-----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, PAGnUy6so3IPKWoWXHVoPhpPa3GBCtQMZNMIJMvJ38LU4xK0Ifi8xke10bBShuql BmlNxgwVyJG0HdTKpy95Dw== 0000065201-99-000003.txt : 19990624 0000065201-99-000003.hdr.sgml : 19990624 ACCESSION NUMBER: 0000065201-99-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990525 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: SEC FILE NUMBER: 001-07763 FILM NUMBER: 99633764 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 WATER TREATMENT CORP DATE OF NAME CHANGE: 19740924 FORMER COMPANY: FORMER CONFORMED NAME: MET PRO INC DATE OF NAME CHANGE: 19661026 10-Q 1 ================================================================================ 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: April 30, 1999 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 $0.10 per share) is 6,707,516 (as of April 30, 1999). ================================================================================ MET-PRO CORPORATION INDEX PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Condensed consolidated balance sheet as of April 30, 1999 and January 31, 1999......................................................... 2 Condensed consolidated statement of operations for the three-month periods ended April 30, 1999 and 1998....................................................... 3 Condensed consolidated statement of stockholders' equity for the three-month periods ended April 30, 1999 and 1998........................................... 4 Condensed consolidated statement of cash flows for the three-month periods ended April 30, 1999 and 1998....................................................... 5 Notes to condensed 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 6(b). Reports on Form 8-K......................................................................... 14 SIGNATURES.................................................................................................... 14
-1- MET-PRO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) PART I - FINANCIAL INFORMATION Item 1. Financial Statements
April 30, January 31, ASSETS 1999 1999 - ------------------------------------------------------------------------------------------------------------------------ Current assets Cash and cash equivalents $ 6,952,175 $ 7,446,369 Accounts receivable, net of allowance for doubtful accounts of approximately $304,000 and $261,000, respectively 14,615,426 14,492,082 Inventories - Note 4 14,811,575 14,973,169 Prepaid expenses, deposits and other current assets 985,540 827,824 Deferred income taxes 944,009 944,009 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 38,308,725 38,683,453 Property, plant and equipment, net 13,762,184 13,931,276 Costs in excess of net assets of businesses acquired, net 19,143,955 19,260,591 Other assets 925,706 1,013,321 - ------------------------------------------------------------------------------------------------------------------------ Total assets $72,140,570 $72,888,641 ======================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------------------------ Current liabilities Current portion of long-term debt $2,077,235 $2,125,093 Accounts payable 4,450,183 5,213,770 Accrued salaries, wages and expenses 7,907,027 5,804,235 Payroll and other taxes payable 165,464 216,822 Customers' advances 993,557 1,027,948 - ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 15,593,466 14,387,868 Long-term debt 11,440,578 11,941,954 Other non-current liabilities 350,562 328,838 Deferred income taxes 297,639 304,874 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities 27,682,245 26,963,534 - ------------------------------------------------------------------------------------------------------------------------ Stockholders' equity Common stock, $.10 par value; 18,000,000 shares authorized, 7,182,843 and 7,138,625 shares issued, of which 475,327 and 343,727 shares were reacquired and held in treasury at the respective dates 718,284 713,862 Additional paid-in capital 7,908,475 7,508,748 Retained earnings 42,432,118 42,718,355 Accumulated other comprehensive loss (236,090) (85,103) Treasury stock, at cost (6,364,462) (4,930,755) - ------------------------------------------------------------------------------------------------------------------------ Net stockholders' equity 44,458,325 45,925,107 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $72,140,570 $72,888,641 ========================================================================================================================
See accompanying notes to condensed consolidated financial statements. -2-
