-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IRolxJA0TxN7ovtt6G9kI6rxTDUnAOR+a9xkZYTYFXHYglC3Rqah4yZg/EmBshJW TNCIUSRPaeQNAt+bMjfOeg== 0000065201-01-500012.txt : 20020412 0000065201-01-500012.hdr.sgml : 20020412 ACCESSION NUMBER: 0000065201-01-500012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011031 FILED AS OF DATE: 20011204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MET PRO CORP CENTRAL INDEX KEY: 0000065201 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL & COMMERCIAL FANS & BLOWERS & AIR PURIFYING EQUIP [3564] IRS NUMBER: 231683282 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07763 FILM NUMBER: 1806084 BUSINESS ADDRESS: STREET 1: 160 CASSELL ROAD CITY: HARLEYSVILLE STATE: PA ZIP: 19438 BUSINESS PHONE: 2157236751 MAIL ADDRESS: STREET 1: 160 CASSELL ROAD STREET 2: BOX 144 CITY: HARLEYSVILLE STATE: PA ZIP: 19438 FORMER COMPANY: FORMER CONFORMED NAME: MET PRO INC DATE OF NAME CHANGE: 19661026 FORMER COMPANY: FORMER CONFORMED NAME: MET PRO WATER TREATMENT CORP DATE OF NAME CHANGE: 19740924 10-Q 1 october2001.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: October 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 6,080,106 (as of October 31, 2001). ================================================================================ MET-PRO CORPORATION INDEX PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Consolidated balance sheet as of October 31, 2001 and January 31, 2001....................................................... 2 Consolidated statement of operations for the nine-month and three-month periods ended October 31, 2001 and 2000..................................................... 3 Consolidated statement of stockholders' equity for the nine-month periods ended October 31, 2001 and 2000.......................................... 4 Consolidated statement of cash flows for the nine-month periods ended October 31, 2001 and 2000..................................................... 5 Notes to consolidated financial statements........................................................ 6 Report of independent accountants................................................................. 9 Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations................................................................... 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings........................................................................... 14 Item 2. Changes in Securities and Use of Proceeds................................................... 14 Item 3. Defaults Upon Senior Securities............................................................. 14 Item 4. Submissions of Matters to a Vote of Security Holders........................................ 14 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
October 31, January 31, ASSETS 2001 2001 - ---------------------------------------------------------------------------------------------------------------- Current assets Cash and cash equivalents $10,316,035 $8,510,045 Accounts receivable, net of allowance for doubtful accounts of approximately $238,000 and $218,000, respectively 11,445,923 14,208,689 Inventories - Note 3 14,220,332 13,085,969 Prepaid expenses, deposits and other current assets 931,788 958,722 Deferred income taxes 648,834 648,834 - ---------------------------------------------------------------------------------------------------------------- Total current assets 37,562,912 37,412,259 Property, plant and equipment, net 12,572,418 13,009,247 Costs in excess of net assets of businesses acquired, net 17,904,693 18,276,472 Other assets 389,392 453,363 - ---------------------------------------------------------------------------------------------------------------- Total assets $68,429,415 $69,151,341 ================================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------------------------------------------------------------------------------- Current liabilities Current portion of long-term debt $1,220,036 $1,833,014 Accounts payable 3,500,122 4,284,687 Accrued salaries, wages and expenses 4,741,598 5,704,372 Payroll and other taxes payable 71,104 8,808 Dividend payable 516,809 517,669 Customers' advances 443,897 609,445 - ---------------------------------------------------------------------------------------------------------------- Total current liabilities 10,493,566 12,957,995 Long-term debt 7,200,000 8,100,000 Other non-current liabilities 565,704 499,395 Deferred income taxes 511,204 532,585 - ---------------------------------------------------------------------------------------------------------------- Total liabilities 18,770,474 22,089,975 - ---------------------------------------------------------------------------------------------------------------- Stockholders' equity Common stock, $.10 par value; 18,000,000 shares authorized, 7,216,099 and 7,206,583 shares issued, of which 1,135,993 and 1,116,428 shares were reacquired and held in treasury at the respective dates 721,610 720,658 Additional paid-in capital 7,845,163 8,139,799 Retained earnings 55,165,291 51,880,800 Accumulated other comprehensive loss (588,891) (491,163) Treasury stock, at cost (13,484,232) (13,188,728) - ---------------------------------------------------------------------------------------------------------------- Total stockholders' equity 49,658,941 47,061,366 - ---------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $68,429,415 $69,151,341 ================================================================================================================
