U.S. dollar equivalent of
one Swiss franc
    
    
    0.807
    
    
    
    
    
    
    
    0.746
    
    
    
    
    
    
    
    0.645% change vs. prior year
    
    
    
    
    
    
    8.2
    %
    
    
    
    
    
    
    15.7
    %Average U.S. dollar equivalent of
one euro
    
    
    1.246
    
    
    
    
    
    
    
    1.135
    
    
    
    
    
    
    
    0.946% change vs. prior year
    
    
    
    
    
    
    9.8
    %
    
    
    
    
    
    
    20.0
    %Average U.S. dollar equivalent of
one British pound sterling
    
    
    1.835
    
    
    
    
    
    
    
    1.638
    
    
    
    
    
    
    
    1.504% change vs. prior year
    
    
    
    
    
    
    12.0
    %
    
    
    
    
    
    
    8.9
    %Average Swiss franc equivalent of
one euro
    
    
    1.543
    
    
    
    
    
    
    
    1.521
    
    
    
    
    
    
    
    1.467% change vs. prior year
    
    
    
    
    
    
    1.4
    %
    
    
    
    
    
    
    3.7
    %Average Swiss franc equivalent of
one British pound sterling
    
    
    2.273
    
    
    
    
    
    
    
    2.196
    
    
    
    
    
    
    
    2.332% change vs. prior year
    
    
    
    
    
    
    3.5
    %
    
    
    
    
    
    
    -5.8
    %
 - 20 -




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Presentation of Results and Analysis The following table sets forth our results of operations, expressed as a percentage of total
revenues for the periods indicated, as well as our year-end backlogs: Fiscal Year2004
    
    
    2003
    
    
    2002Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    58.8
    
    
    
    59.0
    
    
    
    57.7Gross profit
    
    
    41.2
    
    
    
    41.0
    
    
    
    42.3Selling, general and administrative
    
    
    30.1
    
    
    
    30.9
    
    
    
    31.6Research and development
    
    
    2.3
    
    
    
    2.9
    
    
    
    3.6Operating income
    
    
    8.8
    
    
    
    7.2
    
    
    
    7.1Interest (expense)
    
    
    (1.2
    )
    
    
    (1.7
    )
    
    
    (0.7
    )Gain on sale of office building
    
    
    0.2
    
    
    
    
    
    
    
    Income before income taxes
    
    
    7.8
    %
    
    
    5.5
    %
    
    
    6.4
    %Year-end backlog (at year-end 2004
foreign exchange rates, in
thousands of dollars)
    
    $
    21,887
    
    
    $
    17,956
    
    
    $
    9,678
 Total revenues increased by $17,818,000 or 18.8% in 2004 compared to 2003. We believe that
these increases were primarily attributable to improved business conditions which resulted in
increased capital equipment spending by our customers in many of the markets served by our business
lines  feeding, size reduction and pneumatic conveying  and, to a lesser degree, to the positive
effect of a weaker U.S. dollar on the translation of the revenues of our foreign operations into
U.S. dollars. The favorable impact of foreign currency translation accounted for approximately
22%, or $3,958,000, of the $17,818,000 revenue increase in 2004 compared to 2003. Total revenues increased by $26,445,000 or 38.8% in 2003 compared to 2002. This increase was
due to the acquisition of Penn Crusher on January 2, 2003, which contributed revenues of
$32,086,000, and the positive effect of a weaker U.S. dollar on the translation of the revenues of
our foreign operations into U.S. dollars, partly offset by a decline in revenues in our other
businesses as a result of a weaker global economy, a reduction in spending for industrial capital
equipment in the process industries we serve and the effects of the SARS outbreak in Asia in the
early part of 2003. If the average foreign exchange rates for 2002 were applied to 2003, total
revenues for 2003 would have increased by $21,375,000 or 31.3% versus the $26,445,000 and 38.8% on
an as-reported basis. Gross profit as a percentage of total revenues increased to 41.2% in 2004 from 41.0% in 2003.
The increase reflected a change in the sales mix of the material handling products sold within our
three business lines. Sales mix refers to the relative amounts of different products sold and
services provided. Gross margin levels vary with the product sold or service provided. For
example, sales of replacement parts in the size reduction business line generally carry a higher
gross margin than do sales of equipment within that line. Gross profit as a percent of total revenues decreased to 41.0% in 2003 from 42.3% in 2002.
The decline was caused by a change in sales mix of the material handling products sold within our - 21 -




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business lines. As a result of the acquisition of Penn Crusher at the beginning of 2003, the
overall sales mix in 2003 included, for the first time, size reduction equipment which carried
lower margins compared with much of the other equipment sold by the Company. Thus, overall margins
for 2003 were lower than those in 2002 when there were no size reduction equipment sales. Selling, general and administrative (SG&A) expenses increased by $4,601,000 or 15.7% in 2004
compared to 2003. This increase was primarily the result of a higher employee bonus accrual,
higher sales commissions related to increased revenues, the effect of a weaker U.S. dollar on the
translation of foreign costs into U.S. dollars, and an increase in depreciation and amortization
expense related to the implementation of new software systems by the K-Tron Feeder Group. SG&A expenses increased by $7,712,000 or 35.8% in 2003 compared to 2002. This increase was
primarily due to the acquisition of Penn Crusher in 2003 and, to a much lesser extent, selected
employee termination costs that were not part of any specific restructuring plan in the K-Tron
Feeder Group. In addition, SG&A increased as a result of the adverse effect of a weaker U.S.
dollar when translating costs in foreign currencies into U.S. dollars. Research and development (R&D) expense decreased by $26,000 or 1.0% in 2004 compared to
2003. This decrease was primarily due to lower prototype expenditures and a small reduction in
staff, partially offset by the effect of a weaker U.S. dollar when translating Swiss R&D costs into
U.S. dollars. R&D expenditures increased by $266,000 or 11.0 % in 2003 compared to 2002, primarily as a
result of increased tooling costs as well as the effect of a weaker U.S. dollar on the translation
of Swiss franc costs into U.S. dollars. R&D expense as a percent of total revenues was 2.3% in 2004, 2.9% in 2003 and 3.6% in 2002.
There was no significant R&D expense associated with the Penn Crusher and Jeffrey businesses. Interest expense decreased by $274,000 or 17.2% in 2004 as compared to 2003. This decrease
was the result of lower debt levels in 2004, partially offset by increased interest rates in 2004. Interest expense increased by $1,090,000 or 218% in 2003 as compared to 2002. This increase
was largely the result of adding $24,000,000 of acquisition debt for Penn Crusher in January 2003
plus, to a much lesser degree, foreign exchange rates (a weaker U.S. dollar) applicable to interest
paid in other currencies. Further information regarding the Penn Crusher acquisition debt is
presented in the Liquidity and Capital Resources section of this Item 7. The increased interest
expense was somewhat offset by lower interest rates in 2003 on the non-Penn Crusher-related debt
compared with 2002 interest rates and by debt reductions of $1,717,000 in Switzerland ($1,486,000
at the foreign exchange rate at the end of 2003) and $2,904,000 in the United States. In the first quarter of 2004, one of our United Kingdom subsidiaries sold its office building
for $996,000 and realized a pre-tax gain of $164,000. All employees were relocated to a nearby
office building that is leased by another United Kingdom subsidiary. Income before income taxes was $8,732,000 in 2004, $5,243,000 in 2003 and $4,396,000 in 2002.
The changes during the periods were the net result of the items discussed above. The 2004 income
before income taxes was substantially higher than in 2003 primarily because of improved business
conditions in many of the markets served by our business lines and, to a lesser extent, from the
positive effect of a weaker U.S. dollar on the translation of the revenues and profits of our
foreign - 22 -




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operations into U.S. dollars. The 2003 income before income taxes improved versus 2002 due
to the Penn Crusher acquisition. The 2004, 2003 and 2002 provisions for income tax were $2,122,000, $1,520,000 and $1,112,000,
and the overall effective tax rates were 24.3% in 2004, 29.0% in 2003 and 25.3% in 2002. The lower
effective tax rate in 2004 compared with 2003 was primarily due to the impact of a tax benefit of
$540,000 resulting from the fourth quarter 2004 reduction of a previously established tax reserve
following the settlement and closure of a tax audit in Germany, partially offset by a higher
proportion of U.S. income. The higher effective tax rate in 2003 compared with 2002 was primarily
due to the acquisition of Penn Crusher and the resulting higher proportion of U.S. income. On July
1, 2002, New Jersey approved legislation for corporation income tax reform. The changes made to the
law accounted for an increase in the tax provision for 2004, 2003 and 2002 of approximately
$22,000, $40,000 and $50,000 after the related federal income tax benefit. We have foreign and
U.S. state tax loss carryforwards that total $424,000 and $6,378,000 which, if realized, would have
an estimated future net income benefit of approximately $135,000 and $366,000. We do not believe that inflation has had a material impact on our results of operations during
the last three years. Our backlog at constant foreign exchange rates increased by $3,931,000 or 21.9% at the end of
2004 compared with year-end 2003, from $17,956,000 to $21,887,000. Our backlog at constant foreign
exchange rates increased by $8,278,000 or 85.5% at the end of 2003 compared with year-end 2002,
from $9,678,000 to $17,956,000. Of this increase, approximately 76.8% or $6,357,000 was
attributable to the addition of the Penn Crusher and Jeffrey businesses. The remainder of the
backlog increase was largely due to the EMEA/Asia feeder business. A significant part of our
backlog at the end of 2004 consisted of orders that were expected to be shipped within 120 days.
Approximately $1,991,000 of the Penn Crusher backlog at the end of 2004 was for blanket orders that
can be released by the customer at any time over an 18-month period. Liquidity and Capital Resources Penn Crusher Acquisition Debt To finance the 2003 Penn Crusher acquisition described earlier, we borrowed $20,000,000 from
two U.S. banks, and we also issued $4,000,000 in unsecured promissory notes to the Penn Crusher
stockholders. We borrowed $5,000,000 from a U.S. bank through the U.S. manufacturing subsidiary of the
K-Tron Feeder Group, which loan was combined with an outstanding term loan from that bank to that
subsidiary and resulted in a new $7,333,000 term loan. Monthly principal payments of $83,000 plus
interest at a fixed rate of 5.625% on approximately half the loan and at a variable rate of one
month LIBOR plus 1.85% on the other half (4.27% at January 1, 2005) began in February 2003, with
the final principal payment of approximately $2,416,000 plus interest being due in January 2008.
This loan is secured by substantially all of the assets of the U.S. manufacturing subsidiary and is
guaranteed by K-Tron International, Inc. At January 1, 2005, there was $5,417,000 outstanding
under this term loan facility. The term loan facility requires that K-Tron International comply
with certain covenants relating to the consolidated debt to net worth ratio, minimum annual debt
coverage and minimum net worth. Penn Crusher borrowed $15,000,000 from another U.S. bank consisting of $13,500,000 in term
debt ($10,000,000 with a five-year term and $3,500,000 with a six-year term) and $1,500,000 under a
five-year revolving credit facility. Subject to certain conditions, the revolving credit facility - 23 -




