10-K 1 fye2001_10k.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended: January 31, 2001 Commission file number 001-07763 MET-PRO CORPORATION (Exact name of registrant as specified in its charter) Delaware 23-1683282 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 160 Cassell Road, P. O. Box 144 Harleysville, Pennsylvania 19438 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 723-6751 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ---------------- Common Stock, par value $0.10 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.10 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 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 X No --- --- 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 definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. ---- The number of shares outstanding of the Registrant's Common Stock was 6,099,364 as of April 30, 2001. The aggregate market value of the voting stock held by non-affiliates of the Registrant was $77,156,955 as of April 30, 2001. DOCUMENTS INCORPORATED BY REFERENCE Form 10-K Part Number ----------- Portions of Registrant's Definitive Proxy Statement filed pursuant to Regulation 14A in connection with Registrant's Annual Meeting of Stockholders to be held on June 20, 2001...................... III ================================================================================
INDEX PART I Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 7 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . 8 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 10 Item 7A. Quantitative and Qualitative Disclosure About Market Risks. . . . . . . . . . . . . . . . . . . . . . . 13 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . 32 PART III Item 10. Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . . . 32 Item 13. Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 33 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-------------------------------------------------------------------------------- FACTORS THAT MAY AFFECT FUTURE RESULTS Met-Pro's prospects are subject to certain uncertainties and risks. This Annual Report on Form 10-K also contains certain forward-looking statements within the meaning of the Federal securities laws. Met-Pro's future results may differ materially from its current results and actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors. Readers should pay particular attention to the considerations described in the section of this report entitled "Management's Discussion and Analysis of Financial Condition and Results of Operation - Factors that May Affect Future Results." Readers should also carefully review the risk factors described in the other documents Met-Pro files from time to time with the Securities and Exchange Commission. -------------------------------------------------------------------------------- PART I Item 1. Business: General: Met-Pro Corporation ("Met-Pro" or the "Company"), incorporated in the State of Delaware on March 30, 1966, manufactures and sells product recovery/pollution control equipment for purification of air and liquids, and fluid handling equipment for corrosive, abrasive and high temperature liquids. The Company, which operates through ten divisions and three wholly-owned subsidiaries, markets and sells its products through its own personnel, distributors, representatives and agents based on the division or subsidiary involved. The Company's products are sold worldwide primarily in industrial markets. The Company was taken public on April 6, 1967 and traded on the American Stock Exchange from July 25, 1978 until June 18, 1998, at which time the Company's Common Stock began trading on the New York Stock Exchange. The Company's principal executive offices are located at 160 Cassell Road, Harleysville, Pennsylvania and the telephone number at that location is (215) 723-6751. Except where otherwise indicated by the context used herein, references to the "Company" means Met-Pro Corporation, its divisions and its wholly-owned subsidiaries. Products, Services and Markets: The Company operates in two segments, the Product Recovery/Pollution Control Equipment Segment and the Fluid Handling Equipment Segment. To better reflect the significant contribution that the Flex-Kleen Division has made to our sales, we have changed the name of the former "Pollution Control and Allied Equipment" segment of our business to "Product Recovery/Pollution Control Equipment". For financial information concerning the Company's industry segments, reference is made to "Consolidated Business Segment Data" contained within the Company's Consolidated Financial Statements that form a part of this Report on Form 10-K. A narrative description of the Company's operations within these two segments is as follows: Product Recovery/Pollution Control Equipment Segment This segment is composed of the following six divisions and subsidiaries of the Company: Flex-Kleen Division; Stiles-Kem Division; Sethco Division; Strobic Air Corporation; Duall Division; and Systems Division. Flex-Kleen Division, located in Itasca, Illinois, operating with the Company's wholly-owned subsidiary, Flex-Kleen Canada Inc., is a leading supplier of product recovery and dry particulate collectors that are used primarily in the process of manufacturing food products and pharmaceuticals. While some of Flex-Kleen's products are also used for nuisance collection of particulates to conform to environmental concerns, the overwhelming portion of its sales activity is for product collection and is process driven. At present, Flex-Kleen's products are sold through 72 manufacturer's representatives in 32 offices located across the United States and 12 manufacturer's representatives located in four offices throughout Canada. Stiles-Kem Division, located in Waukegan, Illinois, is a leading manufacturer of safe and reliable water treatment compounds which have been used in the public drinking water industry for more than 46 years. Stiles-Kem products are designed to eliminate problems created by high iron and manganese levels in municipal water systems and to reduce scaling and general corrosion tendencies within water distribution piping systems. These food grade products are NSF/ANSI approved for health considerations in municipal drinking water supplies and are certified to meet existing state and federal guidelines. The products are sold both directly through regional sales representatives and through a network of distributors located in the United States and Canada. Sethco Division, located on Long Island, New York, designs, manufactures and sells corrosion resistant pumps, filter chambers and filter systems with flow rates to about 200 gallons per minute. These products are used in wastewater treatment systems and fume scrubbers for pollution control. They are also widely used in the metal finishing, electronics and chemical processing industries. Sethco's products are sold through a network of non-exclusive distributors, as well as to catalog houses and original equipment manufacturers. Our products are sold internationally through Met-Pro's International Division and our Mefiag B.V. subsidiary. Strobic Air Corporation, located in Harleysville, Pennsylvania, designs, manufactures and holds patents on specialty blowers and industrial fans for industrial applications including university laboratories, hospitals, semiconductor manufacturers, government laboratories, pharmaceutical, chemical, petrochemical plants and other testing laboratory facilities. Sales, engineering and customer service are provided through a network of 225 manufacturer's representatives located throughout the United States and Canada. 1 Duall Division, located in Owosso, Michigan, is a leading manufacturer of industrial and municipal air and water quality control systems. The Division's major products include odor control systems, fume and emergency gas scrubbers, particulate collectors, air strippers, ducting and exhaust fans. All equipment is fabricated from corrosion resistant materials. Duall's support services include pilot studies, engineering, installation and performance testing. Duall products are sold both domestically and internationally to the metal finishing, wastewater treatment, composting, food processing, chemical, printed circuit, semiconductor, steel pickling, pharmaceutical, battery manufacturing and groundwater remediation markets. At present, 90 factory trained manufacturer's representatives sell Duall's engineered systems to industrial and municipal clients. Systems Division, located in West Chester, Pennsylvania, is a leader in the supply of custom designed and manufactured air and water pollution control equipment. Systems Division's air pollution control capabilities include: carbon adsorption systems for the concentration and recovery of volatile solvents, thermal and catalytic oxidation systems and the supply of abatement catalysts. These systems are custom engineered for clients in the automotive, aerospace and furniture industries. Additional applications include painting, pharmaceutical, chemical, electronics, food processing and printing industries. Systems Division also offers a full range of catalyst products for the oxidation of pollutants, which include catalysts for the oxidation of chlorinated solvents, low temperature oxidation catalysts and a catalyst specially designed for regenerative catalytic oxidizer applications. Fluid Handling Equipment Segment This segment is composed of the following six divisions and subsidiaries of the Company: Mefiag; Keystone Filter Division; Dean Pump Division; and Fybroc Division. Mefiag(R), operating with the Company's wholly-owned subsidiary, Mefiag B.V., located in Heerenveen, Holland, and the Mefiag Division, located in Harleysville, Pennsylvania, designs and manufactures filter systems utilizing horizontal disc technology for superior performance, particularly in high efficiency and high-flow applications. Mefiag(R) filters are used in tough, corrosive applications in the plating, metal finishing and printing industries. Worldwide sales are accomplished through qualified, market-based distributors and original equipment manufacturers located throughout Europe, United States, Asia and other major markets throughout the world. Keystone Filter Division, located in Hatfield, Pennsylvania, is an established custom pleater and cartridge manufacturer in the United States. The Division provides custom designed and engineered products which are currently used in a