See accompanying notes to consolidated financial statements. -2- MET-PRO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
Nine Months Ended Three Months Ended October 31, October 31, 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- Net sales $54,291,770 $61,767,172 $16,363,945 $21,258,013 Cost of goods sold 35,587,902 40,654,436 11,006,537 14,065,415 - ---------------------------------------------------------------------------------------------------------------------------- Gross profit 18,703,868 21,112,736 5,357,408 7,192,598 Operating expenses Selling 5,433,301 5,469,811 1,755,385 1,780,777 General and administrative 5,928,874 6,449,342 1,855,828 2,154,300 - ---------------------------------------------------------------------------------------------------------------------------- 11,362,175 11,919,153 3,611,213 3,935,077 - ---------------------------------------------------------------------------------------------------------------------------- Income from operations 7,341,693 9,193,583 1,746,195 3,257,521 Interest expense (431,367) (534,376) (140,370) (173,695) Other income, net 723,466 369,224 528,547 143,340 - ---------------------------------------------------------------------------------------------------------------------------- Income before taxes 7,633,792 9,028,431 2,134,372 3,227,166 Provision for taxes 2,786,333 3,327,649 779,047 1,210,187 - ---------------------------------------------------------------------------------------------------------------------------- Net income $4,847,459 $5,700,782 $1,355,325 $2,016,979 ============================================================================================================================ Earnings per share, basic (1) $.79 $.92 $.22 $.33 Earnings per share, diluted (2) $.79 $.92 $.22 $.33 Cash dividend per share - declared (3) $.255 $.24 $.085 $.08 Cash dividend per share - paid (3) $.255 $.24 $.085 $.08 ============================================================================================================================
(1) Basic earnings per share are based upon the weighted average number of shares outstanding of 6,118,139 and 6,173,505 in the nine-month periods ended October 31, 2001 and 2000, respectively, and 6,123,346 and 6,185,487 in three-month periods ended October 31, 2001 and 2000, respectively. (2) Diluted earnings per share are based on the weighted average number of shares outstanding of 6,155,894 and 6,189,773 in the nine-month periods ended October 31, 2001 and 2000, respectively, and 6,165,022 and 6,200,884 in the three-month periods ended October 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, September 10, 2001 and December 10, 2001 to stockholders of record as of February 23, 2001, May 25, 2001, August 31, 2001 and November 30, 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 (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 4,847,459 Foreign currency translation (97,728) Total comprehensive income 4,749,731 Dividends paid, $.17 per share (1,046,159) (1,046,159) Dividends declared, $.085 per share (516,809) (516,809) Proceeds from issuance of common stock under dividend reinvestment plan (9,516 shares) 952 111,042 111,994 Stock option transactions (405,678) 1,497,931 1,092,253 Purchase of 145,590 shares of treasury stock (1,793,435) (1,793,435) - ---------------------------------------------------------------------------------------------------------------------------- Balances, October 31, 2001 $721,610 $7,845,163 $55,165,291 ($588,891) ($13,484,232) $49,658,941 ============================================================================================================================
Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings (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 5,700,782 Foreign currency translation (275,647) Total comprehensive income 5,425,135 Dividends paid, $.16 per share (975,849) (975,849) Dividends declared, $.08 per share (486,879) (486,879) Proceeds from issuance of common stock under dividend reinvestment plan (13,155 shares) 1,316 122,325 123,641 Purchase of 318,412 shares of treasury stock (3,018,127) (3,018,127) - ---------------------------------------------------------------------------------------------------------------------------- Balances, October 31, 2000 $720,235 $8,096,198 $50,325,530 ($679,640) ($13,188,069) $45,274,254 ============================================================================================================================