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provides for up to $3,500,000 of total availability, including the $1,500,000 originally
borrowed thereunder. No amounts were outstanding under the revolving credit facility as of January
1, 2005. Quarterly term debt principal payments of $400,000 began March 31, 2003 and increase each
year by $62,500 per quarter (or $250,000 per year in the aggregate) through December 31, 2007, with
final quarterly principal payments of $750,000 in 2008. In December 2004, we prepaid $1,000,000
that was due in 2008 of the $3,500,000 term debt. Interest is based on one- to six-month LIBOR
plus 3% to 3.5%, and the 3% to 3.5% was reduced to 2% to 2.5% upon meeting certain financial
ratios. As of January 1, 2005, there was $6,750,000 outstanding on the five-year term loan and
$2,300,000 outstanding on the six-year term loan. In January 2003, Penn Crusher entered into an
interest rate swap related to the entire $10,000,000 five-year term loan ($6,750,000 as of January
1, 2005) such that interest cannot exceed 6.11% for the full term of the loan and this limit was
reduced to 5.11% in 2004 upon meeting certain financial ratios. The interest rates on the
outstanding balances under the $10,000,000 term loan and the $3,500,000 term loan were 5.11% and
4.53% as of January 1, 2005. The Penn Crusher debt is guaranteed by Jeffrey and secured by
substantially all of the assets of Penn Crusher and Jeffrey, but it is not guaranteed by any other
K-Tron company (except by a non-recourse pledge of the stock of Penn Crusher). The term loans and
revolving credit facility require that Penn Crusher comply with certain covenants relating to
tangible net worth, fixed charge coverage ratio and total debt to EBITDA ratio. In addition, K-Tron International issued $4,000,000 of unsecured promissory notes to the
former Penn Crusher stockholders as part of the Penn Crusher purchase price. These notes were
payable in three equal, annual installments beginning January 2005 on the second, third and fourth
anniversaries of the January 2, 2003 closing date. Interest at 6% per annum was payable quarterly.
In June 2004, K-Tron International prepaid the $4,000,000 of unsecured promissory notes that were
payable to the former Penn Crusher stockholders. The prepayment of these notes was financed with a
$4,000,000 term loan from a U.S. bank, repayable over 60 months, with 48 monthly principal payments
of $50,000 beginning January 2005, 11 monthly principal payments of $133,333 beginning January 2009
and a final principal payment of $133,337 in December 2009. Interest is payable monthly at a fixed
rate of 5.75% per annum on principal of $1,600,000 and a variable rate of one-month LIBOR plus
1.85% (4.27% as of January 1, 2005) on the remaining principal of $2,400,000. The term loan is
guaranteed by the U.S. manufacturing subsidiary of the K-Tron Feeder Group. Other Bank Debt At January 1, 2005, our Swiss subsidiary had separate credit facilities totaling 12,250,000
Swiss francs (approximately $10,740,000) with three Swiss banks. The Companys real property in
Switzerland is pledged as collateral. As of January 1, 2005, there were no borrowings under any of
these credit facilities. In June 1998, the U.S. manufacturing subsidiary of the K-Tron Feeder Group refinanced its
20-year mortgage debt with a U.S. bank for $2,700,000 at an annual interest rate of 7.625%. In July
2002, the annual interest rate was reduced to 6.45% and, beginning August 1, 2002, this loan became
repayable in eighty-three monthly principal and interest payments of $23,784 each, with a final
payment of $1,042,000 plus interest due on August 1, 2009. As of January 1, 2005, the principal
amount owed on this borrowing was $1,897,000. Also in June 1998, this same U.S. manufacturing subsidiary entered into a two-year secured
revolving credit facility with the U.S. bank that holds the mortgage. As of January 1, 2005, there
was $2,100,000 borrowed under this credit facility, which has now been extended through July 2006,
and $2,900,000 was available for future borrowings. The annual interest rate as of January 1, 2005
was 5.0%. - 24 -




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Future Payments Under Contractual Obligations We are obligated to make future payments under various contracts such as debt, lease and
purchase obligations. The table below summarizes our significant contractual cash obligations as
of January 1, 2005 for the items indicated: (Dollars in thousands)
    
    Payment due by PeriodLess than
    
    
    1-3
    
    
    3-5
    
    
    More thanContractual Obligations1
    

    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsLong-Term Debt ObligationsDebt Maturities
    
    $
    22,674
    
    
    
    4,076
    
    
    
    9,967
    
    
    
    8,631
    
    
    
    Contractual Interest
    
    $
    2,755
    
    
    
    1,052
    
    
    
    1,358
    
    
    
    345Capital Lease ObligationsDebt Maturities
    
    $
    109
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    Contractual Interest
    
    $
    3
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    $
    3,995
    
    
    
    1,201
    
    
    
    1,658
    
    
    
    980
    
    
    
    156Purchase Obligations
    
    $
    9,267
    
    
    
    8,928
    
    
    
    339
    
    
    
    
    
    
    
    Total
    
    $
    38,803
    
    
    
    15,369
    
    
    
    13,322
    
    
    
    9,956
    
    
    
    156
 1In addition to these obligations, the Company has employment contracts with seven
executives. Except in one case when two years advance notice is required, these contracts may be
terminated by the Company with one years advance notice. Under these agreements, each individual
is guaranteed minimum compensation over the contract period. As of January 1, 2005, the estimated
future obligation under these contracts, if all of them were to be terminated at one time, is
$2,016,000, payable within a one-year period. Capitalization Our capitalization at the end of 2004, 2003 and 2002 is summarized below: (Dollars in thousands)
    
    Fiscal Year2004
    
    
    2003
    
    
    2002Short-term debt, including current
portion of long-term debt
    
    $
    4,185
    
    
    $
    3,541
    
    
    $
    2,005Long-term debt
    
    
    18,598
    
    
    
    24,574
    
    
    
    6,499Total debt
    
    
    22,783
    
    
    
    28,115
    
    
    
    8,504Shareholders equity
    
    
    45,559
    
    
    
    35,114
    

    
    
    28,419Total debt and shareholders equity
(total
capitalization)
    
    $
    68,342
    
    
    $
    63,229
    
    
    $
    36,923Percent total debt to total capitalization
    
    
    33
    %
    
    
    44
    %
    
    
    23
    %Percent long-term debt to equity
    
    
    41
    %
    
    
    70
    %
    
    
    23
    %Percent total debt to equity
    
    
    50
    %
    
    
    80
    %
    
    
    30
    %
 Total debt decreased by $5,332,000 in 2004 ($5,374,000 of total net debt repayments partly
offset by an increase of $42,000 due to the effect of a weaker U.S. dollar on the translation of
our foreign debt). Total debt increased by $19,611,000 in 2003 ($24,000,000 related to the Penn
Crusher - 25 -




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acquisition reduced by total net debt repayments of $4,620,000 and increased by $231,000 due
to the effect of a weaker U.S. dollar on the translation of our foreign debt). Other Items At the end of 2004 and 2003, our working capital was $23,778,000 and $17,121,000, and the
ratio of our current assets to our current liabilities was 1.86 and 1.77. The increase in working
capital was primarily due to an increase in cash from operating activities throughout 2004 and also
from the sale of our U.K. office building in the first quarter of 2004. In 2004 and 2003, we utilized internally generated funds and our lines of credit to meet our
working capital needs. Net cash provided by operating activities was $12,548,000 in 2004, $9,360,000 in 2003 and
$9,949,000 in 2002. The increase in operating cash flow in 2004 compared to 2003 was primarily due
to increases in net income, depreciation and amortization, accounts payable and accrued expenses,
partially offset by increases in accounts receivable and inventories. Most of the changes resulted
from the stronger business conditions and higher revenues discussed above. Net cash from
operations declined in 2003 versus 2002 as a result of increases in inventories and accounts
receivable, partially offset by increases in net income and depreciation and amortization. Net
income and depreciation and amortization were the principal components of cash provided by
operating activities in all three years. The average number of days to convert accounts receivable to cash was 66 days in 2004 compared
to 74 days in 2003 and 80 days in 2002. The average number of days to convert inventory into cost
of sales was 79 days in 2004 compared to 91 days in 2003 and 91 days in 2002. Net cash used in investing activities was $666,000, $23,611,000 and $2,829,000 in 2004, 2003
and 2002. Capital expenditures were $1,601,000, $3,311,000 and $2,967,000 in 2004, 2003 and 2002,
which included significant expenditures for the development and implementation of Customer
Relationship Management (CRM) and Enterprise Resource Planning (ERP) software systems for the
K-Tron Feeder Group. Spending on the ERP system implementation was essentially complete as of
January 2005, and a majority of the spending on the CRM was also complete by that date. Funds used
in 2003 to acquire Penn Crusher were $20,276,000. In the first quarter of 2004, we sold our U.K.
office building and received $996,000 of proceeds. Cash used in financing activities in 2004 was for the net reduction in debt, partially offset
by the proceeds from the exercise of stock options. Cash provided by financing activities in 2003
was primarily from the $20,000,000 borrowed to finance the Penn Crusher acquisition, net of debt
reduction. Cash used in financing activities in 2002 was for debt reduction. Cash and short-term
investments increased to $12,443,000 at the end of 2004 versus $4,506,000 at the end of 2003 and
$2,694,000 at the end of 2002. Shareholders equity increased $10,445,000 in 2004 to $45,559,000, of which $2,486,000 was
attributable to changes in foreign exchange rates (weaker U.S. dollar), particularly with respect
to the Swiss franc and euro, while changes in foreign exchange rates caused translation increases
in shareholders equity of $2,800,000 in 2003 and $3,587,000 in 2002. Forward-Looking Statements and Risk Factors The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for
forward-looking statements made by us or on our behalf. We and our representatives may from time - 26 -




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to time make written or oral statements that are forward-looking, including statements
contained in this annual report on Form 10-K and other filings with the Securities and Exchange
Commission, reports to our shareholders and news releases. All statements that express
expectations, estimates, forecasts or projections are forward-looking statements within the meaning
of the Act. In addition, other written or oral statements which constitute forward-looking
statements may be made by us or on our behalf. Words such as expects, anticipates, intends,
plans, believes, seeks, estimates, projects, forecasts, may, should, variations of
such words and similar expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in or suggested by such forward-looking statements.
The forward-looking statements contained in this report include but are not limited to statements
regarding our ability to find alternative suppliers for certain components, the effect of the
expiration of our patents on our business, the expected time for shipments of our products to
customers and the resulting effect on our backlog, the development and expected time for the
introduction of new products, the sufficiency of our facilities, the retention of all of our future
earnings for use in our business, our ability to project business conditions based on trend
indicators used by management, the effect of changes in foreign exchange rates on our business, the
effect of recent New Jersey tax legislation and the effect on our business of legal proceedings in
which we are involved. We undertake no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise. A wide range of factors could materially affect our future performance and financial and
competitive position, including the following: (i) increasing price and product/service competition
by domestic and foreign competitors, including new entrants; (ii) the mix of products/services sold
by us; (iii) rapid technological changes and developments and our ability to continue to introduce
competitive new products on a timely and cost-effective basis; (iv) changes in U.S. and global
financial and currency markets, including significant interest rate and foreign currency exchange
rate fluctuations; (v) protection and validity of patents and other intellectual property rights
held by us and our competitors; (vi) the cyclical nature of our business as an industrial capital
goods supplier; (vii) possible future litigation and governmental proceedings; (viii) the
availability of financing and financial resources in the amounts, at the times and on the terms
required to support our future business, including for debt refinancings, capacity expansions and
possible acquisitions; (ix) the loss of key customers, employees or suppliers; (x) the failure to
carry out marketing and sales plans; (xi) the failure to integrate acquired businesses without
substantial costs, delays or other operational or financial problems; (xii) economic, business and
regulatory conditions and changes which may affect the level of new investments and purchases made
by our customers, including economic and business conditions that are less favorable than expected;
(xiii) domestic and international political and economic conditions, including possible terrorist
acts; and (xiv) the outcome of any legal proceedings in which we are involved. This list of factors that may affect our future performance and financial and competitive
position and also the accuracy of forward-looking statements is illustrative, but it is by no means
exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding
of their inherent uncertainty. 
 Item 7A.Quantitative and Qualitative Disclosures About Market Risk. We are currently exposed to certain market risks related to (i) fluctuations in foreign
exchange rates and (ii) interest rate changes. - 27 -