diversity of applications such as the nuclear power industry, components in medical equipment and in indoor air quality equipment. Keystone Filter also provides standard filters for water purification and industrial applications. Sales and customer service are provided through a non-exclusive distributor network. Dean Pump Division, located in Indianapolis, Indiana, designs and manufactures high quality pumps that handle a broad range of industrial applications. Users such as the chemical, petrochemical, refinery, pharmaceutical, plastics, pulp and paper, and food processing industries choose Dean Pump products particularly for their high temperature applications. The Division's products are sold worldwide through an extensive network of distributors. Fybroc Division, located in Telford, Pennsylvania, is a world leader in the manufacture of fiberglass reinforced plastic ("FRP") centrifugal pumps. These pumps provide excellent corrosion resistance for tough applications including pumping of acids, brines, caustics, bleaches, seawater and a wide variety of waste liquids. Fybroc's second generation epoxy resin, EY-2, allows the Company to offer the first corrosion resistant and high temperature FRP thermoset pumps suitable for solvent applications. The EY-2 material also expands Fybroc's pumping capabilities to include certain acid applications such as high concentration sulfuric acid (75-98%). During the year, Fybroc continued to expand the FRP centrifugal magnetic drive pump line which now offers two sizes available in both our standard vinyl ester resin and our EY-2 epoxy resin. Our ability to manufacture these pumps in EY-2 makes them the only FRP thermoset centrifugal magnetic drive pumps capable of handling corrosive liquids from acids to solvents. Fybroc pumps are sold to many markets including the chemical, steel, pulp and paper, electric utility, aquaculture, aquarium, and industrial and municipal waste treatment industries. Fybroc's EY-2 material is expected to allow it to enter new markets such as pharmaceutical, petrochemical, fertilizer and pesticides. A worldwide distributor network provides sales, engineering and customer service. 2 The following table sets forth certain data concerning total net sales to customers by geographic area in the past three years: Percentage of Net Sales Fiscal Year Ended January 31, 2001 2000 1999 ---------------------------------------------------- United States 79.5% 83.7% 83.4% Foreign 20.5% 16.3% 16.6% ---------------------------------------------------- Net Sales 100.0% 100.0% 100.0% ==================================================== Customers: During each of the past three fiscal years, no single customer accounted for 10% or more of the total net sales of the Company in any year. The Company does not believe that it would be materially adversely affected by the loss of any single customer. Seasonality: The Company does not consider its business to be seasonal in nature. Competition: The Company experiences competition from a variety of sources with respect to virtually all of its products. The Company knows of no single entity that competes with it across the full range of its products and systems. The lines of business in which the Company is engaged are highly competitive. Competition in the markets served is based on a number of considerations, which may include price, technology, applications experience, know-how, reputation, product warranties, service and distribution. With respect to the Fluid Handling Equipment segment, specifically the pump manufacturing operations, several companies, including Ingersoll-Dresser Pumps Co. (a subsidiary of Flowserve Corporation), Goulds Industrial Pumps, Inc. (a subsidiary of ITT Industries), and Durco Pumps, Inc. (a subsidiary of Flowserve Corporation), dominate the industry with several smaller companies, including Met-Pro, competing in selected product lines and niche markets. With respect to the Product Recovery/Pollution Control Equipment segment, there are numerous competitors of both comparable and larger size which may have greater resources than the Company, but there are no companies that dominate the market. The Company is unable to state with certainty its relative market position in all aspects of its businesses. Research and Development: The Company engages in research and development on an operational basis. Due to the wide range of the Company's products, the research and development effort is not centralized. Research is directed towards the development of new products related to current product lines, and the improvement and enhancement of existing products. The principal goals of the Company's research programs are maintaining the Company as a technological leader in the production of product recovery/pollution control equipment, and fluid handling equipment; developing new products; and providing technological support to the manufacturing operations. Research and development expenses were $0.8 million, for each of the years ended January 31, 2001, 2000 and 1999, respectively. Patents and Trademarks: The Company has a small number of patents and trademarks. The Company considers these rights important to its business, although it considers no individual right material to its business. 3 Regulatory Matters: The Company is subject to environmental laws and regulations concerning air emissions, discharges to water processing facilities, and the generation, handling, storage and disposal of waste materials in all operations. All of the Company's production and manufacturing facilities are controlled under permits issued by federal, state and local regulatory agencies. The Company believes it is presently in compliance in all material respects with these laws and regulations. To date, compliance with federal, state and local provisions relating to protection of the environment has had no material effect upon capital expenditures, earnings or the competitive position of the Company. Backlog: Generally, the Company's customers do not enter into long-term contracts, but rather issue purchase orders that are accepted by the Company. The rate of booking new orders varies from month to month. In addition, the orders have varying delivery schedules, and the Company's backlog as of any particular date may not be representative of actual revenues for any succeeding period. The dollar amount of the Company's backlog of orders, considered to be firm, totalled $9,529,541 and $11,660,840 as of January 31, 2001 and 2000, respectively. This does not include an additional $5,469,863 and $4,069,610 of orders in-house as of January 31, 2001 and 2000, respectively, which, according to our longstanding policy, are not included in the backlog until completed drawings have been approved. The Company expects that substantially all of the backlog that existed as of January 31, 2001 will be shipped during the ensuing fiscal year. Raw Materials: The Company procures its raw materials and supplies from various sources. The Company believes it could secure substitutes for the raw materials and supplies should they become unavailable, but there are no assurances that the substitutes would perform as well or be priced competitively. The Company has not experienced any significant difficulty in securing raw materials and supplies, and does not anticipate any significant difficulty in procurement in the coming year or foreseeable future. Employees: As of January 31, 2001, the Company employed 398 people, of whom 153 were involved in manufacturing, and 245 were engaged in administration, sales, engineering, supervision and clerical work. The Company has had no work stoppages during the past 19 years and considers its employee relations to be good. Foreign Operations: Most of the Company's operations and assets are located in the United States. The Company also owns a manufacturing operation in Heerenveen, Holland through its wholly-owned subsidiary, Mefiag B.V., and operates a sales office and warehouse in Markham, Ontario, Canada through its wholly-owned subsidiary, Flex-Kleen Canada Inc. Large export sales are typically made on the basis of confirmed irrevocable letters of credit or time drafts to selected customers in U.S. dollars. The Company believes that currency fluctuation and political and economic instability do not constitute substantial risks to its business. For information concerning foreign net sales on a segment basis, reference is made to the Consolidated Business Segment Data contained on page 20. 4 Executive Officers of the Registrant: The following table sets forth certain information regarding the executive officers of the Company: William L. Kacin, age 69, is Chairman of the Board of Directors, Chief Executive Officer and President of the Company. He was elected Chairman of the Board of Directors in June 1999 and Chief Executive Officer, President and Director in February 1993. Prior to that, he was Vice President and General Manager of the Company's Sethco Division for seventeen years. Raymond J. De Hont, age 47, is Chief Operating Officer of the Company, to which office he was elected in June 2000. Mr. De Hont has served as Vice President and General Manager of the Company's Fybroc Division since 1995. In October 1999, he also assumed the responsibilities of General Manager for the Company's Dean Pump Division. Prior to joining Met-Pro Corporation, Mr. De Hont's management position at Air and Water Technologies included Vice President and General Manager of Flex-Kleen Corporation, which is now a division of Met-Pro Corporation. Gary J. Morgan, CPA, age 46, is Vice President-Finance, Chief Financial Officer, Secretary, Treasurer and a Director of the Company. He was elected Vice President-Finance, Chief Financial Officer, Secretary and Treasurer in October 1997, and a Director of the Company in February 1998. Mr. Morgan joined the Company in 1980 and served as the Company's Corporate Controller immediately prior to October 1997. Mark A. Betchaver, age 51, is a Vice President of the Company and General Manager of the Sethco Division, to which office he was elected in June 1993. He joined the Company in 1972. James G. Board, age 47, is Vice President and General Manager of the Company's Dean Pump and Fybroc Divisions, to which office he was elected in December 2000. For more than five years prior thereto, Mr. Board was employed by Tuthill Energy Systems since September 1997, as Director of Sales and prior to joining Tuthill Energy Systems held the position as Salesman for Oliver and