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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, 1998 Commission file number 001-07763
MET-PRO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1683282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 Cassell Road, P.O. Box 144
Harleysville, Pennsylvania 19438
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 723-6751
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock (par
value $0.10 per share) is 6,896,598 (as of July 31, 1998).
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<PAGE>
MET-PRO CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C> <C>
Condensed consolidated balance sheet as of
July 31, 1998 and January 31, 1998.......................................................... 2
Condensed consolidated statement of operations for the six-month
and three-month periods ended July 31, 1998 and 1997........................................ 3
Condensed consolidated statement of stockholders' equity for the
six-month periods ended July 31, 1998 and 1997.............................................. 4
Condensed consolidated statement of cash flows for the six-month
periods ended July 31, 1998 and 1997........................................................ 5
Notes to condensed consolidated financial statements................................................. 6
Report on review by independent accountants.......................................................... 8
Item 2. Management's discussion and analysis of financial condition
and results of operations................................................................... 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 13
Item 6(b). Reports on Form 8-K.......................................................................... 13
SIGNATURES.................................................................................................... 14
</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 1998 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 8,073,238 $11,253,380
Accounts receivable, net of allowance for doubtful
accounts of approximately $276,000 and
$280,000, respectively 10,128,616 10,664,310
Notes receivable, ESOT -- 200,000
Inventories - Note 3 13,241,599 12,210,749
Prepaid expenses, deposits and other current assets 1,230,123 723,965
Deferred income taxes 1,014,856 1,014,856
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 33,688,432 36,067,260
Property, plant and equipment, net 13,931,444 13,787,596
Costs in excess of net assets of businesses acquired, net 7,219,406 7,198,915
Other assets 1,079,623 930,469
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Total assets $55,918,905 $57,984,240
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------
Current portion of long-term debt $ 895,942 $ 1,441,964
Accounts payable 3,091,564 2,648,943
Accrued salaries, wages and expenses 5,614,831 6,523,442
Payroll and other taxes payable 138,752 5,746
Customers' advances 234,289 647,450
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 9,975,378 11,267,545
Long-term debt 1,843,060 2,242,047
Other non-current liabilities 288,938 249,037
Deferred income taxes 370,598 384,782
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Total liabilities 12,477,974 14,143,411
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Stockholders' equity
Common stock, $.10 par value; 18,000,000 shares
authorized, 7,138,625 shares issued at both dates,
of which 242,027 and 145,152 shares were reacquired
and held in treasury at the respective dates 713,862 713,862
Additional paid-in capital 7,508,748 7,868,357
Retained earnings 39,057,809 37,667,872
Accumulated other comprehensive income (156,653) (219,015)
Treasury stock, at cost (3,682,835) (2,190,247)
- ------------------------------------------------------------------------------------------------------------------------
Net stockholders' equity 43,440,931 43,840,829
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $55,918,905 $57,984,240
========================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements
-2-
<PAGE>
<TABLE>
<CAPTION>
MET-PRO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Six Months Ended Three Months Ended
July 31, July 31,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $29,529,731 $30,779,562 $14,588,843 $15,866,826
Cost of goods sold 18,365,829 19,424,561 9,127,840 10,204,285
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 11,163,902 11,355,001 5,461,003 5,662,541
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Selling 2,705,768 2,778,105 1,298,311 1,390,518
General and administrative 3,278,041 3,416,994 1,640,631 1,715,554
- ---------------------------------------------------------------------------------------------------------------------------------
5,983,809 6,195,099 2,938,942 3,106,072
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Income from operations 5,180,093 5,159,902 2,522,061 2,556,469
Other income, net 336,324 555,069 145,927 377,573
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Income before taxes 5,516,417 5,714,971 2,667,988 2,934,042
Provision for taxes 2,025,911 2,228,839 915,026 1,144,277
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 3,490,506 $ 3,486,132 $ 1,752,962 $ 1,789,765
=================================================================================================================================
Earnings per share, basic (1) $.50 $.49 $.25 $.25
Earnings per share, diluted (2) $.50 $.49 $.25 $.25
Cash dividend per share - declared (3) $.30 $.27 $ -- $ --
Cash dividend per share - paid (3) $.30 $.27 $ -- $ --
=================================================================================================================================
</TABLE>
(1) Basic earnings per share are based upon the weighted average number of
common shares outstanding of 6,974,394 and 7,068,152 in the six-month
periods ended July 31, 1998 and 1997, respectively, and 6,989,563 and
7,066,219 in the three-month periods ended July 31, 1998 and 1997,
respectively.
