-----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, DJJKp2XPH8Bqt47b+Wttm6h0OYR2XFMuY24U9pWp4R2VWBFD/1OlSxIn33Rup/bb 1g8wr/lC9/OaFlz7k9ZJig== 0000065201-02-000006.txt : 20020909 0000065201-02-000006.hdr.sgml : 20020909 20020909134950 ACCESSION NUMBER: 0000065201-02-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020731 FILED AS OF DATE: 20020909 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: 02759410 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 july10q.txt MET-PRO CORPORATION 10Q ================================================================================ 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, 2002 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 6,210,391 (as of July 31, 2002). MET-PRO CORPORATION INDEX PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Consolidated balance sheet as of July 31, 2002 and January 31, 2002.......................................................... 2 Consolidated statement of operations for the six-month and three-month periods ended July 31, 2002 and 2001........................................ 3 Consolidated statement of stockholders' equity for the six-month periods ended July 31, 2002 and 2001.............................................. 4 Consolidated statement of cash flows for the six-month periods ended July 31, 2002 and 2001........................................................ 5 Notes to consolidated financial statements.......................................................... 6 Report of independent accountants................................................................... 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................... 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings........................................................................... 16 Item 2. Changes in Securities and Use of Proceeds................................................... 16 Item 3. Defaults Upon Senior Securities............................................................. 16 Item 4. Submission of Matters to a Vote of Security Holders......................................... 16 Item 5. Other Information........................................................................... 17 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Required by Item 601 of Regulation S-K......................................... 17 (b) Reports on Form 8-K..................................................................... 17 SIGNATURES................................................................................................... 18
1 MET-PRO CORPORATION CONSOLIDATED BALANCE SHEET (unaudited) PART I - FINANCIAL INFORMATION Item 1. Financial Statements
July 31, January 31, ASSETS 2002 2002 - ------------------------------------------------------------------------------------------------------------------ Current assets Cash and cash equivalents $12,551,935 $11,832,260 Accounts receivable, net of allowance for doubtful accounts of approximately $285,000 and $229,000, respectively 12,651,796 10,465,069 Inventories 13,845,640 13,701,676 Prepaid expenses, deposits and other current assets 872,964 911,457 Deferred income taxes 501,217 501,217 - ------------------------------------------------------------------------------------------------------------------ Total current assets 40,423,552 37,411,679 Property, plant and equipment, net 12,383,944 12,505,114 Costs in excess of net assets of businesses acquired, net 20,796,610 17,780,767 Other assets 407,634 372,632 - ------------------------------------------------------------------------------------------------------------------ Total assets $74,011,740 $68,070,192 ================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------------------ Current liabilities Current portion of long-term debt $1,536,926 $1,231,469 Accounts payable 4,077,780 3,094,300 Accrued salaries, wages and expenses 5,298,292 4,555,931 Payroll and other taxes payable 55,575 2,645 Dividend payable 527,526 517,070 Customers' advances 674,347 749,734 - ------------------------------------------------------------------------------------------------------------------ Total current liabilities 12,170,446 10,151,149 Long-term debt 7,619,195 7,125,195 Other non-current liabilities 35,523 34,424 Deferred income taxes 399,719 480,030 - ------------------------------------------------------------------------------------------------------------------ Total liabilities 20,224,883 17,790,798 - ------------------------------------------------------------------------------------------------------------------ Stockholders' equity Common stock, $.10 par value; 18,000,000 shares authorized, 7,223,725 and 7,219,165 shares issued, of which 1,013,334 and 1,135,993 shares were reacquired and held in treasury at the respective dates 722,372 721,916 Additional paid-in capital 8,161,503 7,879,368 Retained earnings 57,568,877 55,990,079 Accumulated other comprehensive loss (588,533) (827,737) Treasury stock, at cost (12,077,362) (13,484,232) - ------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 53,786,857 50,279,394 - ------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $74,011,740 $68,070,192 ==================================================================================================================