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Foreign Exchange Rate Risk The primary currencies for which we have exchange rate exposure are the U.S. dollar versus the
Swiss franc, the U.S. dollar versus the euro, the U.S. dollar versus the British pound sterling,
the Swiss franc versus the euro and the Swiss franc versus the British pound sterling. We do not,
as a routine matter, use hedging vehicles to manage foreign exchange exposures. Foreign currency
debt is used as necessary in Switzerland and the United Kingdom where the Company does business,
thereby reducing our net asset value exposure. In addition, foreign cash balances in currencies
other than the Swiss franc are limited in order to manage the transaction exposure caused by the
marking to market of non-Swiss franc balances to Swiss franc values on the balance sheet of our
Swiss subsidiary. As of January 1, 2005, a 10% unfavorable change in the foreign exchange rates affecting
balance sheet transactional exposures would have resulted in a reduction in pre-tax earnings of
approximately $629,000. This hypothetical reduction on transactional exposures is based on the
difference between the January 2, 2005 actual foreign exchange rates and hypothetical rates
assuming a 10% unfavorable change in foreign exchange rates on that date. The translation of the balance sheets of our non-U.S. operations from local currencies into
U.S. dollars is also sensitive to changes in foreign exchange rates. These translation gains or
losses are recorded as translation adjustments (TA) within shareholders equity on the balance
sheet. Using the example above, the hypothetical change in TA would be calculated by multiplying
the net assets of our non-U.S. operations by a 10% unfavorable change in the applicable foreign
exchange rates. The result of this calculation would be to reduce shareholders equity by
approximately $3,076,000, or 6.8% of our January 1, 2005 shareholders equity of $45,559,000. Interest Rate Risk We have several credit facilities or loans that require us to pay interest at a rate that may
change periodically. These variable rate obligations expose us to the risk of increased interest
expense if short-term interest rates rise. We limit our exposure to increased interest expense
from rising short-term interest rates by including in our debt portfolio various amounts of fixed
rate debt as well as by the use of an interest rate swap. As of year-end 2004, we had total debt
of $22,783,000, $8,650,000 of which was fixed-rate debt, approximately $7,383,000 of which was
subject to variable interest rates which ranged from 4.03% to 4.53% and $6,750,000 of which was
variable rate debt subject to an interest rate swap with the result that the interest rate was
fixed at 6.11%, subject to possible reduction. This rate was reduced in 2004 to 5.11% after we
achieved a targeted debt to EBITDA ratio. A 100 basis point increase in interest rates on the
$7,383,000 of variable rate debt would increase annual interest expense by approximately $74,000. 
 Item 8.Financial Statements and Supplementary Data. The consolidated financial statements of the Company and its subsidiaries and supplementary
data required by this item are attached to this annual report on Form 10-K beginning on page F-1. 
  Item 9.
    Change In and Disagreements with Accountants on Accounting and Financial Disclosures. On August 13, 2003, the Audit Committee of our Board of Directors, pursuant to authority
delegated to it by the Board, dismissed KPMG LLP (KPMG) as our independent auditors and engaged
Grant Thornton LLP (Grant Thornton) to serve as our independent auditors for the 2003 fiscal year
ending January 3, 2004. Grant Thornton audited our financial statements for fiscal years - 28 -




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2003 and 2004. KPMG audited our financial statements as of and for the year ended December
28, 2002 and had been our independent auditors since June 22, 2002. For the fiscal year ended December 28, 2002, KPMGs report on our consolidated financial
statements did not contain an adverse opinion or a disclaimer of opinion, and it was not qualified
or modified as to uncertainty, audit scope or accounting principles, except that it contained a
separate paragraph stating, the fiscal 2001 and fiscal 2000 consolidated financial statements and
financial statement schedule of K-Tron International, Inc. and subsidiaries were audited by other
auditors who have ceased operations. As described in Note 7, these consolidated financial
statements have been revised to include the transitional disclosures required by Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted
by the Company as of December 30, 2001. In our opinion, such disclosures for fiscal 2001 and fiscal
2000 in Note 7 are appropriate. However, we were not engaged to audit, review or apply any
procedures to the fiscal 2001 and fiscal 2000 consolidated financial statements and financial
statement schedule of K-Tron International, Inc. and subsidiaries other than with respect to such
disclosures, and, accordingly, we do not express an opinion or any other form of assurance on the
fiscal 2001 and fiscal 2000 consolidated financial statements taken as a whole. During the fiscal year ended December 28, 2002 and through August 13, 2003, there were no
disagreements with KPMG on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if not resolved to the former
auditors satisfaction, would have caused the former auditors to make reference to the subject
matter of the disagreements in connection with their report on our consolidated financial
statements for fiscal year 2002. We disclosed the foregoing information with respect to KPMG in a current report on Form 8-K
filed August 20, 2003 and amended in a current report on Form 8-K/A filed August 25, 2003
(collectively, the KPMG Form 8-K). We provided KPMG with a copy of this disclosure and requested
KPMG to furnish us with a letter addressed to the Securities and Exchange Commission stating
whether KPMG agreed with the statements in the disclosure and, if not, stating the respects in
which it did not agree. KPMG issued a letter stating that it had read the pertinent paragraphs of
the KPMG Form 8-K and was in agreement with the statements contained therein, except that KPMG said
that it was not in a position to agree or disagree with our statement that Grant Thornton was not
engaged regarding the application of accounting principles to a specific transaction or the type of
audit opinion that might be rendered on our consolidated financial statements. KPMGs letter was
filed as an exhibit to the KPMG Form 8-K. During the fiscal year ended December 28, 2002 and through August 13, 2003, and during the
fiscal year ended December 30, 2001 and through June 22, 2002, we did not consult with Grant
Thornton or KPMG, respectively, with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit opinion that might be
rendered on the Companys consolidated financial statements, or any other matters or reportable

events set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K. Since the retention of Grant Thornton LLP on August 13, 2003, there have been no disagreements
with that firm on any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreements, if not resolved to that firms satisfaction,
would have caused it to make reference to the subject matter of the disagreements in connection
with its report on our financial statements for fiscal year 2003 or fiscal year 2004. - 29 -




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Item 9A.Controls and Procedures. Evaluation of Disclosure Controls and Procedures An evaluation of the effectiveness of our disclosure controls and procedures as of the end of
the period covered by this report was carried out by us under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures as of the end of the period covered by this report are
functioning effectively to provide reasonable assurance that the information required to be
disclosed by us in reports filed under the Securities and Exchange Act of 1934 (i) is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms and (ii) accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding disclosure. A controls system cannot provide absolute assurance, however, that the
objectives of the controls system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a company have been
detected. Changes in Internal Control over Financial Reporting No change in our internal control over financial reporting occurred during our most recent
fiscal quarter that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting. 
 Item 9B.Other Information. None - 30 -




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##### Table of Contents



PART III 
 Item 10.Directors and Executive Officers of the Registrant. The information concerning directors and compliance with Section 16(a) of the Securities
Exchange Act of 1934 and our Statement of Corporate Ethics and Code of Business Conduct that
applies to our principal executive officer, principal financial officer, principal accounting
officer or controller called for by Item 10 of Form 10-K will be set forth under the captions
Election of Directors, Section 16(a) Beneficial Ownership Reporting Compliance and Statement
of Corporate Ethics and Code of Business Conduct in our definitive proxy statement, to be filed
within 120 days after the end of the fiscal year covered by this annual report on Form 10-K, and is
incorporated herein by reference. The required information as to executive officers is set forth in Part I hereof and is
incorporated herein by reference. 
 Item 11.Executive Compensation. The information called for by Item 11 of Form 10-K will be set forth under the caption
Executive Compensation in our definitive proxy statement, to be filed within 120 days after the
end of the fiscal year covered by this annual report on Form 10-K, and is incorporated herein by
reference. 
  Item 12.
    Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters. The information called for by Item 12 of Form 10-K will be set forth under the caption
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters in
our definitive proxy statement, to be filed within 120 days after the end of the fiscal year
covered by this annual report on Form 10-K, and is incorporated herein by reference. 
 Item 13. Certain Relationships and Related Transactions. None. 
 Item 14.Principal Accountant Fees and Services. The information called for by Item 14 of Form 10-K will be set forth under the caption Audit
Fees and All Other Fees in our definitive proxy statement, to be filed within 120 days after the
end of the fiscal year covered by this annual report on Form 10-K, and is incorporated herein by
reference. 
 Item 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) 1. Financial Statements. The following consolidated financial statements are
filed as part of this annual report on Form 10-K: PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Previously Issued Report of Independent Registered Public Accounting Firm
    
    
    F-2
 - 31 -




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PageConsolidated Balance Sheets as of January 1, 2005 and January 3, 2004
    
    
    F-3Consolidated Statements of Income for the Fiscal Years Ended
    
    
    F-4January 1, 2005, January 3, 2004 and December 28, 2002Consolidated Statements of Changes in Shareholders Equity for the Fiscal
    
    
    F-5Years Ended January 1, 2005, January 3, 2004 and December 28, 2002Consolidated Statements of Cash Flows for the Fiscal Years Ended
    
    
    F-6January 1, 2005, January 3, 2004 and December 28, 2002Notes to Consolidated Financial Statements
    
    
    F-7
 2. Financial Statement Schedule. The following consolidated financial statement
schedule is filed as part of this annual report on Form 10-K: PageSchedule II  Valuation and Qualifying Accounts for the Fiscal
Years Ended January 1, 2005, January 3, 2004 and December 28, 2002
    
    
    S-1
 3. Exhibits. The following is a list of exhibits filed as part of this annual report
on Form 10-K. Where so indicated, exhibits which were previously filed are incorporated by
reference. For exhibits incorporated by reference, the location of the exhibit in the previous
filing is indicated in parentheses. 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 January 2, 2003 by and among John D. Whalen, Donald J.
Carrozzino, Frank Wallitsch, Jr. and Nancy S. Hansen and PCC Acquisition Co. (Filed as Exhibit
2.1 to our report on Form 8-K dated January 2, 2003 and filed with the Securities and Exchange
Commission on January 15, 2003 (January 2003 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)
 - 32 -




