SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended: January 31, 2000 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock, par value $0.10 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K.____
The number of shares outstanding of the Registrant's Common Stock was
6,324,005 as of April 13, 2000. The aggregate market value of the voting stock
held by non-affiliates of the Registrant was $57,706,546 as of April 13, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Form 10-K
Part Number
-----------
Portions of Registrant's Definitive Proxy Statement filed pursuant
to Regulation 14A in connection with Registrant's Annual Meeting
of Stockholders to be held on June 7, 2000...................... III
<PAGE>
INDEX
<TABLE>
PART I
<S> <C> <C>
Item 1. Business ...................................................................................................... 1
Item 2. Properties .................................................................................................... 6
Item 3. Legal Proceedings ............................................................................................. 7
Item 4. Submission of Matters to a Vote of Security Holders ........................................................... 7
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ......................................... 8
Item 6. Selected Financial Data ....................................................................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 9
Item 7A. Quantitative and Qualitative Disclosure About Market Risks..................................................... 13
Item 8. Financial Statements and Supplementary Data ................................................................... 14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .......................... 32
PART III
Item 10. Directors and Executive Officers of the Registrant............................................................. 32
Item 11. Executive Compensation......................................................................................... 32
Item 12. Security Ownership of Certain Beneficial Owners and Management ................................................ 32
Item 13. Certain Relationships and Related Transactions ................................................................ 32
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ............................................... 33
SIGNATURES ................................................................................................................. 35
</TABLE>
<PAGE>
PART I
Item 1. Business:
General:
Met-Pro Corporation ("Met-Pro" or the "Company"), incorporated in the State
of Delaware on March 30, 1966, manufactures and sells product recovery/pollution
control equipment for purification of air and liquids, and fluid handling
equipment for corrosive, abrasive and high temperature liquids. The Company
markets its products through its own personnel, distributors, representatives
and agents based on the division or subsidiary involved. The Company's products
are sold worldwide primarily in industrial markets. The Company was taken public
on April 6, 1967 and traded on the American Stock Exchange from July 25, 1978
until June 18, 1998, at which time the Company's Common Stock began trading on
the New York Stock Exchange. The Company's principal executive offices are
located at 160 Cassell Road, Harleysville, Pennsylvania and the telephone number
at that location is (215) 723-6751. The Company operates through ten divisions
and three wholly-owned subsidiaries. Except where otherwise indicated by the
context used herein, references to the "Company" means Met-Pro Corporation and
its wholly-owned subsidiaries.
Products, Services and Markets:
The Company operates in two segments, the Product Recovery/Pollution Control
Equipment and the Fluid Handling Equipment Segment. To better reflect the
significant contribution that the Flex-Kleen Division has made to our sales, we
have changed the name of the former "Pollution Control and Allied Equipment"
segment of our business to "Product Recovery/Pollution Control Equipment". For
financial information concerning the Company's industry segments, reference is
made to "Consolidated Business Segment Data" contained within the Company's
Consolidated Financial Statements that form a part of this Report on Form 10-K.
A narrative description of the Company's operations within these two segments is
as follows:
Product Recovery/Pollution Control Equipment Segment
Flex-Kleen Division, located in Itasca, Illinois, operating with the
Company's wholly-owned subsidiary, Flex-Kleen Canada Inc., is a leading supplier
of product recovery and dry particulate collectors that are used primarily in
the process of manufacturing food products and pharmaceuticals. While some of
Flex-Kleen's products are also used for nuisance collection of particulates to
conform to environmental concerns, the overwhelming portion of its sales
activity is for product collection and is process driven. At present,
Flex-Kleen's products are sold through 72 manufacturer's representatives in 32
offices located across the United States and 12 manufacturer's representatives
located in four offices throughout Canada.
Stiles-Kem Division, located in Waukegan, Illinois, is a leading manufacturer
of safe and reliable water treatment compounds which have been used in the
public drinking water industry for more than 45 years. Stiles-Kem products are
designed to eliminate problems created by high iron and manganese levels in
municipal water systems and to reduce scaling and general corrosion tendencies
within water distribution piping systems. These food grade products are NSF/ANSI
approved for health considerations in municipal drinking water supplies and are
certified to meet existing state and federal guidelines. The products are sold
both directly through regional sales representatives and through a network of
distributors located in the United States and Canada.
Sethco Division, located on Long Island, New York, designs, manufactures and
sells corrosion resistant pumps, filter chambers and filter systems with flow
rates to about 200 gallons per minute. These products are used in wastewater
treatment systems and fume scrubbers for pollution control. They are also widely
used in the metal finishing, electronics and chemical processing industries.
Sethco's products are sold through a network of non-exclusive distributors, as
well as to catalog houses and original equipment manufacturers. Our products are
sold internationally through Met-Pro's International Division and our Mefiag
B.V. subsidiary.