(2) Diluted earnings per share are based upon the weighted average number of
common shares outstanding of 7,032,673 and 7,157,599 in the six-month
periods ended July 31, 1998 and 1997, respectively, and 7,049,815 and
7,156,007 in the three-month periods ended July 31, 1998 and 1997,
respectively.
(3) On February 23, 1998, the Company declared a $.30 per share cash dividend
payable on April 24, 1998 to shareholders of record on April 10, 1998. On
February 24, 1997, the Company declared a cash dividend of $.27 per share
payable on April 25, 1997 to shareholders of record on April 11, 1997.
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
MET-PRO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Income/(Loss) Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 31, 1998 $713,862 $7,868,357 $37,667,872 ($219,015) ($2,190,247) $43,840,829
Comprehensive income:
Net income 3,490,506
Foreign currency translation 62,362
Total comprehensive income 3,552,868
Dividends paid, $.30 per share (2,100,569) (2,100,569)
Stock option transactions (359,609) 721,838 362,229
Purchase of 144,600 shares of (2,214,426) (2,214,426)
treasury stock
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Balances, July 31, 1998 $713,862 $7,508,748 $39,057,809 ($156,653) ($3,682,835) $43,440,931
====================================================================================================================================
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Income/(Loss) Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 31, 1997 $713,862 $8,260,289 $32,467,223 $ 19,121 ($1,107,569) $40,352,926
Comprehensive income:
Net income 3,486,132
Foreign currency translation (257,787)
Total comprehensive income 3,228,345
Dividends paid, $.27 per share (1,915,832) (1,915,832)
Stock option transactions (434,733) 897,752 463,019
Purchase of 43,300 shares of (603,865) (603,865)
treasury stock
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, July 31, 1997 $713,862 $7,825,556 $34,037,523 ($238,666) ($813,682) $41,524,593
====================================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
MET-PRO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Six Months Ended
July 31,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<S> <C> <C>
Net cash provided by operating activities $ 2,940,460 $ 4,267,574
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from sale of property and equipment -- 668,019
Acquisitions of property and equipment (817,462) (671,248)
Acquisitions of other intangibles (412,856) --
- ------------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (1,230,318) (3,229)
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Reduction of debt (945,009) (791,350)
Exercise of stock options 362,229 430,425
Payment of dividends (2,100,569) (1,915,832)
Purchase of treasury shares (2,214,426) (603,865)
- ------------------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (4,897,775) (2,880,622)
- ------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 7,491 (56,557)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (3,180,142) 1,327,166
Cash and cash equivalents at February 1 11,253,380 9,070,976
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at July 31 $ 8,073,238 $10,398,142
========================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 138,316 $ 169,594
Income taxes $2,218,572 $2,170,857
========================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
MET-PRO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of Met-Pro
Corporation and its wholly owned subsidiaries ("Met-Pro" or the "Company"),
Strobic Air Corporation and Mefiag B.V. All significant intercompany accounts
and transactions have been eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments necessary to present fairly the financial
position as of July 31, 1998 and the results of operations for the six-month and
three-month periods ended July 31, 1998 and 1997, and the statement of
stockholders' equity and the statement of cash flows for the six-month periods
then ended. The results of operations for the six-month and three-month periods
ended July 31, 1998 are not necessarily indicative of the results to be expected
for the full year. These condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and notes
thereto contained in the Company's Annual Report on Form 10-K for the year ended
January 31, 1998.