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, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ Net sales $34,471,963 $37,927,825 $18,278,083 $20,371,781 Cost of goods sold 22,766,658 24,581,365 12,101,609 13,442,979 - ------------------------------------------------------------------------------------------------------------------------------ Gross profit 11,705,305 13,346,460 6,176,474 6,928,802 - ------------------------------------------------------------------------------------------------------------------------------ Operating expenses Selling 3,643,497 3,677,916 1,868,673 1,834,209 General and administrative 3,847,768 4,073,046 2,023,639 2,160,159 - ------------------------------------------------------------------------------------------------------------------------------ 7,491,265 7,750,962 3,892,312 3,994,368 - ------------------------------------------------------------------------------------------------------------------------------ Income from operations 4,214,040 5,595,498 2,284,162 2,934,434 Interest expense (250,743) (290,997) (129,749) (139,928) Other income, net 119,330 194,919 53,012 108,542 - ------------------------------------------------------------------------------------------------------------------------------ Income before taxes 4,082,627 5,499,420 2,207,425 2,903,048 Provision for taxes 1,449,333 2,007,286 774,259 1,046,629 - ------------------------------------------------------------------------------------------------------------------------------ Net income $2,633,294 $3,492,134 $1,433,166 $1,856,419 ============================================================================================================================== Earnings per share, basic (1) $.43 $.57 $.23 $.30 Earnings per share, diluted (2) $.43 $.57 $.23 $.30 Cash dividend per share - declared (3) $.17 $.17 $.085 $.085 Cash dividend per share - paid (3) $.17 $.17 $.085 $.085 ==============================================================================================================================
(1) Basic earnings per share are based upon the weighted average number of shares outstanding of 6,146,130 and 6,124,960 in the six-month periods ended July 31, 2002 and 2001, respectively, and 6,131,136 and 6,118,371 in three-month periods ended July 31, 2002 and 2001, respectively. (2) Diluted earnings per share are based on the weighted average number of shares outstanding of 6,193,553 and 6,174,866 in the six-month periods ended July 31, 2002 and 2001, respectively, and 6,181,889 and 6,170,706 in the three-month periods ended July 31, 2002 and 2001, respectively. (3) The Board of Directors declared quarterly dividends of $.085 per share payable on March 8, 2002, June 7, 2002 and September 6, 2002 to stockholders of record as of February 22, 2002, May 24, 2002 and August 23, 2002, respectively. Quarterly dividends of $.085 per share were 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. 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, 2002 $721,916 $7,879,368 $55,990,079 ($827,737) ($13,484,232) $50,279,394 Comprehensive income: Net income - - 2,633,294 - - Cumulative translation adjustment - - - 368,412 - Interest rate swap, net of tax of $71,387 - - - (129,208) - Total comprehensive income 2,872,498 Issuance of treasury stock for acquisition of business - 250,782 - - 1,349,218 1,600,000 Dividends paid, $.085 per share - - (526,970) - - (526,970) Dividends declared, $.085 per share - - (527,526) - - (527,526) Proceeds from issuance of common stock under dividend reinvestment plan (4,560 shares) 456 67,604 - - - 68,060 Stock option transactions - (36,251) - - 346,870 310,619 Purchase of 19,941 shares of treasury stock - - - - (289,218) (289,218) - ------------------------------------------------------------------------------------------------------------------------------------ Balances, July 31, 2002 $722,372 $8,161,503 $57,568,877 ($588,533) ($12,077,362) $53,786,857 ==================================================================================================================================== 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 - - Cumulative translation adjustment - - - (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 ====================================================================================================================================