Strobic Air Corporation, located in Harleysville, Pennsylvania, designs,
manufactures and holds patents on specialty blowers and industrial fans for
industrial applications including university laboratories, hospitals,
semiconductor manufacturers, government laboratories, pharmaceutical, chemical,
petrochemical plants and other testing laboratory facilities. Sales, engineering
and customer service are provided through a network of 225 manufacturer's
representatives located throughout the United States and Canada. Strobic Air has
established a manufacturing and sales office at the Company's Mefiag B.V.
facility in Heerenveen, Holland.
1
<PAGE>
Duall Division, located in Owosso, Michigan, is a leading manufacturer of
industrial and municipal air and water quality control systems. The Division's
major products include odor control systems, fume and emergency gas scrubbers,
particulate collectors, air strippers, ducting and exhaust fans. All equipment
is fabricated from corrosion resistant materials. Duall's support services
include pilot studies, engineering, installation and performance testing. Duall
products are sold both domestically and internationally to the metal finishing,
wastewater treatment, composting, food processing, chemical, printed circuit,
semiconductor, steel pickling, pharmaceutical, battery manufacturing and
groundwater remediation markets. At present, 90 factory trained manufacturer's
representatives sell Duall's engineered systems to industrial and municipal
clients.
Systems Division, located in West Chester, Pennsylvania, is a leader in the
supply of custom designed and manufactured air and water pollution control
equipment. Systems Division's air pollution control capabilities include: carbon
adsorption systems for the concentration and recovery of volatile solvents,
thermal and catalytic oxidation systems and the supply of abatement catalysts.
These systems are custom engineered for clients in the automotive, aerospace and
furniture industries. Additional applications include painting, pharmaceutical,
chemical, electronics, food processing and printing industries. Systems Division
also manufactures a full range of catalyst products for the oxidation of
pollutants, which include catalysts for the oxidation of chlorinated solvents,
low temperature oxidation catalysts and a catalyst specially designed for
regenerative catalytic oxidizer applications.
Fluid Handling Equipment Segment
Mefiag(R), operating with the Company's wholly-owned subsidiary, Mefiag
B.V., located in Heerenveen, Holland, and the Mefiag Division, located in
Harleysville, Pennsylvania, designs and manufactures filter systems utilizing
horizontal disc technology for superior performance, particularly in high
efficiency and high-flow applications. Mefiag(R) filters are used in tough,
corrosive applications in the plating, metal finishing and printing industries.
Worldwide sales are accomplished through qualified, market-based distributors
and original equipment manufacturers located throughout Europe, United States,
Asia and other major markets throughout the world.
Keystone Filter Division, located in Hatfield, Pennsylvania, is an
established custom pleater and cartridge manufacturer in the United States. The
Division provides custom designed and engineered products which are currently
used in a diversity of applications such as the nuclear power industry,
components in medical equipment and in indoor air quality equipment. Keystone
Filter also provides standard filters for water purification and industrial
applications. Sales and customer service are provided through a non-exclusive
distributor network.
Dean Pump Division, located in Indianapolis, Indiana, designs and
manufactures high quality pumps that handle a broad range of industrial
applications. Users such as the chemical, petrochemical, refinery,
pharmaceutical, plastics, pulp and paper, and food processing industries choose
Dean Pump products particularly for their high temperature applications. The
Division's products are sold worldwide through an extensive network of
distributors.
Fybroc Division, located in Telford, Pennsylvania, is a world leader in the
manufacture of fiberglass reinforced plastic ("FRP") centrifugal pumps. These
pumps provide excellent corrosion resistance for tough applications including
pumping of acids, brines, caustics, bleaches, seawater and a wide variety of
waste liquids. Fybroc's second generation epoxy resin, EY-2, allows the Company
to offer the first corrosion resistant and high temperature FRP thermoset pumps
suitable for solvent applications. The EY-2 material also expands Fybroc's
pumping capabilities to include certain acid applications such as high
concentration sulfuric acid (75-98%). During the past year, Fybroc introduced
the first of a series of FRP centrifugal magnetic drive pumps which will
dramatically increase the scope of potential markets for Fybroc, especially for
the solvent-based chemical market. Fybroc pumps are sold to many markets
including the chemical, steel, pulp and paper, electric utility, aquaculture,
aquarium, and industrial and municipal waste treatment industries. Fybroc's EY-2
material is expected to allow it to enter new markets such as pharmaceutical,
petrochemical, fertilizer and pesticides. A worldwide distributor network
provides sales, engineering and customer service.
The following table sets forth certain data concerning total net sales to
customers by geographic area in the past three years:
Percentage of Net Sales
Fiscal Year Ended January 31,
2000 1999 1998
--------------------------------
United States 83.7% 83.4% 83.5%
Foreign 16.3% 16.6% 16.5%
--------------------------------
Net Sales 100.0% 100.0% 100.0%
================================
2
<PAGE>
Customers:
During each of the past three fiscal years, no single customer accounted for
10% or more of the total net sales of the Company in any year. The Company does
not believe that it would be materially adversely affected by the loss of any
single customer.
Seasonality:
The Company does not consider its business to be seasonal in nature.