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". The Company adopted SFAS No. 130 in the three-months
ended April 30, 1998. This standard expands or modifies disclosures and has no
impact on the Company's consolidated results of operations, financial position
or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS No. 131 establishes standards for the
way public business enterprises report information about segments in annual and
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. Financial statement disclosures for prior
periods are required to be restated. Met-Pro is in the process of evaluating the
disclosure requirements. The adoption of SFAS No. 131 will have no impact on
Met-Pro's consolidated results of operations, financial position or cash flows.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures about
Pensions and Other Postretirement Benefits". SFAS No. 132 establishes standards
for the disclosures of pension and other postretirement benefit plans. It does
not change the measurement and recognition standards for those plans, but does
revise and replace the prior disclosure requirements. SFAS No. 132 is effective
for fiscal years beginning after December 15, 1997. Financial statement
disclosures for prior periods are required to be restated. Met-Pro is in the
process of evaluating the disclosure requirements. The adoption of SFAS No. 132
will have no impact on Met-Pro's consolidated results of operations, financial
position or cash flows.
-6-
<PAGE>
MET-PRO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INVENTORIES
Inventories consisted of the following:
July 31, January 31,
1998 1998
----------- -----------
Raw material $ 6,040,947 $ 5,570,663
Work in progress 2,170,598 2,001,618
Finished goods 5,030,054 4,638,468
----------- -----------
$13,241,599 $12,210,749
=========== ===========
NOTE 4 - ACCOUNTANTS' 10-Q REVIEW
Margolis & Company P.C., the Company's auditors, has performed a limited review
of the financial information included herein. Their report on such review
accompanies this filing.
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<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, 1998 and
the related condensed consolidated statements of operations for the six-month
and three-month periods ended July 31, 1998 and 1997 and stockholders' equity
and cash flows for the six-month periods ended July 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 31, 1998 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report dated February 19,
1998, 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, 1998 is fairly stated, in all material respects,
in relation to the balance sheet from which it has been derived.
/s/ Margolis & Company P. C.
----------------------------
Certified Public Accountants
Bala Cynwyd, Pennsylvania
August 19, 1998
-8-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations
Results of Operations:
Six-months Ended July 31, 1998 vs Six-months Ended July 31, 1997
Net sales for the six-month period ended July 31, 1998 were $29,529,731 compared
to $30,779,562 for the six-month period ended July 31, 1997, a decrease of
$1,249,831. The sales decrease can be attributed to the impact of economic
conditions in the Pacific Rim countries, especially in the Fluid Handling
Equipment segment, combined with the timing of shipments due to contract
requirements in the Pollution Control Systems and Allied Equipment segment.
The backlog of $5,598,185 at July 31, 1998 was 8.9% lower compared to the
backlog at the beginning of the fiscal year. Bookings of new orders were 12.5%
lower for the six-month period ended July 31, 1998 than for the six-month period
ended July 31, 1997. This does not include an additional $7,881,080 of orders in
house at July 31, 1998 compared to $3,517,559 at January 31, 1998 which,
according to our longstanding policy, are not included in the backlog until, as
engineered products, complete drawings have been approved.
Net income for the six-month period ended July 31, 1998 was $3,490,506 compared
to $3,486,132 for the six-month period ended July 31, 1997, a slight increase of
$4,374. The increase in net income is related to continuing cost controls offset
by lower sales volume for the six-month period ended July 31, 1998.
The gross margin for the six-month period ended July 31, 1998 was 37.8% compared
to 36.9% for the same period last year. The improvement in gross margin can be
attributed to a combination of improved capacity utilization, product mix, and
production efficiencies in both segments.
Selling expense decreased $72,337 during the six-month period ended July 31,
1998 compared to the same period last year. Selling expense as a percentage of
net sales was 9.2% for the six-month period ended July 31, 1998, a slight
increase compared to the six-month period ended July 31, 1997.
General and administrative expense was $3,278,041 for the six-month period ended
July 31, 1998 compared to $3,416,994 for the same period last year, a decrease
of $138,953. The Company's continued focus on cost controls enabled it to
decrease overall general and administrative expenses. General and administrative
expense as a percentage of net sales was the same as the prior year at 11.1%.
