<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, 1999 Commission file number 001-07763
MET-PRO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1683282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 Cassell Road, P.O. Box 144
Harleysville, Pennsylvania 19438
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 723-6751
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock (par
value $0.10 per share) is 6,548,716 (as of July 31, 1999).
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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, 1999 and January 31, 1999.......................................................... 2
Condensed consolidated statement of operations for the six-month
and three-month periods ended July 31, 1999 and 1998........................................ 3
Condensed consolidated statement of stockholders' equity for the
six-month periods ended July 31, 1999 and 1998.............................................. 4
Condensed consolidated statement of cash flows for the six-month
periods ended July 31, 1999 and 1998........................................................ 5
Notes to condensed consolidated financial statements................................................. 6
Report of independent accountants.................................................................... 9
Item 2. Management's discussion and analysis of the financial condition
and results of operations.................................................................. 10
PART II - OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders......................................... 15
Item 6(b). Reports on Form 8-K......................................................................... 15
SIGNATURES.................................................................................................... 16
</TABLE>
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<PAGE>
MET-PRO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
July 31, January 31,
ASSETS 1999 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $6,955,831 $7,446,369
Accounts receivable, net of allowance for doubtful
accounts of approximately $334,000 and
$261,000, respectively 13,517,911 14,492,082
Inventories - Note 4 13,300,730 14,973,169
Prepaid expenses, deposits and other current assets 1,173,798 827,824
Deferred income taxes 944,009 944,009
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 35,892,279 38,683,453
Property, plant and equipment, net 13,660,207 13,931,276
Costs in excess of net assets of businesses acquired, net 19,020,029 19,260,591
Other assets 838,984 1,013,321
- ------------------------------------------------------------------------------------------------------------------------
Total assets $69,411,499 $72,888,641
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------
Current liabilities
Current portion of long-term debt $2,004,423 $2,125,093
Accounts payable 3,936,502 5,213,770
Dividend payable 527,681 --
Accrued salaries, wages and expenses 6,701,920 5,804,235
Payroll and other taxes payable 15,503 216,822
Customers' advances 861,059 1,027,948
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 14,047,088 14,387,868
Long-term debt 10,938,637 11,941,954
Other non-current liabilities 372,287 328,838
Deferred income taxes 290,533 304,874
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 25,648,545 26,963,534
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock, $.10 par value; 18,000,000 shares
authorized, 7,182,843 and 7,138,625 shares issued,
of which 634,127 and 343,727 shares were reacquired
and held in treasury at the respective dates 718,284 713,862
Additional paid-in capital 7,908,475 7,508,748
Retained earnings 43,781,573 42,718,355
Accumulated other comprehensive loss (210,530) (85,103)
Treasury stock, at cost (8,434,848) (4,930,755)
- ------------------------------------------------------------------------------------------------------------------------
Net stockholders' equity 43,762,954 45,925,107
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $69,411,499 $72,888,641
========================================================================================================================
</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,
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $41,366,235 $29,529,731 $20,538,207 $14,588,843
Cost of goods sold 27,296,904 18,365,829 13,570,589 9,127,840
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 14,069,331 11,163,902 6,967,618 5,461,003
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Selling 3,749,153 2,705,768 1,871,066 1,298,311
General and administrative 4,535,500 3,278,041 2,195,909 1,640,631
- ---------------------------------------------------------------------------------------------------------------------------------
8,284,653 5,983,809 4,066,975 2,938,942
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Income from operations 5,784,678 5,180,093 2,900,643 2,522,061
Other income, net 262,060 336,324 126,994 145,927
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Income before taxes 6,046,738 5,516,417 3,027,637 2,667,988
Provision for taxes 2,297,760 2,025,911 1,150,501 915,026
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 3,748,978 $ 3,490,506 $ 1,877,136 $ 1,752,962
=================================================================================================================================
Earnings per share, basic (1) $.56 $.50 $.28 $.25
Earnings per share, diluted (2) $.56 $.50 $.28 $.25
Cash dividend per share - declared (3) $.40 $.30 $.08 $.00
Cash dividend per share - paid (3) $.32 $.30 $.00 $.00
=================================================================================================================================
</TABLE>
(1) Basic earnings per share are based on the weighted average number of common
shares outstanding of 6,669,627 and 6,974,394 in the six-month periods
ended July 31, 1999 and 1998, respectively, and 6,693,898 and 6,989,563 in
the three-month periods ended July 31, 1999 and 1998, respectively.