Competition:
The Company experiences competition from a variety of sources with respect to
virtually all of its products. The Company knows of no single entity that
competes with it across the full range of its products and systems. The lines of
business in which the Company is engaged are highly competitive. Competition in
the markets served is based on a number of considerations, which may include
price, technology, applications experience, know-how, reputation, product
warranties, service and distribution.
With respect to the Fluid Handling Equipment segment, specifically the pump
manufacturing operations, several companies, including Ingersoll Dresser Pumps
Corporation (a joint venture of Ingersoll-Rand Company and Dresser Industries),
Goulds Industrial Pumps, Inc. (a subsidiary of ITT Industries), and Durco Pumps,
Inc. (a subsidiary of Flow Serve Corporation), dominate the industry with
several smaller companies competing in selected product lines and niche markets.
With respect to the Product Recovery/Pollution Control Equipment segment,
there are numerous competitors of both comparable and larger size which may have
greater resources than the Company, but there are no companies that dominate the
market.
The Company is unable to state with certainty its relative market position in
all aspects of its businesses.
Research and Development:
The Company engages in research and development on an operational basis. Due
to the wide range of the Company's products, the research and development effort
is not centralized. Research is directed towards the development of new products
related to current product lines, and the improvement and enhancement of
existing products.
The principal goals of the Company's research programs are maintaining the
Company as a technological leader in the production of product
recovery/pollution control equipment, and fluid handling equipment; developing
new products; and providing technological support to the manufacturing
operations.
Research and development expenses were $0.8 million, $0.8 million and $0.7
million in the years ended January 31, 2000, 1999 and 1998, respectively.
Patents and Trademarks:
The Company maintains a small number of patents and trademarks. The Company
considers these rights important to its business, although it considers no
individual right material to its business.
Regulatory Matters:
The Company is subject to environmental laws and regulations concerning air
emissions, discharges to water processing facilities, and the generation,
handling, storage and disposal of waste materials in all operations. All of the
Company's production and manufacturing facilities are controlled under permits
issued by federal, state and local regulatory agencies. The Company believes it
is presently in compliance in all material respects with these laws and
regulations. To date, compliance with federal, state and local provisions
relating to protection of the environment has had no material effect upon
capital expenditures, earnings or the competitive position of the Company.
3
<PAGE>
Backlog:
Generally, the Company's customers do not enter into long-term contracts, but
rather issue purchase orders that are accepted by the Company. The rate of
booking new orders varies from month to month. In addition, the orders have
varying delivery schedules, and the Company's backlog as of any particular date
may not be representative of actual revenues for any succeeding period. The
dollar amount of the Company's backlog of orders, considered to be firm,
totalled $11,660,840 and $13,085,678 as of January 31, 2000 and 1999,
respectively. The Company expects that substantially all of the backlog that
existed as of January 31, 2000 will be shipped during the ensuing fiscal year.
Raw Materials:
The Company procures its raw materials and supplies from various sources. The
Company believes it could secure substitutes for the raw materials and supplies
should they become unavailable, but there are no assurances that the substitutes
would perform as well or be priced competitively. The Company has not
experienced difficulty in securing raw materials and supplies, and does not
anticipate any difficulty in procurement in the coming year or foreseeable
future.
Employees:
As of January 31, 2000, the Company employed 400 people, of whom 160 were
involved in manufacturing, and 240 were engaged in administration, sales,
engineering, supervision and clerical work. The Company has had no work
stoppages during the past 17 years and considers its employee relations to be
good.
Foreign Operations:
Most of the Company's operations and assets are located in the United States.
The Company also owns a manufacturing operation in Heerenveen, Holland through
its wholly-owned subsidiary, Mefiag B.V. and operates a sales office and
warehouse in Markham, Ontario, Canada through its wholly-owned subsidiary,
Flex-Kleen Canada Inc.
Large export sales are typically made on the basis of confirmed irrevocable
letters of credit or time drafts to selected customers in U.S. dollars.
Therefore, the Company believes that currency fluctuation and political and
economic instability do not constitute substantial risks to its business.
For information concerning foreign net sales on a segment basis, reference is
made to the Consolidated Business Segment Data contained on page 19.
4
<PAGE>
Executive Officers of the Registrant:
The following table sets forth certain information regarding the executive
officers of the Company:
William L. Kacin, age 68, is Chairman of the Board of Directors, Chief
Executive Officer and President of the Company. He was elected Chairman of the
Board of Directors in June 1999 and Chief Executive Officer, President and
Director in February 1993. Prior to that, he was Vice President and General
Manager of the Company's Sethco Division for seventeen years.
Gary J. Morgan, CPA, age 45, is Vice President-Finance, Chief Financial
Officer, Secretary, Treasurer and a Director of the Company. He was elected Vice
President-Finance, Chief Financial Officer, Secretary and Treasurer in October
1997, and a Director of the Company in February 1998. Mr. Morgan joined the
Company in 1980 and served as the Company's Corporate Controller immediately
prior to October 1997.