See accompanying notes to consolidated financial statements. 4 MET-PRO CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Six Months Ended July 31, 2002 2001 - ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities Net Income $2,633,294 $3,492,134 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 778,783 1,022,172 Deferred income taxes (80,311) (14,250) Gain on sale of property and equipment, net (1,591) (9,254) Allowance for doubtful accounts 56,086 50,946 (Increase) decrease in operating assets, net of acquisition of business: Accounts receivable (1,923,440) 633,640 Inventories 41,897 (1,025,646) Prepaid expenses and other current assets 46,084 (275,073) Other assets (4,494) (4,344) Increase (decrease) in operating liabilities, net of acquisition of business: Accounts payable, accrued expenses and taxes 1,608,059 (891,814) Customers' advances (73,213) (64,751) Other non-current liabilities 1,099 44,206 - ------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 3,082,253 2,957,966 - ------------------------------------------------------------------------------------------------------------- Cash flows from investing activities Proceeds from sale of property and equipment 10,000 66,171 Acquisitions of property and equipment (522,214) (1,018,332) Payment for acquisition of business (463,369) - - ------------------------------------------------------------------------------------------------------------- Net cash (used in) investing activities (975,583) (952,161) - ------------------------------------------------------------------------------------------------------------- Cash flows from financing activities Proceeds from new borrowing 16,373 - Reduction of debt (546,124) (1,008,029) Exercise of stock options 310,619 1,092,253 Payment of dividends (975,979) (965,791) Purchase of treasury shares (289,218) (984,911) - ------------------------------------------------------------------------------------------------------------- Net cash (used in) financing activities (1,484,329) (1,866,478) - ------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash 97,334 (39,496) - ------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 719,675 99,831 Cash and cash equivalents at February 1 11,832,260 8,510,045 - ------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at July 31 $12,551,935 $8,609,876 - -------------------------------------------------------------------------------------------------------------
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., Mefiag B.V. and Pristine Hydrochemical Inc. (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, 2002 and the results of operations for the six-month and three-month periods ended July 31, 2002 and 2001, 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, 2002 and 2001 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, 2002. NOTE 3 - ACQUISITION OF BUSINESS Effective May 22, 2002, the Company, pursuant to an Agreement and Plan of Merger, acquired 100% of the Common Stock of Pristine Hydrochemical Inc. ("Pristine") for a purchase price of approximately $3,200,000. The results of Pristine's operations have been included in the consolidated financial statements since that date. The acquisition was accounted for as a purchase transaction. Pristine sells water treatment chemicals and services to municipal water utilities, and boiler and water cooling chemicals and services to industrial and commercial markets. It is expected that Pristine will complement the operations of the Company's Stiles-Kem Division. The acquisition was completed by issuing Common Stock from the treasury valued at $1,600,000 (113,475 shares), a cash payment of $400,000, promissory notes payable for $1,200,000, plus acquisition costs. The notes are payable over a four-year period in installments of $300,000 annually, plus interest at a fixed rate of 4.75%. Goodwill totaling approximately $3,016,000 was acquired. The following unaudited pro-forma summary presents the consolidated results of operations for the six-month periods ended July 31, 2002 and 2001 as if the Company had acquired Pristine on February 1, 2001: Six Months Ended July 31, 2002 2001 ------------- ------------- Net sales $35,733,902 $38,878,401 Income before taxes 4,340,063 5,693,338 Net income 2,799,340 3,615,272 Earnings per share, basic $.46 $.59 Earnings per share, diluted $.45 $.59 6 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - INVENTORIES Inventories consisted of the following: July 31, January 31, 2002 2002 ------------- -------------- Raw materials $7,447,401 $7,369,965 Work in progress 1,575,656 1,559,273 Finished goods 4,822,583 4,772,438 ------------- ------------- $13,845,640 $13,701,676 ============= ============= NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION Net cash flows from operating activities reflect cash payments for interest and income taxes as follows: Six Months Ended July 31, 2002 2001 ------------ ------------- Cash paid during the period for: Interest $173,857 $293,585 Income taxes 1,264,302 1,958,655 NOTE 6 - OTHER INCOME, NET Other income, net was comprised of the following:
Six Months Ended July 31, Three Months Ended July 31, 2002 2001 2002 2001 ------------- ------------- ------------- ------------- Gain/(loss) on sale of property and equipment $1,591 $9,254 ($4,409) ($152) Other, primarily interest income 117,739 185,665 57,421 108,694 ------------- ------------- ------------- ------------- $119,330 $194,919 $53,012 $108,542 ============= ============= ============= =============