(2) Diluted earnings per share are based on the weighted average number of
common shares outstanding of 6,711,457 and 7,032,673 in the six-month
periods ended July 31, 1999 and 1998, respectively, and 6,734,268 and
7,049,815 in the three-month periods ended July 31, 1999 and 1998,
respectively.
(3) On February 23, 1998, the Company declared a cash dividend of $.30 per
share payable on April 24, 1998 to stockholders of record on April 10,
1998. On February 22, 1999, the Company declared an annual $.32 per share
cash dividend payable on April 23, 1999 for the fiscal year ending January
31, 1999 to stockholders of record on April 9, 1999. On June 2, 1999, the
Company declared a quarterly $.08 per share cash dividend payable on
September 10, 1999 to stockholders of record on August 20, 1999.
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 (Loss) Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 31, 1999 $713,862 $7,508,748 $42,718,355 ($85,103) ($4,930,755) $45,925,107
Comprehensive income:
Net income 3,748,978
Foreign currency translation (125,427)
Total comprehensive income 3,623,551
Dividends paid, $.32 per share (2,158,079) (2,158,079)
Dividends declared, $.08
per share (527,681) (527,681)
Proceeds from issuance of
common stock under dividend
reinvestment plan (44,218 4,422 426,907 431,329
shares)
Stock option transactions (27,180) 42,180 15,000
Purchase of 293,400 shares of
treasury stock (3,546,273) (3,546,273)
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Balances, July 31, 1999 $718,284 $7,908,475 $43,781,573 ($210,530) ($8,434,848) $43,762,954
====================================================================================================================================
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
treasury stock (2,214,426) (2,214,426)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, July 31, 1998 $713,862 $7,508,748 $39,057,809 ($156,653) ($3,682,835) $43,440,931
====================================================================================================================================
</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,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<S> <C> <C>
Net cash provided by operating activities $6,431,201 $2,940,460
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from sale of property and equipment 8,000 --
Acquisitions of property and equipment (526,868) (817,462)
Acquisitions of other intangibles (7,281) (412,856)
- ------------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (526,149) (1,230,318)
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Reduction of debt (1,123,987) (945,009)
Exercise of stock options 15,000 362,229
Payment of dividends (1,726,750) (2,100,569)
Purchase of treasury shares (3,546,273) (2,214,426)
- ------------------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (6,382,010) (4,897,775)
- ------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (13,580) 7,491
- ------------------------------------------------------------------------------------------------------------------------
Net (decrease) in cash and cash equivalents (490,538) (3,180,142)
Cash and cash equivalents at February 1 7,446,369 11,253,380
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at July 31 $6,955,831 $8,073,238
========================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $429,045 $138,316
Income taxes $1,816,716 $2,218,572
========================================================================================================================
</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 Strobic Air Corporation,
Flex-Kleen Canada Inc., and Mefiag B.V. (collectively "Met-Pro" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments necessary to present fairly the financial
position as of July 31, 1999 and the results of operations for the six-month and
three-month periods ended July 31, 1999 and 1998, and changes in stockholders'
equity and cash flows for the six-month periods then ended. The results of
operations for the six-month and three-month periods ended July 31, 1999 and
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, 1999.
NOTE 3 - ACQUISITION OF BUSINESS
On October 29, 1998, the Company, pursuant to an Asset Purchase Agreement,
purchased all of the operating assets of Flex-Kleen Corporation and Flex-Kleen
Canada Limited (collectively "Flex-Kleen") for a purchase price of approximately
$15,000,000 plus the assumption of ordinary business liabilities. The
acquisition was accounted for as a purchase transaction. Flex-Kleen is a
manufacturer of dry particulate collectors that are used primarily in the
process of manufacturing food products and pharmaceuticals. The condensed
consolidated statement of operations for the six-months ended July 31, 1999
includes the operations of Flex-Kleen.