Other income, net, decreased $218,745 for the six-month period ended July 31,
1998 compared to the prior six-month period due to the gain on the sale of the
former Strobic Air Corporation facility included for the six-month period ended
July 31, 1997.
The effective tax rate for the six-month period ended July 31, 1998 was 36.7%
compared to 39.0% for the six-month period ended July 31, 1997.
Three-months Ended July 31, 1998 vs Three-months Ended July 31, 1997
Net sales for the three-month period ended July 31, 1998 were $14,588,843
compared to $15,866,826 for the three-month period ended July 31, 1997, a
decrease of $1,277,983 or 8.1%. The sales decrease can be attributed to the
impact of economic conditions in the Pacific Rim countries, especially in the
Fluid Handling Equipment segment, combined with the timing of shipments due to
contract requirements in the Pollution Control Systems and Allied Equipment
segment.
Net income for the three-month period ended July 31, 1998 was $1,752,962
compared to $1,789,765 for the three-month period ended July 31, 1997, a
decrease of $36,803 or 2.1%. The decrease in net income is related to the lower
sales volume offset by continuing cost controls for the three-month period ended
July 31, 1998.
-9-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
The gross margin for the three-month period ended July 31, 1998 was 37.4%
compared to 35.7% for the same period last year. The improvement in the gross
margin can be attributed to a combination of improved capacity utilization,
product mix, and production efficiencies in both business segments.
Selling expenses decreased $92,207 during the three-month period ended July 31,
1998 compared to the same period last year. As a percentage of net sales,
selling expense increased to 8.9% for the three-month period ended July 31, 1998
from 8.8% for the three-month period ended July 31, 1997.
General and administrative expense was $1,640,631 during the three-month period
ended July 31,1998 compared to $1,715,554 during the three-month period ended
July 31, 1997, a decrease of $74,923. General and administrative expense for the
three-month period ended July 31, 1998 increased to 11.2% of net sales compared
to 10.8% for the same period last year.
Other income, net, decreased $231,646 for the three-month period ended July 31,
1998 compared to the prior three-month period due to the gain on the sale of the
former Strobic Air Corporation facility included in the three-month period ended
July 31, 1997.
The effective tax rate for the three-month period ended July 31, 1998 was 34.3%
compared to 39.0% for the six-month period ended July 31, 1997.
Liquidity:
The Company's cash and cash equivalents was $8,073,238 on July 31, 1998 compared
to $11,253,380 on January 31, 1998, a decrease of $3,180,142. This decrease is
the net result of positive cash flow provided by operating activities of
$2,940,460, proceeds received from the exercise of stock options of $362,229,
offset by payment of the annual cash dividend amounting to $2,100,569, payments
on long-term debt totalling $945,009, open market purchases of stock under the
Company's stock repurchase programs amounting to $2,214,426, acquisition of
other intangibles amounting to $412,856 and investment in property and equipment
amounting to $817,462. The Company's cash flows from operating activities are
influenced by the timing of shipments and negotiated standard payment terms,
including retention associated with major projects.
Accounts receivable (net) amounted to $10,128,616 on July 31, 1998 compared to
$10,664,310 on January 31, 1998, which represents a decrease of $535,694. The
timing and size of shipments and retainage on contracts, especially in the
Pollution Control Systems and Allied Equipment segment, will influence accounts
receivable balances at any point in time.
Inventories were $13,241,599 on July 31, 1998 compared to $12,210,749 on January
31, 1998, an increase of $1,030,850. Inventory balances fluctuate depending upon
market demand, the size and timing of orders and long lead times required.
Current liabilities amounted to $9,975,378 on July 31, 1998 compared to
$11,267,545 on January 31, 1998, a decrease of $1,292,167. Accounts payable,
accrued payroll and other taxes payable, offset by the reduction in accrued
expenses, customer advances and the current portion of long-term debt, accounted
for the decrease.