Mark A. Betchaver, age 50, is a Vice President of the Company and General
Manager of the Sethco Division, to which office he was elected in June 1993. He
joined the Company in 1972.
Raymond J. De Hont, age 46, is a Vice President of the Company and General
Manager of the Fybroc Division, to which office he was elected in June 1995 when
he joined the Company as well as General Manager of the Dean Pump Division, to
which he was elected in September 1999. For more than five years prior thereto,
Mr. De Hont was employed by Air and Water Technologies and served in various
capacities. His last position was Executive Vice President of their Service
Group.
Thomas V. Edwards, age 46, is a Vice President of the Company and General
Manager of the Systems Division, to which office he was elected in December
1998. Mr. Edwards joined the Company in June 1995 and prior to his present
position, held the position of Assistant to the President. For more than five
years prior thereto, Mr. Edwards was employed by Lockheed Martin as Engineering
Manager.
Sonja M. Haggert, age 46, is a Vice President of the Company and General
Manager of the Keystone Filter Division, to which office she was elected in
February 1993. She joined the Company in 1978, and prior to her present
position, held the position of Distributor Sales Manager of the Division.
William G. Hughes, age 53, is Vice President of the Company and General
Manager of the Flex-Kleen Division, to which office he was elected in October
1998. For more than five years prior thereto, Mr. Hughes was employed by the
Flex-Kleen subsidiary of Research Cottrell, a subsidiary of Air and Water
Technologies, as Vice President and General Manager.
Hans J. D. Huizinga, age 49, is the Managing Director of Mefiag B.V., a
wholly-owned subsidiary of the Company, located in Heerenveen, Holland, an
office to which he was elected in August 1993. He was employed by Mefiag B.V.
(formerly Systems Engineering and Manufacturing Corp. Nederland B.V.) for over
five years as Managing Director prior to becoming an employee of the Company's
subsidiary on June 30, 1993, when Registrant acquired that company.
Gregory C. Kimmer, age 45, is Vice President of the Company and General
Manager of the Duall Division, to which office he was elected in October 1989.
For more than five years prior thereto, Mr. Kimmer was employed by Duall
Industries, Inc. in various capacities.
William F. Mersch, age 46, is a Vice President of the Company and General
Manager of the Stiles-Kem Division, to which office he was elected in October
1996. He joined the Company in June 1995 as National Sales Manager. For more
than five years prior thereto, Mr. Mersch was employed by ANCO Corporation, in
which his last position was Vice President Sales and Marketing.
Robert P. Replogle, age 59, is Vice President of the Company and Director of
the International Sales Division and the Mefiag Division, to which offices he
was elected in December 1995. He joined the Company in December 1973 and prior
to his present position, held the position of Director of the International
Sales Division and the Mefiag Division.
Paul A. Tetley, age 41, is a Vice President of the Company and General
Manager of Strobic Air Corporation, to which office he was elected in December
1999. Mr. Tetley joined the Company in 1996 in connection with the Company's
acquisition of Strobic Air Corporation and prior to his present position held
the position of Director of Operations. For more than five years prior thereto,
Mr. Tetley was employed by the predecessor entity as a Plant Manager.
There is no family relationship between any of the Directors or executive
officers of the Company. Each officer serves at the pleasure of the Board of
Directors.
5
<PAGE>
Item 2. Properties:
The following manufacturing and production facilities were owned or leased by
the Company at January 31, 2000:
<TABLE>
<CAPTION>
Name Structure Property/Location Status
<S> <C> <C> <C>
Executive Offices, 73,000 square feet, cement 17 acres in Harleysville, Owned
International Division, building, with finestone facing, Pennsylvania
Mefiag Division and built 1976
Strobic Air Corporation
Sethco Division 30,000 square feet, cement 4 acres in Hauppauge, Owned
block with brick facing, Long Island, New York
built 1982
Fybroc Division 47,500 square feet, cement 8 acres in Telford, Owned
building with brick facing, Pennsylvania
built 1991
Keystone Filter Division 31,000 square feet, cement 2.3 acres in Hatfield, Owned
block, built 1978 Pennsylvania
Systems Division 15,000 square feet, cement 2 acres in West Chester, Owned
block, brick and composition Pennsylvania
facing, built 1984
Dean Pump Division 66,000 square feet, metal 17.1 acres in Owned
building Indianapolis, Indiana
Duall Division 63,000 square feet, metal 7 acres in Owosso, Owned
and masonry building Michigan
Stiles-Kem Division 22,000 square feet, cement 2.55 acres in Owned
block building, built 1996 Waukegan, Illinois
Flex-Kleen Division 13,760 square feet, brick Itasca, Illinois Leased(1)
building
37,320 square feet, metal Sharpsburg, North Carolina Leased(2)
building
Mefiag B.V. 17,200 square feet, metal 1.1 acres in Owned
and masonry building Heerenveen, Holland
Flex-Kleen Canada Inc. 5,880 square feet, masonry Markham, Ontario, Canada Leased(3)
building
</TABLE>
(1) Flex-Kleen Division's lease for the operation in Itasca, Illinois expires on
November 30, 2002.