The acquisition was completed by a cash payment of approximately $15,000,000,
plus acquisition costs, which resulted in approximately $12,150,000 of goodwill.
A bank loan totalling $12,000,000 having a ten-year term with a fixed interest
rate swap of 5.98% was used to finance the acquisition. Payments of principal
and interest are payable on a quarterly basis.
On a pro-forma basis, consolidated results of operations for the six-month
period ended July 31, 1998 would have been as follows, if the acquisition had
been made as of February 1, 1998:
Net sales $38,511,731
Income before taxes on income 6,281,611
Net Income 3,894,611
Earnings per share, basic $.56
Earnings per share, diluted $.55
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<PAGE>
MET-PRO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
Inventories consisted of the following:
July 31, January 31,
1999 1999
----------- -----------
Raw material $6,436,989 $7,246,379
Work in progress 2,163,333 2,435,351
Finished goods 4,700,408 5,291,439
----------- -----------
$13,300,730 $14,973,169
=========== ===========
NOTE 5 - BUSINESS SEGMENT DATA
The Company's operations are conducted in two business segments as follows: the
manufacture and sale of pollution control systems and allied equipment, and the
manufacture and sale of fluid handling equipment.
No significant intercompany revenue is realized by either business segment.
Interest income and expense are not included in the measure of segment profit
reviewed by management. Income taxes are also not included in the measure of
segment operating profit reviewed by management.
Financial information by business segment is shown below.
Six Months Ended July 31,
1999 1998
----------------------------
Net sales
Pollution control systems and allied equipment $28,077,235 $16,252,033
Fluid handling equipment 13,289,000 13,277,698
----------- -----------
$41,366,235 $29,529,731
Income from operations
Pollution control systems and allied equipment $4,004,708 $3,137,751
Fluid handling equipment 1,779,970 2,042,342
----------- -----------
$5,784,678 $5,180,093
=========== ===========
July 31,
1999 1998
----------------------------
Identifiable assets
Pollution control systems and allied equipment $42,240,578 $24,884,264
Fluid handling equipment 19,213,025 20,673,539
----------- -----------
61,453,603 45,557,803
Corporate 7,957,896 10,361,102
----------- -----------
$69,411,499 $55,918,905
=========== ===========
-7-
<PAGE>
MET-PRO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - EMPLOYEE BENEFIT PLAN
Effective April 1, 1999, the Company implemented a 401(k) profit sharing plan.
Substantially all employees of the Company in the United States are eligible to
participate in the plan following their completion of one year of service and
attaining age 21. Pursuant to this plan, employees can contribute up to 15% of
their compensation to the plan. The Company will match up to 50% of the employee
contribution up to 4% of compensation in the form of Met-Pro common stock.
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The adoption of this
pronouncement will have no immediate impact on Met-Pro's consolidated results of
operations, financial position or cash flows.
NOTE 8 - ACCOUNTANTS' 10-Q REVIEW
Margolis & Company P.C., the Company's auditors, has performed a limited review
of the financial information included herein. Their report on such review
accompanies this filing.
-8-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Met-Pro Corporation
Harleysville, Pennsylvania
We have reviewed the accompanying condensed consolidated balance sheet of
Met-Pro Corporation and its wholly owned subsidiaries as of July 31, 1999 and
the related condensed consolidated statements of operations for the six-month
and three-month periods ended July 31, 1999 and 1998 and stockholders' equity
and cash flows for the six-month periods ended July 31, 1999 and 1998. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 31, 1999 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report dated February 25,
1999, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of January 31, 1999 is fairly stated, in all material respects,
in relation to the balance sheet from which it has been derived.
/s/ Margolis & Company P.C.
Certified Public Accountants
Bala Cynwyd, Pennsylvania
August 16, 1999
-9-
<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, 1999 vs Six Months Ended July 31, 1998
Net sales for the six-month period ended July 31, 1999 were $41,366,235 compared
to $29,529,731 for the six-month period ended July 31, 1998, an increase of
$11,836,504 or 40.1%. Sales in the Pollution Control Systems and Allied
Equipment segment were $28,077,235 or 72.8% higher than the six-month period
ended July 31, 1998 due to the acquisition of Flex-Kleen Corporation and
Flex-Kleen Canada Limited (collectively "Flex-Kleen"), effective as of October
1, 1998, coupled with higher demand primarily for our fume and odor control
equipment. Sales in the Fluid Handling Equipment segment were $13,289,000 or .1%
higher compared to the six-month period ended July 31, 1998.