MET-PRO CORPORATION CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) Three Months Ended April 30, 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- Net sales $20,828,028 $14,940,888 Cost of goods sold 13,726,315 9,237,989 - ---------------------------------------------------------------------------------------------------------------------------------- Gross profit 7,101,713 5,702,899 - ---------------------------------------------------------------------------------------------------------------------------------- Operating expenses Selling 1,878,087 1,407,457 General and administrative 2,339,591 1,637,410 - ---------------------------------------------------------------------------------------------------------------------------------- 4,217,678 3,044,867 - ---------------------------------------------------------------------------------------------------------------------------------- Income from operations 2,884,035 2,658,032 Other income, net 135,066 190,397 - ---------------------------------------------------------------------------------------------------------------------------------- Income before taxes 3,019,101 2,848,429 Provision for taxes 1,147,259 1,110,885 - ---------------------------------------------------------------------------------------------------------------------------------- Net income $1,871,842 $1,737,544 ================================================================================================================================== Earnings per share, basic (1) $ .28 $ .25 Earnings per share, diluted (2) $ .28 $ .25 Cash dividend per share - declared (3) $ .32 $ .30 Cash dividend per share - paid (3) $ .32 $ .30 ==================================================================================================================================
(1) Basic earnings per share are based upon the weighted average number of common shares outstanding of 6,745,804 on April 30, 1999 and 7,009,023 on April 30, 1998. (2) Diluted earnings per share are based upon the weighted average number of common shares outstanding of 6,779,524 on April 30, 1999 and 7,071,478 on April 30, 1998. (3) On February 22, 1999, the Company declared a $.32 per share cash dividend payable on April 23, 1999 to shareholders of record on April 9, 1999. On February 23, 1998, the Company declared a cash dividend of $.30 per share payable on April 24, 1998 to shareholders of record on April 10, 1998. See accompanying notes to condensed consolidated financial statements. -3-
MET-PRO CORPORATION CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited) Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings (Loss) Stock Total - ------------------------------------------------------------------------------------------------------------------------------------ Balances, January 31, 1999 $713,862 $7,508,748 $42,718,355 ($85,103) ($4,930,755) $45,925,107 Comprehensive income: Net income 1,871,842 Foreign currency translation (150,987) Total comprehensive income 1,720,855 Dividends paid, $.32 per share (2,158,079) (2,158,079) Proceeds from issuance of common stock under dividend reinvestment plan (44,218 shares) 4,422 426,907 431,329 Stock option transactions (27,180) 42,180 15,000 Purchase of 134,600 shares of treasury stock (1,475,887) (1,475,887) - ------------------------------------------------------------------------------------------------------------------------------------ Balances, April 30, 1999 $718,284 $7,908,475 $42,432,118 ($236,090) ($6,364,462) $44,458,325 ==================================================================================================================================== Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings Income/(Loss) Stock Total - ------------------------------------------------------------------------------------------------------------------------------------ Balances, January 31, 1998 $713,862 $7,868,357 $37,667,872 ($219,015) ($2,190,247) $43,840,829 Comprehensive income: Net income 1,737,544 Foreign currency translation 40,733 Total comprehensive income 1,778,277 Dividends paid, $.30 per share (2,100,569) (2,100,569) Stock option transactions (358,995) 720,315 361,320 Purchase of 44,800 shares of treasury stock (694,456) (694,456) - ------------------------------------------------------------------------------------------------------------------------------------ Balances, April 30, 1998 $713,862 $7,509,362 $37,304,847 ($178,282) ($2,164,388) $43,185,401 ====================================================================================================================================
See accompanying notes to condensed consolidated financial statements. -4-