The Company has consistently maintained a high current ratio and has not
utilized either the domestic line of credit or the foreign line of credit
totalling $5.0 million, which are available for working capital purposes. Funds,
in general, have exceeded the current needs of the Company. The Company
presently foresees no change in this situation, in the immediate future.
-10-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
Capital Resources and Requirements:
Cash flows provided by operating activities during the six-month period ended
July 31, 1998 amounted to $2,940,460 compared with $4,267,574 in the six-month
period ended July 31, 1997, a decrease of $1,327,114.
Cash flows used in investing activities during the six-month period ended July
31, 1998 amounted to $1,230,318 compared with $3,229 for the six-month period
ended July 31, 1997. The Company's investing activities principally represent
the acquisitions of property, plant and equipment in the two operating segments.
During the six-month period ended July 31, 1998, the Company acquired certain
assets of a distributor of its Stiles-Kem products, located in the Southeastern
United States, for a purchase price of approximately $400,000. The purchase
price was allocated to customer lists, covenants not to compete and goodwill.
Financing activities during the six-month period ended July 31, 1998 utilized
$4,897,775 of available resources compared to $2,880,622 for the six-month
period ended July 31, 1997. The 1998 activity is the result of the payment of
the annual cash dividend amounting to $2,100,569, reduction of long-term debt
totalling $945,009, plus open market purchases of stock under the Company's
stock repurchase programs totalling $2,214,426, offset by proceeds provided by
the exercise of stock options totalling $362,229.
On February 23, 1998, the Board of Directors declared a $.30 per share annual
cash dividend (compared to the $.27 per share cash dividend paid in April, 1997)
payable on April 24, 1998 to stockholders of record on April 10, 1998. The
dividend paid April 24, 1998 on the Common Stock represented 29.5% of the prior
fiscal year earnings.
On June 3, 1998, the Company announced the initiation of a 350,000 share stock
repurchase program. The stock repurchase program of 150,000 shares announced on
August 13, 1997 has been completed. The stock repurchase programs were
initiated, because in management's view, the current stock price does not
reflect the true stock value. Purchases will be made from time to time in open
market transactions at the prevailing prices and in accordance with applicable
rules. The Company may discontinue this program at any time. For the six-month
period ended July 31, 1998, the Company has repurchased 144,600 shares under the
two stock repurchase programs.
On August 19, 1998, the Company announced that a Letter of Intent was signed to
purchase the assets of the Flex-Kleen subsidiary of Research Cottrell Inc., a
subsidiary of Air and Water Technologies Corporation, in an all cash
transaction. The purchase price was not disclosed. Flex-Kleen is a manufacturer
of dry particulate collectors that are used primarily in the process of
manufacturing food products and pharmaceuticals. The acquisition is expected to
close by October 31, 1998 and will be effective as of July 31, 1998. Upon the
closing, Flex-Kleen's activities would be included in the Company's operating
results from the third quarter onward. The Company expects to fund the
transaction with a combination of cash on hand and new bank borrowings. No
assurances can be given that this acquisition will be completed.
Consistent with past practices, the Company expects to continue to invest in new
product development programs, and to make capital expenditures to support the
on-going operations during the coming year. The Company expects to finance all
capital expenditure requirements through cash flows generated from operations.
-11-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
Year 2000 Compliance:
During the fiscal year ended January 31, 1998, the Company began to modify its
computer software to correctly process dates for the Year 2000. The Company
presently believes that the modifications to its existing software are complete.
Although the Company does not expect that it will incur material sums prior to
the year 2000 in connection with computer software modifications required in
connection therewith, no assurances can be given as to this, or as to whether
the Company will not be adversely affected by Year 2000 compliance problems.