(2) Flex-Kleen Division's lease for the warehouse in Sharpsburg, North Carolina
expires on October 28, 2001.
(3) Flex-Kleen Canada Inc.'s lease for the sales and warehouse facility in
Markham, Ontario, Canada expires on March 31, 2003.
6
<PAGE>
Item 3. Legal Proceedings:
There are no material pending legal proceedings to which the Company is a
party as of the date of this Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders:
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended January 31, 2000.
7
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters:
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol "MPR". The high and low selling prices of the Common Stock for each
quarterly period for the last two fiscal years, as reported on the New York
Stock Exchange, are shown below.
<TABLE>
<CAPTION>
Quarter ended
Year ended January 31, 2000 April July October January
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
Price range of common stock:
High $12.25 $14.00 $12.69 $11.13
Low 9.88 11.69 10.00 9.75
Cash dividend paid .32 - .08 .08
Year ended January 31, 1999 April July October January
- ----------------------------------------------------------------------------------
Price range of common stock:
High $16.44 $16.00 $13.06 $14.25
Low 14.81 12.88 10.63 11.50
Cash dividend paid .30 - - -
</TABLE>
There were 707 registered stockholders at January 31, 2000, and the Company
estimates that there are approximately 2,000 additional stockholders with stock
held in street name.
On February 22, 1999, the Board of Directors declared a $.32 per share annual
cash dividend payable on April 23, 1999 to stockholders of record as of April 9,
1999.
Due to 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 an expected quarterly dividend. Payment of future
dividends will depend on future earnings and capital requirements of the Company
and is at the discretion of the Board of Directors.
The Board of Directors declared quarterly dividends of $.08 per share payable
on September 10, 1999, December 10, 1999 and March 10, 2000 to stockholders of
record as of August 20, 1999, November 26, 1999 and February 25, 2000.
During the second quarter of fiscal year ended 1999, the Company completed
the purchase of 350,000 shares of its Common Stock, which was authorized under a
stock buyback program approved by the Board of Directors on June 3, 1998.
On May 11, 1999, the Board of Directors authorized an additional 350,000
share stock buyback program. The Company repurchased an aggregate of 457,225
shares under the combined programs during the year ended January 31, 2000.
On February 21, 2000, the Board of Directors authorized an additional 350,000
share stock buyback program after the balance of the shares remaining from the
Company's May 11, 1999 stock buyback program are purchased.
8
<PAGE>
Item 6. Selected Financial Data:
<TABLE>
<CAPTION>
Years ended January 31,
2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selected Operating Statement Data
Net sales $78,449,992 $67,390,488 $62,387,870 $60,853,278 $54,067,320
Income from operations 11,410,679 11,199,867 11,021,314 9,457,301 7,930,070
Net income 7,072,642 7,151,052 7,116,481 6,096,002 4,893,885
EBITDA (a) 13,826,535 13,287,878 12,851,944 11,164,848 9,543,461
Earnings per share, basic 1.08 1.04 1.01 .87 .70
Earnings per share, diluted 1.08 1.03 1.00 .86 .69
Selected Balance Sheet Data
Current assets $35,722,971 $38,683,453 $36,067,260 $32,088,546 $28,268,561
Current liabilities 13,681,578 14,387,868 11,267,545 11,374,115 10,250,506
Working capital 22,041,393 24,295,585 24,799,715 20,714,431 18,018,055
Current ratio 2.6 2.7 3.2 2.8 2.8
Total assets 68,641,983 72,888,641 57,984,240 56,079,391 47,626,587
Long-term obligations 9,933,014 11,941,954 2,242,047 3,683,419 1,692,962
Total stockholders' equity 44,206,333 45,925,107 43,840,829 40,352,926 35,012,578
Total capitalization 54,139,347 57,867,061 46,082,876 44,036,345 36,705,540
Return on average total assets, % 10.0 10.9 12.5 11.8 10.5
Return on average stockholders' equity, % 15.7 15.9 16.9 16.2 14.6
Other Financial Data
Net cash flows from operating activities $10,204,749 $ 7,990,115 $ 7,351,850 $ 7,203,258 $ 6,312,118
Capital expenditures 1,193,559 1,191,616 1,356,065 1,811,833 2,436,419
Stockholders' equity per share 6.92 6.76 6.27 5.73 5.03
Cash dividends paid per share (b) .48 .30 .27 .22 .20
Average common shares, basic 6,542,210 6,907,654 7,053,071 6,989,717 6,999,408
Average common shares, diluted 6,576,820 6,955,892 7,144,931 7,096,214 7,051,527
Shares of common stock outstanding 6,391,242 6,794,898 6,993,473 7,043,436 6,956,535
</TABLE>
(a) EBITDA represents income from operations before taxes, interest expense,
interest income, and depreciation and amortization expenses.