MET-PRO CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) Three Months Ended April 30, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Net cash provided by operating activities $3,511,643 $2,231,312 - ------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities Proceeds from sale of property and equipment 8,000 -- Acquisitions of property and equipment (252,237) (321,994) Acquisitions of other intangibles (7,281) (404,998) - ------------------------------------------------------------------------------------------------------------------------ Net cash (used in) investing activities (251,518) (726,992) - ------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities Reduction of debt (549,234) (547,266) Exercise of stock options 15,000 361,320 Payment of dividends (1,726,750) (2,100,569) Purchase of treasury shares (1,475,887) (694,456) - ------------------------------------------------------------------------------------------------------------------------ Net cash (used in) financing activities (3,736,871) (2,980,971) - ------------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash (17,448) 3,836 - ------------------------------------------------------------------------------------------------------------------------ Net (decrease) in cash and cash equivalents (494,194) (1,472,815) Cash and cash equivalents at February 1 7,446,369 11,253,380 - ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at April 30 $6,952,175 $9,780,565 ======================================================================================================================== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the period for: Interest $219,401 $83,748 Income taxes $190,396 $422,640 ========================================================================================================================
See accompanying notes to condensed consolidated financial statements. -5- MET-PRO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - PRINCIPLES OF CONSOLIDATION The condensed 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 condensed financial statements contain all adjustments necessary to present fairly the financial position as of April 30, 1999 and the results of operations, changes in stockholders' equity and cash flows for the three-month periods ended April 30, 1999 and 1998. The results of operations for the three-month period ended April 30, 1999 are not necessarily indicative of the results to be expected for the full year. These condensed 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, 1999. NOTE 3 - ACQUISITION OF BUSINESS On October 29, 1998, the Company, pursuant to an Asset Purchase Agreement, purchased all of the operating assets of Flex-Kleen Corporation and Flex-Kleen Canada Limited (collectively "Flex-Kleen") for a purchase price of approximately $15,000,000 plus the assumption of ordinary business liabilities. The acquisition was accounted for as a purchase transaction. Flex-Kleen is a manufacturer of dry particulate collectors that are used primarily in the process of manufacturing food products and pharmaceuticals. The condensed consolidated statement of operations for the three months ended April 30, 1999 includes the operations of Flex-Kleen. The acquisition was completed by a cash payment of approximately $15,000,000, plus acquisition costs, which resulted in approximately $12,150,000 of goodwill. A bank loan totalling $12,000,000 having a ten-year term with a fixed interest rate swap of 5.98% was used to finance the acquisition. Payments of principal and interest are payable on a quarterly basis. On a pro-forma basis, consolidated results of operations for the three-month period ended April 30, 1998 would have been as follows, if the acquisition had been made as of February 1, 1998: Net sales $19,210,888 Income before taxes on income 3,051,250 Net Income 1,861,265 Earnings per share, basic $.27 Earnings per share, diluted $.26 -6- MET-PRO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - INVENTORIES Inventories consisted of the following: April 30, January 31, 1999 1999 ----------- ----------- Raw material $7,168,174 $7,246,379 Work in progress 2,409,068 2,435,351 Finished goods 5,234,333 5,291,439 ----------- ----------- $14,811,575 $14,973,169 =========== =========== NOTE 5 - BUSINESS SEGMENT DATA The Company's operations are conducted in two business segments as follows: the manufacture and sale of pollution control systems and allied 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. Three Months Ended April 30, 1999 1998 ---------------------------- Net sales Pollution control systems and allied equipment $14,266,646 $8,160,536 Fluid handling equipment 6,561,382 6,780,352 ----------- ----------- $20,828,028 $14,940,888 =========== =========== Income from operations Pollution control systems and allied equipment $1,999,725 $1,532,873 Fluid handling equipment 884,310 1,125,159 ---------- ---------- $2,884,035 $2,658,032 ========== ========== Identifiable assets Pollution control systems and allied equipment $44,913,862 $24,861,889 Fluid handling equipment 19,553,875 20,856,730 ----------- ----------- 64,467,737 45,718,619 Corporate 7,672,833 11,448,901 ----------- ----------- $72,140,570 $57,167,520 =========== =========== NOTE 6 - EMPLOYEE BENEFIT PLAN Effective April 1, 1999, the Company implemented a 401(k) profit sharing plan. Substantially all employees of the Company in the United States are eligible to participate in the plan following their completion of one year of service and attaining age 21. Pursuant to this plan, employees can contribute up to 15% of their compensation to the plan. The Company will match up to 50% of the employee