Laughten Equipment Company, Inc. since September 1982. Thomas V. Edwards, age 47, is a Vice President of the Company and General Manager of the Systems Division, to which office he was elected in December 1998. Mr. Edwards joined the Company in June 1995 and prior to his present position, held the position of Assistant to the President. For more than five years prior thereto, Mr. Edwards was employed by Lockheed Martin as Engineering Manager. Sonja M. Haggert, age 47, is a Vice President of the Company and General Manager of the Keystone Filter Division, to which office she was elected in February 1993. She joined the Company in 1978, and prior to her present position, held the position of Distributor Sales Manager of the Division. Hans J. D. Huizinga, age 50, is the Managing Director of Mefiag B.V., a wholly-owned subsidiary of the Company, located in Heerenveen, Holland, an office to which he was elected in August 1993. He was employed by Mefiag B.V. (formerly Systems Engineering and Manufacturing Corp. Nederland B.V.) for over five years as Managing Director prior to becoming an employee of the Company 's subsidiary on June 30, 1993, when Registrant acquired that company. Gregory C. Kimmer, age 46, is Vice President of the Company and General Manager of the Duall Division, to which office he was elected in October 1989. For more than five years prior thereto, Mr. Kimmer was employed by Duall Industries, Inc. in various capacities. William F. Mersch, age 47, is a Vice President of the Company and General Manager of the Stiles-Kem Division, to which office he was elected in October 1996. He joined the Company in June 1995 as National Sales Manager. For more than five years prior thereto, Mr. Mersch was employed by ANCO Corporation, in which his last position was Vice President Sales and Marketing. Robert P. Replogle, age 60, is Vice President of the Company and Director of the International Sales Division and the Mefiag Division, to which offices he was elected in December 1995. He joined the Company in December 1973 and prior to his present position, held the position of Director of the International Sales Division and the Mefiag Division. Paul A. Tetley, age 42, is a Vice President of the Company and General Manager of Strobic Air Corporation, to which office he was elected in December 1999. Mr. Tetley joined the Company in 1996 in connection with the Company's acquisition of Strobic Air Corporation and prior to his present position held the position of Director of Operations. For more than five years prior thereto, Mr. Tetley was employed by the predecessor entity as a Plant Manager. Richard J. Wilmoth, age 54, is a Vice President of the Company and General Manager of the Flex-Kleen Division, to which office he was elected in April 2001. For more than five years prior thereto, Mr. Wilmoth was employed by UOP LLC, as Managing Director of the UOPAsia joint venture. There is no family relationship between any of the Directors or executive officers of the Company. Each officer serves at the pleasure of the Board of Directors. 5 Item 2. Properties: The following manufacturing and production facilities were owned or leased by the Company at January 31, 2001:
Name Structure Property/Location Status Executive Offices, 73,000 square feet, cement 17 acres in Harleysville, Owned International Division, building, with finestone facing, Pennsylvania Mefiag Division and built 1976 Strobic Air Corporation Sethco Division 30,000 square feet, cement 4 acres in Hauppauge, Owned block with brick facing, Long Island, New York built 1982 Fybroc Division 47,500 square feet, cement 8 acres in Telford, Owned building with brick facing, Pennsylvania built 1991 Keystone Filter Division 31,000 square feet, cement 2.3 acres in Hatfield, Owned block, built 1978 Pennsylvania Systems Division 15,000 square feet, cement 2 acres in West Chester, Owned block, brick and composition Pennsylvania facing, built 1984 Dean Pump Division 66,000 square feet, metal 17.1 acres in Owned building Indianapolis, Indiana Duall Division 63,000 square feet, metal 7 acres in Owosso, Owned and masonry building Michigan Stiles-Kem Division 22,000 square feet, cement 2.55 acres in Owned block building, built 1996 Waukegan, Illinois Flex-Kleen Division 13,760 square feet, brick Itasca, Illinois Leased(1) building 37,320 square feet, metal Sharpsburg, North Carolina Leased(2) building Mefiag B.V. 17,200 square feet, metal 1.1 acres in Owned and masonry building Heerenveen, Holland Flex-Kleen Canada Inc. 5,880 square feet, masonry Markham, Ontario, Canada Leased(3) building
(1) Flex-Kleen Division's lease for the operation in Itasca, Illinois expires on November 30, 2002. The term of this lease may be renewed by Flex-Kleen Division for an additional five year period. (2) Flex-Kleen Division's lease for the warehouse in Sharpsburg, North Carolina expires on October 29, 2001. The term of this lease may be renewed by Flex-Kleen Division for an additional two year period. (3) Flex-Kleen Canada Inc.'s lease for the sales and warehouse facility in Markham, Ontario, Canada expires on March 31, 2003. 6 Item 3. Legal Proceedings: There are no material pending legal proceedings to which the Company is a party as of the date of this Annual Report. Item 4. Submission of Matters to a Vote of Security Holders: No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended January 31, 2001. 7 PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters: The Company's Common Stock is traded on the New York Stock Exchange under the symbol "MPR". The high and low selling prices of the Common Stock for each quarterly period for the last two fiscal years, as reported on the New York Stock Exchange, are shown below. Quarter ended Year ended January 31, 2001 April July October January ------------------------------------------------------------------------------------------------------- Price range of common stock: High $10.19 $10.63 $10.45 $11.72 Low 8.75 8.38 9.56 9.75 Cash dividend paid .08 .08 .08 .08 Year ended January 31, 2000 April July October January ------------------------------------------------------------------------------------------------------- Price range of common stock: High $12.25 $14.00 $12.69 $11.13 Low 9.88 11.69 10.00 9.75 Cash dividend paid .32 - .08 .08
There were 724 registered stockholders at January 31, 2001, and the Company estimates that there are approximately 2,000 additional stockholders with stock held in street name. The Board of Directors declared quarterly dividends of $.08 per share payable on March 10, 2000, June 9, 2000, September 11, 2000 and December 8, 2000 to stockholders of record as of February 25, 2000, May 26, 2000, August 28, 2000 and November 24, 2000. During the first quarter of fiscal year ended 2001, the Company completed the purchase of 350,000 shares of its Common Stock, which was authorized under a stock buyback program approved by the Board of Directors on May 11, 1999. On February 21, 2000, the Board of Directors authorized an additional 350,000 share stock buyback program. The Company repurchased an aggregate of 318,476 shares under the combined stock buyback programs during the year ended January 31, 2001. On December 15, 2000, the Board of Directors authorized an additional 300,000 share stock buyback program after the balance of the shares remaining from the Company's February 21, 2000 stock buyback program are purchased. 8 Item 6. Selected Financial Data:
Years ended January 31, 2001 2000 1999 1998 1997 ---------------------------------------------------------------------------------------------------------------------------- Selected Operating Statement Data Net sales $81,203,550 $78,449,992 $67,390,488 $62,387,870 $60,853,278 Income from operations 12,513,886 11,410,679 11,199,867 11,021,314 9,457,301 Net income 7,773,720 7,072,642 7,151,052 7,116,481 6,096,002 EBITDA (a) 14,736,541 13,826,535 13,287,878 12,851,944 11,164,848 Earnings per share, basic 1.26 1.08 1.04 1.01 .87 Earnings per share, diluted 1.26 1.08 1.03 1.00 .86 Selected Balance Sheet Data Current assets $37,412,259 $35,722,971 $38,683,453 $36,067,260 $32,088,546 Current liabilities 12,957,995 13,681,578 14,387,868 11,267,545 11,374,115 Working capital 24,454,264 22,041,393 24,295,585 24,799,715 20,714,431 Current ratio 2.9 2.6 2.7 3.2 2.8 Total assets 69,151,341 68,641,983 72,888,641 57,984,240 56,079,391 Long-term obligations 8,100,000 9,933,014 11,941,954 2,242,047 3,683,419 Total stockholders' equity 47,061,366 44,206,333 45,925,107 43,840,829 40,352,926 Total capitalization 55,161,366 54,139,347 57,867,061 46,082,876 44,036,345 Return on average total assets, % 11.3 10.0 10.9 12.5 11.8 Return on average stockholders' equity, % 17.0 15.7 15.9 16.9 16.2 Other Financial Data Net cash flows from operating activities $10,047,845 $10,204,749 $7,990,115 $7,351,850 $7,203,258 Capital expenditures 1,023,682 1,193,559 1,191,616 1,356,065 1,811,833 Stockholders' equity per share 7.73 6.92 6.76 6.27 5.73 Cash dividends paid per share (b) .32 .48 .30 .27 .22 Average common shares, basic 6,152,325 6,542,210 6,907,654 7,053,071 6,989,717 Average common shares, diluted 6,173,437 6,576,820 6,955,892 7,144,931 7,096,214 Shares of common stock outstanding 6,090,155 6,391,242 6,794,898 6,993,473 7,043,436
(a) EBITDA represents income from operations before taxes, interest expense, interest income, and depreciation and amortization expenses. (b) Fiscal year ended January 31, 2000 included an annual dividend of $.32 per share payable on April 23, 1999 and quarterly dividends of $.08 per share payable on September 10, 1999 and December 10, 1999. 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: The following discussion should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K together with "Factors that May Affect Future Results" elsewhere in the Management's Discussion and Analysis of Financial Condition and Result of Operations. General: The Company acquired substantially all of the operating assets of Flex-Kleen Corporation and Flex-Kleen Canada Limited (collectively "Flex-Kleen") effective as of October 1, 1998, pursuant to an Asset Purchase Agreement. The acquisition was accounted for as a purchase transaction. Accordingly, the consolidated financial data for the year ended January 31, 1999 incorporates Flex-Kleen's operations for a four-month period. Results of Operations: The following table sets forth for the periods indicated the percentage of total net sales that such items represent in the Consolidated Statement of Operations.
