<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 31, 1996 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, Box 144
Harleysville, Pennsylvania 19438
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 723-6751
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-------- --------
The number of shares outstanding of the Registrant's common stock
(par value $0.10 per share) is 6,897,491 (as of July 31, 1996).
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<PAGE>
MET-PRO CORPORATION
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheet as of
July 31, 1996 and January 31, 1996................................................ 2
Condensed consolidated statement of operations for the three-month and
six-month periods ended July 31, 1996 and July 31, 1995........................... 3
Condensed consolidated statement of cash flows for the six-month
periods ended July 31, 1996 and July 31, 1995..................................... 4
Notes to condensed consolidated financial statements..................................... 5
Report on Review by Independent Accountants.............................................. 6
Item 2. Management's discussion and analysis of financial condition
and results of operations......................................................... 7
PART II - OTHER INFORMATION
Item 6(b). Reports on Form 8-K.................................................................. 9
SIGNATURES.................................................................................................... 9
</TABLE>
-1-
<PAGE>
MET-PRO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
July 31, January 31,
ASSETS 1996 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 5,678,113 $ 7,415,375
Accounts receivable, net of allowance for doubtful
accounts of approximately $223,000 and
$195,000, respectively 11,549,755 8,941,157
Notes receivable-ESOT 400,000 400,000
Inventories 11,348,811 10,302,844
Prepaid expenses, deposits and other current assets 417,139 559,238
Deferred income taxes 649,947 649,947
- -----------------------------------------------------------------------------------------------------
Total current assets 30,043,765 28,268,561
Property, plant and equipment, net 15,106,290 14,433,565
Cost in excess of net assets of businesses acquired, net 3,680,953 3,725,118
Other assets 947,671 1,199,343
- -----------------------------------------------------------------------------------------------------
Total assets $49,778,679 $47,626,587
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------
Current liabilities
Current portion of long-term debt $ 1,031,559 $ 1,178,177
Accounts payable 3,020,498 2,307,034
Accrued salaries, wages and expenses 7,591,518 6,347,912
Payroll and other taxes payable 11,785 5,974
Customers' advances 673,084 411,409
- -----------------------------------------------------------------------------------------------------
Total current liabilities 12,328,444 10,250,506
Long-term debt 1,251,589 1,692,962
Other non-current liabilities 137,140 101,345
Deferred income taxes 552,552 569,196
- -----------------------------------------------------------------------------------------------------
Total liabilities 14,269,725 12,614,009
- -----------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock, $.10 par value; 10,000,000 shares authorized, 7,138,625
and 4,759,221 shares issued, respectively, of which 241,134 and
121,531 shares, respectively, were reacquired and held in treasury 713,863 475,922
Additional paid-in capital 7,397,662 7,442,810
Retained earnings 29,249,679 28,142,539
Cumulative translation adjustment 229,053 209,333
Treasury stock, at cost (2,081,303) (1,258,026)
- -----------------------------------------------------------------------------------------------------
Net stockholders' equity 35,508,954 35,012,578
- -----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $49,778,679 $47,626,587
=====================================================================================================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
MET-PRO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
July 31, July 31,
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net sales $28,491,576 $26,746,957 $14,759,594 $13,615,141
Cost of goods sold 18,515,559 17,654,872 9,758,897 9,011,505
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 9,976,017 9,092,085 5,000,697 4,603,636
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Operating expenses
Selling 2,506,250 2,303,616 1,250,405 1,177,888
General and administrative 2,951,178 3,252,374 1,447,663 1,606,789
- ---------------------------------------------------------------------------------------------------------------------------------
5,457,428 5,555,990 2,698,068 2,784,677
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Income from operations 4,518,589 3,536,095 2,302,629 1,818,959
Other income, net 239,193 261,717 105,670 128,503
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Income before taxes on income 4,757,782 3,797,812 2,408,299 1,947,462
Provision for taxes on income 1,879,324 1,538,112 951,278 788,721
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 2,878,458 $ 2,259,700 $ 1,457,021 $ 1,158,741
=================================================================================================================================
Earnings per share, primary and fully diluted (1) $ .41 $ .32 $ .21 $ .16
Cash dividend per share - declared (2) $ .33 $ .30 $ -- $ --
Cash dividend per share - paid (2) $ .33 $ .30 $ -- $ .30
=================================================================================================================================
</TABLE>
(1) Based on weighted average number of common stock and common stock
equivalents outstanding during each six-month period (adjusted for the
3-for-2 stock splits completed on July 8, 1996 and May 12, 1995,
respectively). The weighted average number of common shares outstanding
was 7,036,252 and 7,072,973 in the six-month periods ended July 31, 1996
and 1995, respectively, and 7,030,283 and 7,073,547 in the three-month
periods ended July 31, 1996 and 1995, respectively. On June 5, 1996 the
Company declared a 3-for-2 stock split payable July 8, 1996 to
stockholders of record on June 17, 1996.