Backlog at July 31, 1999 totaled $8,680,575 or 55% higher than the backlog of
orders on hand at July 31, 1998. In addition, the Company had an additional
$6,811,915 of orders which are not included in our backlog due to the Company's
long-standing policy of not including these orders in backlog until engineering
drawings are approved.
Net income for the six-month period ended July 31, 1999 was $3,748,978 compared
to $3,490,506 for the six-month period ended July 31, 1998, an increase of
$258,472 or 7.4%. The increase in net income is related to the higher sales
volume and continuing improvements in controlling costs for the six-month period
ended July 31, 1999.
The gross margin for the six-month period ended July 31, 1999 was 34.0% versus
37.8% the same period in the prior year due to lower gross margins experienced
in the Pollution Control Systems and Allied Equipment segment.
Selling expense increased $1,043,385 during the six-month period ended July 31,
1999 compared to the same period last year. Selling expense as a percentage of
net sales was 9.1% for the six-month period ended July 31, 1999, a slight
decrease compared to the six-month period ended July 31, 1998.
General and administrative expense was $4,535,500 for the six-month period ended
July 31, 1999 compared to $3,278,041 for the same period last year, an increase
of $1,257,459. The increase was due mainly to amortization, interest, and other
administrative expenses connected with the inclusion of Flex- Kleen. Interest
expense for the six-months ended July 31, 1999 and 1998 amounted to $429,007 and
$152,426, respectively. General and administrative expense as a percentage of
net sales decreased to 11.0% for the six-month period ended July 31, 1999 from
11.1% for the same period last year.
Other income, net, decreased $74,264 for the six-month period ended July 31,
1999 compared to the six- month period ended July 31, 1998, due to less interest
earned on lower cash balances.
The effective tax rate for the six-month period ended July 31, 1999 was 38%
compared to 36.7% for the six-month period ended July 31, 1998.
Three Months Ended July 31, 1999 vs Three Months Ended July 31, 1998
Net sales for the three-month period ended July 31, 1999 were $20,538,207
compared to $14,588,843 for the three-month period ended July 31, 1998, an
increase of $5,949,364 or 40.8%. The sales increase can be attributed to higher
sales for the Pollution Control Systems and Allied Equipment segment as well as
the acquisition of Flex-Kleen.
-10-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
Net income for the three-month period ended July 31, 1999 was $1,877,136
compared to $1,752,962 for the three-month period ended July 31, 1998, an
increase of $124,174 or 7.1%. The increase in net income is related to the
higher sales volume of the Pollution Control Systems and Allied Equipment
segment for the three-month period ended July 31, 1999.
The gross margin for the three-month period ended July 31, 1999 was 33.9%
compared to 37.4% for the same period last year. The decrease is due to lower
gross margins experienced in Pollution Control Systems and Allied Equipment
segment.
Selling expenses increased $572,755 during the three-month period ended July 31,
1999 compared to the same period last year. As a percentage of net sales,
selling expense increased to 9.1% for the three-month period ended July 31, 1999
from 8.9% for the three-month period ended July 31, 1998.
General and administrative expense was $2,195,909 during the three-month period
ended July 31,1999 compared to $1,640,631 during the three-month period ended
July 31, 1998, an increase of $555,278. General and administrative expense for
the three-month period ended July 31, 1999 decreased to 10.7% of net sales
compared to 11.2% for the same period last year.
Other income, net, decreased $18,933 for the three-month period ended July 31,
1999 compared to the prior three-month period due to less interest earned on
lower cash balances.
The effective tax rate for the three-month period ended July 31, 1999 was 38.0%
compared to 34.3% for the three-month period ended July 31, 1998.