Years ended January 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% Cost of goods sold 65.6% 65.8% 64.3% ------------------------------------------------------------------------------------------------------------------- Gross profit 34.4% 34.2% 35.7% Selling, general and administrative expense 19.0% 19.6% 19.1% ------------------------------------------------------------------------------------------------------------------- Income from operations 15.4% 14.6% 16.6% Interest expense (.8%) (1.1%) (.6%) Other income, net .6% .6% .9% ------------------------------------------------------------------------------------------------------------------- Income before taxes 15.2% 14.1% 16.9% Provision for taxes 5.6% 5.1% 6.3% ------------------------------------------------------------------------------------------------------------------- Net income 9.6% 9.0% 10.6% ===================================================================================================================
FYE 2001 vs FYE 2000: Net sales for the fiscal year ended January 31, 2001 set a new record of $81.2 million compared to $78.4 million for the fiscal year ended January 31, 2000, or an increase of $2.8 million. This is the eighth consecutive year that net sales have achieved a new record. Sales in the Product Recovery/Pollution Control Equipment segment decreased slightly to $51.7 million due primarily to decreased demand for our product recovery equipment. Sales in the Fluid Handling Equipment segment were $29.6 million or 11.2% higher than the prior fiscal year, due to an increased demand for our specialty pump equipment. Foreign sales increased to $16.6 million for the fiscal year ended January 31, 2001, which is 30.4% higher than the prior year. This increase was due to higher sales in Europe and Pacific Rim markets. Foreign sales increased 26.9% in the Fluid Handling Equipment segment from the prior fiscal year, and the Product Recovery/Pollution Control Equipment segment sales were 34.7% higher than the prior fiscal year due to higher demand for our fume and odor control equipment. Net income of $7.8 million for the fiscal year ended January 31, 2001 was the highest in the Company's history, or 9.9% higher than the earnings level of the prior year. The gross margin for the fiscal year ended January 31, 2001 increased to 34.4% versus 34.2% for the prior year. This increase can be attributed to higher gross margins experienced in the Fluid Handling Equipment segment. Selling expense was $7.0 million for the fiscal year ended January 31, 2001 or a slight decrease from the prior fiscal year. Selling expense as a percentage of net sales was 8.7% compared to 9.1% for the prior fiscal year. 10 General and administrative expense was $8.4 million for the fiscal year ended January 31, 2001 compared to $8.3 million in the prior fiscal year. General and administrative expense as a percentage of net sales was 10.3% for the fiscal year ended January 31, 2001 compared to 10.5% for the prior fiscal year. Interest expense was $0.7 million for the fiscal year ended January 31, 2001 compared to $0.8 million in the prior fiscal year. During the fiscal year ended January 31, 2001, the Company reduced its long-term debt by $2.0 million. Other income was $0.5 million for each fiscal year ended January 31, 2001 and 2000. Other income consisted primarily of interest income on short-term investments in both years. The effective tax rate increased to 37.0% for the fiscal year ended January 31, 2001 from 36.1% for the prior year. FYE 2000 vs FYE 1999: Net sales for the year ended January 31, 2000 were $78.4 million, a new record, exceeding net sales for the year ended January 31, 1999 by $11.0 million, an increase of 16.4%. This was the seventh consecutive year that net sales achieved a new record. Sales in the Product Recovery/Pollution Control Equipment segment were $51.9 million or 29.3% higher than the prior fiscal year due to the acquisition of Flex-Kleen Corporation and Flex-Kleen Canada Limited (collectively "Flex-Kleen"), effective as of October 1, 1998, coupled with higher demand primarily for our fume and odor control equipment. Sales in the Fluid Handling Equipment segment were $26.6 million or $0.7 million lower compared to the prior year due primarily to decreased demand for our specialty pump equipment. Foreign sales increased to $12.8 million for the fiscal year ended January 31, 2000, which was 14.3% higher than the prior year. This increase was due to higher sales in Canada and Europe. Foreign sales increased 2.0% in the Fluid Handling Equipment segment from the prior fiscal year, and the Product Recovery/Pollution Control Equipment segment sales were 33.7% higher than the prior fiscal year due to the impact of the Flex-Kleen acquisition and higher demand for our fume and odor control equipment. Net income of $7.1 million for the fiscal year ended January 31, 2000 was slightly lower than the earnings level of the prior year. The gross margin for the fiscal year ended January 31, 2000 decreased to 34.2% from 35.7% for the prior year due to lower gross margins experienced in the Product Recovery/Pollution Control Equipment segment. Selling expense increased approximately $1.2 million or 21.2% over the prior fiscal year. The increase in selling expense is attributed to the inclusion of Flex-Kleen operations for the year ended January 31, 2000, which in the previous year only included four months for the comparative period. Selling expense as a percentage of net sales was 9.1% for the fiscal year ended January 31, 2000, which was slightly higher than the prior fiscal year. General and administrative expense was $8.3 million for the fiscal year ended January 31, 2000 compared to $7.0 million in the prior fiscal year. The $1.3 million increase was due to amortization and other administrative expenses connected with the inclusion of Flex-Kleen, which in the previous year only included four months for the comparative period. General and administrative expense as a percentage of net sales was 10.5% for the fiscal year ended January 31, 2000 compared to 10.4% for the prior fiscal year. Interest expense was $0.8 million for the fiscal year ended January 31, 2000 compared to $0.4 million in the prior fiscal year. The increase can be attributed to the $12.0 million borrowing having a ten-year term with a fixed interest rate swap of 5.98% made in connection with the acquisition of certain assets of Flex-Kleen. Other income was $0.5 million for the fiscal year ended January 31, 2000 compared to $0.6 million in the prior fiscal year. Other income consisted primarily of interest income on short-term investments in both years. The effective tax rate for the fiscal year ended January 31, 2000 was 36.1% compared to 37.4% for the prior year. Liquidity: Cash and cash equivalents were $8.5 million on January 31, 2001, an increase of $2.2 million over the previous year. This increase is the net result of positive cash flows provided by operating activities of $10.0 million, offset by the payment of cash dividends amounting to $1.8 million (net of $0.2 million of dividends returned to the Company in the form of stock purchases under the Company's Dividend Reinvestment Plan), payments of scheduled debt totalling $2.0 million, purchase of treasury stock amounting to $3.0 million and investment in property and equipment amounting to $1.0 million. 11 Accounts receivable were $14.2 million at January 31, 2001, an increase of $0.5 million compared to the prior year. The size of orders, the timing of shipments to meet customer requirements and retainage on contracts will influence accounts receivable balances at any point in time. Inventories totalled $13.1 million at January 31, 2001, a decrease of $0.7 million compared to the prior year. Inventory balances will fluctuate depending on the size and timing of orders and market demand, especially when major systems and contracts are involved. Current liabilities decreased from $13.7 million at January 31, 2000 to $13.0 million at January 31, 2001, or $0.7 million. The Company has consistently maintained a high current ratio and has not utilized either the domestic line of credit or the foreign line of credit totalling $5.0 million which are available for working capital purposes. As of January 31, 2001 and January 31, 2000, working capital was $24.5 million and $22.0 million, respectively, and the current ratio was 2.9 and 2.6, respectively. Capital Resources and Requirements: Cash flows provided by operating activities during the fiscal year ended January 31, 2001 amounted to $10.0 million compared to $10.2 million during the prior fiscal year. This slight decrease from the record high cash flows provided by operating activities for last year was due to a $0.5 million increase in accounts receivable during the fiscal year ended January 31, 2001 compared to a $0.7 million decrease in accounts receivable in the fiscal year ended January 31, 2000. Per share, our cash flows from operating activities increased to a record high $1.63 per share compared to $1.55 per share for the prior year. Cash flows used in investing activities during the fiscal year ended January 31, 2001 amounted to $1.0 million compared to $1.2 million during the fiscal year ended January 31, 2000. The Company's investing activities for the fiscal year ended January 31, 2001, principally represent the acquisition of property, plant and equipment in the two operating segments. The Company continues to invest in machinery and equipment, tooling, patterns and molds to improve efficiency and maintain our position as leaders in the markets that we serve. Financing activities during the fiscal year ended January 31, 2001 used $6.8 million of available resources compared to $10.1 million during the prior fiscal year. The $3.3 million decrease in cash flows used in financing activities is primarily due to a $2.3 million reduction in stock repurchases and a $.9 million decrease in dividend payments to stockholders. As a result of changing from an annual dividend to a quarterly dividend effective September 1999, stockholders received a total of $.32 and $.48 per share in the fiscal years ended January 31, 2001 and 2000, respectively. The Company paid $2.0 million of scheduled debt during the current fiscal year. The percentage of long-term debt to equity at January 31, 2001 decreased to 17.2% compared to 22.5% at January 31, 2000. During the fiscal year ended 2001, the Company continued to repurchase shares outstanding on the open market at prevailing prices under the 350,000 share stock repurchase program authorized on May 11, 1999 which was completed on April 12, 2000, following which the Company began to make additional purchases under an additional stock repurchase program authorized on February 21, 2000. For the fiscal year ended January 31, 2001, the Company repurchased 318,476 shares, 253,501 shares under the plan effective February 21, 2000 and 64,975 shares under the plan effective May 11, 1999. The Company announced an additional 300,000 share stock repurchase program on December 15, 2000, which will begin after the Company's February 21, 2000 stock repurchase program is complete. The Board of Directors declared dividends of $.08 per share payable on March 10, 2000, June 9, 2000, September 11, 2000 and December 8, 2000 to stockholders of record at the close of business on February 25, 2000, May 26, 2000, August 28, 2000 and November 24, 2000, respectively. On December 15, 2000, the Board of Directors declared a quarterly dividend of $.085 per share, or an increase of 6%, which was paid on March 9, 2001 to stockholders of record at the close of business on February 23, 2001. As part of our commitment to the future, the Company expended $0.8 million on research and development for each of the fiscal years ended January 31, 2001 and 2000. The Company will continue to invest in new product development to maintain and enhance our market position as leaders in the markets in which we participate. Capital expenditures will be made to support operations and expand our capacity to meet market demands. The Company intends to finance capital expenditures in the coming year through cash flows from operations and will secure third party financing, when deemed appropriate. 