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ExhibitNumber
    
    Description4.2
    
    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
    
    1986 Stock Option Plan, as amended and restated (Filed as Exhibit 10.2.1 to our annual report
on Form 10-K for the year ended January 4, 1992 (1991 Form 10-K) 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 1991 Form 10-K and incorporated herein by reference)**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 10-K) and incorporated herein by reference)**10.8
    
    Form of Employment Agreement with certain of our employees, 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 10.9, 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)
 - 33 -




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##### Table of Contents



ExhibitNumber
    
    Description10.11
    
    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
    
    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)10.13
    
    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)10.14
    
    Note dated December 20, 2002 from K-Tron America, Inc. in favor of The Bank (Filed as
Exhibit 10.3 to the 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
    
    Loan Modification/Renewal Agreement dated June 9, 2004 between K-Tron America, Inc. and The
Bank (Filed as Exhibit 10.2 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
    
    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)10.20
    
    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)10.21
    
    Note dated June 9, 2004 from K-Tron International, Inc. in favor of The Bank (Filed as
Exhibit 10.1 to the July 2004 Form 10-Q and incorporated herein by reference)21.1
    
    Subsidiaries*23.1
    
    Consent of Grant Thornton LLP*23.2
    
    Consent of KPMG LLP*
 - 34 -




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ExhibitNumber
    
    Description24.1
    
    Power of Attorney (Included on Signature Page)*31.1
    
    Chief Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 193431.2
    
    Chief Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 193432.1
    
    Chief Executive Officer and Chief Financial Officer Certification pursuant to 18
U.S.C. Section 1350
   *
    
    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. - 35 -




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. K-TRON INTERNATIONAL, INC.Date: March 29, 2005
    By

    EDWARD B. CLOUES, IIEdward B. Cloues, IIChief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated. Each person in so signing also makes, constitutes and appoints Edward B. Cloues, II, Chairman
and Chief Executive Officer of K-Tron International, Inc., and Ronald R. Remick, Senior Vice
President, Chief Financial Officer and Treasurer of K-Tron International, Inc., and each of them
acting alone, as his true and lawful attorneys-in-fact, in his name, place and stead, to execute
and cause to be filed with the Securities and Exchange Commission any or all amendments to this
report. Signature
    
    Date
    
    CapacityEDWARD B. CLOUES, II
    
    March 29, 2005
    
    Chief Executive OfficerEdward B. Cloues, II
    
    
    
    (principal executiveofficer) and Chairman ofthe Board of DirectorsRONALD R. REMICK
    
    March 29, 2005
    
    Senior Vice President,Ronald R. Remick
    
    
    
    Chief Financial Officer andTreasurer (principalfinancial officer)ALAN R. SUKONECK
    
    March 29, 2005
    
    Vice President, ChiefAlan R. Sukoneck
    
    
    
    Accounting and TaxOfficer (principalaccounting officer)NORMAN COHEN
    
    March 29, 2005
    
    DirectorNorman CohenROBERT A. ENGEL
    
    March 29, 2005
    
    DirectorRobert A. EngelEDWARD T. HURD
    
    March 29, 2005
    
    DirectorEdward T. HurdRICHARD J. PINOLA
    
    March 29, 2005
    
    DirectorRichard J. Pinola




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Financial Statements For the Fiscal Years Ended January 1, 2005, January 3, 2004 and December 28, 2002 (With Independent Registered Public Accounting Firm Report Thereon)




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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-1Previously Issued Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of January 1, 2005 and January 3, 2004
    
    F-3Consolidated Statements of Income for the Fiscal
Years Ended January 1, 2005, January 3, 2004 and December 28, 2002
    
    F-4Consolidated Statements of Changes in Shareholders Equity for the
Fiscal Years Ended January 1, 2005, January 3, 2004 and December 28, 2002
    
    F-5Consolidated Statements of Cash Flows for the Fiscal
Years Ended January 1, 2005, January 3, 2004 and December 28, 2002
    
    F-6Notes to Consolidated Financial Statements
    
    F-7Schedule:Schedule II  Valuation and Qualifying Accounts for the Fiscal Years Ended January 1, 2005,
January 3, 2004 and December 28, 2002
    
    S-1




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Report of Independent Registered Public Accounting Firm Board of Directors
K-Tron International, Inc. We have audited the accompanying consolidated balance sheets of K-Tron International, Inc. and
Subsidiaries as of January 1, 2005 and January 3, 2004, and the related consolidated statements of
income, changes in shareholders equity and cash flows for the fiscal years ended January 1, 2005
and January 3, 2004. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of K-Tron International, Inc. and
Subsidiaries as of January 1, 2005 and January 3, 2004 and the consolidated results of their
operations and cash flows for the fiscal years ended January 1, 2005 and January 3, 2004, in
conformity with accounting principles generally accepted in the United States of America. We have also audited the accompanying Schedule II of K-Tron International, Inc. and
Subsidiaries as of January 1, 2005 and January 3, 2004 and for the fiscal years ended January 1,
2005 and January 3, 2004. In our opinion, these schedules present fairly, in all material
respects, the information required to be set forth therein. GRANT THORNTON LLP Philadelphia, Pennsylvania
February 4, 2005 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders
K-Tron International, Inc.: We have audited the accompanying consolidated statements of income, changes in shareholders
equity, and cash flows of K-Tron International, Inc. and subsidiaries for the year ended December
28, 2002, as listed in the accompanying index in Item 15(a)1. In connection with our audit of the
fiscal 2002 consolidated financial statements, we also have audited the fiscal 2002 financial
statement schedule as listed in the accompanying index in Item 15(a)2. These consolidated
financial statements and financial statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated financial statements
and financial statement schedule based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the results of operations and the cash flows of K-Tron International, Inc. and
subsidiaries for the year ended December 28, 2002, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related fiscal 2002 financial statement schedule,
when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein. KPMG LLP Philadelphia, Pennsylvania
February 10, 2003 F-2




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES 
 Consolidated Balance Sheets (Dollars in thousands, except share data) January 1,
    
    
    January 3,2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    12,443
    
    
    $
    4,506Accounts receivable, net of allowance for doubtful accounts
of $751 and $820
    
    
    21,234
    
    
    
    19,273Inventories, net
    
    
    15,096
    
    
    
    13,566Deferred income taxes
    
    
    938
    
    
    
    442Prepaid expenses and other current assets
    
    
    1,779
    
    
    
    1,698Total current assets
    
    
    51,490
    
    
    
    39,485Property, plant, and equipment, net of accumulated depreciation
of $35,059 and $31,123
    
    
    25,075
    
    
    
    26,916Patents, net of accumulated amortization of $1,062 and $887
    
    
    1,737
    
    
    
    1,893Goodwill
    
    
    2,053
    
    
    
    2,053Other intangibles, net of accumulated amortization of $360 and $120
    
    
    9,978
    
    
    
    10,218Notes receivable and other assets
    
    
    2,353
    
    
    
    2,111Deferred income taxes
    
    
    330
    
    
    
    405Total assets
    
    $
    93,016
    
    
    $
    83,081Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    4,185
    
    
    $
    3,541Accounts payable
    
    
    6,351
    
    
    
    6,361Accrued expenses and other current liabilities
    
    
    7,782
    
    
    
    6,015Accrued commissions
    
    
    2,169
    
    
    
    1,393Customer advances
    
    
    2,536
    
    
    
    1,757Income taxes payable
    
    
    3,477
    
    
    
    2,503Deferred income taxes
    
    
    1,212
    
    
    
    794Total current liabilities
    
    
    27,712
    
    
    
    22,364Long-term debt, net of current portion
    
    
    18,598
    
    
    
    24,574Deferred income taxes
    
    
    1,147
    
    
    
    947Other non-current liabilities
    
    
    
    
    
    
    82Series 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 4,530,416 and 4,449,928 shares
    
    
    45
    
    
    
    44Paid-in capital
    
    
    18,204
    
    
    
    16,922Retained earnings
    
    
    49,101
    
    
    
    42,491Accumulated other comprehensive income
    
    
    5,723
    
    
    
    3,17173,073
    
    
    
    62,628Treasury stock, 2,002,574 shares, at cost
    
    
    (27,514
    )
    
    
    (27,514
    )Total shareholders
equity
    
    
    45,559
    
    
    
    35,114Total liabilities and shareholders equity
    
    $
    93,016
    
    
    $
    83,081
 See accompanying notes to consolidated financial statements. F-3




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES 
 Consolidated Statements of
Income (Dollars in thousands, except share data) For the Fiscal Year EndedJanuary 1,
    
    
    January 3,
    
    
    December 28,2005
    
    
    2004
    
    
    2002RevenuesEquipment and parts
    
    $
    105,165
    
    
    $
    87,573
    
    
    $
    62,157Services and freight
    
    
    7,329
    
    
    
    7,103
    
    
    
    6,074Total revenues
    
    
    112,494
    
    
    
    94,676
    
    
    
    68,231Cost of revenuesEquipment and parts
    
    
    59,740
    
    
    
    50,166
    
    
    
    33,277Services and freight
    
    
    6,355
    
    
    
    5,737
    
    
    
    6,096Total cost of revenues
    
    
    66,095
    
    
    
    55,903
    
    
    
    39,373Gross profit
    
    
    46,399
    
    
    
    38,773
    
    
    
    28,858Operating expenses:Selling, general, and administrative
    
    
    33,846
    
    
    
    29,245
    
    
    
    21,533Research and development
    
    
    2,669
    
    
    
    2,695
    
    
    
    2,42936,515
    
    
    
    31,940
    
    
    
    23,962Operating income
    
    
    9,884
    
    
    
    6,833
    
    
    
    4,896Interest (expense)
    
    
    (1,316
    )
    
    
    (1,590
    )
    
    
    (500
    )Gain on sale of office building
    
    
    164
    
    
    
    
    
    
    
    Income before income taxes
    
    
    8,732
    
    
    
    5,243
    
    
    
    4,396Income tax provision
    
    
    2,122
    
    
    
    1,520
    
    
    
    1,112Net income
    
    $
    6,610
    
    
    $
    3,723
    
    
    $
    3,284Basic earnings per share
    
    $
    2.65
    
    
    $
    1.53
    
    
    $
    1.35Diluted earnings per share
    
    
    2.53
    
    
    
    1.49
    
    
    
    1.33Weighted average common shares outstanding
    
    
    2,497,000
    
    
    
    2,437,000
    
    
    
    2,432,000Weighted average common and common
equivalents shares outstanding
    
    
    2,613,000
    
    
    
    2,502,000
    
    
    
    2,461,000
 See accompanying notes to consolidated financial statements. F-4




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES 
 Consolidated Statements of Changes in Shareholders Equity Years ended January 1, 2005, January 3, 2004 and December 28, 2002 (Dollars in thousands) AccumulatedotherCommon stock
    
    
    Paid-in
    
    
    Retained
    
    
    comprehensive
    
    
    Treasury stockShares
    
    
    Amount
    
    
    capital
    
    
    earnings
    
    
    income (loss)
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance, December 30, 2001
    
    
    4,432,742
    
    
    $
    44
    
    
    $
    16,697
    
    
    $
    35,484
    
    
    $
    (3,167
    )
    
    
    2,001,250
    
    
    $
    (27,497
    )
    