(b) Fiscal year ended January 31, 2000 included an annual dividend of $.32 per
share payable on April 23, 1999 and quarterly dividends of $.08 per share
payable on September 10, 1999 and December 10, 1999.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere in this
Form 10-K.
General:
The Company acquired substantially all of the operating assets of Flex-Kleen
Corporation and Flex-Kleen Canada Limited (collectively "Flex-Kleen") effective
as of October 1, 1998, pursuant to an Asset Purchase Agreement. The acquisition
was accounted for as a purchase transaction. Accordingly, the consolidated
financial data for the year ended January 31, 1999 incorporates Flex-Kleen's
operations for a four-month period.
9
<PAGE>
Results of Operations:
The following table sets forth for the periods indicated the percentage of
total net sales that such items represent in the Consolidated Statement of
Operations.
<TABLE>
<CAPTION>
Years ended January 31,
2000 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 65.8% 64.3% 63.8%
- --------------------------------------------------------------------------------
Gross profit 34.2% 35.7% 36.2%
Selling, general and administrative expense 19.6% 19.1% 18.6%
- --------------------------------------------------------------------------------
Income from operations 14.6% 16.6% 17.6%
Interest expense (1.0%) (.6%) (.5%)
Other income, net .5% .9% 1.6%
- --------------------------------------------------------------------------------
Income before taxes 14.1% 16.9% 18.7%
Provision for taxes 5.1% 6.3% 7.3%
- --------------------------------------------------------------------------------
Net income 9.0% 10.6% 11.4%
================================================================================
</TABLE>
FYE 2000 vs FYE 1999:
Net sales for the year ended January 31, 2000 were $78.4 million, a new
record, exceeding net sales for the year ended January 31, 1999 by $11.0
million, an increase of 16.4%. This is the seventh consecutive year that net
sales have achieved a new record. Sales in the Product Recovery/Pollution
Control Equipment segment were $51.9 million or 29.3% higher than the prior
fiscal year 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 $26.6 million or $0.7 million
lower compared to the prior year due primarily to decreased demand for our
specialty pump equipment.
Foreign sales increased to $12.8 million for the fiscal year ended January
31, 2000, which is 14.3% higher than the prior year. This increase was due to
higher sales in Canada and Europe. Foreign sales increased 2.0% in the Fluid
Handling segment from the prior fiscal year, and the Product Recovery/Pollution
Control Equipment segment sales were 33.7% higher than the prior fiscal year due
to the impact of the Flex-Kleen acquisition and higher demand for our fume and
odor control equipment.
Net income of $7.1 million for the fiscal year ended January 31, 2000 was
slightly lower than the earnings level of the prior year.
The gross margin for the fiscal year ended January 31, 2000 decreased to
34.2% from 35.7% for the prior year due to lower gross margins experienced in
the Product Recovery/Pollution Control Equipment segment.
Selling expense increased approximately $1.2 million or 21.2% over the prior
fiscal year. The increase in selling expense is attributed to the inclusion of
Flex-Kleen operations for the year ended January 31, 2000, which in the previous
year only included four months for the comparative period. Selling expense as a
percentage of net sales was 9.1% for the fiscal year ended January 31, 2000,
which was slightly higher than the prior fiscal year.
General and administrative expense was $8.3 million for the fiscal year ended
January 31, 2000 compared to $7.0 million in the prior fiscal year. The $1.3
million increase was due to amortization and other administrative expenses
connected with the inclusion of Flex-Kleen, which in the previous year only
included four months for the comparative period. General and administrative
expense as a percentage of net sales was 10.5% for the fiscal year ended January
31, 2000 compared to 10.4% for the prior fiscal year.
Interest expense was $0.8 million for the fiscal year ended January 31, 2000
compared to $0.4 million in the prior fiscal year. The increase can be
attributed to the $12.0 million borrowing having a ten-year term with a fixed
interest rate swap of 5.98% made in connection with the acquisition of certain
assets of Flex-Kleen.
Other income was $0.5 million for the fiscal year ended January 31, 2000
compared to $0.6 million in the prior fiscal year. Other income consisted
primarily of interest income on short-term investments in both years.
The effective tax rate for the fiscal year ended January 31, 2000 was 36.1%
compared to 37.4% for the prior year.
10
<PAGE>
FYE 1999 vs FYE 1998:
Net sales for the year ended January 31, 1999 were $67.4 million, a new
record, exceeding net sales for the year ended January 31, 1998 by $5.0 million,
an increase of 8.0%. This was the sixth consecutive year that net sales have
achieved a new record. Sales in the Product Recovery/Pollution Control Equipment
segment were $40.1 million or 19.8% higher than the prior fiscal year due to the
acquisition of certain assets of 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 $27.3 million or 5.7% lower
compared to the prior year due primarily to decreased demand for our specialty
pump equipment from the Pacific Rim countries.
