10-Q 1 july2001.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY 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 the quarter ended: July 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 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the Registrant's common stock (par value $.10 per share) is 6,153,275 (as of July 31, 2001). ================================================================================ MET-PRO CORPORATION INDEX PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Consolidated balance sheet as of July 31, 2001 and January 31, 2001.......................................................... 2 Consolidated statement of operations for the six-month and three-month periods ended July 31, 2001 and 2000........................................................ 3 Consolidated statement of stockholders' equity for the six-month periods ended July 31, 2001 and 2000.............................................. 4 Consolidated statement of cash flows for the six-month periods ended July 31, 2001 and 2000........................................................ 5 Notes to consolidated financial statements.......................................................... 6 Report of independent accountants................................................................... 8 Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations................................................................... 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings.............................................................................. 13 Item 2. Changes in Securities and Use of Proceeds...................................................... 13 Item 3. Defaults Upon Senior Securities................................................................ 13 Item 4. Submissions of Matters to a Vote of Security Holders........................................... 13 Item 5. Other Information.............................................................................. 14 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Required by Item 601 of Regulation S-K......................................... 14 (b) Reports on Form 8-K..................................................................... 14 SIGNATURES................................................................................................... 15
-1- MET-PRO CORPORATION CONSOLIDATED BALANCE SHEET (unaudited) PART I - FINANCIAL INFORMATION Item 1. Financial Statements
July 31, January 31, ASSETS 2001 2001 ---------------------------------------------------------------------------------------------------------------- Current assets Cash and cash equivalents $8,609,876 $8,510,045 Accounts receivable, net of allowance for doubtful accounts of approximately $269,000 and $218,000, respectively 13,459,230 14,208,689 Inventories - Note 3 14,050,983 13,085,969 Prepaid expenses, deposits and other current assets 1,305,026 958,722 Deferred income taxes 648,834 648,834 ---------------------------------------------------------------------------------------------------------------- Total current assets 38,073,949 37,412,259 Property, plant and equipment, net 13,211,051 13,009,247 Costs in excess of net assets of businesses acquired, net 18,028,619 18,276,472 Other assets 409,162 453,363 ---------------------------------------------------------------------------------------------------------------- Total assets $69,722,781 $69,151,341 ================================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY ---------------------------------------------------------------------------------------------------------------- Current liabilities Current portion of long-term debt $1,424,985 $1,833,014 Accounts payable 4,281,157 4,284,687 Accrued salaries, wages and expenses 4,836,128 5,704,372 Payroll and other taxes payable 33,764 8,808 Dividend payable 523,010 517,669 Customers' advances 544,694 609,445 ---------------------------------------------------------------------------------------------------------------- Total current liabilities 11,643,738 12,957,995 Long-term debt 7,500,000 8,100,000 Other non-current liabilities 543,601 499,395 Deferred income taxes 518,323 532,585 ---------------------------------------------------------------------------------------------------------------- Total liabilities 20,205,662 22,089,975 ---------------------------------------------------------------------------------------------------------------- Stockholders' equity Common stock, $.10 par value; 18,000,000 shares authorized, 7,213,068 and 7,206,583 shares issued, of which 1,059,793 and 1,116,428 shares were reacquired and held in treasury at the respective dates 721,307 720,658 Additional paid-in capital 7,808,481 8,139,799 Retained earnings 54,326,793 51,880,800 Accumulated other comprehensive loss (663,754) (491,163) Treasury stock, at cost (12,675,708) (13,188,728) ---------------------------------------------------------------------------------------------------------------- Total stockholders' equity 49,517,119 47,061,366 ---------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $69,722,781 $69,151,341 ================================================================================================================
See accompanying notes to consolidated financial statements. -2- MET-PRO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
Six Months Ended Three Months Ended July 31, July 31, 2001 2000 2001 2000 ----------------------------------------------------------------------------------------------------------------------------- Net sales $37,927,825 $40,509,159 $20,371,781 $20,258,228 Cost of goods sold 24,581,365 26,589,021 13,442,979 13,115,646 ----------------------------------------------------------------------------------------------------------------------------- Gross profit 13,346,460 13,920,138 6,928,802 7,142,582 Operating expenses Selling 3,677,916 3,689,034 1,834,209 1,877,455 General and administrative 4,073,046 4,295,042 2,160,159 2,177,998 ----------------------------------------------------------------------------------------------------------------------------- 7,750,962 7,984,076 3,994,368 4,055,453 ----------------------------------------------------------------------------------------------------------------------------- Income from operations 5,595,498 5,936,062 2,934,434 3,087,129 Interest expense (290,997) (360,681) (139,928) (175,850) Other income, net 194,919 225,884 108,542 128,909 ----------------------------------------------------------------------------------------------------------------------------- Income before taxes 5,499,420 5,801,265 2,903,048 3,040,188 Provision for taxes 2,007,286 2,117,462 1,046,629 1,109,669 ----------------------------------------------------------------------------------------------------------------------------- Net income $3,492,134 $3,683,803 $1,856,419 $1,930,519 ============================================================================================================================= Earnings per share, basic (1) $.57 $.59 $.30 $.31 Earnings per share, diluted (2) $.57 $.59 $.30 $.31 Cash dividend per share - declared (3) $.17 $.16 $.085 $.08 Cash dividend per share - paid (3) $.17 $.16 $.085 $.08 =============================================================================================================================
(1) Basic earnings per share are based upon the weighted average number of shares outstanding of 6,124,960 and 6,217,327 in the six-month periods ended July 31, 2001 and 2000, respectively, and 6,118,371 and 6,248,061 in three-month periods ended July 31, 2001 and 2000, respectively. (2) Diluted earnings per share are based on the weighted average number of shares outstanding of 6,174,866 and 6,230,215 in the six-month periods ended July 31, 2001 and 2000, respectively, and 6,170,706 and 6,259,884 in the three-month periods ended July 31, 2001 and 2000, respectively. (3) The Board of Directors declared quarterly dividends of $.085 per share payable on March 9, 2001, June 8, 2001 and September 10, 2001 to stockholders of record as of February 23, 2001, May 25, 2001 and August 31, 2001, respectively. Quarterly dividends of $.08 per share were paid on March 10, 2000, June 9, 2000 and September 11, 2000 to stockholders of record as of February 25, 2000, May 26, 2000 and August 28, 2000, respectively. See accompanying notes to consolidated financial statements. -3- MET-PRO CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited)
Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings Income/(Loss) Stock Total ------------------------------------------------------------------------------------------------------------------------------------ Balances, January 31, 2001 $720,658 $8,139,799 $51,880,800 ($491,163) ($13,188,728) $47,061,366 Comprehensive income: Net income 3,492,134 Foreign currency translation (172,591) Total comprehensive income 3,319,543 Dividends paid, $.085 per share (523,131) (523,131) Dividends declared, $.085 per share (523,010) (523,010) Proceeds from issuance of common stock under dividend reinvestment plan (6,485 shares) 649 74,360 75,009 Stock option transactions (405,678) 1,497,931 1,092,253 Purchase of 69,390 shares of treasury stock (984,911) (984,911) ------------------------------------------------------------------------------------------------------------------------------------ Balances, July 31, 2001 $721,307 $7,808,481 $54,326,793 ($663,754) ($12,675,708) $49,517,119 ==================================================================================================================================== Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings Income/(Loss) Stock Total ------------------------------------------------------------------------------------------------------------------------------------ Balances, January 31, 2000 $718,919 $7,973,873 $46,087,476 ($403,993) ($10,169,942) $44,206,333 Comprehensive income: Net income 3,683,803 Foreign currency translation (103,790) Total comprehensive income 3,580,013 Dividends paid, $.08 per share (489,000) (489,000) Dividends declared, $.08 per share (486,849) (486,849) Proceeds from issuance of common stock under dividend reinvestment plan (8,779 shares) 878 79,230 80,108 Purchase of 314,412 shares of treasury stock (2,978,555) (2,978,555) ------------------------------------------------------------------------------------------------------------------------------------ Balances, July 31, 2000 $719,797 $8,053,103 $48,795,430 ($507,783) ($13,148,497) $43,912,050 ====================================================================================================================================
See accompanying notes to consolidated financial statements. -4- MET-PRO CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Six Months Ended July 31, 2001 2000 -------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities Net Income $3,492,134 $3,683,803 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,022,172 1,109,145 Deferred income taxes (14,250) (14,249) (Gain) loss on sale of property and equipment, net (9,254) 5,963 Allowance for doubtful accounts 50,946 (35,167) (Increase) decrease in operating assets Accounts receivable 633,640 (37,552) Inventories (1,025,646) 113,833 Prepaid expenses and other current assets (275,073) 362,324 Other assets (4,344) 34,422 Increase (decrease) in operating liabilities Accounts payable, accrued expenses and taxes (891,814) 37,843 Customers' advances (64,751) 539,278 Other non-current liabilities 44,206 41,832 -------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 2,957,966 5,841,475 -------------------------------------------------------------------------------------------------------------- Cash flows from investing activities Proceeds from sales of property and equipment 66,171 2,000 Acquisitions of property and equipment (1,018,332) (408,949) -------------------------------------------------------------------------------------------------------------- Net cash (used in) investing activities (952,161) (406,949) -------------------------------------------------------------------------------------------------------------- Cash flows from financing activities Reduction of debt (1,008,029) (1,003,317) Exercise of stock options 1,092,253 -- Payment of dividends (965,791) (920,191) Purchase of treasury shares (984,911) (2,978,555) -------------------------------------------------------------------------------------------------------------- Net cash (used in) financing activities (1,866,478) (4,902,063) -------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (39,496) (15,603) -------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 99,831 516,860 Cash and cash equivalents at February 1 8,510,045 6,331,556 -------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at July 31 $8,609,876 $6,848,416 ==============================================================================================================
See accompanying notes to consolidated financial statements. -5- MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Met-Pro Corporation and its wholly-owned subsidiaries, Strobic Air Corporation, Flex-Kleen Canada Inc., and Mefiag B.V. (collectively "Met-Pro" or the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. NOTE 2 - BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the financial position as of July 31, 2001 and the results of operations for the six-month and three-month periods ended July 31, 2001 and 2000, and changes in stockholders' equity and cash flows for the six-month periods then ended. The results of operations for the six-month and three-month periods ended July 31, 2001 and 2000 are not necessarily indicative of the results to be expected for the full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended January 31, 2001. NOTE 3 - INVENTORIES Inventories consisted of the following: July 31, January 31, 2001 2001 ------------- ------------- Raw materials $8,343,930 $7,770,874 Work in progress 1,689,860 1,573,802 Finished goods 4,017,193 3,741,293 ------------- ------------- $14,050,983 $13,085,969 ============= ============= NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION Net cash flow from operating activities reflect cash payments for interest and income taxes as follows: Six Months Ended July 31, 2001 2000 ------------- ------------- Cash paid during the period for: Interest $293,585 $230,042 Income taxes $1,958,655 $1,586,183 -6- MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 - 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 below:
Six Months Ended July 31, 2001 2000 --------------------------------- Net sales Product recovery/pollution control equipment $24,204,834 $25,940,266 Fluid handling equipment 13,722,991 14,568,893 ------------ ------------ $37,927,825 $40,509,159 ============ ============ Income from operations Product recovery/pollution control equipment $3,209,024 $3,257,483 Fluid handling equipment 2,386,474 2,678,579 ----------- ------------ $5,595,498 $5,936,062 =========== ============ July 31, January 31, 2001 2000 --------------------------------- Identifiable assets Product recovery/pollution control equipment $41,298,389 $40,274,449 Fluid handling equipment 18,903,957 18,785,577 ------------ ------------ 60,202,346 59,060,026 Corporate 9,520,435 10,091,315 ------------ ------------ $69,722,781 $69,151,341 ============ ============
NOTE 6 - NEW ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board ("FASB") issued FASB No. 141, "Business Combinations", and FASB No. 142, "Goodwill and Other Intangible Assets". FASB No. 141, which is effective for business combinations completed after June 30, 2001, requires among other things, that (1) the purchase method of accounting be used for all business combinations, (2) establishing specific criteria for the recognition of intangible assets separately from goodwill and (3) additional information about acquired intangible assets be provided. FASB No. 142, which will become effective for the Company prospectively as of February 1, 2002, primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. Among other things it requires that goodwill not be amortized for financial statement purposes; instead, management will be required to test goodwill for impairment at least annually. As a result, amortization of existing goodwill will cease as of January 31, 2002. NOTE 7 - ACCOUNTANTS' 10-Q REVIEW Margolis & Company P.C., the Company's independent accountants, has performed a limited review of the financial information included herein. Their report on such review accompanies this filing. -7- MET-PRO CORPORATION To the Board of Directors Met-Pro Corporation Harleysville, Pennsylvania We have reviewed the accompanying consolidated balance sheet of Met-Pro Corporation and its wholly-owned subsidiaries as of July 31, 2001 and the related consolidated statements of operations, for the six-month and three-month periods ended July 31, 2001 and 2000 and stockholders' equity and cash flows for the six-month periods ended July 31, 2001 and 2000. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of January 31, 2001 and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 22, 2001, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 31, 2001 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ Margolis & Company P.C. ---------------------------- Certified Public Accountants Bala Cynwyd, Pennsylvania August 16, 2001 -8- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations Results of Operations: The following table sets forth, for the six and three-month periods indicated, certain financial information derived from the Company's consolidated statement of operations expressed as a percentage of net sales.
Six Months Ended Three Months Ended July 31, July 31, 2001 2000 2001 2000 -------------------------------------------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 64.8% 65.6% 66.0% 64.7% -------------------------------------------------------------------------------------------------------------- Gross profit 35.2% 34.4% 34.0% 35.3% Selling 9.7% 9.1% 9.0% 9.3% General and administrative 10.7% 10.6% 10.6% 10.7% -------------------------------------------------------------------------------------------------------------- Income from operations 14.8% 14.7% 14.4% 15.3% Interest expense (.8%) (.9%) (.7%) (.9%) Other income, net .5% .5% .5% .6% -------------------------------------------------------------------------------------------------------------- Income before taxes 14.5% 14.3% 14.2% 15.0% Provision for taxes 5.3% 5.2% 5.1% 5.5% -------------------------------------------------------------------------------------------------------------- Net income 9.2% 9.1% 9.1% 9.5% ==============================================================================================================
Six Months Ended July 31, 2001 vs Six Months Ended July 31, 2000 Net sales for the six-month period ended July 31, 2001 were $37,927,825 compared to $40,509,159 for the six-month period ended July 31, 2000, a decrease of $2,581,334 or 6.3%. Sales in the Product Recovery/Pollution Control Equipment segment were $24,204,834 or $1,735,432 lower than the six-month period ended July 31, 2000 due to lower demand for our product recovery equipment. Sales in the Fluid Handling Equipment segment were $13,722,991 or $845,902 lower compared to the six-month period ended July 31, 2000 due primarily to decreased demand for our specialty pump equipment. We believe that the decreased demand in both business segments is attributed to a slowing economy. Backlog at July 31, 2001 totaled $9,947,194 compared to $14,268,534 for the period ended July 31, 2000. In addition, at July 31, 2001, the Company had $4,052,676 of orders which are not included in our backlog due to the Company's long-standing policy of not including these orders in backlog until engineering drawings are approved, compared to $3,323,362 at the period ended July 31, 2000. Net income for the six-month period ended July 31, 2001 was $3,492,134 compared to $3,683,803 for the six-month period ended July 31, 2000, a decrease of $191,669 or 5.2%. The decrease in net income is principally related to the lower sales in both of the Company's business segments during the period. The gross margin for the six-month period ended July 31, 2001 was 35.2% versus 34.4% for the same period in the prior year due to higher gross margins experienced in the Product Recovery/Pollution Control Equipment segment. Selling expense decreased $11,118 during the six-month period ended July 31, 2001 compared to the same period last year. Selling expense as a percentage of net sales was 9.7% for the six-month period ended July 31, 2001 compared to 9.1% for the six-month period ended July 31, 2000. -9- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... General and administrative expense was $4,073,046 for the six-month period ended July 31, 2001 compared to $4,295,042 for the same period last year, a decrease of $221,996. General and administrative expense as a percentage of net sales was 10.7% for the six-month period ended July 31, 2001 compared to 10.6% for the same period last year. Interest expense was $290,997 for the six-month period ended July 31, 2001 compared to $360,681 for the same period in the prior year, or a decrease of $69,684. The reduction is the result of reduced borrowings. Other income, net, decreased $30,965 for the six-month period ended July 31, 2001 compared to the six-month periods ended July 31, 2000. The effective tax rate for the six-month periods ended July 31, 2000 and 2001 was 36.5%. Three Months Ended July 31, 2001 vs Three Months Ended July 31, 2000 Net sales for the three-month period ended July 31, 2001 were $20,371,781 compared to $20,258,228 for the three-month period ended July 31, 2000, an increase of $113,553. Sales in the Product Recovery/Pollution Control Equipment segment were $13,843,124 or $952,241 higher than the three-month period ended July 31, 2000. Sales in the Fluid Handling Equipment segment were $6,528,657 or $838,688 lower compared to the three-month period ended July 31, 2000. Net income for the three-month period ended July 31, 2001 was $1,856,419 compared to $1,930,519 for the three-month period ended July 31, 2000, a decrease of $74,100 or 3.8%. The decrease in net income is related to the lower sales volume in the Fluid Handling Equipment segment for the three-month period ended July 31, 2001. The gross margin for the three-month period ended July 31, 2001 was 34.0% compared to 35.3% for the same period last year. The decrease is due to lower sales experienced in the Fluid Handling Equipment segment. Selling expenses decreased $43,246 during the three-month period ended July 31, 2001 compared to the same period last year. As a percentage of net sales, selling expense decreased to 9.0% for the three-month period ended July 31, 2001 from 9.3% for the three-month period ended July 31, 2000. General and administrative expense was $2,160,159 for the three-month period ended July 31, 2001 compared to $2,177,998 for the three-month period ended July 31, 2000, a decrease of $17,839. General and administrative expense for the three-month period ended July 31, 2001 was 10.6% of net sales, compared to 10.7% of net sales for the same period last year. Interest expense was $139,928 for the three-month period ended July 31, 2001 compared to $175,850 for the same period in the prior year, or a decrease of 20.4%. Other income, net, decreased $20,367 for the three-month period ended July 31, 2001 compared to the three-month period ended July 31, 2000. The effective tax rate for the three-month period ended July 31, 2001 was 36.1% compared to 36.5% for the three-month period ended July 31, 2000. Liquidity: The Company's cash and cash equivalents were $8,609,876 on July 31, 2001 compared to $8,510,045 on January 31, 2001, an increase of $99,831. This increase is the net result of the following occurring during this six-month -10- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... period: cash flows provided by operating activities of $2,957,966, proceeds received from the exercise of stock options totaling $1,092,253 and proceeds received from the sale of equipment amounting to $66,171, offset by the payment of quarterly cash dividends amounting to $965,791 (net of $75,009 of dividends utilized by stockholders for stock purchases under the Dividend Reinvestment Plan), payments on long-term debt totalling $1,008,029, purchases of treasury stock amounting to $984,911, investment in property and equipment amounting to $1,018,332 and exchange rate changes of $39,496. The Company's cash flows from operating activities are influenced by the timing of shipments and negotiated standard payment terms, including retention associated with major projects. Accounts receivable (net) amounted to $13,459,230 on July 31, 2001 compared to $14,208,689 on January 31, 2001, which represents a decrease of $749,459. The timing and size of shipments and retainage on contracts, especially in the Product Recovery/Pollution Control Equipment segment, will influence accounts receivable balances at any point in time. Inventories were $14,050,983 on July 31, 2001 compared to $13,085,969 on January 31, 2001, an increase of $965,014. Inventory balances fluctuate depending upon market demand, the size and timing of orders, and varying lead times required. Current liabilities amounted to $11,643,738 on July 31, 2001 compared to $12,957,995 on January 31, 2001, a decrease of $1,314,257. A reduction in accrued expenses, current portion of long-term debt and customer advances accounted for the decrease. 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. Cash flows, in general, have exceeded the current needs of the Company. The Company presently foresees no change in this situation in the immediate future. Capital Resources and Requirements: Cash flows provided by operating activities for the six-month period ended July 31, 2001 amounted to $2,957,966, compared with $5,841,475 for the six-month period ended July 31, 2000, a decrease of $2,883,509. This decrease in cash flows from operating activities was due principally to the increase in inventories and prepaid expenses and a decrease in accrued expenses for the period ended July 31, 2001. Cash flows used in investing activities for the six-month period ended July 31, 2001 amounted to $952,161, compared with $406,949 for the six-month period ended July 31, 2000. The Company's investing activities principally consist of the acquisitions of property, plant and equipment in the two operating segments. Financing activities for the six-month period ended July 31, 2001 utilized $1,866,478 of available resources compared to $4,902,063 for the six-month period ended July 31, 2000. The 2001 activity is the result of the payment of quarterly cash dividends amounting to $965,791 (net of $75,009 of dividends utilized for stock purchases under the Dividend Reinvestment Plan), reduction of long-term debt totaling $1,008,029, and the purchase of treasury stock totaling $984,911, offset by proceeds received by the exercise of stock options amounting to $1,092,253. The Company paid $1,008,029 of scheduled debt during the six-month period ended July 31, 2001. The percentage of long-term debt to equity at July 31, 2001 decreased to 15.1% compared to 17.2% at January 31, 2001. The Board of Directors declared quarterly dividends of $.085 per share payable on March 9, 2001, June 8, 2001, and September 10, 2001 to stockholders of record as of February 23, 2001, May 25, 2001, and August 31, 2001, respectively. -11- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... During the six-month period ended July 31, 2001 the Company repurchased a total of 69,390 shares under the 350,000 share repurchase program authorized on February 21, 2000, at a cost of $984,911, which was charged to stockholders' equity. Consistent with past practices, the Company intends to continue to invest in new product development programs and to make capital expenditures to support the ongoing operations during the coming year. The Company expects to finance all capital expenditure requirements through cash flows generated from operations. Cautionary Statement Concerning Forward-Looking Statements: In this Management's Discussion and Analysis, and elsewhere in this Quarterly Report, we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risk and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words "anticipates", "believes", "estimates", "hopes" or other similar expressions. For those statements, we claim protection of the safe harbor for all forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors, along with those discussed elsewhere in our filings with the Securities and Exchange Commission including without limitation our Annual Report on Form 10-K for the year ended January 31, 2001, 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 changes in our accounting rules promulgated by regulatory agencies, including the Securities and Exchange Commission, 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. -12- MET-PRO CORPORATION PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submissions of Matters to a Vote of Security Holders The annual meeting of the Company's stockholders was held on June 20, 2001. At that meeting, three proposals were submitted to a vote of the Company's stockholders. Proposal 1 was a proposal to elect two Directors (with William L. Kacin and Nicholas DeBenedictis being the nominees) to serve until the 2004 Annual Meeting of Stockholders. Proposal 2 was to approve the adoption of the Met-Pro Corporation Year 2001 Equity Incentive Plan. Proposal 3 was to ratify the selection of Margolis & Company P.C. as independent certified public accountants for the Company's fiscal year ending January 31, 2002. At the close of business on the record date for the meeting (which was April 30, 2001), there were 6,099,365 shares of common stock outstanding and entitled to be voted at the meeting. Holders of 5,731,333 shares of common stock (representing a like number of votes) were present at the meeting, either in person or by proxy. The following table sets forth the results of the voting on each of the proposals:
Number of Votes Proposals For Against Abstain Unvoted ------------------------------------------------------------------------------------------------------------------------------- Proposal 1 - Election of Directors William L. Kacin 5,416,897 314,436 -- -- Nicholas DeBenedictis 5,515,431 215,902 -- -- ------------------------------------------------------------------------------------------------------------------------------- Proposal 2 - Adoption of Met-Pro Corporation Year 2001 Equity Incentive Plan 3,167,293 467,861 156,241 1,939,938 ------------------------------------------------------------------------------------------------------------------------------- Proposal 3 - Selection of Margolis & Company P.C. 5,626,528 40,780 20,972 43,053 -------------------------------------------------------------------------------------------------------------------------------
Consequently, all proposals were adopted by the stockholders. -13- MET-PRO CORPORATION Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Required by Item 601 of Regulation S-K None (b) Reports on Form 8-K There were no Reports on Form 8-K filed during the six-month period ended July 31, 2001. -14- MET-PRO CORPORATION SIGNATURES Pursuant to the requirements 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 -------------------------------------------- (Registrant) August 30, 2001 /s/ William L. Kacin -------------------------------------------- William L. Kacin, Chairman, President and Chief Executive Officer August 30, 2001 /s/ Gary J. Morgan -------------------------------------------- Gary J. Morgan, Vice President of Finance, Secretary and Treasurer, Chief Financial Officer, Chief Accounting Officer and Director -15-