7 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - 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, Three Months Ended July 31, 2002 2001 2002 2001 -------------------------------- ------------------------------- Net sales Product recovery/pollution control equipment $22,568,507 $24,204,834 $12,258,886 $13,843,124 Fluid handling equipment 11,903,456 13,722,991 6,019,197 6,528,657 --------------- --------------- -------------- -------------- $34,471,963 $37,927,825 $18,278,083 $20,371,781 =============== =============== ============== ============== Income from operations Product recovery/pollution control equipment $2,707,279 $3,209,024 $1,463,779 $1,937,747 Fluid handling equipment 1,506,761 2,386,474 820,383 996,687 --------------- --------------- -------------- -------------- $4,214,040 $5,595,498 $2,284,162 $2,934,434 =============== =============== ============== ==============
July 31, January 31, 2002 2002 -------------------------------- Identifiable assets Product recovery/pollution control equipment $41,480,954 $38,458,075 Fluid handling equipment 18,578,324 18,209,157 --------------- --------------- 60,059,278 56,667,232 Corporate 13,952,462 11,402,960 --------------- --------------- $74,011,740 $68,070,192 =============== ===============
8 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 - 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 became 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 is required to test goodwill for impairment at least annually. If FASB No. 142 had been in effect during the year ended January 31, 2002, the Company's earnings would have been improved because of reduced amortization, as described below:
Six Months Ended July 31, 2001 ----------------------------------------------------------- Net Income Basic Earnings Diluted Earnings per Share per Share --------------- ----------------- ------------------- Net income as reported $3,492,134 $.57 $.57 Add: amortization 157,387 .03 .02 --------------- ----------------- ------------------- Adjusted net income $3,649,521 $.60 $.59 =============== ================= ===================
In April 2002, the FASB approved SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145, among other things, rescinds SFAS No. 4, which required all gains and losses from the extinguishment of debt to be classified as an extraordinary item and amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. This statement is not expected to have a material impact on the Company's results of operations and financial position. NOTE 9 - RECLASSIFICATIONS Certain reclassifications have been made to the financial statements for the fiscal year ended January 31, 2002 to conform with the presentation of the financial statements for the six-month period ended July 31, 2002. Such reclassifications did not have any impact on stockholders' equity and net income as of and for the year ended January 31, 2002. NOTE 10 - 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. 9 REPORT OF INDEPENDENT ACCOUNTANTS 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, 2002, and the related consolidated statements of operations for the six-month and three- month periods ended July 31, 2002 and 2001 and stockholders' equity and cash flows for the six-month periods ended July 31, 2002 and 2001. 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 accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of January 31, 2002, 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 21, 2002, 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, 2002 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 20, 2002 10 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, 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 66.0% 64.8% 66.2% 66.0% - -------------------------------------------------------------------------------------------------------------------- Gross profit 34.0% 35.2% 33.8% 34.0% Selling expenses 10.6% 9.7% 10.2% 9.0% General and administrative expenses 11.1% 10.7% 11.1% 10.6% - -------------------------------------------------------------------------------------------------------------------- Income from operations 12.3% 14.8% 12.5% 14.4% Interest expense (.8%) (.8%) (.7%) (.7%) Other income, net .3% .5% .3% .5% - -------------------------------------------------------------------------------------------------------------------- Income before taxes 11.8% 14.5% 12.1% 14.2% Provision for taxes 4.2% 5.3% 4.3% 5.1% - -------------------------------------------------------------------------------------------------------------------- Net income 7.6% 9.2% 7.8% 9.1% ====================================================================================================================