(2) The Company also declared a 3-for-2 stock split and a cash dividend of
$.30 per share, both of which were paid on May 12, 1995 to stockholders of
record on April 7, 1995. The cash dividend was paid on all outstanding
shares, including those issued as a result of the stock split. The Company
also declared a cash dividend of $.33 per share on February 26, 1996
payable on April 26, 1996 to shareholders of record on April 12, 1996.
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
MET-PRO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
1996 1995
- ----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<S> <C> <C>
Net cash provided by operating activities $ 2,373,293 $ 3,517,306
- ----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from sale of property and equipment 135,003 --
Acquisitions of property and equipment ( 1,271,138) ( 868,009)
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Net cash (used in) investing activities ( 1,136,135) ( 868,009)
- ----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Reduction of debt ( 587,992) ( 584,661)
Exercise of stock options 109,838 299,990
Payment of dividends ( 1,530,693) ( 1,411,308)
Purchase of treasury shares ( 978,268) ( 354,371)
Cash in lieu of fractional shares ( 2,685) --
- ----------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities ( 2,989,800) ( 2,050,350)
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Effect of exchange rate changes on cash 15,380 23,375
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Net increase (decrease) in cash and cash equivalents ( 1,737,262) 622,322
Cash and cash equivalents at February 1 7,415,375 6,648,380
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at July 31 $ 5,678,113 $ 7,270,702
================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 89,625 $ 140,476
Income taxes $ 2,005,722 $ 1,445,034
================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
MET-PRO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include Met-Pro Corporation
and its wholly-owned subsidiaries, Mefiag B.V. and Mefiag of Puerto Rico, Inc.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
NOTE 2 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present
fairly the financial position as of July 31, 1996 and the results of
operations for the three-month and six-month periods ended July 31, 1996 and
1995 and the statement of cash flows for the six-month periods then ended. The
results of operations for the three-month and six-month periods ended July 31,
1996 are not necessarily indicative of the results to be expected for the full
year.
Margolis & Company P.C., the Company's auditors, has performed a limited
review of the financial information included herein. Their report on such
review accompanies this filing.
NOTE 3 - INVENTORIES
Inventories were comprised of the following:
July 31, January 31,
1996 1996
----------- -----------
Raw material $ 4,711,282 $ 4,277,065
Work in progress 2,262,115 2,053,626
Finish goods 4,375,414 3,972,153
----------- -----------
$11,348,811 $10,302,844
============ ===========
-5-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Met-Pro Corporation and its Wholly-Owned Subsidiaries
Harleysville, Pennsylvania
We have reviewed the accompanying condensed consolidated balance sheet of
Met-Pro Corporation and its Wholly-Owned Subsidiaries as of July 31, 1996 and
the related condensed consolidated statements of operations for the
three-month and six-month periods ended July 31, 1996 and 1995 and cash flows
for the six-month periods ended July 31, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of January 31, 1996 and the related statements
of operations, stockholders equity, and cash flows for the year then ended
(not presented herein); and in our report dated February 19, 1996, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of January 31, 1996 is fairly stated, in all material
respects, in relation to the balance sheet from which it has been derived.