contribution up to 4% of compensation in the form of Met-Pro common stock. -7- MET-PRO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This pronouncement is effective for the fiscal year ending January 31, 2000. The adoption of this pronouncement will have no impact on Met-Pro's consolidated results of operations, financial position or cash flows. NOTE 8 - ACCOUNTANTS' 10-Q REVIEW Margolis & Company P.C., the Company's auditors, has performed a limited review of the financial information included herein. Their report on such review accompanies this filing. -8- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors Met-Pro Corporation Harleysville, Pennsylvania We have reviewed the accompanying condensed consolidated balance sheet of Met-Pro Corporation and its wholly owned subsidiaries as of April 30, 1999 and the related condensed consolidated statements of operations, stockholders' equity and cash flows for the three-month periods ended April 30, 1999 and 1998. 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 condensed 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, 1999 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 25, 1999, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 31, 1999 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 May 14, 1999 -9- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations Results of Operations: Three Months Ended April 30, 1999 vs Three Months Ended April 30, 1998 Net sales for the three-month period ended April 30, 1999 were $20,828,028 compared to $14,940,888 for the three-month period ended April 30, 1998, an increase of $5,887,140 or 39.4%. Sales in the Pollution Control Systems and Allied Equipment segment were $14,266,646 or 74.8% higher than the three-month period ended April 30, 1998 due to the acquisition of Flex-Kleen Corporation and Flex-Kleen Canada Limited (collectively "Flex-Kleen"), effective as of October 1, 1998, coupled with higher demand primarily for our fume and odor control equipment. Sales in the Fluid Handling Equipment segment were $6,561,382 or 3.2% lower compared to the three-month period ended April 30, 1998 due primarily to decreased demand for our specialty pump equipment. Backlog at April 30, 1999 totaled $11,004,683 or 93% higher than the backlog of orders on hand at April 30, 1998. In addition, the Company had an additional $4,630,878 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 three-month period ended April 30, 1999 was $1,871,842 compared to $1,737,544 for the three-month period ended April 30, 1998, an increase of $134,298 or 7.7%. The increase in net income is related to the higher sales volume and continuing cost controls for the three-month period ended April 30, 1999. The gross margin for the three-month period ended April 30, 1999 was 34.1% versus 38.2% for the same period in the prior year due to lower gross margins experienced in the Pollution Control Systems and Allied Equipment segment. Selling expense increased $470,630 during the three-month period ended April 30, 1999 compared to the same period last year. Selling expense as a percentage of net sales was 9.0% for the three-month period ended April 30, 1999, a slight decrease compared to the three-month period ended April 30, 1998. General and administrative expense was $2,339,591 for the three-month period ended April 30, 1999 compared to $1,637,410 for the same period last year, an increase of $702,181. The increase was due mainly to amortization, interest, and other administrative expenses connected with the inclusion of Flex-Kleen. General and administrative expense as a percentage of net sales increased to 11.2% for the three-month period ended April 30, 1999 from 11.0% for the same period last year. Other income, net, decreased $55,331 for the three-month period ended April 30, 1999 compared to the three-month period ended April 30, 1998, due to less interest earned on lower cash balances. The effective tax rate for the three-month period ended April 30, 1999 was 38% compared to 39% for the three-month period ended April 30, 1998. -10- 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 $6,952,175 on April 30, 1999 compared to $7,446,369 on January 31, 1999, a decrease of $494,194. This decrease is the net result of the payment of the annual cash dividend amounting to $1,726,750 (net of $431,329 of dividends untilized for stock purchased under the Dividend Reinvestment Plan), payments on long-term debt totalling $549,234, purchase of treasury stock amounting to $1,475,887, acquisition of other intangibles amounting to $7,281 and investment in property and equipment amounting to $252,237, offset by positive cash flow provided by operating activities of $3,511,643, proceeds received from the exercise of stock options of $15,000, and proceeds received from the sale of property and equipment amounting to $8,000. 