12 Recent Accounting Pronouncements: In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which will be effective for the fiscal years beginning after June 15, 2000. This standard requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in fair value of derivatives will be recorded each period in current earnings or comprehensive income. The adoption of this pronouncement will have no significant impact on Met-Pro's consolidated results of operations, financial position, or cash flows. Factors that May Affect Future Results: Met-Pro's prospects are subject to certain uncertainties and risk. This Annual Report on Form 10-K also contains certain forward-looking statements within the meaning of the Federal securities laws. Met-Pro's results may differ material from its current results and actual could differ materially from those suggested in the forward-looking statements as a result of certain risk factors, including but not limited to those set forth below, other important factors disclosed previously and from time to time in Met-Pro's Other filings with the Securities and Exchange Commission. The following important factors, along with those discussed elsewhere in this Annual Report, could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: o materially adverse changes in economic conditions in the markets served by us or in significant customers of ours; o material changes in available technology; o failure in execution of aquisition strategy; o losses related to international sales; o changes in our accounting rules promulgated by regulatory agencies, including the SEC, which could result in an impact on earnings; o unexpected results in our product development activities; o changes in our existing management; o unexpected changes in our execution of customers orders; and o changes in federal or state laws. Item 7A. Quantitative and Qualitative Disclosure About Market Risks: Not Applicable 13 Item 8. Financial Statements and Supplementary Data: Index to Consolidated Financial Statements and Supplementary Data:
Consolidated Financial Statements: Page ---- Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Consolidated Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Consolidated Business Segment Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Supplementary Data: Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders Met-Pro Corporation Harleysville, Pennsylvania We have audited the accompanying consolidated balance sheet of Met-Pro Corporation and its wholly-owned subsidiaries as of January 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended January 31, 2001. 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 generally accepted auditing standards. 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 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 financial position of Met-Pro Corporation and its wholly-owned subsidiaries as of January 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2001 in conformity with generally accepted accounting principles. /s/ Margolis & Company P.C. --------------------------- Bala Cynwyd, Pennsylvania February 22, 2001 14 This Page is intentionally left blank 15
MET-PRO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS Years ended January 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------------ Net sales $81,203,550 $78,449,992 $67,390,488 Cost of goods sold 53,242,396 51,645,593 43,316,656 ------------------------------------------------------------------------------------------------------------------------------------ Gross profit 27,961,154 26,804,399 24,073,832 ------------------------------------------------------------------------------------------------------------------------------------ Operating expenses Selling 7,043,540 7,128,258 5,880,080 General and administrative 8,403,728 8,265,462 6,993,885 ------------------------------------------------------------------------------------------------------------------------------------ 15,447,268 15,393,720 12,873,965 ------------------------------------------------------------------------------------------------------------------------------------ Income from operations 12,513,886 11,410,679 11,199,867 Interest expense (694,112) (815,805) (398,051) Other income, net 524,729 471,008 618,707 ------------------------------------------------------------------------------------------------------------------------------------ Income before taxes 12,344,503 11,065,882 11,420,523 Provision for taxes 4,570,783 3,993,240 4,269,471 ------------------------------------------------------------------------------------------------------------------------------------ Net income $7,773,720 $7,072,642 $7,151,052 ==================================================================================================================================== Earnings per share Basic $1.26 $1.08 $1.04 Diluted $1.26 $1.08 $1.03 ==================================================================================================================================== Average number of common and common equivalent shares outstanding Basic 6,152,325 6,542,210 6,907,654 Diluted 6,173,437 6,576,820 6,955,892 ====================================================================================================================================
The notes to consolidated financial statements are an integral part of the above statement. 16 MET-PRO CORPORATION CONSOLIDATED BALANCE SHEET
January 31, ASSETS 2001 2000 --------------------------------------------------------------------------------------------------------------- Current assets Cash and cash equivalents $8,510,045 $6,331,556 Accounts receivable, net of allowance for doubtful accounts of approximately $218,000 and $225,000, respectively 14,208,689 13,733,256 Inventories 13,085,969 13,744,142 Prepaid expenses, deposits and other current assets 958,722 1,135,443 Deferred income taxes 648,834 778,574 --------------------------------------------------------------------------------------------------------------- Total current assets 37,412,259 35,722,971 Property, plant and equipment, net 13,009,247 13,473,299 Costs in excess of net assets of businesses acquired, net 18,276,472 18,772,176 Other assets 453,363 673,537 --------------------------------------------------------------------------------------------------------------- Total assets $69,151,341 $68,641,983 =============================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY --------------------------------------------------------------------------------------------------------------- Current liabilities Current portion of long-term debt $1,833,014 $2,008,940 Accounts payable 4,284,687 4,989,810 Accrued salaries, wages and expenses 5,704,372 5,108,552 Payroll and other taxes payable 8,808 182,545 Dividend payable 517,669 511,299 Customers' advances 609,445 880,432 --------------------------------------------------------------------------------------------------------------- Total current liabilities 12,957,995 13,681,578 Long-term debt 8,100,000 9,933,014 Other non-current liabilities 499,395 415,731 Deferred income taxes 532,585 405,327 --------------------------------------------------------------------------------------------------------------- Total liabilities 22,089,975 24,435,650 --------------------------------------------------------------------------------------------------------------- Commitments Stockholders' equity Common stock, $.10 par value; 18,000,000 shares 720,658 718,919 Authorized, 7,206,583 and 7,189,194 shares issued, of which 1,116,428 and 797,952 shares were reacquired and held in treasury, at the respective dates Additional paid-in capital 8,139,799 7,973,873 Retained earnings 51,880,800 46,087,476 Accumulated other comprehensive loss (491,163) (403,993) Treasury stock, at cost (13,188,728) (10,169,942) --------------------------------------------------------------------------------------------------------------- Total stockholders' equity 47,061,366 44,206,333 --------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $69,151,341 $68,641,983 ===============================================================================================================
The notes to consolidated financial statements are an integral part of the above statement. 17 MET-PRO CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended January 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities Net income $7,773,720 $7,072,642 $7,151,052 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,222,655 2,415,856 2,088,011 Deferred income taxes 256,998 266,073 (9,185) (Gain) loss on sale of property and equipment, net 12,656 (1,096) (6,590) Allowance for doubtful accounts (6,576) (36,524) (18,827) (Increase) decrease in operating assets, net of acquisitions Accounts receivable (515,006) 681,168 (492,274) Notes receivable, ESOT - - 200,000 Inventories 631,810 1,131,608 (1,007,069) Prepaid expenses and other current assets 92,357 (320,752) 9,494 Other assets (52,309) (24,187) 10,346 Increase (decrease) in operating liabilities, net of acquisitions Accounts payable, accrued expenses and taxes (181,137) (918,189) (244,547) Customers' advances (270,987) (148,743) 229,903 Other non-current liabilities 83,664 86,893 79,801 ------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 10,047,845 10,204,749 7,990,115 ------------------------------------------------------------------------------------------------------------ Cash flows from investing activities Proceeds from sale of property and equipment 2,000 14,690 6,600 Acquisitions of property and equipment (1,023,682) (1,193,559) (1,191,616) Payment for purchase of acquisitions, net of cash acquired - (7,281) (15,811,625) ----------------------------------------------------------------------------------------------------------- Net cash (used in) investing activities (1,021,682) (1,186,150) (16,996,641) ----------------------------------------------------------------------------------------------------------- Cash flows from financing activities Proceeds from new borrowings - - 12,000,000 Reduction of debt (2,008,940) (2,125,093) (1,616,964) Exercise of stock options - 15,000 362,229 Payment of dividends (1,806,361) (2,694,860) (2,100,569) Purchase of treasury shares (3,018,786) (5,281,367) (3,462,346) ----------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (6,834,087) (10,086,320) 5,182,350 ----------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (13,587) (47,092) 17,165 ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 2,178,489 (1,114,813) (3,807,011) Cash and cash equivalents at beginning of year 6,331,556 7,446,369 11,253,380 ----------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $8,510,045 $6,331,556 $7,446,369 ===========================================================================================================
The notes to consolidated financial statements are an integral part of the above statement. 18
MET-PRO CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings Income/(Loss) Stock Total ------------------------------------------------------------------------------------------------------------------------------------ Balances, January 31, 1998 $713,862 $7,868,357 $37,667,872 ($219,015) ($2,190,247) $43,840,829 Comprehensive income: Net income - - 7,151,052 - - Cumulative translation adjustment - - - 133,912 - Total comprehensive income 7,284,964 Dividends paid, $.30 per share - - (2,100,569) - - (2,100,569) Stock option transactions - (359,609) - - 721,838 362,229 Purchase of 246,300 shares of treasury stock - - - - (3,462,346) (3,462,346) ------------------------------------------------------------------------------------------------------------------------------------ Balances, January 31, 1999 713,862 7,508,748 42,718,355 (85,103) (4,930,755) 45,925,107 Comprehensive income: Net income - - 7,072,642 - - Cumulative translation adjustment - - - (318,890) - Total comprehensive income 6,753,752 Dividends paid, $.48 per share - - (3,192,222) - - (3,192,222) Dividend declared, $.08 per share - - (511,299) - - (511,299) Proceeds from issuance of common stock under dividend reinvestment plan (50,569 shares) 5,057 492,305 - - - 497,362 Stock option transactions - (27,180) - - 42,180 15,000 Purchase of 457,225 shares of treasury stock - - - - (5,281,367) (5,281,367) ------------------------------------------------------------------------------------------------------------------------------------ Balances, January 31, 2000 718,919 7,973,873 46,087,476 (403,993) (10,169,942) 44,206,333 Comprehensive income: Net income - - 7,773,720 - - Cumulative translation adjustment - - - (87,170) - Total comprehensive income 7,686,550 Dividends paid, $.32 per share - - (1,462,727) - - (1,462,727) Dividend declared, $.085 per share - - (517,669) - - (517,669) Proceeds from issuance of common stock under dividend reinvestment plan (17,389 shares) 1,739 165,926 - - - 167,665 Purchase of 318,476 shares of treasury stock - - - - (3,018,786) (3,018,786) ------------------------------------------------------------------------------------------------------------------------------------ Balances, January 31, 2001 $720,658 $8,139,799 $51,880,800 ($491,163) ($13,188,728) $47,061,366 ====================================================================================================================================