Foreign sales increased to $11.2 million for the fiscal year ended January
31, 1999 which was 8.6% higher than the prior year. This increase was due to
higher sales in Canada and Europe, offset by lower sales in the Pacific Rim
countries. Foreign sales decreased 21.2% in the Fluid Handling Equipment segment
versus the prior fiscal year, while the Product Recovery/Pollution Control
Equipment segment were 170.4% higher than the prior fiscal year due to the
impact of the Flex-Kleen acquisition and higher demand for our fume and odor
control, and catalytic oxidizer equipment.
Net income of $7.2 million for the fiscal year ended January 31, 1999 was
slightly above the earnings level of the prior year. This was the sixth
consecutive year of increased earnings.
The gross margin for the fiscal year ended January 31, 1999 decreased to
35.7% versus 36.2% for the prior year. This slight decline in gross margin can
be attributed to product mix and the recent acquisition of Flex-Kleen.
Selling expense increased approximately $0.5 million or 10.3% over the prior
fiscal year. The Flex-Kleen acquisition accounted for substantially all of the
increase. Selling expense as a percentage of net sales was 8.7% for the fiscal
year ended January 31, 1999, which was slightly higher than the prior fiscal
year.
General and administrative expense was $7.0 million for the fiscal year ended
January 31, 1999 compared to $6.3 million in the prior fiscal year. The $0.7
million increase can be attributed entirely to the operations of Flex-Kleen.
General and administrative expense as a percentage of net sales was 10.4% for
the fiscal year ended January 31, 1999 compared to 10.0% for the prior fiscal
year.
Interest expense was $0.4 million for the fiscal year ended January 31, 1999
compared to $0.3 million in the prior fiscal year.
Other income of $0.6 million for the fiscal year ended January 31, 1999
consisted primarily of interest income earned on short-term investments. Other
income of $1.0 million for the fiscal year ended January 31, 1998 consisted
primarily of interest income on short-term investments and a $0.2 million net
gain on the disposal of certain properties.
The effective tax rate for the fiscal year ended January 31, 1999 was 37.4%
compared to 39.0% for the prior year.
Liquidity:
Cash and cash equivalents were $6.3 million on January 31, 2000, a decrease
of $1.1 million over the previous year. This decrease is the net result of the
payment of cash dividends amounting to $2.7 million (net of $0.5 million of
dividends returned to the Company in the form of stock purchases under the
Company's Dividend Reinvestment Plan), payments on long-term debt totalling $2.1
million, purchase of treasury stock amounting to $5.3 million and investment in
property and equipment amounting to $1.2 million, offset by positive cash flows
provided by operating activities of $10.2 million.
Accounts receivable were $13.7 million at January 31, 2000, a decrease of
$0.8 million compared to the prior year. The size of orders, the timing of
shipments to meet customer requirements and retainage on contracts, combined
with increased sales volume in the Product Recovery/Pollution Control Equipment
segment, will influence accounts receivable balances at any point in time.
Inventories totalled $13.7 million at January 31, 2000, a decrease of $1.2
million compared to the prior year. Inventory balances will fluctuate depending
on the size and timing of orders and market demand, especially when major
systems and contracts are involved.
Current liabilities decreased from $14.4 million at January 31, 1999 to $13.7
million at January 31, 2000, or $0.7 million.
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. The
current ratio was 2.6 and 2.7 at January 31, 2000 and 1999, respectively.
11
<PAGE>
Capital Resources and Requirements:
Cash flows provided by operating activities during the fiscal year ended
January 31, 2000 amounted to $10.2 million compared to $8.0 million during the
prior fiscal year.
Cash flows used in investing activities during the fiscal year ended January
31, 2000 amounted to $1.2 million compared to $17.0 million during the fiscal
year ended January 31, 1999. The Company's investing activities principally
represent the acquisition of property, plant and equipment in the two operating
segments, combined with acquisition of businesses. One of those acquisitions
occurred in October 1998, when the Company acquired all operating assets of
Flex-Kleen for approximately $15.0 million together with the assumption of
ordinary business liabilities. Flex-Kleen is a manufacturer of dry particulate
dust collectors that are used primarily in the process of manufacturing food
products and pharmaceuticals. The Company continues to invest in machinery and
equipment, tooling, patterns and molds to improve efficiency and maintain our
position as leaders in the markets in which we serve.
Financing activities during the fiscal year ended January 31, 2000 used $10.1
million of available resources compared to providing $5.2 million during the
prior fiscal year.
The Company paid $2.1 million of scheduled long-term debt during the current
fiscal year. The percentage of long-term debt to equity at January 31, 2000 was
22.5% compared to 26.0% at January 31, 1999.
During the fiscal year ended 2000, the Company continued to repurchase shares
outstanding on the open market at prevailing prices under the 350,000 share
stock buyback program authorized on June 3, 1998 which was completed on May 13,
1999, following which the Company began to make additional purchases under an
additional stock buyback program authorized on May 11, 1999. For the fiscal year
ended January 31, 2000, the Company repurchased 457,225 shares, 285,025 shares
under the plan effective May 11, 1999 and 172,200 shares under the plan
effective June 3, 1998.