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 $14,615,426 on April 30, 1999 compared to $14,492,082 on January 31, 1999, which represents an increase of $123,344. The timing and size of shipments and retainage on contracts, especially in the Pollution Control Systems and Allied Equipment segment, will influence accounts receivable balances at any point in time. Inventories were $14,811,575 on April 30, 1999 compared to $14,973,169 on January 31, 1999, a decrease of $161,594. Inventory balances fluctuate depending upon market demand, the size and timing of orders and varying lead times required. Current liabilities amounted to $15,593,466 on April 30, 1999 compared to $14,387,868 on January 31, 1999, an increase of $1,205,598. Accrued expenses, offset by the reduction in the current portion of long-term debt and other current liabilities, accounted for 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 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 during the three-month period ended April 30, 1999 amounted to $3,511,643 compared with $2,231,312 in the three-month period ended April 30, 1998, an increase of $1,280,331. Cash flows used in investing activities during the three-month period ended April 30, 1999 amounted to $251,518 compared with $726,992 for the three-month period ended April 30, 1998. The Company's investing activities principally represent the acquisitions of property, plant and equipment in the two operating segments. During the three-month period ended April 30, 1998, the Company acquired certain assets of a distributor of its Stiles-Kem products, located in the Southeastern United States, for a purchase price of approximately $400,000. The purchase price was allocated to customer lists, covenants not to compete and goodwill. Financing activities during the three-month period ended April 30, 1999 utilized $3,736,871 of available resources compared to $2,980,971 for the three-month period ended April 30, 1998. The 1999 activity is the result of the payment of the annual cash dividend amounting to $1,726,750 (net of $431,329 of dividends utilized for stock purchased under the Dividend Reinvestment Plan), reduction of long-term debt totalling $549,234, plus the purchase of treasury stock totalling $1,475,887, offset by proceeds provided by the exercise of stock options totalling $15,000. -11- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... On June 3, 1998, the Company announced the initiation of a 350,000 share stock repurchase program. For the three-month period ended April 30, 1999, the Company had repurchased 134,600 shares under this stock repurchase program. As of April 30, 1999, the Company had 37,600 shares remaining under the 1998 stock repurchase program. On October 29, 1998, the Company acquired all of the operating assets of Flex-Kleen Corporation and Flex-Kleen Canada Limited from Aqua Alliance, Inc. Flex-Kleen is a manufacturer of dry particulate collectors that are used primarily in the process of manufacturing food products and pharmaceuticals. The Company paid approximately $15,000,000 in the transaction through the utilization of $3,000,000 from available resources and $12,000,000 from new borrowings of long-term debt from Mellon Bank, N.A., exclusive of assumed liabilities. On February 22, 1999, the Board of Directors declared a $.32 per share annual cash dividend (compared to the $.30 per share cash dividend paid on April 24, 1998) payable on April 23, 1999 to stockholders of record on April 9, 1999. The dividend paid April 23, 1999 in cash and 44,218 of newly issued shares purchased by stockholders through our dividend reinvestment program represented 30.1% of the prior fiscal year earnings. On May 12, 1999, the Company announced a new stock repurchase program for an additional 350,000 shares or approximately 5% of the Company's outstanding stock, to commence after all shares have been repurchaed under the 1998 stock repurchase program. The new program was initiated, because in management's view, the current stock price does not reflect the true stock value. Purchases will be made from time to time in open market transactions at the prevailing prices and in accordance with applicable rules. The Company may discontinue the program at any time. Consistent with past practices, the Company intends to continue to invest in new product development programs, and to make capital expenditures to support the on-going operations during the coming year. The Company expects to finance all capital expenditure requirements through cash flows generated from operations. Year 2000 Compliance: The "Year 2000" issue refers to computer systems and other equipment operating on software that uses only two digits to represent the year, rather than four digits. As a result, these systems and equipment may not process information or otherwise function properly when using the year "2000", since that year will be indistinguishable from the year "1900". The Company initiated a Year 2000 program to assess and develop plans to resolve the issue both internally and externally. During 1997, the Company began