Cautionary Statement Regarding Forward Looking Statements:
As a cautionary note to investors, the Company and its representatives may make
oral or written statements from time to time that are "forward-looking
statements". This would include information concerning possible or assumed
future activities, plans, results of operations of the Company and statements
preceded by, followed by or that include the words "believes", "expects",
"anticipates", "intends" or similar expressions. For those statements, the
Company claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
There are a number of important factors which could cause actual results to
differ materially from those anticipated. The Company believes that its future
operating results will continue to be subject to quarterly variations based upon
a wide variety of factors including the cyclical nature of both the business
segments and the markets addressed by the Company's products, price erosion,
competitive factors, the timing of new product introductions, changes in product
mix, the availability and extent of utilization of manufacturing capacity,
product obsolescence and the ability to develop and implement new technologies.
The Company's operating results could also be impacted by sudden fluctuations in
customer requirements, currency exchange rate fluctuations and other economic
conditions affecting customer demand and the cost of operations in one or more
of the global markets in which the Company does business. In addition, although
the Company has signed a Letter of Intent for an acquisition which, if completed
as proposed, would be included in the results of operations for the quarter
beginning August 1, 1998, there can be no assurances that this transaction will
be completed. See "Capital Resources and Requirements". 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.
-12-
<PAGE>
MET-PRO CORPORATION
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the Company's stockholders was held on June 3, 1998. At
that meeting, two proposals were submitted to a vote of the Company's
stockholders. Proposal 1 was a proposal to elect two Directors (with William L.
Kacin and Nicholas DeBenedictis being the nominees) to serve until the 2001
Annual Meeting of Stockholders, one Director (with Gary J. Morgan being the
nominee) to serve until the 2000 Annual Meeting of Stockholders and one Director
(with Jeffrey H. Nicholas being the nominee) to serve until the 1999 Annual
Meeting of Stockholders. Proposal 2 was to ratify the selection of Margolis &
Company P. C. as independent certified public accountants for the Company's
fiscal year ending January 31, 1999.
At the close of business on the record date for the meeting (which was April 10,
1998), there were 6,999,298 shares of common stock outstanding and entitled to
be voted at the meeting. Holders of 6,140,449 shares of common stock
(representing a like number of votes) were present at the meeting, either in
person or by proxy.
The following table sets forth the results of the voting on each of the
proposals (including, the case of Proposal 1, the results of the voting with
respect to each nominee):
<TABLE>
Number of Votes
Proposals For Against Abstain
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proposal 1 -- Election of Directors:
William L. Kacin 5,924,130 216,319 --
Nicholas DeBenedictis 6,010,645 129,804 --
Gary J. Morgan 5,964,520 175,929 --
Jeffrey H. Nicholas 5,970,764 169,685 --
- --------------------------------------------------------------------------------------------------------------------
Proposal 2 -- Selection of Margolis
& Company P. C. 6,111,606 7,930 20,913
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Consequently, all proposals were passed by the stockholders.
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,
1998.
-13-
<PAGE>
MET-PRO CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Met-Pro Corporation
----------------------------------------
(Registrant)
August 28, 1998 /s/ William L. Kacin
----------------------------------------
William L. Kacin,
President and
Chief Executive Officer
August 28, 1998 /s/ Gary J. Morgan
----------------------------------------
Gary J. Morgan,
Vice President of Finance,
Secretary and Treasurer, Chief Financial
Officer and Chief Accounting Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JUL-31-1998
<CASH> 8,073,238
<SECURITIES> 0
<RECEIVABLES> 10,128,616
<ALLOWANCES> 275,773
<INVENTORY> 13,241,599
<CURRENT-ASSETS> 33,688,432
<PP&E> 27,240,701
<DEPRECIATION> 13,309,257
<TOTAL-ASSETS> 55,918,905
<CURRENT-LIABILITIES> 9,975,378
<BONDS> 2,739,002
<COMMON> 713,862
0
0
<OTHER-SE> 42,727,069
<TOTAL-LIABILITY-AND-EQUITY> 55,918,905
<SALES> 29,529,731
<TOTAL-REVENUES> 29,529,731
<CGS> 18,365,829
<TOTAL-COSTS> 24,349,638
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,926
<INCOME-PRETAX> 5,516,417
<INCOME-TAX> 2,025,911
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,490,506
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