Six Months Ended July 31, 2002 vs Six Months Ended July 31, 2001 Net sales for the six-month period ended July 31, 2002 were $34,471,963 compared to $37,927,825 for the six-month period ended July 31, 2001, a decrease of $3,455,862 or 9.1%. Sales in the Product Recovery/Pollution Control Equipment segment were $22,568,507 or $1,636,327 lower than the six-month period ended July 31, 2001. Sales in the Fluid Handling Equipment segment were $11,903,456 or $1,819,535 lower compared to the six-month period ended July 31, 2001. We believe that the decreased demand in both business segments is attributed to a slow economy. Backlog at July 31, 2002 totaled $9,354,974 compared to $9,947,194 at July 31, 2001. In addition, at July 31, 2002 the Company had $7,673,760, compared to $4,052,676 at July 31, 2001, 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. Net income for the six-month period ended July 31, 2002 was $2,633,294 compared to $3,492,134 for the six-month period ended July 31, 2001, a decrease of $858,840 or 24.6%. 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, 2002 was 34.0% versus 35.2% for the same period in the prior year due to lower gross margins experienced in the Fluid Handling Equipment segment. The Fluid Handling Equipment segment represented 34.5% of the Company's sales for the six-month period ended July 31, 2002 compared to 36.2% for the six-month period ended July 31, 2001. Selling expense decreased $34,419 during the six-month period ended July 31, 2002 compared to the same period last year. Selling expense as a percentage of net sales was 10.6% for the six-month period ended July 31, 2002 compared to 9.7% for the six-month period ended July 31, 2001. 11 MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... General and administrative expense was $3,847,768 for the six-month period ended July 31, 2002 compared to $4,073,046 for the same period last year, a decrease of $225,278. General and administrative expense as a percentage of net sales was 11.1% for the six-month period ended July 31, 2002 compared to 10.7% for the same period last year. This reduction, in dollars, is principally related to the reduction in amortization expense for goodwill that is no longer being amortized per FASB No. 142. Interest expense was $250,743 for the six-month period ended July 31, 2002 compared to $290,997 for the same period in the prior year, or a decrease of $40,254. This decrease was due principally to a reduction of existing long-term debt. Other income, net, decreased $75,589 for the six-month period ended July 31, 2002 compared to the six-month period ended July 31, 2001, principally because of the reduction in interest rates on our short-term investments. The effective tax rate for the six-month periods ended July 31, 2002 and 2001 was 35.5% and 36.5%, respectively. Three Months Ended July 31, 2002 vs Three Months Ended July 31, 2001 Net sales for the three-month period ended July 31, 2002 were $18,278,083 compared to $20,371,781 for the three-month period ended July 31, 2001, a decrease of $2,093,698. Sales in the Product Recovery/Pollution Control Equipment segment were $12,258,886 or $1,584,238 lower than the three-month period ended July 31, 2001. Sales in the Fluid Handling Equipment segment were $6,019,197 or $509,460 lower compared to the three-month period ended July 31, 2001. We believe that the decreased demand in both business segments is attributed to a slow economy. Net income for the three-month period ended July 31, 2002 was $1,433,166 compared to $1,856,419 for the three-month period ended July 31, 2001, a decrease of $423,253 or 22.8%. The decrease in net income is related to the lower sales in both of the Company's business segments during the period. The gross margin for the three-month period ended July 31, 2002 was 33.8% compared to 34.0% for the same period last year, due to lower gross margins experienced in the Fluid Handling Equipment segment. Selling expenses increased $34,464 during the three-month period ended July 31, 2002 compared to the same period last year. As a percentage of net sales, selling expense increased to 10.2% for the three-month period ended July 31, 2002 from 9.0% for the three-month period ended July 31, 2001. General and administrative expense was $2,023,639 for the three-month period ended July 31, 2002 compared to $2,160,159 for the three-month period ended July 31, 2001, a decrease of $136,520. General and administrative expense for the three-month period ended July 31, 2002 was 11.1% of net sales, compared to 10.6% of net sales for the same period last year. This reduction, in dollars, is principally related to the reduction of amortization expense for goodwill that is no longer being amortized per FASB No. 142. Interest expense was $129,749 for the three-month period ended July 31, 2002 compared to $139,928 for the same period in the prior year, or a decrease of 7.3%. This decrease was due principally to a reduction of existing long-term debt. Other income, net, decreased $55,530 for the three-month period ended July 31, 2002 compared to the three-month period ended July 31, 2001, principally because of the reduction in interest rates on our short-term investments. The effective tax rate for the three-month period ended July 31, 2002 was 35.1% compared to 36.1% for the three-month period ended July 31, 2001. 