UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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 1934
	For the fiscal year ended January 1, 2005

OR

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ________ to ________

Commission file number 0-9576

K-TRON INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (856) 589-0500

Securities registered pursuant to Section 12(b) of the Act:

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

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.

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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.

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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.

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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.

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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.

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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.

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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

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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:

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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

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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.

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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.

     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.

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     We have not paid any cash dividends on our shares of Common Stock during the periods presented.

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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.

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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.

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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

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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

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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.

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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.

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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: