-----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, RcuyoXNAtkD7E1fTkQlxV9a4lQR7no595rWDSYdDPVu2O8e/C7RaF1gg6PhNKs1i 9I/Ik5/y8MTFzIxKMj4/Gw== 0000950116-97-000776.txt : 19970428 0000950116-97-000776.hdr.sgml : 19970428 ACCESSION NUMBER: 0000950116-97-000776 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970425 SROS: NONE 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07763 FILM NUMBER: 97587033 BUSINESS ADDRESS: STREET 1: P O BOX 144 STREET 2: 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-K 1 ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended: January 31, 1997 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 principle executive offices) (Zip Code) Registrant's telephone number, including area code: (215)723-6751 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ---------------- Common Stock, par value $0.10 per share American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.10 per share (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. _________ The number of shares outstanding of the Registrant's Common Stock was 7,095,673 as of April 11, 1997. The aggregate market value of the voting stock held by non-affiliates of the Registrant was $88,695,913 as of April 11, 1997. APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes __ No __ DOCUMENTS INCORPORATED BY REFERENCE FORM 10-K Part Number ----------- Proxy Statement filed pursuant to Regulation 14A in connection with Registrant's Annual Meeting of Stockholders to be held on June 4, 1997.................................. III =============================================================================== INDEX PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . 9 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 29 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . 29 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . 30 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . 30 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . 31 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2 PART I Item 1. Business: General: Met-Pro Corporation (the "Company") was incorporated in the State of Delaware on March 30, 1960. The Company was taken public on April 6, 1967 and has been traded on the American Stock Exchange since July 25, 1978. The Company's principal executive offices are located at 160 Cassell Road, Harleysville, Pennsylvania and its telephone number at that location is (215) 723-6751. Except where otherwise indicated by the context used herein, references to the "Company" means Met-Pro Corporation and its wholly owned subsidiaries. The Company manufactures and sells pollution control and allied equipment for purification of air and liquids, and fluid handling equipment for corrosive, abrasive and high temperature liquids. On February 26, 1996, the Board of Directors declared a $.22 per share annual cash dividend (value after the 3-for-2 stock split of July 8, 1996) payable on April 26, 1996 to stockholders of record as of April 12, 1996. On April 11, 1996, the Company adopted a program to repurchase 75,000 shares of its Common Stock during the next twelve months at prevailing prices and in accordance with applicable rules in open market transactions. The repurchase program was completed in October, 1996. On June 5, 1996, the Company declared a 3-for-2 stock split payable on July 8, 1996 to shareholders of record at the close of business on June 17, 1996. On September 12, 1996, the Company, pursuant to an Agreement and Plan of Merger, acquired the Common Stock of Strobic Air Corporation ("Strobic Air"), a company involved in the air movement industry, effective as of July 31, 1996, in a transaction accounted for as a purchase for approximately $5,000,000. The acquisition was accomplished by issuing Common Stock from the treasury valued at $2,400,020 (195,920 shares), a cash payment of $2,150,000, a promissory note payable for $250,000, plus acquisition costs. The Company financed $3,500,000 with unsecured bank loans, paying the balance with internal funds. On October 4, 1996, the Company ceased the manufacturing and assembly operations of Mefiag of Puerto Rico, Inc., a wholly owned subsidiary, located in Las Piedras, Puerto Rico, which was acquired on June 30, 1993, as part of a major acquisition. The economic justification for maintaining the subsidiary no longer proved evident due to changes in the federal tax laws and the expiration of certain local tax holidays. The manufacturing operation previously conducted by the subsidiary was consolidated into locations of the Company in Pennsylvania and New York to maximize capacity and improve economies of scale. On October 11, 1996, the Company adopted a program to repurchase 100,000 shares of its Common Stock during the next twelve months at prevailing prices and in accordance with applicable rules in open market transactions during the next twelve months. There were 46,600 shares repurchased under the program as of January 31, 1997. There were no other material changes in the nature of the business conducted by the Company during the fiscal year ended January 31, 1997. Products, Services and Markets: The Stiles-Kem Division located in Waukegan, Illinois, is a leading manufacturer of specialty chemicals for the control of lead and copper leaching, scale, and the discoloration of drinking water caused by the presence of iron and manganese in the source water. Stiles-Kem Division's products for drinking water treatment are food grade and are certified to meet existing state, federal and ANSI/NSF standards for health effects in drinking water. The products are manufactured in the Division's plant in Waukegan, Illinois and are distributed through a network of dealers and distributors located in the United States, Mexico and Canada. The Sethco Division, located on Long Island, New York, designs, manufactures and sells corrosion resistant pumps, filter chambers and filter systems with flow rates to about 200 gallons per minute. These products are used in wastewater treatment systems and fume scrubbers for pollution control. They are also widely used in the metal finishing industry, electronics industry and chemical processing industry. Sethco products are sold through a network of non-exclusive distributors, as well as to original equipment manufacturers and catalog houses. 3 Mefiag(R), operating through its wholly owned subsidiary, Mefiag B. V., located in Heerenveen, Holland, and the Mefiag Division, located in Harleysville, Pennsylvania, designs and manufactures filter systems utilizing horizontal disc technology for superior performance, particularly in high efficiency and high-flow applications in the plating and metal finishing industries and elsewhere. Worldwide sales are accomplished through qualified, market-based distributors and original equipment manufacturers located throughout Europe, the United States, South America and other major markets. The Systems Division, located in West Chester, Pennsylvania, designs, manufactures and installs major air and water pollution control systems. Systems Division's air pollution control capabilities include; carbon adsorption systems for the concentration and recovery of volatile solvents, thermal and catalytic oxidation systems and the supply of abatement catalysts. These systems are custom engineered for clients in the automotive, aerospace and furniture industries. These products also have a variety of applications in the painting, pharmaceutical, chemical, electronics, food processing and printing industries. Systems Division also manufactures a full range of catalytic converters for stationary engines and cogeneration plants to greatly reduce smog producing and toxic gases, such as NOx, CO and residual hydrocarbons, which are emitted from these sources. The Duall Division, located in Owosso, Michigan, is a leading manufacturer of industrial and municipal air pollution control equipment. The Division's major products include odor control systems, fume and emergency gas scrubbers, stripping towers and exhaust fans and plating and process tanks. All equipment is fabricated from corrosion resistant materials. Services include pilot studies, engineering, installation and performance testing. Duall products are sold both domestically and internationally to the metal finishing, wastewater treatment, composting, food processing, chemical, printed circuit, semiconductor, pharmaceutical, battery manufacturing and groundwater remediation markets. Over ninety factory trained manufacturer's representatives sell Duall's systems to industrial and municipal clients. The Keystone Filter Division, located in Hatfield, Pennsylvania, is an established custom pleater and cartridge manufacturer in the United States. The Division provides custom designed and engineered products which are currently used in such diverse applications as the nuclear power industry, as components in medical equipment and in indoor air quality equipment. Keystone Filter also provides standard filters for water purification and industrial applications. Sales and customer service are provided through a non-exclusive distributor network. The Fybroc Division, located in Telford, Pennsylvania, is a world leader in the manufacture of fiberglass reinforced pumps. These pumps provide excellent corrosion resistance for tough applications including pumping of acids, brines, caustics, bleaches and a wide range of waste liquids. Fybroc pumps are sold to many markets including the chemical, steel, pulp and paper, electric utility, aquaculture, aquarium, and industrial and municipal waste treatment industries. Sales, engineering, and customer service are provided through a worldwide distributor network. The Dean Pump Division, located in Indianapolis, Indiana, designs and manufactures high quality pumps that handle a broad range of industrial applications. Users such as the chemical, petrochemical, refinery, pharmaceutical, plastics, pulp and paper, and food processing industries choose Dean Pump products particularly for their high temperature applications. The Division's manufacturing facility in Indianapolis, Indiana produces pumps which are sold through an extensive network of distributors. Strobic Air, located in Bensalem, Pennsylvania, designs, manufactures and holds patents on specialty blowers and industrial fans for industrial applications including laboratories, hospitals, semi-conductor manufacturing clean rooms, pharmaceutical manufacturing and chemical and petrochemical plants. Sales, engineering and customer service are provided through a distributor network. The Company markets its products through its own personnel, distributors, representatives and agents based on the division or subsidiary involved. The Company's products are sold worldwide primarily in industrial markets. The following table sets forth certain data concerning total net sales to customers by geographic area in the past three years: Percentage of Net Sales Fiscal Year Ended January 31, 1997 1996 1995 ----------------------------------------- United States 87.6% 87.6% 88.4% Foreign 12.4% 12.4% 11.6% ----------------------------------------- Net Sales 100.0% 100.0% 100.0% ----------------------------------------- 4 Customers: Over the past three years, no single customer accounted for 10% or more of the total net sales of the Company in any year. Competition: The Company experiences competition from a variety of sources with respect to virtually all of its products. The Company knows of no single entity that competes with it across the full range of its products and systems. The lines of business in which the Company is engaged are highly competitive. Competition in the markets served is based on a number of considerations, which may include price, technology, applications experience, know-how, reputation, product warranties, service and distribution. With respect to the Fluid Handling Equipment segment, specifically the pump manufacturing operations, several companies, including Ingersoll Dresser Pumps Corp., Goulds Pumps, Inc., and The Duriron Company, dominate the industry with several smaller companies competing in selected product lines and niche markets. With respect to the Pollution Control Systems and Allied Equipment segment, there are numerous competitors of both comparable and larger size which may have greater resources than the Company, but there are no companies that dominate the market. The Company is unable to state with certainty its relative market position in all aspects of its business. Research and Development: The Company engages in research and development on an operational basis. The research and development effort is not centralized due to the wide range of products. Research is directed towards the development of new products related to current product lines, and the improvement and enhancement of existing products. The principal goals of the Company's research programs are maintaining the Company as a technological leader in the production of pollution control and allied equipment, and fluid handling equipment; developing new products; and providing technological support to the manufacturing operations. Research and development expenses were $0.7 million in 1997, $0.6 million in 1996 and $0.5 million in 1995. Patents and Trademarks: The Company maintains a small number of patents and trademarks. The Company considers these items important to the business, although it considers no individual item material to its business. Regulatory Matters: The Company is subject to environmental laws and regulations concerning air emissions, discharges to water processing facilities, and the generation, handling, storage and disposal of waste materials in all operations. All of the Company's production and manufacturing facilities are controlled under permits issued by federal, state and local regulatory agencies. The Company believes it is presently in substantial compliance with these laws and regulations. Compliance with federal, state and local provisions relating to protection of the environment has had no material effect upon capital expenditures, earnings or the competitive position of the Company. Backlog: Generally, the Company's customers are not subject to long-term contracts, but to purchase orders accepted by the Company. The rate of booking new orders varies from month to month. In addition, the orders have varying delivery schedules, and the Company's backlog as of any particular date may not be representative of actual revenues for any succeeding period. The dollar amount of the Company's backlog of orders considered to be firm totalled $6,017,795 and $6,302,625 as of January 31, 1997 and 1996, respectively. 5 Raw Materials: The Company procures its raw materials and supplies from various sources. The Company believes it could secure substitutes for the raw materials and supplies should they become unavailable, but there are no assurances that the substitutes would perform as well or be priced competitively. The Company has not experienced difficulty in securing raw materials and supplies and does not anticipate any difficulty in procurement in the coming year or foreseeable future. Employees: The Company employs approximately 396 persons, of whom 207 are involved in manufacturing, and 189 are engaged in administration, sales, engineering, supervision and clerical work. The Company has negotiated to terminate a collective bargaining contract involving the Systems Division's operation in Harleysville, Pennsylvania. The Systems Division's manufacturing activities were outsourced as of January 2, 1997. The Company has had no work stoppages during the past 14 years and considers its employee relations to be good. Foreign Operations: Most of the Company's operations and assets are located in the United States. The Company also owns a manufacturing operation in Heerenveen, Holland through its wholly owned subsidiary, Mefiag B.V. Large export sales are made on the basis of confirmed irrevocable letters of credit or time drafts to selected customers in U.S. dollars. Therefore, the Company believes that currency fluctuation, and political and economic instability do not constitute substantial risks to the business. 6 Item 2. Properties: The Company owns and operates twelve manufacturing and production facilities as described below:
Division Structure Property/Location Status Executive Offices, 73,000 square feet, cement 17 acres in Harleysville, Owned International Division, building, with finestone facing, Pennsylvania and Mefiag Division built 1976 Sethco Division 30,000 square feet, cement 4 acres in Hauppauge, Owned block with brick facing, Long Island, New York built 1982 Fybroc Division 47,500 square feet, cement 8 acres in Telford, Owned building with brick facing, Pennsylvania built 1991 Keystone Filter Division 31,000 square feet, cement 2.3 acres in Hatfield, Owned block, built 1978 Pennsylvania Systems Division and 15,000 square feet, cement 2 acres in West Chester, Owned Catalytic Department block, brick and composition Pennsylvania facing, built 1984 Dean Pump Division 66,000 square feet, metal 17.1 acres in Owned building Indianapolis, Indiana Duall Division 63,000 square feet, metal 7 acres in Owosso, Owned and masonry building; Michigan 7,000 square feet, metal 5.61 acres in Owosso, Leased and masonry building Michigan Stiles-Kem Division 20,000 square feet, cement 2.55 acres in Owned block building, built 1996 Waukegan, Illinois Subsidiaries Mefiag B.V. 17,200 square feet, metal 1.1 acres in Owned and masonry building Heerenveen, Holland Strobic Air Corporation 20,000 square feet, metal 2.3 acres in Owned and masonry building; Bensalem, Pennsylvania 16,000 square feet, metal 2.0 acres in Leased and masonry building Bensalem, Pennsylvania
The Company also owns 1.42 acres in Las Piedras, Puerto Rico on which there is a 10,000 square foot masonry and metal building which formerly housed the Mefiag of Puerto Rico, Inc. operation. This facility is held for sale. 7 During the fiscal year ended January 31, 1997, the Company sold idle land located in Indianapolis, Indiana on which it formerly maintained a foundry operation for the Dean Pump Division. The Company also sold a 20,000 square foot, metal building located on 3.5 acres in Forest City, North Carolina which formerly housed the Duall Division's manufacturing operations which were consolidated into existing facilities in Owosso, Michigan in 1990. In addition, the Duall Division also sold a 34,166 square foot, metal building located on 5.61 acres in Owosso, Michigan which had previously housed its fiberglass overlay operations. The Duall Division has leased a part of that facility until April 30, 1997 to allow for an orderly transfer of operations. The Company believes that the current manufacturing facilities are adequate for near term operations. The Company does not intend to renew Strobic Air's lease of a 16,000 square foot building, as the operations are expected to be transferred to an existing facility. Item 3. Legal Proceedings: Subsequent to January 31, 1997, the Company was served with a Complaint filed against the Company and several other corporations and individuals in the United States District Court for the Eastern District of Pennsylvania. The plaintiff, F. P. Woll, Inc., is the present owner of land and building ("Site") in Lansdale, Pennsylvania which was occupied by the Company and its predecessor for approximately 20 years prior to 1976. The other defendants identified in the Complaint are entities which owned or occupied the Site or neighboring properties at various times, or which insured entities that owned or occupied the Site. The Complaint alleges that the plaintiff has been ordered by the Pennsylvania Department of Environmental Protection to take remedial action with respect to petroleum contamination allegedly detected on the Site. The Complaint seeks declaratory relief and monetary damages under federal and state statutes and the common law to recover from the defendants all or some portion of the expenses which the plaintiff has incurred or may incur in connection with the condition of the Site. The Company intends to defend against the Complaint vigorously. The Company has not yet answered the Complaint and intends to move to dismiss the Complaint, which motion will be consolidated with similar motions filed by other defendants. Because this case is in its preliminary stages and because no discovery has been taken, it is not possible to assess the strength of the plaintiff's claims or the nature of the Company's defense. There are no other material pending legal proceedings to which the Company or any of its wholly owned subsidiaries is a party as of the date of this Annual Report. Item 4. Submission of Matters to a Vote of Security Holders: No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended January 31, 1997. 8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters: The Company's Common Stock is traded on the American Stock Exchange under the symbol "MPR". The high and low selling prices of the Common Stock for each quarterly period for the last two fiscal years, as reported on the American Stock Exchange, are shown below. The price of Common Stock and annual cash dividend have been adjusted to reflect the 3-for-2 stock splits occurring on July 8, 1996 and May 12, 1995, respectively.
Quarter ended Year ended January 31, 1997 April July October January - ----------------------------------------------------------------------------------------------------------------------------------- Price range of common stock: High $11.50 $13.92 $13.38 $14.25 Low 9.75 11.33 11.88 12.88 Cash dividend paid .22 - - - Year ended January 31, 1996 April July October January - ----------------------------------------------------------------------------------------------------------------------------------- Price range of common stock: High $8.59 $9.42 $9.75 $10.09 Low 7.67 8.33 9.00 8.42 Cash dividend paid .20 - - -
There were 738 registered stockholders at January 31, 1997, and the Company estimates that there are approximately 500 additional stockholders with stock held in street name. The Company has paid either a cash or stock dividend for twenty-one consecutive years. Item 6. Selected Financial Data:
Years ended January 31, 1997 1996 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------------- Selected Operating Statement Data Net sales $60,853,278 $54,067,320 $50,005,577 $41,199,444 $38,318,138 Income from operations 9,157,131 7,663,957 6,281,437 3,952,510 3,004,211 Net income 6,096,002 4,893,885 3,830,042 2,517,155 1,975,012 Earnings per share .86 .69 .54 .35 .28 Selected Balance Sheet Data Current assets $32,088,546 $28,268,561 $26,595,928 $21,987,515 $21,268,454 Current liabilities 11,374,115 10,250,506 9,506,301 7,177,206 5,876,660 Working capital 20,714,431 18,018,055 17,089,627 14,810,309 15,391,794 Current ratio 2.8 2.8 2.8 3.1 3.6 Total assets 56,079,391 47,626,587 45,168,544 40,917,481 35,551,151 Long-term obligations 3,683,419 1,692,962 2,877,386 4,048,119 1,890,400 Total stockholders' equity 40,352,926 35,012,578 32,084,010 29,187,306 27,574,624 Total capitalization 44,036,345 36,705,540 34,961,396 33,235,425 29,465,024 Return on average total assets, % 11.8 10.5 8.9 6.6 5.6 Return on average stockholders' equity, % 16.2 14.6 12.5 8.9 7.3 Other Financial Data Capital expenditures $1,811,833 $2,436,419 $1,098,893 $2,415,385 $1,236,115 Stockholders' equity per share 5.73 5.03 4.61 4.15 3.92 Cash dividends paid per share .22 .20 .11 .11 .11 Average common shares, fully diluted 7,096,214 7,051,527 7,063,920 7,079,057 7,065,467 Shares of common stock outstanding 7,043,436 6,956,535 6,964,403 7,034,108 7,039,283
9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: The following discussion should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K. General: The Company acquired Strobic Air, effective as of July 31, 1996. The acquisition was accounted for as a purchase transaction. Accordingly, the consolidated financial data for the year ended January 31, 1997 incorporates Strobic Air's operations for a six-month period. Results of Operations: The following table sets forth for the periods indicated the percentage of total net sales that such items represent in the Consolidated Statement of Operations.
Years ended January 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% Cost of goods sold 66.0% 65.9% 66.9% - ----------------------------------------------------------------------------------------------------------------------------------- Gross profit 34.0% 34.1% 33.1% Selling, general and administrative expense 19.0% 19.9% 20.5% - ----------------------------------------------------------------------------------------------------------------------------------- Income from operations 15.0% 14.2% 12.6% Other income 1.5% 1.0% 0.4% - ----------------------------------------------------------------------------------------------------------------------------------- Income before taxes 16.5% 15.2% 13.0% Provision for taxes 6.5% 6.2% 5.3% - ----------------------------------------------------------------------------------------------------------------------------------- Net income 10.0% 9.0% 7.7% - -----------------------------------------------------------------------------------------------------------------------------------
FYE 1997 vs FYE 1996: Net sales for the year ended January 31, 1997 were $60.9 million, a new record, exceeding net sales for the year ended January 31, 1996 by $6.8 million, an increase of 12.6%. This is the fourth consecutive year that net sales have achieved a new record. Sales in the Pollution Control Systems and Allied Equipment segment were $3.5 million or 12.4% higher than the prior fiscal year due to the acquisition of Strobic Air Corporation ("Strobic Air"), effective as of July 31, 1996, coupled with higher demand primarily for our fume and odor control equipment. Sales in the Fluid Handling Equipment segment were $3.3 million or 12.7% higher compared to the prior year due primarily to increased demand for our specialty pump equipment. Foreign sales increased to $7.5 million for the fiscal year ended January 31, 1997 which is a 12.7% increase over the prior year. This increase was due to higher sales in the Middle East region, Pacific Rim and the European Common Market. Foreign sales increased 16.5% in the Fluid Handling segment versus the prior fiscal year, while the Pollution Control Systems and Allied Equipment segment were flat versus the prior fiscal year due to the timing of fume and odor control orders. Net income of $6.1 million for the fiscal year ended January 31, 1997 was $1.2 million or 24.6% above the earnings level of the prior year. This is the fourth consecutive year of increased earnings. The gross margin was 34.0% for the fiscal year ended January 31, 1997, equal to the prior year. The consistent gross margin is related to higher sales volume and product mix in both business segments, and includes $0.3 million of costs associated with the relocation of the Puerto Rico operations and the out-sourcing of the Systems Division's manufacturing operations. Selling expense increased approximately $0.4 million or 8.1% over the prior fiscal year. The Strobic Air acquisition accounted for $0.1 million of the increase, combined with increased staffing and marketing efforts in existing operations to position the Company for future growth. Selling expense as a percentage of net sales was 8.0% for the fiscal year ended January 31, 1997, virtually equal to the prior fiscal year. 10 General and administrative expense was $6.7 million for the fiscal year ended January 31, 1997 compared to $6.3 million in the prior fiscal year. The $0.4 million increase can be attributed entirely to the acquisition of Strobic Air. General and administrative expense as a percentage of net sales was 11.0% for the fiscal year ended January 31, 1997 compared to 11.6% for the prior fiscal year. Other income of $0.9 million for the fiscal year ended January 31, 1997 consisted primarily of interest income earned on short-term investments and a $0.4 million net gain on the disposal of certain properties. Other income of $0.6 million at January 31, 1996 consisted primarily of interest income on short-term investments. The effective tax rate for the fiscal year ended January 31, 1997 was 39.5% compared to 40.5% for the prior year. Earnings per share for the fiscal year ended January 31, 1997 increased approximately $.01 as a result of the decline in the effective tax rate compared to the prior year. FYE 1996 vs FYE 1995: Net sales for the year ended January 31, 1996 were $54.1 million, a new record, exceeding net sales for the year ended January 31, 1995 by 8.1%. Sales in the Pollution Control Systems and Allied Equipment segment were $28.1 million, an increase of 8.9% over the prior fiscal year. The increase was primarily attributable to continued demand for our Aquadene(TM) products manufactured to prevent lead and copper leaching into drinking water, combined with improved results in the fume and odor control product lines. Sales in the Fluid Handling Equipment segment of the business totalled $26.0 million or 7.3% higher than the prior fiscal year, as a result of the continuing demand for our specialty pump equipment and related products. Foreign sales increased to $6.7 million for the year ended January 31, 1996 which is a 14.9% increase over the prior fiscal year. The increase can be attributed to expanded sales efforts in both the Pacific Rim region and the European Common Market. Foreign sales increased 32.9% in the Pollution Control Systems and Allied Equipment segment, and 11.7% in the Fluid Handling Equipment segment versus the prior year. Net income of $4.9 million for the fiscal year ended January 31, 1996 was $1.1 million or 27.8% above the record earnings for the prior year. This was the second consecutive year of record earnings. The gross margin for the fiscal year ended January 31, 1996 increased to 34.1% versus 33.1% for the prior fiscal year. This was the fourth consecutive year that the gross margin has increased. The improvement was due to a combination of factors, including higher sales volume, product mix, and production efficiencies. Selling expense increased approximately $0.5 million or 11.2% over the prior year due to the expansion of the sales force in both market segments which was required to position our diversified businesses for future growth. Selling expense as a percentage of net sales was 8.3% for the fiscal year ended January 31, 1996, virtually flat compared to the prior year. General and administrative expense was $6.3 million or 11.6% as a percentage of net sales for the fiscal year ended January 31, 1996. This represented a 1.0% decline in general and administrative expense as a percentage of net sales compared to the prior year. Other income of $0.6 million for the fiscal year ended January 31, 1996 consisted primarily of interest earned on short-term investments. The effective tax rate for the year ended January 31, 1996 was 40.5% compare to 41.0% for the prior year. Earnings per share for the fiscal year ended January 31, 1996 increased by $.01, as a result of the decline in the effective tax rate compared to the prior year. Liquidity: The cash and short-term investment position was $9.1 million on January 31, 1997, an increase of $1.7 million over the previous year. The improvement is the result of cash flows generated from operations combined with the decision to finance the Strobic Air acquisition. Accounts receivable were $10.6 million at January 31, 1997, an increase of $1.6 million compared to the prior year. Strobic Air accounted for $1.2 million of the increase in accounts receivable. The size of orders, the timing of shipments to meet customer requirements and retainage on contracts, combined with increased sales volume, especially in the Pollution Control and Allied Equipment segment, will influence accounts receivable balances at any point in time. Inventories totalled $10.6 million at January 31, 1997, an increase of $0.3 million compared to the prior year. Strobic Air's inventory of $0.8 million was offset by lower inventory levels in existing operations. Inventory balances will fluctuate depending upon the size and timing of orders and market demand especially when major systems and contracts are involved. 11 Current liabilities increased from $10.3 million at January 31, 1996 to $11.4 million at January 31, 1997 or $1.1 million. Strobic Air's operations accounted for $0.8 million of the increase, while debt financing associated with the acquisition amounted to $0.4 million. The Company has consistently maintained a high current ratio and has not utilized lines of credit totalling $5.0 million which are available for working capital purposes. The current ratio was 2.8 at both January 31, 1997 and January 31, 1996. Capital Resources and Requirements: Cash flows provided by operating activities during the fiscal year ended January 31, 1997 amounted to $7.2 million compared to $6.3 million during the prior fiscal year. The increase of $0.9 million can be attributed to the higher sales activity. Investing activities during the fiscal year ended January 31, 1997 amounted to $3.8 million compared to $2.4 million during the fiscal year ended January 31, 1996. The Company completed the construction of a 22,000 square foot facility for the Stiles-Kem Division. The total investment in the facility, constructed over two years, is $2.0 million. The Company invested $0.3 million in capital equipment and tooling at the Keystone Filter Division to increase the range of products manufactured and to develop a new product line. Machinery and equipment totalling $0.4 million was purchased for the Dean Pump Division to expand capacity and improve efficiency. The Company continues to invest in machinery and equipment, tooling, patterns and molds to improve efficiency and maintain our position as leaders in the markets in which we serve. The Company acquired the Common Stock of Strobic Air on September 12, 1996, pursuant to an Agreement and Plan of Merger, effective as of July 31, 1996 for approximately $5.0 million. The acquisition was accounted for as a purchase transaction. As part of the transaction, the Company entered into a non-compete agreement having a four-year term and a three-year employment agreement with the former President of Strobic Air. Financing activities during the fiscal year ended January 31, 1997 utilized $1.7 million of available resources compared to $3.1 million during the prior fiscal year. The Strobic Air acquisition was financed through unsecured bank loans consisting of two separate $1.75 million notes, payable with fixed and floating interest rates. The Company also disposed of certain idle properties in Indiana, Michigan and North Carolina, generating net proceeds of approximately $1.5 million and a net gain of $0.4 million. The Company paid $1.9 million of scheduled long-term debt during the current fiscal year. The long-term debt to equity ratio at January 31, 1997 was 9.1% compared to 4.8% at January 31, 1996. A total of 48,088 stock options were exercised during the year ended January 31, 1997 which provided cash proceeds of approximately $0.3 million. The Company continued to repurchase shares outstanding on the open market at prevailing prices under the stock buyback program announced on June 7, 1995. The Board of Directors also authorized two separate buyback programs totalling 175,000 shares during the fiscal year ended January 31, 1997. The Company repurchased 156,900 shares at a cost of approximately $2.0 million under the combined programs during the year ended January 31, 1997. The Board of Directors also declared a cash dividend of $.22 (adjusted for stock split) per share which was paid on April 26, 1996. This represented a 10% increase in the dividend payout rate, amounting to $1.5 million or 31.3% of prior year earnings. On June 5, 1996, the Board of Directors announced a 3-for-2 stock split which was paid to shareholders of record on July 8, 1996. This resulted in an increase of approximately 2.4 million shares outstanding, and is the second consecutive year that a 3-for-2 stock split was executed. During the fiscal year ended January 31, 1997, the Company expended approximately $0.7 on research and development compared to $0.6 million during the prior fiscal year as part of our commitment to the future. The Company will continue to invest in new product development to maintain and enhance our market position as leaders in the markets in which we participate. Capital expenditures will be made to support operations and expand our capacity to meet market demands. The Company intends to finance capital expenditures in the coming year through cash flows from operations and will secure third party financing, when deemed appropriate. 12 Certain Trends and Uncertainties: 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 or operations of the Company and those 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. Item 8. Financial Statements and Supplementary Data: Index to Consolidated Financial Statements and Supplementary Data:
Page Consolidated Financial Statements: Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Statement of Consolidated Stockholder's Equity . . . . . . . . . . . . . . . . . . . . . . . 16 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Consolidated Business Segment Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 19 Supplementary Data: Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders Met-Pro Corporation and its Wholly Owned Subsidiaries Harleysville, Pennsylvania We have audited the accompanying consolidated balance sheet of Met-Pro Corporation and its wholly owned subsidiaries as of January 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended January 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Met-Pro Corporation and its wholly owned subsidiaries as of January 31, 1997 and 1996 and the results of their operations and their cash flows for each of the three years in the period ended January 31, 1997 in conformity with generally accepted accounting principles. /s/ Margolis & Company P.C. ---------------------------- Certified Public Accountants Bala Cynwyd, Pennsylvania February 28, 1997 14 MET-PRO CORPORATION CONSOLIDATED BALANCE SHEET
January 31, ASSETS 1997 1996 - ---------------------------------------------------------------------------------------------------------------------------------- Current assets Cash and cash equivalents - Note 3 $9,070,976 $7,415,375 Accounts receivable, net of allowance for doubtful accounts of approximately $233,000 and $195,000, respectively 10,570,528 8,941,157 Notes receivable, ESOT - Note 4 400,000 400,000 Inventories - Note 5 10,597,813 10,302,844 Prepaid expenses, deposits and other current assets 571,226 559,238 Deferred income taxes - Note 8 878,003 649,947 - ---------------------------------------------------------------------------------------------------------------------------------- Total current assets 32,088,546 28,268,561 Property, plant and equipment, net - Notes 6 and 7 14,346,995 14,433,565 Costs in excess of net assets of businesses acquired, net 7,502,470 3,725,118 Other assets 2,141,380 1,199,343 - ---------------------------------------------------------------------------------------------------------------------------------- Total assets $56,079,391 $47,626,587 - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------------------------------------------------------------------------------------------------- Current liabilities Current portion of long-term debt - Note 7 $1,585,087 $1,178,177 Accounts payable 2,996,065 2,307,034 Accrued salaries, wages and expenses - Note 10 6,424,709 6,347,912 Payroll and other taxes payable 19,685 5,974 Customers' advances 348,569 411,409 - ---------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 11,374,115 10,250,506 Long-term debt - Note 7 3,683,419 1,692,962 Other non-current liabilities 172,941 101,345 Deferred income taxes - Note 8 495,990 569,196 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities 15,726,465 12,614,009 - ---------------------------------------------------------------------------------------------------------------------------------- Commitments and contingencies - Notes 9, 10 and 14 Stockholders' equity - Note 10 Common stock, $.10 par value; 10,000,000 shares authorized, 7,138,625 and 4,759,221 shares issued, respectively, of which 95,189 and 121,531 shares were reacquired and held in treasury at the respective dates 713,862 475,922 Additional paid-in capital 8,260,289 7,442,810 Retained earnings 32,467,223 28,142,539 Cumulative translation adjustment 19,121 209,333 Treasury stock, at cost (1,107,569) (1,258,026) - ---------------------------------------------------------------------------------------------------------------------------------- Net stockholders' equity 40,352,926 35,012,578 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $56,079,391 $47,626,587 - ---------------------------------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements are an integral part of the above statement.
15 MET-PRO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
Years ended January 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- Net sales $60,853,278 $54,067,320 $50,005,577 Cost of goods sold 40,157,752 35,625,610 33,472,665 - ----------------------------------------------------------------------------------------------------------------------------------- Gross profit 20,695,526 18,441,710 16,532,912 - ----------------------------------------------------------------------------------------------------------------------------------- Operating expenses Selling 4,854,845 4,489,905 4,037,676 General and administrative 6,683,550 6,287,848 6,213,799 - ----------------------------------------------------------------------------------------------------------------------------------- 11,538,395 10,777,753 10,251,475 - ----------------------------------------------------------------------------------------------------------------------------------- Income from operations 9,157,131 7,663,957 6,281,437 Other income, net - Note 11 918,905 561,060 210,158 - ----------------------------------------------------------------------------------------------------------------------------------- Income before taxes 10,076,036 8,225,017 6,491,595 Provision for taxes - Note 8 3,980,034 3,331,132 2,661,553 - ----------------------------------------------------------------------------------------------------------------------------------- Net income $6,096,002 $4,893,885 $3,830,042 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings per share, primary and fully diluted $.86 $.69 $.54
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Additional Cumulative Common Paid-in Retained Translation Treasury Stock Capital Earnings Adjustment Stock Total - -------------------------------------------------------------------------------------------------------------------------------- Balances, January 31, 1994 $319,342 $7,392,546 $21,766,568 ($63,071) ($228,079) $29,187,306 Net income - - 3,830,042 - - 3,830,042 Dividends paid, $.11 per share - - (780,068) - - (780,068) Stock option transactions - Note 10 - 9,095 - - 5,155 14,250 Purchase of 31,980 shares of treasury stock - - - - (464,351) (464,351) Cumulative translation adjustment - - - 296,831 - 296,831 - -------------------------------------------------------------------------------------------------------------------------------- Balances, January 31, 1995 319,342 7,401,641 24,816,542 233,760 (687,275) 32,084,010 Net income - - 4,893,885 - - 4,893,885 Dividends paid, $.20 per share - - (1,409,322) - - (1,409,322) Stock split, 50% 156,580 - (156,580) - - - Cash in lieu of fractional shares - - (1,986) - - (1,986) Stock option transactions - Note 10 - 41,169 - - 265,570 306,739 Purchase of 61,003 shares of treasury stock - - - - (836,321) (836,321) Cumulative translation adjustment - - - (24,427) - (24,427) - -------------------------------------------------------------------------------------------------------------------------------- Balances, January 31, 1996 475,922 7,442,810 28,142,539 209,333 (1,258,026) 35,012,578 Net income - - 6,096,002 - - 6,096,002 Dividends paid, $.22 per share - - (1,530,693) - - (1,530,693) Stock split, 50% 237,940 - (237,940) - - - Cash in lieu of fractional shares - - (2,685) - - (2,685) Stock option transactions - Note 10 - 143,514 - - 406,813 550,327 Purchase of 156,900 shares of treasury stock - - - - (1,982,411) (1,982,411) Acquisition of Strobic Air Corporation - Note 2 - 673,965 - - 1,726,055 2,400,020 Cumulative translation adjustment - - - (190,212) - (190,212) - -------------------------------------------------------------------------------------------------------------------------------- Balances, January 31, 1997 $713,862 $8,260,289 $32,467,223 $19,121 ($1,107,569) $40,352,926 - -------------------------------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements are an integral part of the above statement.
16 MET-PRO CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended January 31, 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities Net income $6,096,002 $4,893,885 $3,830,042 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,707,547 1,613,391 1,619,098 Deferred income taxes (379,520) (222,131) (354,198) (Gain)/loss on sale of property and equipment, net (369,100) (4,217) 85,726 Non-cash compensation expensed on exercise of stock options 286,733 - 3,500 Allowance for doubtful accounts 38,014 10,528 93,444 (Increase) decrease in operating assets, net of acquisition of Strobic Air Corporation: Accounts receivable (617,027) (833,030) (557,147) Notes receivable, ESOT - (400,000) 75,000 Inventories 496,743 400,946 (1,258,406) Prepaid expenses and other current assets 82,789 89,169 - Other assets (40,968) (38,929) (165,656) Increase (decrease) in operating liabilities, net of acquisition of Strobic Air Corporation: Accounts payable, accrued expenses and taxes (106,710) 596,986 2,107,095 Customers' advances (62,840) 139,022 171,009 Other non-current liabilities 71,595 66,498 17,997 - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 7,203,258 6,312,118 5,667,504 - ---------------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities Proceeds from sale of property and equipment 1,498,747 4,881 4,274 Acquisitions of property and equipment (1,811,833) (2,436,419) (1,098,893) Payment for purchase of Strobic Air Corporation, net of cash acquired (3,535,898) - - - ---------------------------------------------------------------------------------------------------------------------------------- Net cash (used in) investing activities (3,848,984) (2,431,538) (1,094,619) - ---------------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities Proceeds from new borrowings 3,500,000 - - Reduction of debt (1,919,659) (1,177,068) (1,165,012) Exercise of stock options 263,594 306,739 10,750 Payment of dividends (1,530,693) (1,409,322) (780,068) Cash in lieu of fractional shares (2,685) (1,986) - Purchase of treasury shares (1,982,411) (836,321) (464,351) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash (used in) financing activities (1,671,854) (3,117,958) (2,398,681) - ---------------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (26,819) 4,373 48,829 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 1,655,601 766,995 2,223,033 Cash and cash equivalents at beginning of year 7,415,375 6,648,380 4,425,347 - ---------------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $9,070,976 $7,415,375 $6,648,380 - ---------------------------------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements are an integral part of the above statement.
17 MET-PRO CORPORATION CONSOLIDATED BUSINESS SEGMENT DATA
Years ended January 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Net sales to unaffiliated customers Pollution control systems and allied equipment $31,578,749 $28,090,728 $25,802,405 Fluid handling equipment 29,274,529 25,976,592 24,203,172 - ------------------------------------------------------------------------------------------------------------------- $60,853,278 $54,067,320 $50,005,577 Includes foreign sales of: Pollution control systems and allied equipment $ 1,106,077 $ 1,164,509 $ 875,966 Fluid handling equipment 6,431,167 5,521,619 4,945,125 - ------------------------------------------------------------------------------------------------------------------- $ 7,537,244 $ 6,686,128 $ 5,821,091 - ------------------------------------------------------------------------------------------------------------------- Income from operations Pollution control systems and allied equipment $ 5,048,313 $ 4,269,701 $ 3,489,710 Fluid handling equipment 4,108,818 3,394,256 2,791,727 - ------------------------------------------------------------------------------------------------------------------- $ 9,157,131 $ 7,663,957 $ 6,281,437 - ------------------------------------------------------------------------------------------------------------------- Depreciation and amortization expense Pollution control systems and allied equipment $ 750,677 $ 506,260 $ 502,254 Fluid handling equipment 956,870 1,107,131 1,116,844 - ------------------------------------------------------------------------------------------------------------------- $ 1,707,547 $ 1,613,391 $ 1,619,098 - ------------------------------------------------------------------------------------------------------------------- Capital expenditures Pollution control systems and allied equipment $ 797,799 $ 1,693,342 $ 319,468 Fluid handling equipment 922,724 660,377 678,316 - ------------------------------------------------------------------------------------------------------------------- 1,720,523 2,353,719 997,784 Corporate 91,310 82,700 101,109 - ------------------------------------------------------------------------------------------------------------------- $ 1,811,833 $ 2,436,419 $ 1,098,893 - ------------------------------------------------------------------------------------------------------------------- Identifiable assets at January 31 Pollution control systems and allied equipment $24,530,682 $16,370,893 $16,466,133 Fluid handling equipment 20,601,654 21,726,465 21,046,118 - ------------------------------------------------------------------------------------------------------------------- 45,132,336 38,097,358 37,512,251 Corporate 10,947,055 9,529,229 7,656,293 - ------------------------------------------------------------------------------------------------------------------- $56,079,391 $47,626,587 $45,168,544 - ------------------------------------------------------------------------------------------------------------------- The Company follows the practice of allocating general corporate expenses, including depreciation and amortization expense, among the segments.
18 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation: The consolidated financial statements include the accounts of Met-Pro Corporation ("Met-Pro" or the "Company") and its wholly owned subsidiaries, Mefiag B.V. and Strobic Air Corporation ("Strobic Air"). Significant intercompany accounts and transactions have been eliminated. Accounts denominated in foreign currencies have been remeasured into the functional currency in accordance with Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation," using the U.S. dollar as the functional currency. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Nature of operations: The Company manufactures and sells pollution control and allied equipment for purification of air and liquids, and fluid handling equipment for corrosive, abrasive and high temperature liquids. Inventories: Inventories generally are stated at the lower of cost or market (principally first-in, first-out) except for the inventory at the Dean Pump Division which is determined on the last-in, first-out basis (see Note 5). Property, plant and equipment: Property, plant and equipment are stated at cost. Depreciation is computed principally by the straight-line method over estimated useful lives. Expenditures for maintenance and repairs are charged to expense as incurred. Renewals and betterments are capitalized (see Note 6). Costs in excess of net assets of businesses acquired: Costs in excess of net assets of businesses acquired prior to November 1, 1970, totalling $582,513, are not being amortized because management believes that there has been no impairment in value. Costs in excess of net assets of businesses acquired subsequent to October 31, 1970, totalling $6,919,957, are being amortized over 40 years. The Company monitors the recoverability of goodwill using a fair value approach. Revenue recognition: Revenues are recognized when products are shipped. Advertising: Advertising costs are charged to operations in the year incurred and were $809,476, $767,507 and $709,977 for the years ended January 31, 1997, 1996 and 1995, respectively. Research and development: Research and development costs are charged to expense in the year incurred. The amounts charged were $670,336, $584,191 and $506,139 in the years ending in 1997, 1996 and 1995, respectively. 19 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) Earnings per share: Earnings per share is computed based on the weighted average number of shares of common stock and common stock equivalents outstanding during each year. The weighted average number of common shares outstanding was 7,096,214, 7,051,527 and 7,063,920 during each of the years ended in 1997, 1996 and 1995, respectively. Stock splits and cash dividends: On May 12, 1995, the Company issued 1,565,803 shares of Common Stock in connection with the 3-for-2 stock split, and on July 8, 1996, the Company issued 2,379,197 shares of Common Stock in connection with a second 3-for-2 stock split. Both stock splits were in the form of a 50% stock dividend. Per share figures and other information included in the financial statements and notes are based on the increased number of shares after giving affect to the stock splits. On February 24, 1997, the Board of Directors declared a $.27 per share annual cash dividend payable on April 25, 1997 to stockholders of record on April 11, 1997. Concentrations of credit risk: The Company believes concentrations of credit risk are limited due to the number of customers, and dispersion among the business segments and geographic areas. The Company had no significant concentrations of credit risk as of January 31, 1997 and 1996. Contract retainage: Accounts receivable at January 31, 1997 and 1996 included retainage on contracts of $276,000 and $528,000, respectively. Supplemental cash flow information: 1997 1996 1995 ----------------------------------------------------------------------- Cash paid during the year for: Interest $228,841 $258,297 $287,112 ----------------------------------------------------------------------- Income taxes $4,039,248 $3,148,038 $2,443,099 ----------------------------------------------------------------------- NOTE 2: ACQUISITION OF BUSINESS The Company, pursuant to an Agreement and Plan of Merger, acquired the Common Stock of Strobic Air for a purchase price of approximately $5,000,000. The acquisition was accounted for as a purchase transaction. Strobic Air designs, manufactures and markets the patented Tri-Stack(R) direct drive mixed flow exhaust fans which are state-of-the-art design. The acquisition was completed by issuing Common Stock from the treasury valued at $2,400,020 (195,920 shares), a cash payment of $2,150,000, a promissory note payable for $250,000, plus acquisition costs. As part of the transaction, the Company entered into a non-compete agreement in the amount of $1,000,000 having a four-year term. Bank loans totalling $3,500,000, consisting of two $1,750,000 notes, one with a floating interest rate and one with a fixed interest rate (see Note 7), were used to finance the purchase of Strobic Air. Goodwill totalling $3,914,602 was acquired and will be amortized over 40 years. On December 31, 1996, the Securities and Exchange Commission declared effective the Company's Registration Statement on Form S-3 pursuant to which the Company registered an aggregate of 195,920 shares of Common Stock issued to the former stockholders of Strobic Air in connection with the acquisition. The shares registered may be sold pursuant to the plan of distribution described therein. An aggregate of 193,544 of such shares are subject, through December 11, 1997, to certain contractual restrictions. 20 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) The following unaudited pro forma summary presents the consolidated results of operations as if the Company had acquired Strobic Air at the start of the year in which the acquisition occurred and the immediately preceding year: 1997 1996 ------------------------------------------------------------------ Net sales $64,060,415 $59,621,240 Income before taxes 10,327,460 8,686,542 Net income 6,214,483 5,172,751 Earnings per share (fully diluted) $.88 $.71 NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS Cash and cash equivalents: Short-term investments at January 31, 1997 and 1996 were valued at cost (approximating market) and amounted to $8,495,100 and $6,955,338, respectively. Short-term investments consist principally of commercial paper maturing within three months and money market funds, which are considered to be cash equivalents. The Company evaluates the creditworthiness of the financial institutions and financial instruments in which it invests. Debt: The fair value and carrying amount of long-term debt was as follows: January 31, 1997 1996 --------------------------------------------------------------------- Fair value $5,276,656 $2,905,748 Carrying amount 5,268,506 2,871,139 Valuations for long-term debt are determined based on borrowing rates currently available to the Company for loans with similar terms and maturities. NOTE 4: NOTES RECEIVABLE, ESOT The Company has advanced a total of $400,000 to the Employee Stock Ownership Trust to acquire shares of the Company's stock, which are evidenced by four demand notes with interest rates ranging from 4.95% to 5.64% per annum. NOTE 5: INVENTORIES Inventories were comprised of the following: January 31, 1997 1996 ------------------------------------------------------------------ Raw material $4,784,192 $4,277,065 Work in process 1,715,157 2,053,626 Finished goods 4,098,464 3,972,153 ------------------------------------------------------------------ $10,597,813 $10,302,844 ------------------------------------------------------------------ At January 31, 1997 and 1996, inventories valued at the last-in, first-out method (LIFO) were $2,548,477 and $2,921,430, respectively. The LIFO value of inventories was lower than replacement cost by $746,485 and $719,000 at January 31, 1997 and 1996, respectively. 21 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) The book basis of LIFO inventories exceeded the tax basis by approximately $1,026,000 at both January 31, 1997 and 1996, as a result of applying the provisions of Accounting Principles Board Opinion (APB) No. 16, "Business Combinations" to an acquisition completed in a prior year. NOTE 6: PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment was comprised of the following: January 31, 1997 1996 --------------------------------------------------------------------- Land $1,906,387 $2,028,934 Buildings and improvements 11,444,189 12,456,649 Machinery and equipment 11,614,730 9,094,165 Furniture and fixtures 2,599,240 2,321,768 Automotive equipment 928,420 877,124 Leasehold improvements 3,710 - --------------------------------------------------------------------- 28,496,676 26,778,640 Less accumulated depreciation 14,149,681 12,345,075 --------------------------------------------------------------------- $14,346,995 $14,433,565 --------------------------------------------------------------------- Depreciation of property, plant and equipment charged to operations amounted to $1,295,483, $1,160,717 and $1,157,483 for the years ended in 1997, 1996 and 1995, respectively. 22 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) NOTE 7: DEBT Short-term debt: The Company has available both domestic and foreign unsecured lines of credit totalling $5,000,000 which can be used for working capital. The lines of credit were not used during either year. Long-term debt: Long-term debt was comprised of the following:
January 31, 1997 1996 ----------------------------------------------------------------------------------------------------- Notes payable, bank, payable in quarterly installments ranging from $87,500 to $100,000, plus interest at fixed rates ranging from 6.15% to 7.51%, maturing July, 1998 and September, 2001 $2,262,500 $1,000,000 Notes payable, bank, payable in quarterly installments ranging from $87,500 to $100,000, plus interest at variable rates ranging from 6.375% to 6.625%, maturing July, 1998 and September, 2001 2,262,500 1,000,000 Note payable, acquisition escrow account, balloon payment due on April 2, 1998, plus interest at a fixed rate of 5.90% 250,000 - Mortgage note payable, secured by property, payable in $10,267 monthly installments (including principal and interest), at a fixed interest rate of 8.50%, maturing February, 2001 493,506 571,139 Mortgage note payable, secured by property, payable in $25,000 monthly installments, plus interest, at a variable rate of 6.281% - 300,000 ------------------------------------------------------------------------------------------------------ 5,268,506 2,871,139 Less current portion 1,585,087 1,178,177 ------------------------------------------------------------------------------------------------------ $3,683,419 $1,692,962 ------------------------------------------------------------------------------------------------------
Interest expense was $300,170, $266,113, and $285,710 for the years ending in 1997, 1996 and 1995, respectively. The aggregate maturities of long-term debt for each of the five years subsequent to January 31, 1997 are as follows: 1998, $1,585,087; 1999, $1,442,608; 2000, $800,794; 2001, $809,703; 2002, $630,314; and thereafter, none. 23 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) NOTE 8: INCOME TAXES The provision for income taxes was comprised of the following: 1997 1996 1995 -------------------------------------------------------------------- Current Federal $3,048,214 $2,545,999 $2,037,642 State 982,353 824,518 818,781 Foreign 250,729 207,366 127,130 -------------------------------------------------------------------- 4,281,296 3,577,883 2,983,553 Deferred (301,262) (246,751) (322,000) -------------------------------------------------------------------- $3,980,034 $3,331,132 $2,661,553 -------------------------------------------------------------------- Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the net deferred tax assets were as follows: 1997 1996 ----------------------------------------------------------------------- Deferred tax assets Inventory cost capitalization $183,897 $191,927 Pension cost 901,131 748,488 Non-compete agreements 334,999 275,557 Write-down of property, plant and equipment - 36,000 Other 203,439 120,000 ----------------------------------------------------------------------- Total deferred tax assets 1,623,466 1,371,972 ----------------------------------------------------------------------- Deferred tax liabilities Accelerated depreciation 568,128 535,085 Inventory - Dean Pump Division 410,463 410,468 Excess of book over tax basis of property acquired in acquisitions 213,011 309,732 Goodwill 49,851 35,936 ----------------------------------------------------------------------- Total deferred tax liabilities 1,241,453 1,291,221 ----------------------------------------------------------------------- Net deferred tax assets $382,013 $80,751 ----------------------------------------------------------------------- A reconciliation of the federal statutory rate and the Company's effective tax rate is presented as follows:
1997 1996 1995 ------------------------------------------------------------------------------------------------ Computed expected tax expense (federal) $3,425,852 34.0% $2,796,506 34.0% $2,207,142 34.0% State income taxes, net of federal income tax benefit 648,353 6.4 544,180 6.6 540,395 8.3 Foreign tax differential (59,709) (.6) (5,500) (.1) (39,951) (.6) Foreign tax credit (5,140) - (3,861) - (11,427) (.2) Other (29,322) (.3) (193) - (34,606) (.5) ------------------------------------------------------------------------------------------------ Effective income taxes $3,980,034 39.5% $3,331,132 40.5% $2,661,553 41.0% ------------------------------------------------------------------------------------------------
24 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) NOTE 9: LEASES AND OTHER COMMITMENTS The Company leases two facilities under operating leases which expire on April 15 and October 31, 1997. The operating leases will not be renewed at expiration. Minimum rental commitments under these non-cancelable leases amount to $39,750. Rental expense under all operating leases was $50,622, $60,335 and $74,161 during the years ended in 1997, 1996 and 1995, respectively. NOTE 10: EMPLOYEE BENEFIT PLANS Pension Plans: The Company has several tax-qualified defined benefit pension plans covering eligible employees in the United States. The Company contributes amounts to the plans equal to the amounts that are tax deductible. Net periodic pension cost included the following components:
1997 1996 1995 --------------------------------------------------------------------------------------------------- Service cost-benefits earned during the period $461,000 $414,100 $458,500 Interest cost on projected benefit obligation 625,083 562,387 487,152 Return on assets (1,624,484) (1,499,590) (56,541) Amortization 58,205 (31,546) (47,428) Deferred gain/(loss) on investments 984,187 962,487 (489,546) --------------------------------------------------------------------------------------------------- $503,991 $407,838 $352,137 ---------------------------------------------------------------------------------------------------
25 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) The following table sets forth the Plans' funded status and amounts recognized in the Company's balance sheet at January 31, 1997 and 1996:
1997 1996 -------------------------------------------------------------------------------------------------------------- Overfunded Underfunded Overfunded Underfunded Plan Plans Plan Plans -------------------------------------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested $4,679,000 $2,208,200 $4,344,000 $2,073,300 Non-vested 131,000 91,700 142,000 94,100 -------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation $4,810,000 $2,299,900 $4,486,000 $2,167,400 -------------------------------------------------------------------------------------------------------------- Projected benefit obligation $6,269,000 $2,299,900 $5,867,000 $2,167,400 Plan assets at fair value 7,585,508 1,908,531 6,505,476 1,571,989 -------------------------------------------------------------------------------------------------------------- Plan assets in excess of (less than) projected benefit obligation 1,316,508 (391,369) 638,476 (595,411) Unrecognized net gain (2,897,814) (456,947) (1,989,709) (224,557) Unrecognized transition (obligation) asset (381,958) 205,948 (413,788) 244,700 Unrecognized prior service cost 64,828 168,093 63,707 264,174 -------------------------------------------------------------------------------------------------------------- Accrued pension expense included in accounts payable and accrued expenses ($1,898,436) ($474,275) ($1,701,314) ($311,094) --------------------------------------------------------------------------------------------------------------
Assumptions used in the accounting for pension cost were: 1997 1996 1995 ---------------------------------------------------------------------- Discount rate 7.50% 7.50% 7.75% Rate of increase in compensation levels (where applicable) 6.00% 6.00% 6.00% Expected long-term rate of return on assets 8.00% 8.00% 8.00% Directors' Benefit Plan: The Company also provides a non-qualified pension plan for Directors which is unfunded. The plan is designed to provide pension benefits based on the category of the Director and length of service. The amounts applicable are included in the tables above. Employees' Stock Ownership Trust: The Company sponsors an employee stock ownership plan under which it makes discretionary contributions to the trust either in cash or in stock of the Company for salaried employees in the United States eligible to participate in the Plan. The Company provided for cash contributions to the Employees' Stock Ownership Trust of $200,000, $200,000 and $150,000 in the years ended in 1997, 1996 and 1995, respectively. All shares are considered to be allocated to participants or to be released for allocation to participants, and are included in the earnings per share computations. 26 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) Incentive Stock Option Plans: The Company accounts for employee stock options in accordance with APB No. 25, "Accounting for Stock Issued to Employees" and related Interpretations. The Company will apply APB No. 25 for purposes of accounting for its employee stock options. The pro forma disclosures required by SFAS No. 123, "Accounting for Stock-Based Compensation" are not presented, since the impact on the Company's financial statements for the periods presented is de minimis. During 1987 ("1987 Plan"), the Company adopted an incentive stock option plan under which 100,000 shares (354,375 after stock splits and dividends) of the Company's Common Stock were reserved for employees as selected by the Board of Directors. At the Company's annual meeting held June 3, 1992, a similar resolution for an additional 100,000 shares (225,000 after stock splits and dividends), as adopted by the Board of Directors on October 10, 1991 ("1992 Plan"), was approved. Each of the Plans provides for anti-dilution provisions. The status of the Plans was as follows:
1987 Plan 1997 1996 1995 ------------------------------------------------------------------------------------------------- Options outstanding at February 1 60,300 108,338 109,463 Grants 40,500 27,000 - Exercises 35,713 75,038 1,125 Options outstanding at January 31 65,087 60,300 108,338 Options price range at January 31 $ 3.38 $ 3.38 $ 3.38 to to to $ 7.17 $ 7.17 $ 7.17 Options exercisable at January 31 65,087 33,300 108,338 ------------------------------------------------------------------------------------------------- Options available for grant at January 31 1,238 41,738 68,738 ------------------------------------------------------------------------------------------------- 1992 Plan 1997 1996 1995 ------------------------------------------------------------------------------------------------- Options outstanding at February 1 197,625 73,125 45,000 Grants 21,000 133,500 29,250 Exercises 12,375 9,000 1,125 Cancellations 3,750 - - Options outstanding at January 31 202,500 197,625 73,125 Options price range at January 31 $ 5.00 $ 5.00 $ 5.00 to to to $ 13.13 $ 9.08 $ 6.00 Options exercisable at January 31 143,251 59,625 48,375 ------------------------------------------------------------------------------------------------- Options available for grant at January 31 0 17,250 150,750 -------------------------------------------------------------------------------------------------
The weighted average exercise prices for both of the Company's stock option plans were as follows:
1997 1996 1995 ----------------------------------------------------------------------------------------------------- Options outstanding at February 1 $7.19 $4.33 $4.18 Grants $8.40 $8.56 $5.23 Exercises $5.48 $3.65 $4.78 Cancellations $9.08 - - Options outstanding at January 31 $7.75 $7.19 $4.33
27 MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued) NOTE 11: OTHER INCOME, NET Other income, net, was comprised of the following:
1997 1996 1995 ----------------------------------------------------------------------------------------------- Gain/(loss) on sale of property and equipment $369,100 $4,217 ($85,726) Other, primarily interest income 549,805 556,843 295,884 ----------------------------------------------------------------------------------------------- $918,905 $561,060 $210,158 -----------------------------------------------------------------------------------------------
NOTE 12: BUSINESS SEGMENT DATA The Company operates in two business segments as shown on page 18. NOTE 13: GEOGRAPHIC INFORMATION Transfers between geographic areas are accounted for at cost and consistent with rules and regulations of governing tax authorities. Such transfers are eliminated in the consolidated financial statements. Income from operations by geographic segment includes an allocation of general corporate expenses. Identifiable assets are those that can be directly associated with the geographic area. Geographic information for three years ended January 31 is presented in the following table:
1997 1996 1995 ---------------------------------------------------------------------------------------------------- Net sales: United States $53,316,034 $47,381,192 $44,184,486 Foreign 7,537,244 6,686,128 5,821,091 ---------------------------------------------------------------------------------------------------- $60,853,278 $54,067,320 $50,005,577 ---------------------------------------------------------------------------------------------------- Income from operations: United States $8,499,378 $7,119,170 $5,897,020 Foreign 657,753 544,787 384,417 ---------------------------------------------------------------------------------------------------- $9,157,131 $7,663,957 $6,281,437 ---------------------------------------------------------------------------------------------------- Total assets: United States $51,916,885 $43,348,162 $41,154,326 Foreign 4,162,506 4,278,425 4,014,218 ---------------------------------------------------------------------------------------------------- $56,079,391 $47,626,587 $45,168,544 ----------------------------------------------------------------------------------------------------
NOTE 14: CONTINGENT LIABILITIES Subsequent to January 31, 1997, the Company was served a complaint relating to environmental remediation costs for a property which it had occupied prior to 1976. The Company believes that the outcome of any resultant litigation will not have a materially adverse effect on the Company's financial condition. 28 QUARTERLY FINANCIAL DATA (Unaudited)
Earnings 1996 Net Sales Gross Profit Net Income Per Share ------------------------------------------------------------------------------------------------------------------------ First Quarter $13,131,816 $4,488,449 $1,100,959 $.15 Second Quarter 13,615,141 4,603,636 1,158,741 .17 Third Quarter 14,089,960 4,826,286 1,268,331 .18 Fourth Quarter 13,230,403 4,523,339 1,365,854 .19 Earnings 1997 Net Sales Gross Profit Net Income Per Share ------------------------------------------------------------------------------------------------------------------------ First Quarter $13,731,982 $4,975,320 $1,421,437 $.20 Second Quarter 14,759,594 5,000,697 1,457,021 .21 Third Quarter 16,255,744 5,431,110 1,567,402 .22 Fourth Quarter 16,105,958 5,288,399 1,650,142 .23