Liquidity:
The Company's cash and cash equivalents were $6,955,831 on July 31, 1999
compared to $7,446,369 on January 31, 1999, a decrease of $490,538. This
decrease is the net result of the payment of the annual cash dividend amounting
to $1,726,750 (net of $431,329 of dividends utilized for stock purchased under
the Dividend Reinvestment Plan), payments on long-term debt totalling
$1,123,987, purchase of treasury stock amounting to $3,546,273, acquisition of
other intangibles amounting to $7,281 and investment in property and equipment
amounting to $526,868, offset by positive cash flow provided by operating
activities of $6,431,201, proceeds received from the exercise of stock options
of $15,000, and proceeds received from the sale of property and equipment
amounting to $8,000. The Company's cash flows from operating activities are
influenced by the timing of shipments and negotiated standard payment terms,
including retention associated with major projects.
Accounts receivable (net) amounted to $13,517,911 on July 31, 1999 compared to
$14,492,082 on January 31, 1999, which represents a decrease of $974,171. 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 $13,300,730 on July 31, 1999 compared to $14,973,169 on January
31, 1999, a decrease of $1,672,439. Inventory balances fluctuate depending upon
market demand, the size and timing of orders and varying lead times required.
Current liabilities amounted to $14,047,088 on July 31, 1999 compared to
$14,387,868 on January 31, 1999, a decrease of $340,780. Accounts payable,
current portion of long term debt, customer advances and other taxes payable
offset by the increase in accrued expenses and dividends payable accounted for
the decrease.
-11-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
The Company has consistently maintained a high current ratio and has not
utilized either the domestic line of credit or the foreign line of credit
totalling $5.0 million which are available for working capital purposes. Cash
flows, in general, have exceeded the current needs of the Company. The Company
presently foresees no change in this situation in the immediate future.
Capital Resources and Requirements:
Cash flows provided by operating activities during the six-month period ended
July 31, 1999 amounted to $6,431,201 compared with $2,940,460 in the six-month
period ended July 31, 1998, an increase of $3,490,741.
Cash flows used in investing activities during the six-month period ended July
31, 1999 amounted to $526,149 compared with $1,230,318 for the six-month period
ended July 31, 1998. 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, 1999 utilized
$6,382,010 of available resources compared to $4,897,775 for the six-month
period ended July 31, 1998. The 1999 activity is the result of the payment of
the annual cash dividend amounting to $1,726,750 (net of $431,329 of dividends
utilized for stock purchased under the Dividend Reinvestment Plan), reduction of
long-term debt totalling $1,123,987, plus the purchase of treasury stock
totalling $3,546,273, offset by proceeds provided by the exercise of stock
options totalling $15,000.
On October 29, 1998, the Company acquired all of the operating assets of
Flex-Kleen Corporation and Flex-Kleen Canada Limited from Aqua Alliance, Inc.
Flex-Kleen is a manufacturer of dry particulate collectors that are used
primarily in the process of manufacturing food products and pharmaceuticals. The
Company paid approximately $15,000,000 in the transaction through the
utilization of $3,000,000 from available resources and $12,000,000 from new
borrowings of long-term debt from Mellon Bank, N.A., exclusive of assumed
liabilities.
On February 22, 1999, the Board of Directors declared a $.32 per share annual
cash dividend (compared to the $.30 per share cash dividend paid on April 24,
1998) payable on April 23, 1999 to stockholders of record on April 9, 1999. The
dividend paid on April 23, 1999 in cash and in 44,218 newly issued shares
purchased by stockholders through our dividend reinvestment program represented
30.1% of the prior fiscal year earnings.
On June 3, 1998, the Company announced the initiation of a 350,000 share stock
repurchase program ("1998 Stock Repurchase Program"). The Company completed this
stock repurchase program, during the six-month period ended July 31, 1999. On
May 12, 1999, the Company announced a new stock repurchase program for an
additional 350,000 shares or approximately 5% of the Company's outstanding
stock, to commence after all shares have been repurchased under the 1998 Stock
Repurchase Program. The new program was initiated, because in management's view,
the current stock price does not reflect the true stock value. Purchases will be
made from time to time in open market transactions at the prevailing prices and
in accordance with applicable rules. The Company may discontinue the program at
any time. For the six-month period ended July 31, 1999, the Company had
repurchased 293,400 shares, 121,200 under the plan effective May 12, 1999 and
172,200 shares under the 1998 Stock Repurchase Program.