See accompanying notes to consolidated financial statements. -4- MET-PRO CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Nine Months Ended October 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities Net Income $4,847,459 $5,700,782 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,531,771 1,673,515 Deferred income taxes (21,374) (21,374) (Gain) loss on sale of property and equipment, net (468,380) 9,584 Allowance for doubtful accounts 19,345 32,562 (Increase) decrease in operating assets Accounts receivable 2,699,142 287,722 Inventories (1,158,100) (145,353) Prepaid expenses and other current assets 97,559 176,945 Other assets (6,069) (59,209) Increase (decrease) in operating liabilities Accounts payable, accrued expenses and taxes (1,750,633) 1,040,400 Customers' advances (165,548) (476,781) Other non-current liabilities 66,310 62,748 - ----------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 5,691,482 8,281,541 - ----------------------------------------------------------------------------------------------------------------- Cash flows from investing activities Proceeds from sales of property and equipment 1,090,941 2,000 Acquisitions of property and equipment (1,291,302) (784,322) - ----------------------------------------------------------------------------------------------------------------- Net cash (used in) investing activities (200,361) (782,322) - ----------------------------------------------------------------------------------------------------------------- Cash flows from financing activities Reduction of debt (1,512,978) (1,505,834) Exercise of stock options 1,092,253 -- Payment of dividends (1,451,834) (1,363,507) Purchase of treasury shares (1,793,435) (3,018,127) - ----------------------------------------------------------------------------------------------------------------- Net cash (used in) financing activities (3,665,994) (5,887,468) - ----------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (19,137) (42,726) - ----------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 1,805,990 1,569,025 Cash and cash equivalents at February 1 8,510,045 6,331,556 - ----------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at October 31 $10,316,035 $7,900,581 =================================================================================================================
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 October 31, 2001 and the results of operations for the nine-month and three-month periods ended October 31, 2001 and 2000, and changes in stockholders' equity and cash flows for the nine-month periods then ended. The results of operations for the nine-month and three-month periods ended October 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: October 31, January 31, 2001 2001 -------------- ------------- Raw materials $8,444,496 $7,770,874 Work in progress 1,710,228 1,573,802 Finished goods 4,065,608 3,741,293 -------------- ------------- $14,220,332 $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: Nine Months Ended October 31, 2001 2000 -------------- -------------- Cash paid during the period for: Interest $434,209 $620,652 Income taxes $2,683,556 $2,595,536 -6- MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 - OTHER INCOME, NET Other income, net was comprised of the following:
Nine Months Ended Three Months Ended October 31, October 31, 2001 2000 2001 2000 ------------------------------ --------------------------- Gain/(loss) on sale of property and equipment $468,380 ($9,584) $459,126 ($3,621) Other, primarily interest income 255,086 378,808 69,421 146,961 ------------------------------ --------------------------- $723,466 $369,224 $528,547 $143,340 ============================== ===========================
NOTE 6 - 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:
Nine Months Ended October 31, 2001 2000 ------------------------------------- Net sales Product recovery/pollution control equipment $34,388,322 $39,616,215 Fluid handling equipment 19,903,448 22,150,957 ------------ ------------ $54,291,770 $61,767,172 ============ ============ Income from operations Product recovery/pollution control equipment $3,958,801 $5,325,510 Fluid handling equipment 3,382,892 3,868,073 ------------ ------------ $7,341,693 $9,193,583 ============ ============ October 31, January 31, 2001 2001 ------------------------------------- Identifiable assets Product recovery/pollution control equipment $38,587,805 $40,274,449 Fluid handling equipment 18,727,330 18,785,577 ------------ ------------ 57,315,135 59,060,026 Corporate 11,114,280 10,091,315 ------------ ------------ $68,429,415 $69,151,341 ============ ============
-7- MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - 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) specific criteria be established 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. While the company is still analyzing the effect of FASB No. 142 on the financial statements, a preliminary estimate of the annual amortization of goodwill and indefinite-lived intangible assets that will cease in the fiscal year ending January 31, 2003 is approximately $0.5 million. NOTE 8 - 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. -8- 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 October 31, 2001 and the related consolidated statements of operations for the nine-month and three-month periods ended October 31, 2001 and 2000 and stockholders' equity and cash flows for the nine-month periods ended October 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 November 16, 2001 -9- 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 nine and three-month periods indicated, certain financial information derived from the Company's consolidated statement of operations expressed as a percentage of net sales.
Nine Months Ended Three Months Ended October 31, October 31, 2001 2000 2001 2000 ----------------------------------------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 65.6% 65.8% 67.3% 66.2% ----------------------------------------------------------------------------------------------------------- Gross profit 34.4% 34.2% 32.7% 33.8% Selling 10.0% 8.9% 10.7% 8.4% General and administrative 10.9% 10.4% 11.3% 10.1% ----------------------------------------------------------------------------------------------------------- Income from operations 13.5% 14.9% 10.7% 15.3% Interest expense (.8%) (.9%) (.9%) (.8%) Other income, net 1.3% .6% 3.2% .7% ----------------------------------------------------------------------------------------------------------- Income before taxes 14.0% 14.6% 13.0% 15.2% Provision for taxes 5.1% 5.4% 4.7% 5.7% ----------------------------------------------------------------------------------------------------------- Net income 8.9% 9.2% 8.3% 9.5% -----------------------------------------------------------------------------------------------------------
Nine Months Ended October 31, 2001 vs Nine Months Ended October 31, 2000 Net sales for the nine-month period ended October 31, 2001 were $54,291,770 compared to $61,767,172 for the nine-month period ended October 31, 2000, a decrease of $7,475,402 or 12.1%. Sales in the Product Recovery/Pollution Control Equipment segment were $34,388,322 or $5,227,893 lower than the nine-month period ended October 31, 2000. Sales in the Fluid Handling Equipment segment were $19,903,448 or $2,247,509 lower compared to the nine-month period ended October 31. We believe that the decreased demand in both business segments is attributed to a slowing economy. Backlog at October 31, 2001 totaled $10,951,097 compared to $11,358,413 at October 31, 2000. In addition, at October 31, 2001, the Company had $4,003,234 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 $4,245,571 at October 31, 2000. Net income for the nine-month period ended October 31, 2001 was $4,847,459 compared to $5,700,782 for the nine-month period ended October 31, 2000, a decrease of $853,323 or 15.0%. 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 nine-month period ended October 31, 2001 was 34.4% versus 34.2% for the same period in the prior year. Selling expense decreased $36,510 during the nine-month period ended October 31, 2001 compared to the same period last year. Selling expense as a percentage of net sales was 10.0% for the nine-month period ended October 31, 2001 compared to 8.9% for the nine-month period ended October 31, 2000. -10- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... General and administrative expense was $5,928,874 for the nine-month period ended October 31, 2001 compared to $6,449,342 for the same period last year, a decrease of $520,468. General and administrative expense as a percentage of net sales was 10.9% for the nine-month period ended October 31, 2001 compared to 10.4% for the same period last year. This reduction is related to the overall reduction in compensation expense and amortization expenses for certain intangible assets which are fully amortized. Interest expense was $431,367 for the nine-month period ended October 31, 2001 compared to $534,376 for the same period in the prior year, a decrease of $103,009. The reduction is the result of lower principal balances on the scheduled repayment of debt. Other income, net, totaling $723,466 at October 31, 2001 consisted of interest income on short-term investments and a $468,380 net gain on the sale of property and equipment. In September 2001, the Company sold property and equipment associated with the Systems Division's operations in West Chester, Pennsylvania resulting in the majority of this gain. These operations were relocated to a leased facility in Towamencin, Pennsylvania. Other income, net, of $369,224 at October 31, 2000 consisted primarily of interest income on short-term investments. The effective tax rate for the nine-month period ended October 31, 2001 was 36.5% compared to 36.9% for the nine-month period ended October 31, 2000. Three Months Ended October 31, 2001 vs Three Months Ended October 31, 2000 Net sales for the three-month period ended October 31, 2001 were $16,363,945 compared to $21,258,013 for the three-month period ended October 31, 2000, a decrease of $4,894,068. Sales in the Product Recovery/Pollution Control Equipment segment were $10,183,488 or $3,492,461 lower than the three-month period ended October 31, 2000. Sales in the Fluid Handling Equipment segment were $6,180,457 or $1,401,607 lower compared to the three-month period ended October 31, 2000. Net income for the three-month period ended October 31, 2001 was $1,355,325 compared to $2,016,979 for the three-month period ended October 31, 2000, a decrease of $661,654 or 32.8%. The decrease in net income is related to the lower sales volume in both the Product Recovery/Pollution Control Equipment and Fluid Handling Equipment segments for the three-month period ended October 31, 2001. The gross margin for the three-month period ended October 31, 2001 was 32.7% compared to 33.8% for the same period last year. The decrease is related to lower gross margins in the Product Recovery/Pollution Control Equipment segment for the three-month period ended October 31, 2001. Selling expenses decreased $25,392 during the three-month period ended October 31, 2001 compared to the same period last year. As a percentage of net sales, selling expense increased to 10.7% for the three-month period ended October 31, 2001 from 8.4% for the three-month period ended October 31, 2000. General and administrative expense was $1,855,828 for the three-month period ended October 31, 2001 compared to $2,154,300 for the three-month period ended October 31, 2000, a decrease of $298,472. General and administrative expense for the three-month period ended October 31, 2001 was 11.3% of net sales, compared to 10.1% of net sales for the same period last year. Interest expense was $140,370 for the three-month period ended October 31, 2001 compared to $173,695 for the same period in the prior year, a decrease of 19.2%. Other income, net, totaling $528,547 for the three months ended October 31, 2001 consisted of interest income on short-term investments and a $459,126 net gain on the sale of property and equipment associated with the Systems Division's operations in West Chester, Pennsylvania. Other income, net, of $143,340 for the three months ended October 31, 2000 consisted primarily of interest income on short-term investments. -11- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... The effective tax rate for the three-month period ended October 31, 2001 was 36.5% compared to 37.5% for the three-month period ended October 31, 2000. Liquidity: The Company's cash and cash equivalents were $10,316,035 on October 31, 2001 compared to $8,510,045 on January 31, 2001, an increase of $1,805,990. This increase is the net result of the following occurring during this nine-month period: cash flows provided by operating activities of $5,691,482, proceeds received from the exercise of stock options totaling $1,092,253 and proceeds received from the sale of property and equipment amounting to $1,090,941, offset by the payment of quarterly cash dividends amounting to $1,451,834 (net of $111,994 of dividends utilized by stockholders for stock purchases under the Dividend Reinvestment Plan), payments on long-term debt totalling $1,512,978, purchases of treasury stock amounting to $1,793,435, investment in property and equipment amounting to $1,291,302 and exchange rate changes of $19,137. 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 $11,445,923 on October 31, 2001 compared to $14,208,689 on January 31, 2001, a decrease of $2,762,766. The timing and size of shipments and retainage on contracts, especially in the Product Recovery/Pollution Control Equipment segment combined with lower sales, resulted in this decrease. Inventories were $14,220,332 on October 31, 2001 compared to $13,085,969 on January 31, 2001, an increase of $1,134,363. Inventory balances fluctuate depending upon market demand, the size and timing of orders, and varying lead times required. Current liabilities amounted to $10,493,566 on October 31, 2001 compared to $12,957,995 on January 31, 2001, a decrease of $2,464,429. A reduction in accounts payable and 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 anticipates no change in this situation in the immediate future. Capital Resources and Requirements: Cash flows provided by operating activities for the nine-month period ended October 31, 2001 amounted to $5,691,482, compared with $8,281,541 for the nine-month period ended October 31, 2000, a decrease of $2,590,059. This decrease in cash flows from operating activities was due principally to the increase in inventories and a decrease in net income and accrued expenses for the period ended October 31, 2001, offset by an increase in accounts receivable collections. Cash flows used in investing activities for the nine-month period ended October 31, 2001 amounted to $200,361, compared with $782,322 for the nine-month period ended October 31, 2000. The Company's investing activities for the nine-month period ended October 31, 2001 consisted of the acquisitions of property and equipment in both business segments, offset by proceeds received from the sale of property and equipment associated with the Systems Division's operations in West Chester, Pennsylvania. The Company continues to invest in machinery and equipment, tooling, patterns and molds to improve efficiency and maintain our position in the markets in which we serve. -12- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... Financing activities for the nine-month period ended October 31, 2001 utilized $3,665,994 of available resources compared to $5,887,468 for the nine-month period ended October 31, 2000. The 2001 activity is the result of the payment of quarterly cash dividends amounting to $1,451,834 (net of $111,994 of dividends utilized by stockholders for stock purchases under the Dividend Reinvestment Plan), reduction of long-term debt totaling $1,512,978, and the purchase of treasury stock totaling $1,793,435, offset by proceeds received by the exercise of stock options amounting to $1,092,253. The Company paid $1,512,978 of scheduled debt during the nine-month period ended October 31, 2001. The percentage of long-term debt to equity at October 31, 2001 decreased to 14.5% 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, September 10, 2001 and December 10, 2001 to stockholders of record as of February 23, 2001, May 25, 2001, August 31, 2001 and November 30, 2001, respectively. During the nine-month period ended October 31, 2001, the Company had repurchased a total of 145,590 shares consisting of 96,499 shares under the Stock Repurchase Program authorized on February 21, 2000 and 49,091 shares under the Stock Repurchase Program authorized on December 15, 2000, at a cost of $1,793,435, 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 and the Financial Accounting Standards Board, 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. -13- 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 None 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 nine-month period ended October 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) December 4, 2001 /s/ William L. Kacin ----------------------------------- William L. Kacin, Chairman, President and Chief Executive Officer December 4, 2001 /s/ Gary J. Morgan ----------------------------------- Gary J. Morgan, Vice President of Finance, Secretary and Treasurer, Chief Financial Officer, Chief Accounting Officer and Director -15- -----END PRIVACY-ENHANCED MESSAGE-----