12 MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... Liquidity: The Company's cash and cash equivalents were $12,551,935 on July 31, 2002 compared to $11,832,260 on January 31, 2002, an increase of $719,675. This increase is the net result of the following occurring during this six-month period: cash flows provided by operating activities of $3,082,253, proceeds received from new borrowings of $16,373, proceeds received from the exercise of stock options totaling $310,619, exchange rate changes of $97,334, and proceeds received from the sale of equipment amounting to $10,000, offset by the payment of quarterly cash dividends amounting to $975,979 (net of $68,060 of dividends returned to the Company for stock purchases under the Dividend Reinvestment Plan), payments on long-term debt totaling $546,124, purchases of treasury stock amounting to $289,218, investment in property, plant and equipment amounting to $522,214 and payment for the acquisition of a business amounting to $463,369. 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 $12,651,796 on July 31, 2002 compared to $10,465,069 on January 31, 2002, which represents an increase of $2,186,727. 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 $13,845,640 on July 31, 2002 compared to $13,701,676 on January 31, 2002, an increase of $143,964. Inventory balances fluctuate depending on the size and timing of orders, and market demand, especially when major systems and contracts are involved. Current liabilities amounted to $12,170,446 on July 31, 2002 compared to $10,151,149 on January 31, 2002, an increase of $2,019,297. Increases in accounts payable, current portion of long-term debt and accrued expenses, offset by a reduction in customer advances, accounted for a substantial amount of the increase. 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 which together total $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. As of July 31, 2002 and January 31, 2002, working capital was $28,253,106 and $27,260,530, respectively, and the current ratio was 3.3 and 3.7, respectively. Capital Resources and Requirements: Cash flows provided by operating activities during the six-month period ended July 31, 2002 amounted to $3,082,253 compared with $2,957,966 for the six-month period ended July 31, 2001, an increase of $124,287. Cash provided by operating activities for the six-month period ended July 31, 2002 was due principally to an increase in accounts payable, accrued expenses and taxes, offset by an increase in accounts receivable. Cash flows used in investing activities during the six-month period ended July 31, 2002 amounted to $975,583 compared with $952,161 for the six-month period ended July 31, 2001. The Company's investing activities principally represent the acquisition of a business during the six-month period ended July 31, 2002, and the purchase of property, plant and equipment in the two operating segments during both years. 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. Financing activities during the six-month period ended July 31, 2002 utilized $1,484,329 of available resources compared to $1,866,478 for the six-month period ended July 31, 2001. The 2002 activity is the result of the payment of the quarterly cash dividend amounting to $975,979 (net of $68,060 of dividends returned to the Company for stock purchases under the Dividend Reinvestment Plan), reduction of long-term debt totaling $546,124, plus the purchase of treasury stock totaling $289,218, offset by the proceeds received through 13 MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... borrowings of $16,373 for equipment purchases and proceeds received from the exercise of stock options totaling $310,619. The Board of Directors declared quarterly dividends of $.085 per share payable on March 8, 2002, June 7, 2002 and September 6, 2002 to stockholders of record as of February 22, 2002, May 24, 2002 and August 23, 2002, respectively. Critical Accounting Policies and Estimates: Management's discussion and analysis of the Company's financial position and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: The Company's revenues are recognized when products are shipped to unaffiliated customers. The Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition", provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues. The Company has concluded that its revenue recognition policy is appropriate and in accordance with generally accepted accounting principles and SAB No. 101. Property, plant and equipment, intangible and certain other long-lived assets are depreciated and amortized over their useful lives. Useful lives are based on management's estimates of the period that the assets will generate revenue. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Costs in excess of net assets of businesses acquired (goodwill) subsequent to October 31, 1970, totaling approximately $20,800,000, were being amortized over forty years through January 31, 2002. Subsequent to January 31, 2002, goodwill is no longer being amortized; instead, management will be required to test for impairment of goodwill annually. A preliminary estimate of the annual amortization of goodwill that will cease in the fiscal year ending January 31, 2003 is approximately $500,000. The determination of our obligation and expense for pension benefits is dependent on our selection of certain assumptions including, among others, the discount rate, expected long-term rate of return on plan assets and rates of increase in compensation used by actuaries in calculating such amounts. In accordance with generally accepted accounting principles, actual results that differ from our assumptions are accumulated and amortized over future periods and therefore, generally affect our recognized expense and recorded obligation in such future periods. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our pension obligations and our future expense. 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, 2002, could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: 14 MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... 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 accounting rules, which could result in an impact on earnings; o the write-down of costs in excess of net assets of businesses acquired (goodwill), as a result of the determination that the acquired business is impaired; o unexpected results in our product development activities; o loss of key customers; o changes in our existing management; o exchange rate fluctuations; o unexpected changes in our execution of customers' orders; o changes in federal or state laws; o rate of return on our pension assets; o the assertion of claims that the Company's products, including products produced by companies acquired by the Company, caused injury, loss or damage; and o the effect of acquisitions and other strategic ventures. 15 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 12, 2002. At that meeting, two proposals were submitted to a vote of the Company's stockholders. Proposal 1 was a proposal to elect two Directors (with Michael J. Morris and Jeffrey H. Nicholas being the nominees) to serve until the 2005 Annual Meeting of Stockholders. Proposal 2 was to ratify the selection of Margolis & Company P.C. as independent certified public accountants for the Company's fiscal year ending January 31, 2003. At the close of business on the record date for the meeting (which was April 25, 2002), there were 6,086,608 shares of common stock outstanding and entitled to be voted at the meeting. Holders of 5,630,762 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 - --------------------------------------------------------------------------------------------------------------- Proposal 1 - Election of Directors Michael J. Morris 5,574,404 56,358 -- Jeffrey H. Nicholas 5,575,748 55,014 -- - --------------------------------------------------------------------------------------------------------------- Proposal 2 - Selection of Margolis& Company P.C. as Independent Certified Public Accountants 5,602,118 11,719 16,925 - ---------------------------------------------------------------------------------------------------------------
Consequently, all proposals were adopted by the stockholders. 16 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 Exhibit No. Description ----------- ----------- 99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K There were no Current Reports on Form 8-K filed during the three-month period ended July 31, 2002. 17 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) September 9, 2002 /s/ William L. Kacin -------------------------------------- William L. Kacin Chairman, President and Chief Executive Officer September 9, 2002 /s/ Gary J. Morgan -------------------------------------- Gary J. Morgan Vice President of Finance, Secretary and Treasurer, Chief Financial Officer, Chief Accounting Officer and Director 18 EX-99.1 3 exhibit99.txt CERTIFICATE OF PRINCIPAL EXECUTIVE OFFICER MET-PRO CORPORATION Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q for the period ended July 31, 2002 of Met-Pro Corporation (the "Company") as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William L. Kacin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ William L. Kacin ----------------------------------- William L. Kacin Chief Executive Officer September 9, 2002 EX-99.2 4 exhibit99-2.txt CERTIFICATE OF PRINCIPAL EXECUTIVE OFFICER MET-PRO CORPORATION Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q for the period ended July 31, 2002 of Met-Pro Corporation (the "Company") as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary J. Morgan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Gary J. Morgan ----------------------------------- Gary J. Morgan Chief Financial Officer September 9, 2002 -----END PRIVACY-ENHANCED MESSAGE-----