-12-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
On June 2, 1999, the Board of Directors declared a quarterly dividend of $.08
per share payable on September 10, 1999 to shareholders of record at the close
of business on August 20, 1999. Due to the strong cash flows generated from
operating activities, the Company announced the change from an annual dividend
which was traditionally paid during the month of April to a regular quarterly
dividend that is expected to be paid every three months beginning in September
1999.
Consistent with past practices, the Company intends to continue to invest in new
product development programs, and to make capital expenditures to support the
on-going operations during the coming year. The Company expects to finance all
capital expenditure requirements through cash flows generated from operations.
Year 2000 Compliance:
The "Year 2000" issue refers to computer systems and other equipment operating
on software that uses only two digits to represent the year, rather than four
digits. As a result, these systems and equipment may not process information or
otherwise function properly when using the year "2000", since that year will be
indistinguishable from the year "1900".
The Company initiated a Year 2000 program to assess and develop plans to resolve
the issue both internally and externally. During 1997, the Company began
developing a plan to upgrade its business and operating systems to Year 2000
compliant software. Implementation of the upgrade began in 1998 with the initial
testing of the system on a limited basis prior to converting all of the
Company's locations. As of May 1998, the Company had completed implementation
and testing of its business and operating systems at all of the Company's
facilities.
The Company has surveyed its suppliers, financial institutions, and others with
which it does business to determine their Year 2000 readiness and coordinate
conversion efforts. Approximately 90% of third party suppliers have responded to
the Company's surveys. At the current time, respondents critical to the
operations of the Company have indicated that they are, or reasonably believe
that they will be, Year 2000 compliant. If a material risk arises, the Company
is prepared to implement procedures that will resolve the issues associated with
the risks. Additionally, the Company has established programs to ensure that
future purchases of equipment and software are Year 2000 compliant.
While reasonable actions have been taken to address the Year 2000 problem and
will continue to be taken in the future to mitigate such disruption, the
magnitude of all Year 2000 disturbances cannot be predicted. Management believes
that past or expected future capital requirements related to Year 2000
compliance issues will not have a material impact on the Company's consolidated
financial position or results of operations.
The information above contains forward-looking statements including, without
limitation, statements relating to the Company's plans, strategies, objectives,
expectations, intentions, and adequate resources that are made pursuant to the
"Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995. Readers are cautioned that forward-looking statements about the Year 2000
should be read in conjunction with the Company's disclosures under the heading:
Cautionary Statement Regarding Forward Looking Statements.
-13-
<PAGE>
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
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 "anticipates", "believes",
"designed to", "estimates", "expects", "foreseeable future", "goal", "intends",
"projects", "projection", "plans", "scheduled", "should" 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 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.
-14-
<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 2, 1999. At
that meeting, two proposals were submitted to a vote of the Company's
stockholders. Proposal 1 was a proposal to elect one Director (with Jeffrey H.
Nicholas being the nominee) to serve until the 2002 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, 2000.
At the close of business on the record date for the meeting (which was April 9,
1999), there were 6,743,998 shares of common stock outstanding and entitled to
be voted at the meeting. Holders of 6,553,893 shares of common stock
(representing a like number of votes) were present at the meeting, either in
person or by proxy.
<TABLE>
The following table sets forth the results of the voting on each of the proposals:
Number of Votes
Proposals For Against Abstain
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proposal 1 -- Election of Director:
Jeffrey H. Nicholas 6,169,770 384,123 --
- --------------------------------------------------------------------------------------------------------------------
Proposal 2 -- Selection of Margolis
& Company P. C. 6,501,196 16,057 36,640
- --------------------------------------------------------------------------------------------------------------------
</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,
1999.
-15-
<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 27, 1999 /s/ William L. Kacin
-------------------------------------------
William L. Kacin,
Chairman, President and
Chief Executive Officer
August 27, 1999 /s/ Gary J. Morgan
-------------------------------------------
Gary J. Morgan,
Vice President of Finance,
Secretary and Treasurer, Chief
Financial Officer, Chief Accounting Officer
and Director
-16-
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<FISCAL-YEAR-END> JAN-31-2000
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0
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