    $
    21,561Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,284
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,284Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,587
    
    
    
    
    
    
    
    
    
    
    
    3,587Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,871Issuance of stock
    
    
    600
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Purchase of treasury
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,324
    
    
    
    (17
    )
    
    
    (17
    )Balance, December 28, 2002
    
    
    4,433,342
    
    
    
    44
    
    
    
    16,701
    
    
    
    38,768
    
    
    
    420
    
    
    
    2,002,574
    
    
    
    (27,514
    )
    
    
    28,419Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,723
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,723Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,800
    
    
    
    
    
    
    
    
    
    
    
    2,800Unrealized (loss)
on interest rate
swap, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    
    
    
    
    (49
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,474Issuance of stock
    
    
    16,586
    
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221Balance, January 3, 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
    )
    
    $
    45,559
 See accompanying notes to consolidated financial statements. F-5




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES 
 Consolidated Statements of Cash Flows (Dollars in thousands) For the Fiscal Year EndedJanuary 1,
    
    
    January 3,
    
    
    December 28,2005
    
    
    2004
    
    
    2002Operating activities:Net income
    
    $
    6,610
    
    
    $
    3,723
    
    
    $
    3,284Adjustments to reconcile net income to net
cash provided by operating activities:Gain on disposition of assets
    
    
    (164
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    4,156
    
    
    
    2,873
    
    
    
    2,499Deferred income taxes
    
    
    176
    
    
    
    502
    
    
    
    192Changes in assets and liabilities:Accounts receivable, net
    
    
    (1,036
    )
    
    
    440
    
    
    
    1,179Inventories, net
    
    
    (1,014
    )
    
    
    917
    
    
    
    1,765Prepaid expenses and other current assets
    
    
    115
    
    
    
    440
    
    
    
    (309
    )Other assets
    
    
    286
    
    
    
    308
    
    
    
    4Accounts payable
    
    
    501
    
    
    
    (675
    )
    
    
    179Accrued expenses and other current liabilities
    
    
    2,918
    
    
    
    832
    
    
    
    1,156Net cash provided by operating activities
    
    
    12,548
    
    
    
    9,360
    
    
    
    9,949Investing activities:Proceeds from disposition of assets
    
    
    996
    
    
    
    
    
    
    
    Business acquired, net of cash acquired
    
    
    
    
    
    
    (20,276
    )
    
    
    Capital expenditures
    
    
    (1,601
    )
    
    
    (3,311
    )
    
    
    (2,967
    )Other
    
    
    (61
    )
    
    
    (24
    )
    
    
    138Net cash used in investing activities
    
    
    (666
    )
    
    
    (23,611
    )
    
    
    (2,829
    )Financing activities:Net borrowings under notes payable to banks
    
    
    213
    
    
    
    458
    
    
    
    Proceeds from issuance of long-term debt
    
    
    4,000
    
    
    
    20,000
    
    
    
    821Principal payments on long-term debt
    
    
    (9,587
    )
    
    
    (5,079
    )
    
    
    (7,859
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (17
    )Proceeds from issuance of common stock
    
    
    599
    
    
    
    221
    
    
    
    4Net cash (used in) provided by financing activities
    
    
    (4,775
    )
    
    
    15,600
    
    
    
    (7,051
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    830
    
    
    
    463
    
    
    
    411Net increase in cash and cash
equivalents
    
    
    7,937
    
    
    
    1,812
    
    
    
    480Cash and cash equivalents:Beginning of year
    
    
    4,506
    
    
    
    2,694
    
    
    
    2,214End of year
    
    $
    12,443
    
    
    $
    4,506
    
    
    $
    2,694Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    1,364
    
    
    $
    1,578
    
    
    $
    575Income taxes (refund)
    
    
    1,432
    
    
    
    556
    
    
    
    (84
    )Business acquired through seller notes
    
    $
    
    
    
    $
    4,000
    
    
    $
    
 See accompanying notes to consolidated financial statements. F-6




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES 
 Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  (1)
    Nature of OperationsK-Tron International, Inc. and its subsidiaries (K-Tron or the Company) design, engineer,
produce, market, sell and service material handling equipment and systems for a wide variety
of industrial markets. The Company has manufacturing facilities in the United States,
Switzerland, the United Kingdom and Canada, 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. For the years ended January 1, 2005 and
January 3, 2004, these subsidiaries include Pennsylvania Crusher Corporation (Penn
Crusher), which was acquired on January 2, 2003 (see Note 3), and its wholly-owned
subsidiary, Jeffrey Specialty Equipment Corporation (Jeffrey). All material
intercompany accounts and transactions have been eliminated.Certain reclassifications were made to the prior years consolidated financial statements
to conform them to the current period presentation.(b)
    Fiscal YearThe Companys fiscal year is reported on a fifty-two/fifty-three week period. Fiscal
years ended January 1, 2005 (referred to herein as 2004), January 3, 2004 (referred to
herein as 2003) and December 28, 2002 (referred to herein as 2002) include fifty-three
weeks for 2003 and fifty-two weeks for each of 2004 and 2002.(c)
    Cash and Cash EquivalentsAll cash equivalents represent highly liquid, interest-bearing investments purchased with
original maturities of three months or less.(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, 30 to 50
years; automotive equipment, 3 years; machinery and equipment, 3 to 10 years; and
furniture and equipment, including computer equipment and software, 3 to 7 years.
Leasehold improvements are amortized over the shorter of the estimated useful lives of
such assets or the remaining term of the applicable lease. F-7




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  (f)
    PatentsPatents are stated at cost less accumulated amortization. The costs of patents are
amortized on a straight-line basis over the remaining economic lives of the respective
assets, but in no event longer than the 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.In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 addresses financial accounting and reporting for acquired 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 adopted SFAS No. 142 on December 30,
2001. Accordingly, the Company no longer amortizes goodwill, and it amortizes the cost
of other intangibles over their estimated useful lives unless such lives are deemed
indefinite. In accordance with the provisions of SFAS No. 142, the Company performed
impairment tests on goodwill and other intangible assets, which indicated no impairment.
Disclosures required by SFAS No. 142 are presented in Note 6.Prior to December 30, 2001, the Company amortized goodwill on a straight-line basis over
15 to 30 years. Intangible assets which do not have indefinite lives are being amortized
on a straight-line basis over the expected periods of benefit, which range from 17 to 50
years.(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 Recognition The Company recognizes revenue when all of 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.
    Collectability is reasonably assured. Equipment produced by all three of the Companys business lines generally starts with
selection 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. Terms and conditions of sale, including payment terms which
range from 30 to 60 days or more depending on the customer and the geography of the sale,
are generally similar across all business lines. Sales orders may include post-shipment
start-up assistance or training, which is not recorded (Continued) F-8




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002 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 the few cases when customer inspection is required. In those cases,
revenue is not recorded until acceptance is obtained; costs of sale are recorded in the
period in which the related revenue is recognized.  (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 to 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 a foreign currency transaction
loss of approximately $135,000 for 2004, a gain of approximately $227,000 for 2003 and a
loss of approximately $604,000 for 2002. These transaction gains or losses are recorded
within selling, general and administrative expenses of the Consolidated Statements of
Income. Translation gains and losses are recorded as a separate component of
shareholders equity.(l)
    Stock Option AccountingPro Forma InformationAs permitted under SFAS No. 123, Accounting for Stock-Based Compensation, as amended by
SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, an
amendment of FASB Statement No. 123, the Company has elected to continue to account for
compensation cost using the intrinsic value-based method of accounting as prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees. SFAS No. 123 requires the Company to disclose pro forma net income and pro
forma earnings per share amounts, as if compensation expense were recognized for options
granted after fiscal year 1994. Using this approach, net income and earnings per share
would have been reduced to the pro forma amounts indicated in the table: 2004
    
    
    2003
    
    
    2002(In thousands, except per share)Net income  as reported
    
    $
    6,610
    
    
    $
    3,723
    
    
    $
    3,284Deduct stock option employee compensation
expense determined, net of related tax effect
    
    
    (151
    )
    
    
    (201
    )
    
    
    (343
    )Net income  pro forma
    
    
    6,459
    
    
    
    3,522
    
    
    
    2,941Basic earnings per share  as reported
    
    
    2.65
    
    
    
    1.53
    
    
    
    1.35Basic earnings per share  pro forma
    
    
    2.59
    
    
    
    1.45
    
    
    
    1.21Diluted earnings per share  as reported
    
    
    2.53
    
    
    
    1.49
    
    
    
    1.33Diluted earnings per share  pro forma
    
    
    2.47
    
    
    
    1.41
    
    
    
    1.20
 This pro forma impact may not be representative of the effects for future years, and
could increase if additional options are granted and amortized over the vesting period.
For disclosure purposes, the fair value of each stock option granted is estimated on the
date of grant using the Black-Scholes (Continued) F-9




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002 option-pricing model with the following weighted average assumptions: no dividend yield;
expected volatility of 31.45%, 30.80% and 28.04%; risk-free interest rate of 4.15%, 2.76%
and 5.02%; and expected life of 6.00 years, 6.00 years and 6.00 years for grants in 2004,
2003 and 2002. 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.  (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 estimates
and assumptions 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,
inventory reserves, warranty reserves, legal contingencies and estimates of the
realizability of deferred tax assets.(o)
    New Accounting PronouncementsIn December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosure, an amendment of FASB Statement No. 123. SFAS
No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The disclosure
provisions of SFAS No. 148 were adopted by the Company during the quarter ended March 29,
2003. See Note 2(l).In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. This statement
requires all entities to recognize compensation expense for all share-based payments
granted to employees in an amount equal to their fair value. The new standard is
effective for the first period that begins after June 15, 2005, and allows two different methods of transition. Note
2(l) contains pro forma disclosures regarding the effect on net earnings and earnings per
share as if the Company had applied the fair value method of accounting for stock-based
compensation. Depending on the model (Continued) F-10




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002 used to calculate stock-based compensation expense in the future and other requirements
of SFAS No. 123(R), the pro forma disclosure may not be indicative of the stock-based
compensation expense that will be recognized in the Companys future financial
statements. The Company expects to implement the new standard in the third quarter
ending October 1, 2005 and is currently evaluating the new standard and models which may
be used to calculate future stock-based compensation expense. The Company is currently
unable to determine the impact on its results of operations or financial position. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). In general, a variable interest entity is a corporation,
partnership, trust or any other legal structure used for business purposes that either
(a) does not have equity investors with voting rights or (b) has equity investors that do
not provide sufficient financial resources for the entity to support its activities. FIN
46 requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from other
parties. The consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003. The adoption of the provisions of FIN 46
effective February 1, 2003 did not have a material impact on the Companys consolidated
financial statements since the Company did not at that time have, and has not since that
time had, variable interest entities. In December 2003, the FASB issued FIN 46R with
respect to variable interest entities created before January 31, 2003, which, among other
things, revised the implementation date to the first fiscal year or interim period ending
after March 15, 2004, with the exception of Special Purpose Entities (SPE). The
consolidation requirements apply to all SPEs in the first fiscal year or interim period
ending after December 15, 2003. The Companys adoption of the provisions of FIN 46R
effective January 3, 2004 did not have a material impact on the Companys consolidated
financial statements since the Company did not at that time have, and has not since that
time had, any SPEs. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, which amends and clarifies accounting for derivative
instruments embedded in other contracts, and hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The amendments set forth
in SFAS No. 149 improve financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. The provisions of SFAS No. 149 are effective
for contracts entered into or modified after June 30, 2003. The Companys adoption of
SFAS No. 149 did not have a material impact on the financial position or results of
operations of the Company. On May 15, 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as a liability
(or an asset in some circumstances). Many of those instruments were previously classified
as equity. SFAS No. 150 affects the issuers accounting for three types of freestanding
financial instruments: (Continued) F-11