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure: There has been no change in accountants and no disagreements on accounting and financial disclosures. PART III Item 10. Directors and Executive Officers of the Registrant: Information required by this Item (other than the information regarding executive officers set forth below) is incorporated by reference to the material appearing under the captions "Election of Directors" and "Security Ownership" in the Company's Proxy Statement for its 1997 Annual Meeting of Stockholders. The executive officers of Registrant are as follows: Walter A. Everett, age 75, is Chairman and a Director of the Company. He is the former President and Chief Executive Officer. Except for a brief period prior to August 15, 1990, he has been a Director of the Company for the past twenty-seven years. William L. Kacin, age 65, is President, Chief Executive Officer and a Director of the Company. He was elected to this position in February, 1993. Prior to that, he was Vice President and General Manager of the Company's Sethco Division for seventeen years. William F. Moffitt, C.P.A., age 47, is Vice President-Finance, Secretary and Treasurer, Chief Financial Officer and a Director. He has held these positions since 1986, and was elected a Director in August, 1993. Prior to that, he was employed by IU International as a Vice President and Treasurer of a subsidiary. Mark A. Betchaver, age 47, is a Vice President of Registrant and General Manager of the Sethco Division, to which he was elected in June, 1993. He joined the Registrant in 1972 and was most recently Sales Manager of the Division and was elected a Vice President in June, 1993. Carl W. Dean, age 50, is a Vice President of Registrant and General Manager of the Dean Pump Division, to which office he was elected in February, 1987. He was employed by Dean Brothers Pumps, Inc. in 1972 and became an employee of Registrant when that entity was acquired in July, 1984. He previously held the position of Sales Manager of the Division. Raymond J. De Hont, age 43, is a Vice President of Registrant and General Manager of the Fybroc Division, to which office he was elected in June, 1995. He joined the Registrant in June, 1995. For more than five years prior thereto, Mr. De Hont was employed by Air and Water Technologies and served in various capacities. His last position was Executive Vice President of their Service Group. 29 Sonja M. Haggert, age 43, is a Vice President of Registrant and General Manager of the Keystone Filter Division, to which office she was elected in February, 1993. She joined the Registrant in 1978 and previously held the position of Distributor Sales Manager of the Division. Hans J. D. Huizinga, age 46, is the Managing Director of Mefiag B.V., a wholly owned subsidiary of Registrant, located in Heerenveen, Holland, an office to which he was elected in August, 1993. He was employed by Mefiag B.V. (formerly Systems Engineering and Manufacturing Corp. Nederland B.V.) for over five years as Managing Director prior to becoming an employee of the Registrant's subsidiary on June 30, 1993, when Registrant acquired that company. Gregory C. Kimmer, age 42, is Vice President and General Manager of the Duall Division, to which office he was elected in October, 1989. For more than five years prior thereto, Mr. Kimmer was employed by Duall Industries, Inc. in various capacities. William F. Mersch, age 43, is a Vice President of Registrant and General Manager of the Stiles-Kem Division, to which office he was elected in October, 1996. He joined the Registrant in June, 1995 as National Sales Manager. For more than five years prior thereto, Mr. Mersch was employed by ANCO Corporation. His last position was Vice President Sales and Marketing. Robert P. Replogle, age 56, is Vice President and Director of the International Sales Division and the Mefiag Division, to which office he was elected in December, 1995. He joined the Registrant in December, 1973 and previously held the position of Director of the International Sales Division and the Mefiag Division. Lynn T. Secrest, age 59, is a Vice President of Registrant and General Manager of Strobic Air Corporation, to which office he was elected in October, 1996. He became an employee of the Registrant when that entity was acquired in September, 1996. For more than five years prior thereto, Mr. Secrest was employed by Strobic Air Corporation as President. There is no family relationship between any of the Directors or executive officers of Registrant. The term of office for each officer is subject to the pleasure of the Board of Directors for up to one year and will expire on June 4, 1997, the date of Registrant's forthcoming Annual Meeting of Stockholders. Item 11. Executive Compensation: Information required by this Item is incorporated by reference to the material appearing under the heading "Executive Compensation and Other Information" in the Company's definitive Proxy Statement for its 1997 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management: Information required by this Item is incorporated by reference to the material appearing under the heading "Principal Security Holders" in the Company's definitive Proxy Statement for its 1997 Annual Meeting of Stockholders. Item 13. Certain Relationships and Related Transactions: Information required by this Item is incorporated by reference to the material appearing under the headings "Election of Directors" and "Certain Transactions" in the Company's definitive Proxy Statement for its 1997 Annual Meeting of Stockholders. 30 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K: A. Financial statements: Financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements and Supplementary Data on page 13. B. Exhibits: The following exhibits are filed herewith or incorporated by reference: (2) Agreement and Plan of Merger dated September 12, 1996 by and between Met-Pro Corporation, Met-Pro Acquisition Corporation, Strobic Air Corporation, Lynn T. Secrest, Ronald H. Secrest, Richard P. Secrest and John W. Stone, III. Incorporated by reference to Registrant's Registration Statement on Form S-3 (File No. 333-13929), declared effective December 31, 1996. (3) Certificate of Incorporation, as amended. (11) Statement re Computation of Per Share Earnings. See page 16 of Item 8. (21) List of Subsidiaries of Registrant:
Corporate Jurisdiction of Name under which Business Name Incorporation is Conducted ---- ------------- ------------ Mefiag B.V. The Netherlands Mefiag B.V., a wholly owned subsidiary of Met-Pro Corporation Strobic Air Corporation Delaware Strobic Air Corporation, a wholly owned subsidiary of Met-Pro Corporation
(23) Independent Auditors' Consent. (27) Financial Data Schedule. The following exhibits required under Item 601 of Regulation S-K promulgated by the Securities & Exchange Commission have been omitted because they are either inapplicable or non-existent. (4) Instruments defining the rights of security holders. (9) Voting trust agreements. (10) Material contracts. (12) Statements re computation of ratios. (13) Annual report to security holders. (16) Letter re change in certifying accountant. (18) Letter re change in accounting principles. (22) Published report regarding matters submitted to vote of security holders. (24) Power of attorney. (28) Information from reports furnished to state insurance regulatory authorities. (99) Additional exhibits. C. Reports on Form 8-K: No reports on Form 8-K were filed during the three month period ended January 31, 1997. 31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MET-PRO CORPORATION April 25, 1997 By: /S/ William L. Kacin - ----------------------- ----------------------------------- Date William L. Kacin President, Chief Executive Officer and Director Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /S/ William L. Kacin President, Chief Executive April 25, 1997 - ----------------------------- Officer and Director William L. Kacin /S/ William F. Moffitt Vice President-Finance April 25, 1997 - ----------------------------- Secretary and Treasurer William F. Moffitt Chief Financial Officer Chief Accounting Officer Director /S/ Walter A. Everett Director, Chairman April 25, 1997 - ----------------------------- Walter A. Everett /S/ Thomas F. Hayes Director April 25, 1997 - ----------------------------- Thomas F. Hayes /S/ Richard P. Klopp Director April 25, 1997 - ----------------------------- Richard P. Klopp /S/ Alan Lawley Director April 25, 1997 - ----------------------------- Alan Lawley
32 EX-3 2 RESTATED CERTIFICATE OF INCORPORATION Exhibit 3 RESTATED CERTIFICATE OF INCORPORATION OF MET-PRO CORPORATION FIRST. The name of the corporation is MET-PRO CORPORATION SECOND. Its principal office in the State of Delaware is located at No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The name and address of its resident agent is The Corporation Trust Company, No. 100 West Tenth Street, Wilmington 99, Delaware. THIRD. The nature of the business, or objects or purposes to be transacted, promoted or carried on are: To design, manufacture, buy and sell and generally deal in equipment, machinery, systems and devices for purifying and filtering water for home consumption and for industrial and commercial use and for use of municipalities, including the water to be used therein and to manufacture, buy and sell and generally deal in equipment, machinery, systems and devices for purifying and filtering liquids other than water and of gases (including air) of all kinds. To manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description. To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the goodwill, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to or useful in connection with any business of this corporation. To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by any corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof. To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof. To borrow or raise moneys for any of the purposes of the corporation and, from time to time without limit as to amount, to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the corporation for its corporate purposes. To loan to any person, firm or corporation any of its surplus funds, either with or without security. To purchase, hold, sell and transfer the shares of its own capital stock; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital except as otherwise permitted by law, and provided further that shares of its own capital stock belonging to it shall not be voted upon directly or indirectly. To have one or more offices, to carry on all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey or otherwise dispose of real and personal property of every class and description in any of the states, districts, territories or colonies of the United States, and in any and all foreign countries, subject to the laws of such state, districts, territory, colony or country. In general, to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by the laws of Delaware upon corporations formed under the General Corporation Law of the State of Delaware, and to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do. The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in this certificate of incorporation, but the objects and purposes specified in each of the foregoing clauses of this article shall be regarded as independent objects and purposes. FOURTH. The total number of shares of stock which the corporation shall have authority to issue is Ten Million (10,000,000), each share to be designated Common Stock and to have a par value of Ten Cents ($.10), amounting to aggregate capital of One Million Dollars ($1,000,000). FIFTH. The minimum amount of capital with which the corporation will commence business is One Thousand Dollars ($1,000.00). SIXTH. The names and places of residence of the incorporators are as follows: NAMES RESIDENCES ----- ---------- S.H. Livesay Wilmington, Delaware F.J. Obara, Jr. Wilmington, Delaware