The notes to consolidated financial statements are an integral part of the above statement. 19 MET-PRO CORPORATION CONSOLIDATED BUSINESS SEGMENT DATA
Years ended January 31, 2001 2000 1999 ----------------------------------------------------------------------------------------------- Net sales to unaffiliated customers Product recovery/pollution control equipment $51,650,730 $51,883,604 $40,128,412 Fluid handling equipment 29,552,820 26,566,388 27,262,076 ----------------------------------------------------------------------------------------------- $81,203,550 $78,449,992 $67,390,488 ----------------------------------------------------------------------------------------------- Includes foreign sales of: Product recovery/pollution control equipment $7,787,437 $5,780,112 $4,323,506 Fluid handling equipment 8,846,889 6,971,799 6,837,293 ----------------------------------------------------------------------------------------------- $16,634,326 $12,751,911 $11,160,799 =============================================================================================== Income from operations Product recovery/pollution control equipment $7,066,793 $7,431,748 $6,818,554 Fluid handling equipment 5,447,093 3,978,931 4,381,313 ----------------------------------------------------------------------------------------------- $12,513,886 $11,410,679 $11,199,867 =============================================================================================== Depreciation and amortization expense Product recovery/pollution control equipment $1,450,025 $1,633,097 $1,250,163 Fluid handling equipment 772,630 782,759 837,848 ----------------------------------------------------------------------------------------------- $2,222,655 $2,415,856 $2,088,011 =============================================================================================== Capital expenditures Product recovery/pollution control equipment $442,662 $571,629 $893,003 Fluid handling equipment 448,685 531,435 269,585 ----------------------------------------------------------------------------------------------- 891,347 1,103,064 1,162,588 Corporate 132,335 90,495 29,028 ----------------------------------------------------------------------------------------------- $1,023,682 $1,193,559 $1,191,616 =============================================================================================== Identifiable assets at January 31 Product recovery/pollution control equipment $40,274,449 $42,803,505 $44,137,192 Fluid handling equipment 18,785,577 18,662,280 20,321,860 ----------------------------------------------------------------------------------------------- 59,060,026 61,465,785 64,459,052 Corporate 10,091,315 7,176,198 8,429,589 ----------------------------------------------------------------------------------------------- $69,151,341 $68,641,983 $72,888,641 ===============================================================================================
The Company follows the practice of allocating general corporate expenses, including depreciation and amortization expense, among the segments. 20 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of operations: The Company manufactures and sells product recovery/pollution control equipment for purification of air and liquids, and fluid handling equipment for corrosive, abrasive and high temperature liquids. Basis of presentation: The consolidated financial statements include the accounts of Met-Pro Corporation ("Met-Pro" or the "Company") and its wholly-owned subsidiaries, Mefiag B.V., Flex-Kleen Canada Inc. and Strobic Air Corporation ("Strobic Air"). Significant intercompany accounts and transactions have been eliminated. Accounts denominated in foreign currencies have been remeasured into the functional currency in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation," using the U. S. dollar as the functional currency. The preparation of financial statements in conformity with generally accepted accounting principles 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Inventories: Inventories generally are stated at the lower of cost (principally first-in, first-out) or market except for the inventory at the Dean Pump Division which is determined on the last-in, first-out basis (see Note 3). Property, plant and equipment: Property, plant and equipment are stated at cost. Depreciation is computed principally by the straight-line method over estimated useful lives. Expenditures for maintenance and repairs are charged to expense as incurred. Renewals and betterments are capitalized (see Note 4). Costs in excess of net assets of businesses acquired: Costs in excess of net assets of businesses acquired prior to November 1, 1970, totalling $582,513, are not being amortized because management believes that there has been no impairment in value. Costs in excess of net assets of businesses acquired subsequent to October 31, 1970, totalling $17,693,959, are being amortized over 40 years. The Company monitors the recoverability of goodwill using a fair value approach. Revenue recognition: Revenues are generally recognized when products are shipped. Advertising: Advertising costs are charged to operations in the year incurred and were $1,344,231, $1,289,803 and $1,151,535 for the years ended January 31, 2001, 2000 and 1999, respectively. Research and development: Research and development costs are charged to operations in the year incurred and were $788,777, $798,507 and $752,648 for the years ended January 31, 2001, 2000 and 1999, respectively. 21 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) Earnings per share: Basic earnings per share are computed based on the weighted average number of common shares actually outstanding during each year. Diluted earnings per share are computed based on the weighted average number of shares actually outstanding plus all potential dilutive common shares outstanding (stock options) during each year. Dividends: On December 15, 2000, the Board of Directors declared an $.085 per share quarterly cash dividend payable on March 9, 2001 to stockholders of record on February 23, 2001, amounting to $517,669. Concentrations of credit risk: The Company believes concentrations of credit risk are limited due to the number of customers, and dispersion among the business segments and geographic areas. The Company had no significant concentrations of credit risk as of January 31, 2001 and 2000. Supplemental cash flow information: 2001 2000 1999 ----------------------------------------------------------------------- Cash paid during the year for: Interest $819,054 $826,635 $415,893 Income taxes $3,689,100 $3,885,098 $4,691,163 ======================================================================= Recent accounting pronouncements: In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which will be effective for the fiscal years beginning after June 15, 2000. This standard requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in fair value of derivatives will be recorded each period in current earnings or comprehensive income. The adoption of this pronouncement will have no significant impact on Met-Pro's consolidated results of operations, financial position, or cash flows for the fiscal year ended January 31, 2002. 22 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) NOTE 2: FAIR VALUE OF FINANCIAL INSTRUMENTS Cash and cash equivalents: Short-term investments at January 31, 2001 and 2000 were valued at cost (approximating market) and amounted to $6,480,666 and $4,186,461, respectively. Short-term investments consist principally of commercial paper with an original maturity of three months or less, and money market funds, both of which are considered to be cash equivalents. The Company evaluates the creditworthiness of the financial institutions and financial instruments in which it invests. Debt: The fair value and carrying amount of long-term debt was as follows: January 31, 2001 2000 ------------------------------------------------------------------------ Fair value $9,764,997 $11,261,578 Carrying amount 9,933,014 11,941,954 Valuations for long-term debt are determined based on borrowing rates currently available to the Company for loans with similar terms and maturities. The Company uses an interest rate swap (see Note 5) to minimize its exposure to fluctuations in interest rates. The interest rate differential to be paid or received under this agreement is recognized over the term of the loan and is included in interest expense. The Company's financial instruments are not held for trading purposes. NOTE 3: INVENTORIES Inventories consisted of the following: January 31, 2001 2000 ------------------------------------------------------------------------ Raw materials $7,770,874 $6,755,944 Work in process 1,573,802 2,016,612 Finished goods 3,741,293 4,971,586 ------------------------------------------------------------------------ $13,085,969 $13,744,142 ======================================================================== At January 31, 2001 and 2000, inventories valued at the last-in, first-out method ("LIFO") were $2,284,381 and $2,389,238, respectively. The LIFO value of inventories was lower than replacement cost by $899,223 and $875,558 at January 31, 2001 and 2000, respectively. The book basis of LIFO inventories exceeded the tax basis by approximately $1,026,000 at both January 31, 2001 and 2000 as a result of applying the provisions of Accounting Principles Board Opinion ("APB") No. 16, "Business Combinations", to an acquisition completed in a prior year. 23 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) NOTE 4: PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following: January 31, 2001 2000 ------------------------------------------------------------- Land $1,794,088 $1,793,795 Buildings and improvements 11,378,228 11,353,232 Machinery and equipment 11,605,401 11,207,542 Furniture and fixtures 3,158,346 3,062,990 Automotive equipment 985,818 1,023,219 Construction in progress 154,266 15,448 ------------------------------------------------------------- 29,076,147 28,456,226 Less accumulated depreciation 16,066,900 14,982,927 ------------------------------------------------------------- $13,009,247 $13,473,299 ============================================================= Depreciation of property, plant and equipment charged to operations amounted to $1,454,467, $1,556,191 and $1,443,458 for the years ended in 2001, 2000 and 1999, respectively. 24 MET-PRO CORPORATION NOTES TO Consolidated FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) NOTE 5: DEBT Short-term debt: The Company has available both domestic and foreign unsecured lines of credit totalling $5,000,000 which can be used for working capital. The lines of credit were not used during either year. Long-term debt: Long-term debt consisted of the following:
January 31, 2001 2000 ----------------------------------------------------------------------------- Note payable, bank, payable in quarterly installments of $300,000, plus interest at a fixed rate swap of 5.98%, maturing October, 2008 $9,300,000 $10,500,000 Notes payable, bank, payable in quarterly installments of $87,500, plus interest at a fixed rate of 7.51%, maturing September, 2001 262,500 612,500 Notes payable, bank, payable in quarterly installments of $87,500, plus interest at a variable rate ranging from 6.87% to 7.33%, maturing September, 2001 262,500 612,500 Mortgage note payable, collateralized by property, payable $10,267 monthly (including principal and interest), at a fixed interest rate of 8.5%, maturing January, 2002 108,014 216,954 ----------------------------------------------------------------------------- 9,933,014 11,941,954 Less current portion 1,833,014 2,008,940 ----------------------------------------------------------------------------- $8,100,000 $9,933,014 =============================================================================
These notes are subject to certain covenants, including maintenance of prescribed amounts of leverage and fixed charge coverage ratios. 25 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) Maturities of long-term debt are as follows: Year Ending January 31, --------------------------------------------------------------- 2002 $1,833,014 2003 1,200,000 2004 1,200,000 2005 1,200,000 2006 1,200,000 Thereafter 3,300,000 --------------------------------------------------------------- $9,933,014 =============================================================== Interest expense was $694,112, $815,805 and $398,051 for the years ended in 2001, 2000 and 1999, respectively. NOTE 6: STOCKHOLDERS' EQUITY On February 21, 2000 the Company announced a 350,000 share stock repurchase program, which began after the Company's May 11, 1999 stock repurchase program was completed. In addition, the Company announced an additional 300,000 share stock repurchase program on December 15, 2000, which will begin after the Company's February 21, 2000 stock repurchase program is completed. During the fiscal year ended January 31, 2001, the Company repurchased 318,476 shares of its Common Stock at a cost of $3.0 million. At January 31, 2001, the Company had the authority to repurchase 96,499 shares under the February 21, 2000 stock repurchase program and 300,000 shares under the December 15, 2000 stock repurchase program. The Company has a Shareholder's Rights Plan, under which the Company's Board of Directors declared a dividend of one Right for each share of Company common stock owned. The Plan provides, under certain conditions involving acquisition of the Company's common stock, that holders of Rights, except for the acquiring entity, would be entitled to purchase shares of common stock of the Company, or acquiring company, having a value of twice the Rights' exercise price. The Rights under the Plan expire in 2010. NOTE 7: INCOME TAXES The provision for income taxes was comprised of the following: 2001 2000 1999 ----------------------------------------------------------------------- Current Federal $3,408,005 $2,859,285 $3,216,200 State 662,757 556,607 878,903 Foreign 243,023 311,275 183,553 ----------------------------------------------------------------------- 4,313,785 3,727,167 4,278,656 Deferred 256,998 266,073 (9,185) ----------------------------------------------------------------------- $4,570,783 $3,993,240 $4,269,471 ======================================================================= 26 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the net deferred tax assets were as follows: 2001 2000 ------------------------------------------------------------------------ Deferred tax assets Inventory cost capitalization $169,848 $215,686 Pension cost 757,001 911,611 Non-compete agreements 525,952 498,980 Other 127,333 51,479 ------------------------------------------------------------------------ Total deferred tax assets 1,580,134 1,677,756 ------------------------------------------------------------------------ Deferred tax liabilities Accelerated depreciation 493,256 512,407 Inventory - Dean Pump Division 400,257 400,202 Excess of book over tax basis of property acquired in acquisitions 37,582 66,678 Goodwill 532,790 325,222 ------------------------------------------------------------------------ Total deferred tax liabilities 1,463,885 1,304,509 ------------------------------------------------------------------------ Net deferred tax assets $116,249 $373,247 ======================================================================== A reconciliation of the federal statutory rate and the Company's effective tax rate is presented as follows:
2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------- Computed expected tax expense (federal) $4,197,131 34.0% $3,762,400 34.0% $3,882,978 34.0% State income taxes, net of federal income tax benefit 403,528 3.2 367,361 3.3 580,076 5.1 Foreign tax differential (7,293) - (30,703) (.3) (5,277) - Foreign tax credit (11,831) (.1) (5,606) - (10,924) (.1) Other (10,752) (.1) (100,212) (.9) (177,382) (1.6) ---------------------------------------------------------------------------------------------------------------------- Effective income taxes $4,570,783 37.0% $3,993,240 36.1% $4,269,471 37.4% ======================================================================================================================
NOTE 8: LEASES AND OTHER COMMITMENTS The Company has various real estate operating leases for warehouse space and office space for sales, general and administrative purposes. Future minimum lease payments under these non-cancelable operating leases at January 31, 2001 were as follows: 2002 $339,373 2003 265,204 2004 10,938 Rental expense for the above operating leases during the years ended in 2001, 2000 and 1999, was $411,929, $408,487 and $153,711, respectively. 27 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) NOTE 9: EMPLOYEE BENEFIT PLANS Pension Plans: The Company has several defined benefit pension plans covering eligible employees in the United States. The Company contributes amounts to the plans equal to the amounts that are tax deductible. Net periodic pension cost (income) included the following components:
2001 2000 1999 ---------------------------------------------------------------------------------- Service cost - benefits earned during the period $583,387 $597,400 $527,196 Interest cost on projected benefit obligation 788,141 750,170 708,083 Return on assets (765,117) (2,009,740) (1,707,281) Amortization (515,449) (210,591) (195,466) Deferred gain/(loss) on investments (393,568) 840,679 769,701 ---------------------------------------------------------------------------------- ($302,606) ($32,082) $102,233 ==================================================================================
The following table sets forth the plans' change in benefit obligations, change in plan assets and amounts recognized in the Company's balance sheet at January 31, 2001 and 2000:
2001 2000 ------------------------------------------------------------------------------------ Change in benefit obligation: Benefit obligation at beginning of year $9,625,064 $10,334,600 Service cost 583,387 597,400 Interest cost 788,141 750,170 Actuarial (gain) (145,217) (1,457,537) Benefits paid (594,139) (599,569) Other 274,852 - ------------------------------------------------------------------------------------ Benefit obligation at end of year $10,532,088 $9,625,064 ------------------------------------------------------------------------------------ Change in plan assets: Fair value of plan assets at beginning of year $14,702,989 $13,171,597 Actual return on plan assets 765,117 2,009,740 Employer contribution 129,360 121,221 Benefits paid (594,139) (599,569) ------------------------------------------------------------------------------------ Fair value of plan assets at end of year $15,003,327 $14,702,989 ------------------------------------------------------------------------------------ Funded status $4,471,239 $5,077,925 Unrecognized actuarial (gain) (6,894,792) (7,465,147) Unrecognized transition (asset) (133,950) (144,465) Unrecognized prior service costs 410,966 180,855 Unrecognized net loss 190,508 - Contribution after measurement date, prior year 15,000 - ------------------------------------------------------------------------------------ Net amount recognized ($1,941,029) ($2,350,832) ------------------------------------------------------------------------------------ Amounts recognized in the balance sheet consist of: Accrued benefit liability ($1,941,029) ($2,350,832) ====================================================================================
28 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) Assumptions used in the accounting for pension cost were: 2001 2000 1999 ----------------------------------------------------------------------- Discount rate 7.75% 7.00% 7.00% Rate of increase in compensation levels (where applicable) 4.50% 4.50% 4.50% Expected long-term rate of return on assets 8.00% 9.00% 8.00% Directors' Benefit Plan: The Company also provides a non-qualified pension plan for Directors which is unfunded. The plan is designed to provide pension benefits based on the category of the Director and length of service. The aggregate benefit obligation payable in the future under the terms of the plan was $659,997 and $598,064 at January 31, 2001 and 2000, respectively. The amounts applicable are included in the tables above. This plan was discontinued in December 1999 as to non-vested Directors. Defined Contribution Plan: Effective April 1, 1999, the Company implemented a 401(k) profit sharing plan. Substantially all employees of the Company in the United States are eligible to participate in the plan following completion of one year of service and attaining age 21. Pursuant to this plan, employees can contribute up to 15% of their compensation to the plan. The Company will match, in the form of Met-Pro common stock, up to 50% of the employee's contribution up to 4% of compensation. Defined Contribution Plan: Effective April 1, 1999, the Company implemented a 401(k) profit sharing plan. Substantially all employees of the Company in the United States are eligible to participate in the Plan following completion of one year of service and attaining age 21. Pursuant to this plan, employees can contribute up to 15% of their compensation to the Plan. The Company will match, in the form of Met-Pro common stock, up to 50% of the employee's contribution up to 4% of compensation. Employees' Stock Ownership Trust: The Company sponsors an employee stock ownership plan under which it makes discretionary contributions to the trust either in cash or in stock of the Company for salaried employees in the United States eligible to participate in the plan. The Company provided for cash contributions to the Employees' Stock Ownership Trust of $0, $0, and $225,000 in the years ended in 2001, 2000 and 1999, respectively. All shares are considered to be allocated to participants or to be released for allocation to participants, and are included in the earnings per share computations. Stock Option Plans: The Company accounts for stock options in accordance with APB No. 25, "Accounting for Stock Issued to Employees", and related Interpretations. The pro forma disclosures required by SFAS No. 123, "Accounting for Stock-Based Compensation", are not presented since the impact on the Company's financial statements for the periods presented is de minimis. In 1991, the Board of Directors of the Company approved a stock option plan covering 100,000 shares (increased to 225,000 shares after giving effect to stock splits and stock dividends), that was approved by the Company's stockholders at the 1992 meeting of stockholders (the "1992 Plan"). In 1997, the Board of Directors of the Company approved a stock option plan covering 350,000 shares that was approved by the Company's stockholders at the 1997 meeting of stockholders (the "1997 Plan"). Both of these plans contain anti-dilution provisions that apply to stock splits and stock dividends declared by the Company. 29 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