developing a plan to upgrade its business and operating systems to Year 2000 compliant software. Implementation of the upgrade began in 1998 with the initial testing of the system on a limited basis prior to converting all of the Company's locations. As of May 1998, the Company had completed implementation and testing of its business and operating systems at all of the Company's facilities. In order to identify potential Year 2000 problems at key suppliers, the Company has initiated external surveys to assess their level of compliance. The Company expects to complete its assessment of outside parties and develop the appropriate actions to be taken by the end of May 1999. The Company is also in the process of reviewing embedded software in its equipment and facilities to identify potential Year 2000 issues. Equipment manufacturers are being requested to certify their compliance and assist the Company in developing solutions where they are currently non-compliant. The Company expects to complete the assessment and testing process by August 1999. -12- MET-PRO CORPORATION Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations continued... While reasonable actions have been taken to address the Year 2000 problem and will continue to be taken in the future to mitigate such disruption, the magnitude of all Year 2000 disturbances cannot be predicted. Management believes that past or expected future capital requirements related to Year 2000 compliance issues will not have a material impact on the Company's consolidated financial position or results of operations. The information above contains forward-looking statements including, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions, and adequate resources that are made pursuant to the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that forward-looking statements about the Year 2000 should be read in conjunction with the Company's disclosures under the heading: Cautionary Statement Regarding Forward Looking Statements. Cautionary Statement Regarding Forward Looking Statements: As a cautionary note to investors, the Company and its representatives may make oral or written statements from time to time that are "forward-looking statements". This would include information concerning possible or assumed future activities, plans, results of operations of the Company and statements preceded by, followed by or that include the words "believes", "expects", "anticipates", "intends" or similar expressions. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. There are a number of important factors which could cause actual results to differ materially from those anticipated. The Company believes that its future operating results will continue to be subject to quarterly variations based upon a wide variety of factors including the cyclical nature of both the business segments and the markets addressed by the Company's products, price erosion, competitive factors, the timing of new product introductions, changes in product mix, the availability and extent of utilization of manufacturing capacity, product obsolescence and the ability to develop and implement new technologies. The Company's operating results could also be impacted by sudden fluctuations in customer requirements, currency exchange rate fluctuations and other economic conditions affecting customer demand and the cost of operations in one or more of the global markets in which the Company does business. As a participant in the pollution control and fluid handling industries, the Company operates in a rapidly changing and highly competitive environment. The Company sells both custom products to customers, and industrial products; accordingly, changes in the conditions or composition of any of the Company's customers may have an impact on the Company. While the Company cannot predict what effect these various factors may have on its financial results, the aggregate effect of these and other factors could result in volatility in the Company's future performance and stock price. -13- MET-PRO CORPORATION PART II - OTHER INFORMATION Item 6(b). Reports on Form 8-K There were no reports on Form 8-K filed for the three-month period ended April 30, 1999. 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) May 25, 1999 /s/ William L. Kacin ------------------------------------------- William L. Kacin, President, Chief Executive Officer and Director May 25, 1999 /s/ Gary J. Morgan ------------------------------------------- Gary J. Morgan, Vice President of Finance, Secretary and Treasurer, Chief Financial Officer, Chief Accounting Officer and Director -14- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS JAN-31-2000 APR-30-1999 6,952,175 0 14,615,426 304,374 14,811,575 38,308,725 27,914,383 14,152,199 72,140,570 15,593,466 13,517,813 718,284 0 0 43,740,041 72,140,570 20,828,028 20,828,028 13,726,315 17,943,993 0 0 213,141 3,019,101 1,147,259 0 0 0 0 1,871,842 .28 .28
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