A.D. Grier Wilmington, Delaware SEVENTH. The corporation is to have perpetual existence. EIGHTH. The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. NINTH. The following provisions are inserted for the management of the business and for the conduct of the affairs of this corporation, and for further definition, limitation and regulation of the powers of this corporation and of its directors and stockholders: (1) The number of directors of the corporation shall be such as from time to time shall be fixed by, or in the manner provided in the by-laws, but shall not be less than three (3). Election of directors need not be by ballot unless the by-laws so provide. (2) Vacancies among the directors and newly created directorships resulting from an increase in the number of directors shall be filled in the manner provided in the by-laws. (3) The board of directors shall have power (a) Without the assent or vote of the stockholders to make, alter, amend, change, add to, or repeal the by-laws of this corporation; to fix and vary the amount to be reserved for any proper purpose; to authorize and cause to be executed mortgages and liens upon any part of the property of the corporation; to determine the use and disposition of any surplus or net profits and to fix the times for the declaration and payment of dividends. (b) To determine from time to time whether, and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the corporations (other than the stock ledger) or any of them, shall be open to the inspection of the stockholders. (c) To designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in the resolution or in the by-laws of the corporation, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the by-laws of the corporation or as may be determined from time to time by resolution adopted by the board of directors. (4) In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts as may be exercised or done by the corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this certificate and to any by-laws from time to time by the stockholders; provided, however, that no by-law so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made. (5) When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called for that purpose, or when authorized by the written consent of the holders of a majority of the voting stock issued and outstanding, to sell, lease, or exchange all of the property and assets of the corporation, including its goodwill and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, and/or other securities of, any other corporation or corporations, as its board of directors shall deem expedient and for the best interests of the corporation. TENTH. In the absence of fraud, no contract or other transaction between this corporation and any other person, firm, or corporation or any partnership or association shall be effected or invalidated by the fact that any director or officer of this corporation is pecuniarily or otherwise interested in or is a director, member or officer of such other corporation or of such person, firm, association or partnership or is a party to or is pecuniarily or otherwise interested in such contract or other transaction or in any way connected with any person or persons, firm, association, partnership or corporation pecuniarily or otherwise interested therein; any director so interested may be counted in determining the existence of a quorum at any meeting of the board of directors of this corporation for the purpose of authorizing any such contract or transaction with like force and effect as if he were not so interested, or were not a director, member or officer of such other corporation, firm, association or partnership. Any director whose interest in any such contract or transaction arises solely by reason of the fact that he is a stockholder, officer or creditor of such other corporation (or solely by reason of the fact that he is a director of such other corporation or partner in such firm where such dealing, contract or arrangement is made by officers or employees of the corporation in the ordinary performance of their duties and without the actual participation of such director) shall not be deemed interested in such contract or other transaction under any of the provisions of this Article, nor shall any such contract or transaction be void or voidable, nor shall any such director be liable to account because of such interest nor need any such interest be disclosed. Apart from and in addition to the other provisions of this Article, no contract or other transaction between the corporation and any other corporation or firm which provides for the purchase or sale of securities by such other corporation or firms upon terms not less favorable to the corporation than offered by such other corporation or firm to others, shall in any case be void or voidable because of the fact that directors of the corporation are directors of such other corporation or partners in such firm, nor shall any such director be deemed interested in such contract or other transaction under any of the provisions of this Article, nor shall any such director be liable to account in respect thereof. No contract or other transaction between the corporation and any other corporation, at least a majority of the stock of which having voting powers owned or controlled by the corporation or which owns or controls at least a majority of the stock having voting power of the corporation, shall in any case be void or voidable because of the fact that directors of the corporation are directors of such other corporation, nor shall any such director be deemed interested in such contract or other transaction under any of the provisions of this Article, nor shall any such director be liable to account because of such interest nor need any such interest be disclosed. Any contract or act that shall be approved or ratified by the vote of the holders of a majority of the capital stock of the corporation having voting power which is represented in person or by proxy at any annual meeting of stockholders or at any special meeting called for the purpose, among others, of considering the approval or ratification of the acts of officers and/or directors (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and as binding upon the corporation and upon all its stockholders as though it had been approved or ratified by every stockholder of the corporation. ELEVENTH. A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) For any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) Under section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. TWELFTH. Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourth in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. THIRTEENTH. Meetings of stockholders may be held outside the State of Delaware, if the by-laws so provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Elections of directors need not be by ballot unless the by-laws of the corporation shall so provide. FOURTEENTH. The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. FIFTEENTH. Directors shall be divided into three classes, each class to be as nearly equal in number as possible, the number assigned to each class to be determined by the directors prior to the election of a particular class. In the event that at any time or from time to time the number of directors is increased, the newly created directorships resulting therefrom shall be filled by a majority of the directors in office immediately prior to such increase. Vacancies in any class of directors shall be filled by the majority of the remaining directors in office. At the 1979 Annual Meeting of Stockholders, one class shall be elected to a term of three years, another class to a term of two years, and a third class to a term of one year; and at each subsequent annual meeting, the successors to directors whose term shall expire that year shall be elected to a term of three years. SIXTEENTH. Except as set forth below, the affirmative vote of the holders of not less than 80% of the outstanding shares of the corporation entitled to vote at an election of directors shall be required to authorize any of the following items of business: (a) any merger or consolidation of the corporation into or with any other corporation; (b) any sale, lease, exchange, or other disposition of all or substantially all of the assets of the corporation to any other corporation, person or entity; (c) any purchase, lease or other acquisition by the corporation or any of its subsidiaries of any assets or securities of any other corporation, person or entity in exchange for securities of the corporation or any of its subsidiaries; or (d) any amendment of the Certificate of Incorporation which changes the percentage of votes of stockholders required for the transaction of any business or of any specified item of business, including, without limitation, amendments to the Certificate of Incorporation, unless such item of business has been by a majority of the entire Board of Directors of the corporation, in which event the approval of the holders of a majority of the outstanding share of the corporation entitled to vote at an election of directors shall be required to authorize any of the transactions set forth in clauses (a), (b), or (d) hereof and no such approval of stockholders shall be required to authorize any of the transactions set forth in clause (c) hereof. SEVENTEENTH. The following provision is inserted for the regulation and conduct of the affairs of the corporation and it is intended that it be in furtherance of and not in limitation or exclusion of the powers conferred by law: The stockholders of the corporation shall have the authority to make, alter, amend or repeal the by-laws of the corporation only upon the affirmative vote of the holders of not less than 80% of the outstanding shares of the corporation entitled to vote. WE,THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set our hands and seals this 30th day of March A. D. 1966. Signature /S/ S. A. LIVESAY - ----------------------------- S. A. Livesay /S/ F. J. OBARA, JR - ----------------------------- F. J. Obara, Jr /S/ A. D. GRIER - ----------------------------- A. D. Grier STATE OF DELAWARE ) ) ss: COUNTY OF NEW CASTLE ) BE IT REMEMBERED that on this 30th day of March, A. D. 1966, personally came before me, a Notary Public for the State of Delaware, S. H. Livesay, F. J. Obara, Jr. and A. D. Grier, all of the parties to the foregoing certificate of incorporation, known to me personally to be such, and severally acknowledged the said certificate to be the act and deed of the signers respectively and that the facts therein stated are truly set forth. GIVEN under my hand and seal of office the day and year aforesaid. Signature --------- /S/ - ----------------------------- Notary Public EX-23 3 INDEPENDENT AUDITOR'S REPORT Exhibit 23 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Met-Pro Corporation Harleysville, Pennsylvania We consent to the incorporation by reference in the Prospectus forming a part of the Registration Statement on Form S-3 of Met-Pro Corporation declared effective on December 31, 1996 (File No. 333-13929) of our report dated February 28, 1997 on the consolidated financial statements of Met-Pro Corporation and its wholly owned subsidiaries filed as part of Met-Pro Corporation's Annual Report on Form 10-K for the year ended January 31, 1997. /s/ MARGOLIS & COMPANY P.C. ------------------------------ Certified Public Accountants Bala Cynwyd, Pennsylvania April 25, 1997 EX-27 4
5 12-MOS 12-MOS JAN-31-1997 JAN-31-1996 JAN-31-1997 JAN-31-1996 9,070,976 7,415,735 0 0 10,570,528 8,941,157 (232,986) (194,972) 10,597,813 10,302,844 32,088,546 28,268,561 28,496,676 26,778,640 (14,149,681) (12,345,075) 56,079,391 47,626,587 11,374,115 10,250,506 5,268,506 2,871,139 0 0 0 0 713,862 475,922 39,639,064 34,536,656 56,079,391 47,626,587 60,853,278 54,067,320 60,853,278 54,067,320 40,157,752 35,625,610 51,696,147 46,403,363 0 0 0 0 300,170 266,113 10,076,036 8,225,017 3,980,034 3,331,132 6,096,002 4,893,885 0 0 0 0 0 0 6,096,002 4,893,885 .86 .69 .86 .69
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