Certified Public Accountants
Bala Cynwyd, Pennsylvania
August 12, 1996
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<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations
Results of Operations:
Net sales for the six-month period ended July 31, 1996 were $28,491,576
compared to $26,746,957 for the six-month period ended July 31, 1995, an
increase of $1,744,619 or 6.5%. This increase was due to higher sales in both
the Fluid Handling and the Pollution Control Systems and Allied Equipment
segments of the business. The backlog at July 31, 1996 was 23.7% higher
compared to the backlog at the beginning of the fiscal year. Bookings of new
orders were 7.2% higher for the six-month period ended July 31, 1996 than for
the six-month period ended July 31, 1995. The length of time required to
design, engineer, manufacture and ship product, especially in the Pollution
Control and Allied Equipment segment of our business, combined with contract
requirements, will cause shipments to vary from quarter to quarter.
Net income for the six-month period ended July 31, 1996 was $2,878,458
compared to $2,259,700 for the six-month period ended July 31, 1995, an
increase of $618,758 or 27.4%. The increase in net income is primarily related
to increased sales of $1,744,619 for the six-month period ended July 31, 1996,
combined with the improvement in the gross margin to 35.0%.
The gross margin for the six-month period ended July 31, 1996 was 35.0%
compared to 34.0% for the same period last year. The improvement in the gross
margin can be attributed to better capacity utilization, product mix and
production efficiencies in both business segments.
Selling expense increased $202,634 during the six-month period ended July 31,
1996 compared to the same period last year. This is due primarily to an
increase in staffing levels to position our diversified businesses for future
growth. Selling expense as a percentage of sales was 8.8%, compared to 8.6%
for the six-month period ended July 31, 1995.
General and administrative expense was $2,951,178 for the six-month period
ended July 31, 1996 compared to $3,252,374 for the same period last year, a
decrease of $301,196. General and administrative expense as a percentage of
sales declined to 10.4% for the six-month period ended July 31, 1996 from
12.2% for the same period last year. The decrease is due primarily to an
insurance rebate and improved cost controls.
Other income, net, decreased $22,524 for the six-month period ended July 31,
1996 compared to the six-month period ended July 31, 1995, due to lower cash
balances available for investment.
The effective tax rate for the six-month period ended July 31, 1996 was 39.5%
compared to 40.5% for the six-month period ended July 31, 1995. The change in
the effective tax rate had virtually no effect on earnings per share.
Liquidity:
The Company's cash and cash equivalents was $5,678,113 on July 31, 1996
compared to $7,415,375 on January 31, 1996, a decrease of $1,737,262. This
decrease is the net result of positive cashflow provided by operating
activities of $2,373,293, proceeds received from the exercise of stock
options of $109,838, and proceeds received from the sale of property and
equipment of $135,003, offset by the payment of the annual cash dividend
amounting to $1,530,693, payments on long-term debt totalling $587,992,
purchase of treasury stock amounting to $978,268 and investment in property
and equipment amounting to $1,271,138. The Company's cash flows from operating
activities are influenced by the timing of shipments and negotiated standard
payment terms, including retention associated with major projects.
-7-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations
continued...
Accounts receivable (net) amounted to $11,549,755 on July 31, 1996 compared to
$8,941,157 on January 31, 1996, which represents an increase of $2,608,598.
The timing and size of shipments combined with retainage on contracts,
especially in the Pollution Control Systems and Allied Equipment segment, will
influence accounts receivable balances at any point in time.
Inventories were $11,348,811 on July 31, 1996 compared to $10,302,844 on
January 31, 1996, an increase of $1,045,967. Inventory balances fluctuate
depending upon market demand, the size and timing of orders and long lead
times required.