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  
    mandatorily redeemable shares, which the issuing company is obligated to buy
back in exchange for cash or other assets;
    instruments that do or may require the issuer to buy back some of its shares
in exchange for cash or other assets, including put options and forward purchase
contracts; and
    obligations that can be settled with shares, the monetary value of which is
fixed, tied solely or predominantly to a variable such as a market index, or
varies inversely with the value of the issuers shares. SFAS No. 150 does not apply to features embedded in a financial instrument that is not a
derivative in its entirety. Most of the guidance in SFAS No. 150 is effective for all financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Companys adoption of SFAS No.
150 did not have a material effect on the Companys financial position, results of
operations or cash flows. In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No.
43, Chapter 4. SFAS No. 151 clarifies the accounting for abnormal amounts 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. While still evaluating
the impact of this statement, the Company does not currently believe that it will have a
material impact on its consolidated financial statements. In October 2004, the American Jobs Creation Act of 2004 (the Jobs Act), was signed into
law, allowing U.S. companies to repatriate accumulated income from abroad by providing a
one-time deduction of 85% for certain dividends from controlled foreign corporations.
This deduction is subject to certain limitations, and numerous provisions of the Jobs Act
contain uncertainties that require interpretation and evaluation. The Company is
currently evaluating whether, and to what extent, to repatriate accumulated income from
abroad under the provisions of the Jobs Act. Until such evaluation is complete, the
Company will not accrue income taxes on the accumulated undistributed earnings of its
foreign subsidiaries, as these earnings are currently expected to be reinvested
indefinitely. (Continued) F-12




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  (3)
    AcquisitionOn January 2, 2003, the Company acquired all of the stock of privately-held Penn Crusher.
As a result of this purchase, the Company also acquired Jeffrey, a wholly-owned subsidiary of
Penn Crusher. The purchase price for the Penn Crusher stock was $23,500,000 paid at closing, a
post-closing adjustment of $205,000 based on Penn Crushers consolidated stockholders equity
at December 31, 2002 and $1,288,000 in the quarter ended January 3, 2004 in conjunction with
the Companys IRS Code section 338(h)(10) election relating to such acquisition. Of this
amount, $20,993,000 was paid in cash and $4,000,000 was in unsecured promissory notes which
were payable in equal, annual installments on January 2 of 2005, 2006 and 2007. The excess of
the purchase price over the carrying value of the net assets acquired was $16,649,000, which
was allocated as follows: IntangibleUseful Life
    
    2003(In thousands)Inventories
    
    
    
    $
    356Property, plant, and equipment
    
    
    
    
    4,704Patents
    
    10 Years
    
    
    1,251Drawings
    
    25 Years
    
    
    3,550Trademarks and tradenames
    
    Indefinite
    
    
    1,890Customer relationships
    
    50 Years
    
    
    4,898$
    16,649
 The total purchase price of $24,993,000 was allocated as follows: 2003(In thousands)Cash
    
    $
    656Accounts receivable
    
    
    3,183Inventories
    
    
    4,611Other current assets
    
    

    275Property, plant, and equipment
    
    
    8,685Patents
    
    
    1,251Drawings
    
    
    3,550Trademarks and tradenames
    
    
    1,890Customer relationships
    
    
    4,898Accounts payable
    
    
    (1,732
    )Accrued expenses
    
    
    (2,274
    )$
    24,993
 Drawings, trademarks and tradenames and customer relationships are included in other
intangibles in the consolidated balance sheet. (Continued) F-13




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  (4)
    InventoriesInventories consist of the following: 2004
    
    
    2003(In thousands)Components
    
    $
    14,275
    
    
    $
    13,676Work-in-process
    
    
    2,217
    
    
    
    1,635Finished goods
    
    
    79
    
    
    
    62Inventory reserves
    
    
    (1,475
    )
    
    
    (1,807
    )$
    15,096
    
    
    $
    13,566
  (5)
    Property, Plant, and EquipmentProperty, plant, and equipment consists of the following: 2004
    
    
    2003(In thousands)Land
    
    $
    1,595
    
    
    $
    1,492Buildings and improvements
    
    
    22,875
    
    
    
    22,922Automotive equipment
    
    
    427
    
    
    
    363Machinery and equipment
    
    
    14,171
    
    
    
    13,771Furniture and equipment, including computer equipment
and software
    
    
    21,066
    
    
    
    19,49160,134
    
    
    
    58,039Less accumulated depreciation and amortization
    
    
    (35,059
    )
    
    
    (31,123
    )$
    25,075
    
    
    $
    26,916
 Depreciation of property, plant, and equipment for 2004, 2003 and 2002 was $3,644,000,
$2,544,000 and $2,282,000. (Continued) F-14




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  (6)
    Intangible AssetsIntangible assets consist of the following (in thousands): 2004
    
    
    2003Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortized intangible assetsPatents
    
    $
    2,799
    
    
    $
    1,062
    
    
    $
    2,780
    
    
    $
    887Drawings
    
    
    3,550
    
    
    
    213
    
    
    
    3,550
    
    
    
    71Customer relationships
    
    
    4,898
    
    
    
    147
    
    
    
    4,898
    
    
    
    49$
    11,247
    
    
    $
    1,422
    
    
    $
    11,228
    
    
    $
    1,007Unamortized intangible assetsTrademarks and tradenames
    
    $
    1,890
    
    
    
    
    
    
    $
    1,890
 The amortized intangible assets are being amortized on the straight-line basis (half-year
expense in the year of acquisition) over the expected periods of benefit, which range from 17
to 50 years. The weighted average life of the amortizable intangible assets is 37 years. The
amortization expense of intangible assets for 2004 and 2003 was $415,000 and $288,000.
Intangible assets of $11,589,000, including patents, drawings, customer relationships, and
trademarks and tradenames, were acquired in 2003 as part of the acquisition of Penn Crusher.
(See Note 3). Future annual amortization of intangible assets is as follows: Amount(In thousands)Fiscal year:2005
    
    $
    4152006
    
    
    4152007
    
    
    4152008
    
    
    4152009
    
    
    415Thereafter
    
    
    7,750$
    9,825
  (7)
    Accrued WarrantyThe Company offers a one-year product warranty on a majority of its products. Warranty is
accrued as a percentage of sales on a monthly basis and is included in accrued expenses and
other current liabilities. The following is an analysis of accrued warranty for 2004 and
2003. (Continued) F-15




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002 2004
    
    
    2003(In thousands)Beginning balance
    
    $
    967
    
    
    $
    687Accrued warranty of acquired business
    
    
    
    
    
    
    553Accrual of warranty expense
    
    
    2,010
    
    
    
    1,254Warranty costs incurred
    
    
    (1,748
    )
    
    
    (1,580
    )Foreign exchange adjustment
    
    
    28
    
    
    
    53Ending balance
    
    $
    1,257
    
    
    $
    967
  (8)
    Notes Payable to Banks and Other Long-Term DebtTo finance the January 2003 Penn Crusher acquisition described in Note 3, the Company
borrowed $20,000,000 from two U.S. banks and also issued $4,000,000 in unsecured promissory
notes to the former Penn Crusher stockholders.The Company borrowed $5,000,000 from a U.S. bank through its U.S. manufacturing subsidiary.
The loan was combined with an outstanding term loan from that bank to that subsidiary and
resulted in a $7,333,000 term loan. Monthly principal payments of $83,000 plus interest at a
fixed rate of 5.625% on approximately half the loan and at a variable rate of one-month LIBOR
plus 1.85% on the other half (4.27% at January 1, 2005) began in February 2003, with the
final principal payment of approximately $2,416,000 plus interest being due in January 2008.
This loan is secured by substantially all of the assets of the U.S. manufacturing subsidiary
and is guaranteed by K-Tron International, Inc. As of January 1, 2005, there was $5,417,000
outstanding under the term loan facility. The term loan facility requires that the Company
comply with certain covenants relating to the consolidated debt to net worth ratio, minimum
annual debt coverage and minimum net worth.Penn Crusher borrowed $15,000,000 from another U.S. bank consisting of $13,500,000 in term
debt ($10,000,000 with a five-year term and $3,500,000 with a six-year term) and $1,500,000
under a five-year revolving credit facility. Subject to certain conditions, the revolving
credit facility provides for up to $3,500,000 of total availability, including the $1,500,000
originally borrowed thereunder. There was nothing borrowed under the revolving credit
facility as of January 1, 2005. Quarterly term debt principal payments of $400,000 began
March 31, 2003 and increase each year by $62,500 per quarter (or $250,000 per year in the
aggregate) through December 31, 2007, with final quarterly principal payments of $750,000 in
2008. In December 2004, $1,000,000 that was due in 2008 was prepaid on the $3,500,000 term
debt. Interest is based on one- to six-month LIBOR plus 3% to 3.5%, and the 3% to 3.5% was
reduced to 2% to 2.5% in 2004 upon meeting certain financial ratios. As of January 1, 2005,
there was $6,750,000 outstanding on the five-year term loan and $2,300,000 outstanding on the
six-year term loan. In January 2003, Penn Crusher entered into an interest rate swap related
to the entire $10,000,000 five-year term loan ($6,750,000 as of January 1, 2005) such that
interest cannot exceed 6.11% for the full term of the loan, and this limit was reduced to
5.11% in 2004 upon meeting certain financial ratios. The interest rates on the outstanding
balances under the $10,000,000 term loan and the $3,500,000 term loan were 5.11% and 4.53% as
of January 1, 2005. The Penn Crusher debt is guaranteed by Jeffrey and secured by
substantially all of the assets of Penn Crusher and Jeffrey, but it is not guaranteed by the
parent company (K-Tron (Continued) F-16