The status of the plans was as follows: 1992 Plan 2001 2000 1999 ----------------------------------------------------------------------------------------- Options outstanding at February 1 121,025 135,525 183,250 Grants - - - Exercises - 3,000 47,725 Cancellations - 11,500 - Options outstanding at January 31 121,025 121,025 135,525 Options price range at January 31 $5.00 $5.00 $5.00 to to to $13.13 $13.13 $13.13 Options exercisable at January 31 121,025 121,025 131,025 ----------------------------------------------------------------------------------------- Options available for grant at January 31 0 0 0 ========================================================================================= 1997 Plan 2001 2000 1999 ----------------------------------------------------------------------------------------- Options outstanding at February 1 134,950 33,500 20,000 Grants 1,325 118,450 23,500 Exercises - - - Cancellations 4,200 17,000 10,000 Options outstanding at January 31 132,075 134,950 33,500 Options price range at January 31 $9.75 $9.98 $12.00 to to to $15.50 $15.50 $15.50 Options exercisable at January 31 95,324 55,151 22,500 ----------------------------------------------------------------------------------------- Options available for grant at January 31 186,725 188,050 306,500 ========================================================================================= The weighted average exercise prices of the Company's stock option plans were as follows: 2001 2000 1999 ----------------------------------------------------------------------------------------- Options outstanding at February 1 $9.76 $9.68 $8.84 Grants $9.75 $10.12 $13.69 Exercises - $5.00 $7.59 Cancellations $9.88 $11.31 $12.00 Options outstanding at January 31 $9.75 $9.76 $9.68
30 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued) NOTE 10: OTHER INCOME, NET Other income, net, was comprised of the following: 2001 2000 1999 ------------------------------------------------------------------ Gain/(loss) on sale of property and equipment ($12,656) $1,096 $6,590 Other, primarily interest income 537,385 469,912 612,117 ------------------------------------------------------------------ $524,729 $471,008 $618,707 ================================================================== NOTE 11: BUSINESS SEGMENT DATA The Company's operations are conducted in two business segments as follows: the manufacture and sale of product recovery/pollution control equipment, and the manufacture and sale of fluid handling equipment. No significant intercompany revenue is realized by either business segment. Interest income and expense are not included in the measure of segment profit reviewed by management. Income taxes are also not included in the measure of segment operating profit reviewed by management. Financial information by business segment is shown on page 20. NOTE 12: GEOGRAPHIC INFORMATION Transfers between geographic areas are accounted for at cost and consistent with rules and regulations of governing tax authorities. Such transfers are eliminated in the consolidated financial statements. Income from operations by geographic segment includes an allocation of general corporate expenses. Identifiable assets are those that can be directly associated with the geographic area. Geographic information for the three years ended January 31 is presented in the following table:
2001 2000 1999 --------------------------------------------------------------------------------------------------- Net sales: United States $64,569,224 $65,698,081 $56,229,689 Foreign 16,634,326 12,751,911 11,160,799 --------------------------------------------------------------------------------------------------- $81,203,550 $78,449,992 $67,390,488 =================================================================================================== Income from operations: United States $10,822,911 $10,144,373 $10,017,987 Foreign 1,690,975 1,266,306 1,181,880 --------------------------------------------------------------------------------------------------- $12,513,886 $11,410,679 $11,199,867 =================================================================================================== Total assets: United States $64,620,734 $63,774,777 $68,284,881 Foreign 4,530,607 4,867,206 4,603,760 --------------------------------------------------------------------------------------------------- $69,151,341 $68,641,983 $72,888,641 ===================================================================================================
31 QUARTERLY FINANCIAL DATA (Unaudited)
Earnings Earnings Per Share, Per Share, 2000 Net Sales Gross Profit Net Income Basic Diluted ----------------------------------------------------------------------------------------------------------------------- First Quarter $20,828,028 $7,101,713 $1,871,842 $.28 $.28 Second Quarter 20,538,207 6,967,618 1,877,136 .28 .28 Third Quarter 17,846,269 6,318,206 1,701,663 .26 .26 Fourth Quarter 19,237,488 6,416,862 1,622,001 .25 .25 Earnings Earnings Per Share, Per Share, 2001 Net Sales Gross Profit Net Income Basic Diluted ----------------------------------------------------------------------------------------------------------------------- First Quarter $20,250,931 $6,777,556 $1,753,284 $.28 $.28 Second Quarter 20,258,228 7,142,582 1,930,519 .31 .31 Third Quarter 21,258,013 7,192,598 2,016,979 .33 .33 Fourth Quarter 19,436,378 6,848,418 2,072,938 .34 .34
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure: During the fiscal year ended January 31, 2001, there has been no change in accountants and no disagreements on accounting and financial disclosure. PART III Item 10. Directors and Executive Officers of the Registrant: The information required by this Item (except for the information set forth on page 5 with respect to Executive Officers of the Registrant) is hereby incorporated by reference to the information set forth under the captions "Election of Directors" and "Security Ownership of Certain Beneficial Owners and Management" contained in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company's fiscal year. Item 11. Executive Compensation: The information required by this Item is hereby incorporated by reference to the information set forth under the caption "Executive Compensation and Other Information" contained in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company's fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management: The information required by this Item is hereby incorporated by reference to the information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" contained in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company's fiscal year. Item 13. Certain Relationships and Related Transactions: The information required by this Item is hereby incorporated by reference to the information set forth under the captions "Election of Directors" and "Certain Business Relationships" contained in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company's fiscal year. 32 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K: A. Financial statements: Financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements and Supplementary Data on page 14. B. Exhibits: The following exhibits are filed herewith or incorporated by reference: (2)(a) Agreement and Plan of Merger dated September 12, 1996 by and between Met-Pro Corporation, Met-Pro Acquisition Corporation, Strobic Air Corporation, Lynn T. Secrest, Ronald H. Secrest, Richard P. Secrest and John W. Stone, III. Incorpora ted by reference to Registrant's Registration Statement on Form S-3 (File No. 333-13929), declared effective December 31, 1996. (2)(b) Asset Purchase Agreement dated October 29, 1998 among Flex-Kleen Corporation, Flex-Kleen Canada Limited, Aqua Alliance, Inc., AWT Air Company Inc., 1321249 Ontario Limited and Met-Pro Corporation. Incorporated by reference to Company's R egistration Statement on Form 8-K filed on November 13, 1998 and amended on January 12, 1999. (3)(a) Restated Certificate of Incorporation, incorporated by reference to Company's Registration Statement on Form 8-A filed June 12, 1998. (3)(b) Certificate of Amendment of Certificate of Incorporation, incorporated by reference to Company's annual report on Form 10-K filed April 24, 1998. (3)(c) By-Laws as amended through February 7, 1968, incorporated by reference to Company's Registration Statement No. 2-26979, declared effective October 15, 1968. (3)(d) Amendments to By-Laws adopted June 3, 1987, July 18, 1978 and June 15, 1977, incorporated by reference to Company's Registration Statement on Form 8-A filed June 12, 1998. (3)(e) Amendments to By-Laws adopted February 21, 2000, incorporated by reference to the Company's annual report on Form 10-K filed April 27, 2000. (4) Stockholders' Rights Plan, incorporated by reference to Company's Current Report on Form 8-K filed on January 6, 2000. (10)(a) The 1992 Stock Option Plan*, incorporated by reference to Company's Registration Statement on Form S-8 filed June 13, 2000. (10)(b) The 1997 Stock Option Plan*, incorporated by reference to Company's Registration Statement on Form S-8 filed January 16, 1998. (10)(c) Amendment No. 1 to the 1992 Stock Option Plan.* (10)(d) Amendment No. 1 to the 1997 Stock Option Plan.* (10)(e) Key Employee Severance Agreement between Met-Pro Corporation and William L. Kacin.* (10)(f) Key Employee Severance Agreement between Met-Pro Corporation and Gary J. Morgan.* (10)(g) Key Employee Severance Agreement between Met-Pro Corporation and Raymond J. De Hont.* (10)(h) Amendment to Key Employee Severance Agreement between Met-Pro Corporation and William L. Kacin.* (10)(i) Amendment to Key Employee Severance Agreement between Met-Pro Corporation and Gary J. Morgan.* 33 (10)(j) The Company's Director's Pension Plan.* (10)(k) Amendment 1 of the Company's Director's Pension Plan.* (10)(l) Amendment 2 of the Company's Director's Pension Plan.* (10)(m) Restoration Plan, effective February 1, 2000.* (10)(n) Amendment 1 of the Company's Restoration Plan.* (10)(o) Additional 1% Supplemental Executive Retirement Plan, effective February 1, 2000.* (11) Statement Re-computation of Per Share Earnings. See page 16 of Item 8. (21) List of Subsidiaries of Registrant:
Corporate Jurisdiction of Name under which Business Name Incorporation is Conducted --------- --------------- ------------------------- Mefiag B.V. The Netherlands Mefiag B.V., a wholly- owned subsidiary of Met-Pro Corporation Flex-Kleen Canada Inc. Ontario, Canada Flex-Kleen Canada Inc., a wholly-owned subsidiary of Met-Pro Corporation Strobic Air Corporation Delaware Strobic Air Corporation, a wholly-owned subsidiary of Met-Pro Corporation
(23) Consent of Independent Public Accountants. (27) Financial Data Schedule. The following exhibits required under Item 601 of Regulation S-K promulgated by the Securities & Exchange Commission have been omitted because they are either inapplicable or non-existent: (9) Voting trust agreements. (12) Statements re computation of ratios. (13) Annual report to security holders. (16) Letter re change in certifying accountant. (18) Letter re change in accounting principles. (22) Published report regarding matters submitted to vote of security holders. (24) Power of attorney. (99) Additional exhibits. - Notes - * Indicates management contract or compensatory plan or arrangement. C. Reports on Form 8-K: No reports on Form 8-K were filed during the three month period ended January 31, 2001. 34 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. MET-PRO CORPORATION May 4, 2001 By: /s/ William L. Kacin ---------------- ------------------------------- Date William L. Kacin Chairman, Chief Executive Officer and President Pursuant to the requirement 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.
Signature Title Date --------- ----- --------- /s/ William L. Kacin Chairman, Chief May 4, 2001 ---------------------------- Executive Officer William L. Kacin and President /s/ Gary J. Morgan Vice President-Finance, May 4, 2001 ---------------------------- Secretary, Treasurer, Gary J. Morgan Chief Financial Officer, Chief Accounting Officer and Director /s/ Thomas F. Hayes Director May 4, 2001 ---------------------------- Thomas F. Hayes /s/ Alan Lawley Director May 4, 2001 ---------------------------- Alan Lawley /s/ Nicholas DeBenedictis Director May 4, 2001 ---------------------------- Nicholas DeBenedictis /s/ Jeffrey H. Nicholas Director May 4, 2001 ---------------------------- Jeffrey H. Nicholas /s/ Michael J. Morris Director May 4, 2001 ---------------------------- Michael J. Morris
35 (LOGO OMITTED)