March 9, 2008 - K-Tron International Inc. (KTII-NASDAQ) helps keep manufacturers well fed. The company makes gravimetric and volumetric feeders that let manufacturers control the flow of solid bulk and liquid materials during manufacturing processes. It also makes pneumatic conveying systems, including vacuum and pressure systems that precisely control the flow of ingredients used by the pharmaceutical, food, chemical, and plastics industries. K-Tron also makes size reduction equipment used to crush coal and wood products. Subsidiary K-Tron Electronics produces electronic assemblies and controller hardware.

Last week the company said its fourth-quarter profit climbed 40 percent, helped by stronger international sales and bookings as well as contributions from an acquisition. Earnings rose to $6.3 million, or $2.18 per share, compared with $4.5 million, or $1.57 per share, in the prior-year period. Analysts had predicted $1.71 for the quarter. Quarterly sales grew 33 percent to $59.1 million from $44.4 million a year earlier. Annual net income soared 65 percent to $21.3 million, or $7.49 per share, from $12.9 million, or $4.59 per share. Full-year revenue increased to $201.7 million, up 36 percent from $148.1 million in the previous year. Results benefited from K-Tron's September acquisition of Rader Cos., as well as the weaker dollar's positive effect on international sales.

"Bookings in the fourth quarter were strong, especially in our process group in Europe, the Middle East and Asia," Chairman and Chief Executive Edward B. Cloues II said in a statement. This is the little company that can.

There are only 2.707 million shares outstanding with 18.4% of the stock held by officers and directors. Three institutions own 24.4% of it. That only leaves about 1.5 million shares outstanding to trade. The average daily volume over the last month was 7000 shares. Of course, this is a 3 edged sword: small stocks with great earnings can go up very quickly; small stocks are harder to buy without moving the stock price; small stocks are very difficult to sell when news is bad since there is no active market in them.

K-Tron has several things going for it. Backlog ran to $70 million in the last quarter of 2007. This is for a company that had $201 million in total revenues for the year. That pretty much cinches a good year for 2008. Acquisitions are paying off with new niches and more of a global reach. The coal mining industry is strong right now as it's seen as a good alternative to oil or gas when applicable. KTII will see positive results from its recent acquisition of Gundlach Equipment which offers size-reduction and related equipment and occupies a lead position in serving the coal industry. Two other areas opening up are pneumatic conveying and paper and pulp industries as the company integrates its acquisitions of Premier Pneumatics and Rader Companies.

More numbers: Look for Earnings of $7.20 this year and $7.85 next year. Over the next 5 years, analysts predict growth in eps will be 17% a year, on average. They see revenues moving ahead by 13.5% a year, on average. There is no dividend. Debt is 32% of capital. The P/E is 16 which seems relatively benign. But this is a stock that had an average annual P/E ratio between 6.3 and 7.3 from 1996 to 2000. In 2001, earnings took a hit and the P/E was at 31 for the year. Then it settled back to a range of 8.7 to 11.7 for the following years. So 16 is high for this particular stock. Return on Equity was an eye catching 30% last year with expectations of 23% this year.

There's lots of good in this stock. The price reflects that. Investors have been buying this earnings stream since 2001 when it traded at $9 a share. It's had a great run and will most likely see continued success. But don't expect the same performance over the next 7 years, unless the company surprises everyone with better numbers, as it just did for the fourth quarter of last year.

- Company Web site: www.ktron.com

- Ted Allrich