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  International, Inc.) or any other subsidiary (except by a non-recourse pledge of the stock of
Penn Crusher). The term loans and revolving credit facility require that Penn Crusher comply
with certain covenants relating to tangible net worth, fixed charge coverage ratio and total
debt to EBITDA ratio.In addition, K-Tron International, Inc. issued $4,000,000 of unsecured promissory notes to the
former Penn Crusher stockholders as part of the Penn Crusher purchase price. These notes were
payable in three equal, annual installments on the second, third and fourth anniversaries of
the January 2, 2003 closing date. Interest at 6% per annum was payable quarterly. In June
2004, K-Tron International, Inc. prepaid the $4,000,000 of unsecured promissory notes that
were payable to the former Penn Crusher stockholders. The prepayment of these notes was
financed with a $4,000,000 term loan from a U.S. bank, repayable over 60 months, with 48
monthly principal payments of $50,000 beginning January 2005, 11 monthly principal payments of
$133,333 beginning January 2009 and a final principal payment of $133,337 in December 2009.
Interest is payable monthly at a fixed rate of 5.75% per annum on principal of $1,600,000 and
at a variable rate of one-month LIBOR plus 1.85% (4.27% as of January 1, 2005) on the
remaining principal of $2,400,000. The term loan is guaranteed by the U.S. manufacturing
subsidiary that borrowed the $5,000,000 described in the second paragraph of this Note 8.At January 1, 2005, the Companys Swiss subsidiary had separate credit facilities totaling
12,250,000 Swiss francs (approximately $10,740,000) with three Swiss banks. The Companys real
property in Switzerland is pledged as collateral. As of January 1, 2005, there were no
borrowings under these facilities.In June 1998, the Companys U.S. manufacturing subsidiary, previously referred to, refinanced
its 20-year mortgage with a U.S. bank for $2,700,000 at an annual interest rate of 7.625%. In
July 2002, the annual interest rate was reduced to 6.45% and, beginning August 1, 2002, this
loan became repayable in eighty-three monthly principal and interest payments of $23,784 each,
with a final payment of $1,042,000 plus interest due on August 1, 2009. As of January 1,
2005, the principal amount owed on this borrowing was $1,897,000.Also in June 1998, this same U.S. manufacturing subsidiary entered into a two-year secured
revolving credit facility with the U.S. bank that holds the mortgage. As of January 1, 2005,
there was $2,100,000 borrowed under this credit facility, which has now been extended through
July 2006, and $2,900,000 was available for future borrowings. The annual interest rate as of
January 1, 2005 was 5.0%.Under the terms of the various U.S. credit facilities, fixed assets with a book value of
$13,528,000 and accounts receivable and inventory with a book value of $18,008,000 are pledged
as collateral. In addition, fixed assets with a book value of $6,894,000 are pledged as
collateral under the Swiss credit facilities. (Continued) F-17




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  Long-term debt consists of the following: 2004
    
    
    2003(In thousands)U.S. mortgage
    
    $
    1,897
    
    
    $
    2,052U.S. line of credit
    
    
    2,100
    
    
    
    1,935U.S. term facilities
    
    
    18,467
    
    
    
    18,317Unsecured notes payable
    
    
    
    
    
    
    4,000Swiss facilities
    
    
    
    
    
    
    1,211Other
    
    
    319
    
    
    
    60022,783
    
    
    
    28,115Less current portion
    
    
    (4,185
    )
    
    
    (3,541
    )$
    18,598
    
    
    $
    24,574
  Future annual principal payments required on long-term debt are as follows: Amount(In thousands)Fiscal year:2005
    
    $
    4,1852006
    
    
    5,6402007
    
    
    4,3272008
    
    
    5,8862009
    
    
    2,745Thereafter
    
    
    $
    22,783
  (9)
    Employee Benefit PlansThe Company has a profit-sharing and thrift plan (the K-Tron Plan) for all U.S. employees
except for those of Penn Crusher and its subsidiary and a thrift plan (the Penn Crusher
Plan) for all Penn Crusher and its subsidiarys U.S. employees. The K-Tron Plan requires
employees to have at least six months of continuous service and employment at the end of the
year in order to be eligible to receive a matching contribution under the thrift portion of
the plan. In 2004, 2003 and 2002, all Company contributions to the K-Tron Plan were at the
discretion of the board of directors. The Companys profit-sharing contribution, if any, vests
over a five-year period. Employees may voluntarily participate in the thrift portion of the
K-Tron Plan and authorize payroll deductions ranging from 1% to 50% of their compensation.
Related matching Company contributions are vested immediately. The board of directors
authorized matching contributions of 100% of the first 6% of participants compensation for
the K-Tron Plan employees for
each of 2004, 2003 and 2002. The board of directors did not authorize any 2004, 2003 or 2002
contribution to the profit-sharing portion of the K-Tron Plan. (Continued) F-18




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  For 2004, 2003 and 2002, the Penn Crusher Plan covered employees who worked for Penn Crusher
or its subsidiary for at least one year and who voluntarily chose to participate in the Plan,
and it authorized payroll deductions ranging from 1% to 50% of compensation with matching
monthly contributions of 100% of the first 4% of participants compensation. These
contributions were approved each year, in advance, by Penn Crushers board of directors.Substantially all foreign employees participated in defined contribution group pension plans
for 2004, 2003 and 2002. Contributions were paid by the employee and employer at percentages
that varied according to age and other factors.The Company expense associated with the thrift plans for 2004, 2003 and 2002 was $657,000,
$668,000 and $375,000. The foreign pension expense for 2004, 2003 and 2002 was $1,077,000,
$941,000 and $776,000.(10)
    Shareholders EquityIn 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 common stock which is payable
in common stock or any subdivisions or combinations with respect to the outstanding shares of
common stock. At the same time as the Series B Preferred Shares were established, the number
of Series A Junior Participating Preferred Shares were reduced from 50,000 to 0 and returned
to authorized but unissued shares of the Companys preferred stock. The board of directors had
not determined the rights on the remaining 950,000 shares of the authorized preferred stock as
of January 1, 2005.The Company had a stock option plan for nonemployee directors (the 1988 plan) which expired
in November 1998, and the last outstanding option grant under that plan was exercised in 2004.
The plan provided that each eligible director was granted a single option to purchase 10,000
shares of the Companys common stock at a price equal to the fair market value of the stock at
the date of grant. The aggregate number of shares which could be issued under the plan was
100,000. These options had a term of ten years and became exercisable in four equal annual
installments beginning on the date of the grant.The Companys 1986 Stock Option Plan, as amended (the 1986 plan), expired in January 1996,
but some option grants under the 1986 plan remained outstanding as of the end of 2004. Key
employees of the Company could be granted options to purchase shares of the Companys common
stock. These options could be either incentive stock options or nonqualified stock options.
The Stock Option Committee under the 1986 plan determined the term of each option, but no
option could be exercisable more than ten years from the date the option was granted. The
Stock Option Committee also determined the option exercise price per share.In 1996, the Company adopted the 1996 Equity Compensation Plan (the 1996 plan), with
features similar to the 1986 plan, except that the maximum number of shares that may be issued
was 450,000. The 1996
plan also permits the awarding of restricted stock grants. The 1996 plan was amended in 1998,
increasing the maximum number of shares that may be issued to 600,000 and allowing nonemployee
directors to (Continued) F-19




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  receive grants thereunder at fair market value. The 1996 plan is administered by
a Stock Option Committee selected by the board of directors.With respect to incentive stock options, the exercise price must at least equal the fair
market value of a share of common stock as of the date the option was granted.A summary of the Companys stock option and restricted stock grant activity for the plans
referred to above for the three fiscal years ended January 1, 2005 is as follows: Weightedaverage optionOutstanding
    
    
    exercise price
    
    
    Availableshares
    
    
    per share
    
    
    sharesBalance, December 30, 2001
    
    
    446,201
    
    
    $
    14.02
    
    
    
    181,335Options granted
    
    
    4,000
    
    
    
    13.75
    
    
    
    (4,000
    )Canceled
    
    
    (23,834
    )
    
    
    14.28
    
    
    
    13,834Exercised
    
    
    (600
    )
    
    
    6.25
    
    
    
    Balance, December 28, 2002
    
    
    425,767
    
    
    
    14.01
    
    
    
    191,169Options granted
    
    
    4,000
    
    
    
    15.37
    
    
    
    (4,000
    )Canceled
    
    
    (5,750
    )
    
    
    14.01
    
    
    
    5,750Exercised
    
    
    (21,000
    )
    
    
    13.51
    
    
    
    Balance, January 3, 2004
    
    
    403,017
    
    
    
    14.05
    
    
    
    192,919Options granted
    
    
    4,000
    
    
    
    21.39
    
    
    
    (4,000
    )Restricted stock granted
    
    
    24,000
    
    
    
    
    
    
    
    (24,000
    )Exercised
    
    
    (81,850
    )
    
    
    14.01
    
    
    
    Balance, January 1, 2005
    
    
    349,167
    
    
    
    14.66
    
    
    
    164,919
  During 2004, the Company issued 24,000 shares of restricted common stock under the 1996 plan.
The restricted stock vests on the four-year anniversary of the date of grant. Compensation
expense related to the restricted stock is recognized ratably over the four years based on the
fair value of the shares at date of grant, which was $21.53 per share.As of January 1, 2005, seven employees held options under the 1986 plan for an aggregate of
11,000 shares at an exercise price per share of $6.25. These options expire in 2005. As of
January 1, 2005, twenty-eight employees and four nonemployee directors held options under the
1996 plan for an aggregate of 338,167 shares at exercise prices per share ranging from $12.20
to $21.39 with a weighted average exercise price per share of $14.93. These options expire at
varying times through 2014. Of the 349,167 shares subject to outstanding options as of
January 1, 2005, 213,417 shares were exercisable with a weighted average exercise price per
share of $14.85.(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 and which replaced an earlier plan that was adopted on October
3, 1991 and expired
on October 14, 2001. The new 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 (Continued) F-20




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  of business on October 29, 2001, and thereafter each share of the
Companys common stock will have a Right associated with it. The new 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: 2004
    
    
    2003
    
    
    2002(In thousands)United States
    
    $
    4,832
    
    
    $
    2,581
    
    
    $
    1,143Foreign
    
    
    3,900
    
    
    
    2,662
    
    
    
    3,253Income before income tax
    
    $
    8,732
    
    
    $
    5,243
    
    
    $
    4,396
  The income tax provision consists of the following: 2004
    
    
    2003
    
    
    2002(In thousands)Current:Federal and state
    
    $
    1,085
    
    
    $
    476
    
    
    $
    204Foreign
    
    
    861
    
    
    
    542
    
    
    
    716Total current
    
    
    1,946
    
    
    
    1,018
    
    
    
    920Deferred:Federal and state
    
    
    211
    
    
    
    502
    
    
    
    192Foreign
    
    
    (35
    )
    
    
    
    
    
    
    Total deferred
    
    
    176
    
    
    
    502
    
    
    
    192Total income tax provision
    
    $
    2,122
    
    
    $
    1,520
    
    
    $
    1,112
 (Continued) F-21




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  Significant components of the deferred tax assets and liabilities at January 1, 2005 and
January 3, 2004 are as follows: 2004
    
    
    2003(In thousands)Deferred tax assetsFixed assets and intangibles
    
    $
    116
    
    
    $
    193Accrued liabilities
    
    
    841
    
    
    
    986Net operating loss carryforwards
    
    
    648
    
    
    
    926Inventory basis differences
    
    
    744
    
    
    
    173Interest rate swap
    
    
    12
    
    
    
    33Other
    
    
    120
    
    
    
    112,481
    
    
    
    2,322Valuation allowance
    
    
    (1,261
    )
    
    
    (1,543
    )Total assets
    
    
    1,220
    
    
    
    779Deferred tax liabilitiesDepreciation
    
    
    (2,087
    )
    
    
    (1,604
    )Other
    
    
    (224
    )
    
    
    (69
    )Total liabilities
    
    
    (2,311
    )
    
    
    (1,673
    )Net deferred tax liability
    
    $
    (1,091
    )
    
    $
    (894
    )
  Foreign and U.S. state operating loss carryforwards as of January 1, 2005 were $424,000 and
$6,378,000. Foreign operating losses have an unlimited carryforward period. U.S. state
operating losses are available through 2010.A valuation allowance is provided when it is more likely than not that some portion or all of
the deferred tax assets 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. (Continued) F-22




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  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: 2004
    
    
    2003
    
    
    2002(In thousands)Income tax provision on income before
income tax at statutory federal
income tax rates
    
    $
    2,969
    
    
    $
    1,783
    
    
    $
    1,496Foreign tax rate differential
    
    
    (294
    )
    
    
    (303
    )
    
    
    (210
    )State tax net of federal benefit
    
    
    186
    
    
    
    177
    
    
    
    61U.S. and foreign permanent tax differences
    
    
    6
    
    
    
    (28
    )
    
    
    (44
    )Changes in valuation allowance
    
    
    (256
    )
    
    
    (49
    )
    
    
    (206
    )Decrease in tax reserve, net
    
    
    (489
    )
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    (60
    )
    
    
    15Income tax provision
    
    $
    2,122
    
    
    $
    1,520
    
    
    $
    1,112
  The Company reduced its tax reserve in 2004 following the settlement and closure of a tax
audit in Germany.(13)
    Related Party TransactionsDuring 2004, 2003 and 2002, the Company sold equipment to two entities in which it has a cost
method investment. Sales during 2004, 2003 and 2002 were $1,581,000, $824,000 and $512,000,
with $457,000, $427,000 and $190,000 in accounts receivable at January 1, 2005, January 3,
2004 and December 28, 2002.(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. (Continued) F-23




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K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  The Companys Basic and Diluted Earnings per Share are calculated as follows: Net incomeavailableto common
    
    
    
    
    
    
    Earningsshareholders
    
    
    Shares
    
    
    per share2004:Basic
    
    $
    6,610,000
    
    
    
    2,497,000
    
    
    $
    2.65Common share equivalent
of options issued
    
    
    
    
    
    
    116,000
    
    
    
    (0.12
    )Diluted
    
    $
    6,610,000
    
    
    
    2,613,000
    
    
    $
    2.532003:Basic
    
    $
    3,723,000
    
    
    
    2,437,000
    
    
    $
    1.53Common share equivalent
of options issued
    
    
    
    
    
    
    65,000
    
    
    
    (0.04
    )Diluted
    
    $
    3,723,000
    
    
    
    2,502,000
    
    
    $
    1.492002:Basic
    
    $
    3,284,000
    
    
    
    2,432,000
    
    
    $
    1.35Common share equivalent
of options issued
    
    
    
    
    
    
    29,000
    
    
    
    (0.02
    )Diluted
    
    $
    3,284,000
    
    
    
    2,461,000
    
    
    $
    1.33
  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 noncancelable
leases. These leases expire in periods ranging from one to eight years and, in certain
instances, provide for purchase options. (Continued) F-24




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  As of January 1, 2005, future minimum payments under operating leases having noncancelable
terms in excess of one year are summarized below (in thousands): Operatingleases2005
    
    $
    1,2012006
    
    
    9282007
    
    
    7302008
    
    
    5092009
    
    
    471Thereafter
    
    
    156$
    3,995
  Rent expense for 2004, 2003 and 2002 was $754,000, $786,000 and $427,000.The Company has employment contracts with seven executives. Except in one case when two years
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 January 1, 2005, the estimated future obligation under these
contracts if all of them were to be terminated is $2,016,000.The Company in the normal course of business has commitments, lawsuits, contingent liabilities
and claims. However, 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). (Continued) F-25




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  For years 2004, 2003 and 2002, the following table sets forth the Companys geographic
information: Americas
    
    
    EMEA/Asia
    
    
    Eliminations
    
    
    Consolidated(In thousands)2004: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
    
    
    2,540
    
    
    
    1,616
    
    
    
    
    
    
    
    4,156Total assets
    
    
    49,744
    
    
    
    43,272
    
    
    
    
    
    
    
    93,0162003:Revenues:Sales to unaffiliated customers
    
    $
    55,730
    
    
    $
    38,946
    
    
    
    
    
    
    $
    94,676Sales to affiliates
    
    
    2,518
    
    
    
    2,734
    
    
    $
    (5,252
    )
    
    
    Total sales
    
    $
    58,248
    
    
    $
    41,680
    
    
    $
    (5,252
    )
    
    $
    94,676Operating income
    
    $
    4,577
    
    
    $
    2,211
    
    
    $
    45
    
    
    $
    6,833Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,590
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,243Capital expenditures
    
    $
    1,645
    
    
    $
    1,666
    
    
    
    
    
    
    $
    3,311Depreciation and amortization expense
    
    
    1,621
    
    
    
    1,252
    
    
    
    
    
    
    
    2,873Total assets
    
    
    46,719
    
    
    
    36,362
    
    
    
    
    
    
    
    83,0812002:Revenues:Sales to unaffiliated customers
    
    $
    28,727
    
    
    $
    39,504
    
    
    
    
    
    
    $
    68,231Sales to affiliates
    
    
    3,374
    
    
    
    2,061
    
    
    $
    (5,435
    )
    
    
    Total sales
    
    $
    32,101
    
    
    $
    41,565
    
    
    $
    (5,435
    )
    
    $
    68,231Operating income
    
    $
    1,926
    
    
    $
    2,906
    
    
    $
    64
    
    
    $
    4,896Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,396Capital expenditures
    
    $
    1,995
    
    
    $
    972
    
    
    
    
    
    
    $
    2,967Depreciation and amortization expense
    
    
    1,248
    
    
    
    1,251
    
    
    
    
    
    
    
    2,499Total assets
    
    
    18,542
    
    
    
    31,917
    
    
    
    
    
    
    
    50,459
 (Continued) F-26




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  For years 2004, 2003 and 2002, the following table sets forth revenues from external
customers: 2004
    
    
    2003
    
    
    2002(In thousands)AmericasU.S.
    
    $
    54,064
    
    
    $
    48,802
    
    
    $
    24,889All others
    
    
    9,858
    
    
    
    6,928
    
    
    
    3,838Total
    
    
    63,922
    
    
    
    55,730
    
    
    
    28,727EMEA/AsiaGermany
    
    
    8,003
    
    
    
    6,005
    
    
    
    7,599All others
    
    
    40,569
    
    
    
    32,941
    
    
    
    31,905Total
    
    
    48,572
    
    
    
    38,946
    
    
    
    39,504$
    112,494
    
    
    $
    94,676
    
    
    $
    68,231
 (Continued) F-27




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements January 1, 2005, January 3, 2004 and December 28, 2002  (17)
    Quarterly Financial Information (Unaudited)The following table summarizes unaudited quarterly financial data for 2004 and 2003 (in
thousands, except per share data): 2004 by quarterFirst
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    26,321
    
    
    $
    27,062
    
    
    $
    28,644
    
    
    $
    30,467Gross profit
    
    
    11,184
    
    
    
    11,350
    
    
    
    11,304
    
    
    
    12,561Net income
    
    
    1,422
    
    
    
    1,389
    
    
    
    1,562
    
    
    
    2,237Basic earnings
per share
    
    
    0.58
    
    
    
    0.56
    
    
    
    0.62
    
    
    
    0.88Diluted earnings
per share
    
    
    0.55
    
    
    
    0.53
    
    
    
    0.59
    
    
    
    0.84
 2003 by quarterFirst
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    23,398
    
    
    $
    22,661
    
    
    $
    22,158
    
    
    $
    26,459Gross profit
    
    
    9,441
    
    
    
    8,998
    
    
    
    9,170
    
    
    
    11,164Net income
    
    
    835
    
    
    
    865
    
    
    
    910
    
    
    
    1,113Basic earnings
per share
    
    
    0.34
    
    
    
    0.36
    
    
    
    0.37
    
    
    
    0.46Diluted earnings
per share
    
    
    0.34
    
    
    
    0.35
    
    
    
    0.36
    
    
    
    0.44
 F-28




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##### Table of Contents



K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES Financial Statement Schedule




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##### Table of Contents



Schedule II K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES 
 Valuation and Qualifying Accounts Year ended January 1, 2005, January 3, 2004 and December 28, 2002 Balance at
    
    
    Additions
    
    
    
    
    
    
    Balancebeginning
    
    
    charged
    
    
    
    
    
    
    at endof period
    
    
    to income
    
    
    Deductions(1)
    
    
    of periodFiscal year ended
January 1, 2005Allowance for doubtful
accounts
    
    $
    820,000
    
    
    $
    134,000
    
    
    $
    203,000
    
    
    $
    751,000Fiscal year ended
January 3, 2004Allowance for doubtful
accounts
    
    $
    716,000
    
    
    $
    285,000
    (2)
    
    $
    181,000
    
    
    $
    820,000Fiscal year ended
December 28, 2002:Allowance for doubtful
accounts
    
    $
    687,000
    
    
    $
    137,000
    
    
    $
    108,000
    
    
    $
    716,000
   (1)
    
    Accounts written off less recoveries, net of foreign exchange translation adjustment.(2)
    
    $162,000 charged to income plus $123,000 allowance for doubtful accounts of acquired business. See accompanying reports of independent registered public accounting firms. S-1




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##### Table of Contents



EXHIBIT INDEX 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 January 2, 2003 by and among John D. Whalen, Donald J.
Carrozzino, Frank Wallitsch, Jr. and Nancy S. Hansen and PCC Acquisition Co. (Filed as Exhibit
2.1 to our report on Form 8-K dated January 2, 2003 and filed with the Securities and Exchange
Commission on January 15, 2003 (January 2003 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
    
    1986 Stock Option Plan, as amended and restated (Filed as Exhibit 10.2.1 to our annual report
on Form 10-K for the year ended January 4, 1992 (1991 Form 10-K) 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 1991 Form 10-K and incorporated herein by reference)**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)**




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##### Table of Contents



ExhibitNumber
    
    Description10.6
    
    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 10-K) and incorporated herein by reference)**10.8
    
    Form of Employment Agreement with certain of our employees, 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 10.9, 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
    
    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)10.13
    
    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)10.14
    
    Note dated December 20, 2002 from K-Tron America, Inc. in favor of The Bank (Filed as
Exhibit 10.3 to the 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)




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##### Table of Contents



ExhibitNumber
    
    Description10.16
    
    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
    
    Loan Modification/Renewal Agreement dated June 9, 2004 between K-Tron America, Inc. and The
Bank (Filed as Exhibit 10.2 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
    
    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)10.20
    
    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)10.21
    
    Note dated June 9, 2004 from K-Tron International, Inc. in favor of The Bank (Filed as
Exhibit 10.1 to the July 2004 Form 10-Q and incorporated herein by reference)21.1
    
    Subsidiaries*23.1
    
    Consent of Grant Thornton LLP*23.2
    
    Consent of KPMG LLP*24.1
    
    Power of Attorney (Included on Signature Page)*31.1
    
    Chief Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 193431.2
    
    Chief Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 193432.1
    
    Chief Executive Officer and Chief Financial Officer Certification pursuant to 18
U.S.C. Section 1350
   *
    Filed herewith**
    Management contract or compensatory plan or arrangement required to be filed or incorporated
as an exhibit