Current liabilities amounted to $12,328,444 on July 31, 1996 compared to
$10,250,506 on January 31, 1996, an increase of $2,077,938. Accounts payable,
customer progress payments and accrued expenses accounted for $2,224,556 of
the increase, offset by a reduction of $146,618 of current portion of long
term debt.
The Company has consistently maintained a high current ratio and has not
utilized either the domestic line of credit or the foreign line of credit
totalling $5.0 million, which are available for working capital purposes.
Funds, in general, have exceeded the current needs of the Company. The Company
presently foresees no change in this situation.
Capital Resources and Requirements:
Cash flows provided by operating activities during the six-month period ended
July 31, 1996 amounted to $2,373,293 compared with $3,517,306 in the six-month
period ended July 31, 1995, a decrease of $1,144,013. This decrease is
attributable to higher sales activity in both business segments, the timing of
the payment of current obligations, and advances from customers on projects in
progress, offset by increased balances in accounts receivable and inventory.
Cash flows used in investing activities during the six-month period ended July
31, 1996 amounted to $1,136,135 compared with $868,009 for the six-month
period ended July 31, 1995. The Company's investing activities principally
represent the acquisition of property, plant, and equipment in the combined
operations.
Financing activities during the six-month period ended July 31, 1996 utilized
$2,989,800 of available resources compared to $2,050,350 of cash used for the
six-month period ended July 31, 1995. This utilization of cash is the result
of the payment of the annual cash dividend amounting to $1,530,693, reduction
of long-term debt totalling $587,992, the purchase of treasury stock totalling
$978,268 and cash in lieu of fractional shares amounting to $2,685 for a
3-for-2 stock split dated July 8, 1996, offset by $109,838 provided by the
exercise of stock options.
On February 26, 1996, the Board of Directors declared a $.33 per share annual
cash dividend payable on April 26, 1996 to stockholders of record on April 12,
1996. The dividend paid on the Common Stock represented 31.3% of the prior
fiscal year earnings. The Board of Directors also declared a 3-for-2 stock
split on June 5, 1996 which was payable July 8, 1996 to stockholders of record
on June 17, 1996.
Consistent with past practices, the Company will continue to invest in new
product development programs, and to make capital expenditures to support the
on-going operations during the coming year. The Company expects to finance all
capital expenditures requirements through cash flows generated from
operations.
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<PAGE>
MET-PRO CORPORATION
PART II - OTHER INFORMATION
Item 6(b). Reports on Form 8-K
There were no reports on Form 8-K filed for the six-month period ended
July 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Met-Pro Corporation
--------------------------------
(Registrant)
August 20, 1996 /S/ William L. Kacin
--------------------------------
William L. Kacin,
President,
Chief Executive Officer and Director
August 20, 1996 /S/ William F. Moffitt
--------------------------------
William F. Moffitt,
Vice President of Finance,
Secretary and Treasurer, Chief
Financial Officer, Chief Accounting Officer,
and Director
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 5,678,113
<SECURITIES> 0
<RECEIVABLES> 11,549,755
<ALLOWANCES> 222,749
<INVENTORY> 11,348,811
<CURRENT-ASSETS> 30,043,765
<PP&E> 27,979,698
<DEPRECIATION> 12,873,408
<TOTAL-ASSETS> 49,788,679
<CURRENT-LIABILITIES> 12,328,444
<BONDS> 2,283,148
0
0
<COMMON> 713,863
<OTHER-SE> 34,795,091
<TOTAL-LIABILITY-AND-EQUITY> 49,778,679
<SALES> 28,491,576
<TOTAL-REVENUES> 28,491,576
<CGS> 18,515,559
<TOTAL-COSTS> 23,972,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,117
<INCOME-PRETAX> 4,757,782
<INCOME-TAX> 1,879,324
<INCOME-CONTINUING> 2,878,458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,878,458
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