On February 22, 1999, the Board of Directors declared a $.32 per share annual
cash dividend payable on April 23, 1999 to stockholders of record on April 9,
1999.
Due to 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 an expected quarterly dividend.
The Board of Directors declared quarterly dividends of $.08 per share payable
on September 10, 1999, December 10, 1999 and March 10, 2000 to stockholders of
record at the close of business on August 20, 1999, November 26, 1999 and
February 25, 2000, respectively.
As part of our commitment to the future, the Company expended $0.8 million on
research and development for each of the fiscal years ended January 31, 2000 and
1999.
The Company will continue to invest in new product development to maintain
and enhance our market position as leaders in the markets in which we
participate. Capital expenditures will be made to support operations and expand
our capacity to meet market demands. The Company intends to finance capital
expenditures in the coming year through cash flows from operations and will
secure third party financing, when deemed appropriate.
Recent Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This pronouncement is effective for the fiscal years
beginning after June 15, 2000. The adoption of this pronouncement is expected to
have no significant impact on Met-Pro's consolidated results of operations,
financial position, or cash flows.
Year 2000 Compliance:
The conversion from calendar year 1999 to calendar year 2000 occurred without
any disruption to the Company's critical business systems. Since 1997, the
Company has been upgrading its information systems with Year 2000 (Y2K)
compliant software and hardware. These actions have minimized Y2K related
capital costs and expenses. The Company will continue to monitor Y2K related
exposures both internally and with its suppliers, customers and other business
partners. Such monitoring will be ongoing and encompassed in normal operations
and associated costs are not expected to be significant.
12
<PAGE>
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", "foreseeable future", "goal", "estimates", "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 product recovery/pollution control and fluid handling industries, the
Company operates in a rapidly changing and highly competitive environment. The
Company sells both custom products to customers, and industrial products;
accordingly, changes in the conditions or composition of any of the Company's
customers may have an impact on the Company. While the Company cannot predict
what effect these various factors may have on its financial results, the
aggregate effect of these and other factors could result in volatility in the
Company's future performance and stock price.
Item 7A. Quantitative and Qualitative Disclosure About Market Risks:
Not Applicable
13
<PAGE>
Item 8. Financial Statements and Supplementary Data:
Index to Consolidated Financial Statements and Supplementary Data:
Page
----
Consolidated Financial Statements:
Independent Auditor's Report .................................... 14
Consolidated Statement of Operations ........................... 15
Consolidated Balance Sheet ...................................... 16
Consolidated Statement of Cash Flows ........................... 17
Consolidated Statement of Stockholders' Equity .................. 18
Consolidated Business Segment Data .............................. 19
Notes to Consolidated Financial Statements ..................... 20
Supplementary Data:
Quarterly Financial Data ....................................... 32
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Met-Pro Corporation
Harleysville, Pennsylvania
We have audited the accompanying consolidated balance sheet of Met-Pro
Corporation and its wholly-owned subsidiaries as of January 31, 2000 and 1999,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended January 31, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Met-Pro Corporation
and its wholly owned subsidiaries as of January 31, 2000 and 1999 and the
results of their operations and their cash flows for each of the three years in
the period ended January 31, 2000 in conformity with generally accepted
accounting principles.
/s/ Margolis & Company P.C.
---------------------------
Bala Cynwyd, Pennsylvania
February 25, 2000
14
<PAGE>
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Years ended January 31,
2000 1999 1998
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Net sales $78,449,992 $67,390,488 $62,387,870
Cost of goods sold 51,645,593 43,316,656 39,773,485
- -----------------------------------------------------------------------------------------------------------
Gross profit 26,804,399 24,073,832 22,614,385
- -----------------------------------------------------------------------------------------------------------
Operating expenses
Selling 7,128,258 5,880,080 5,331,954
General and administrative 8,265,462 6,993,885 6,261,117
- -----------------------------------------------------------------------------------------------------------
15,393,720 12,873,965 11,593,071
- -----------------------------------------------------------------------------------------------------------
Income from operations 11,410,679 11,199,867 11,021,314
Interest expense (815,805) (398,051) (325,718)
Other income, net 471,008 618,707 970,767
- -----------------------------------------------------------------------------------------------------------
Income before taxes 11,065,882 11,420,523 11,666,363
Provision for taxes 3,993,240 4,269,471 4,549,882
- -----------------------------------------------------------------------------------------------------------
Net income $ 7,072,642 $ 7,151,052 $ 7,116,481
===========================================================================================================
Earnings per share
Basic $1.08 $1.04 $1.01
Diluted $1.08 $1.03 $1.00
===========================================================================================================
Average number of common and
common equivalent shares outstanding
Basic 6,542,210 6,907,654 7,053,071
Diluted 6,576,820 6,955,892 7,144,931
===========================================================================================================
</TABLE>
The notes to consolidated financial statements are an integral part of the above
statement.
15
<PAGE>
MET-PRO CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
January 31,
ASSETS 2000 1999
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 6,331,556 $ 7,446,369
Accounts receivable, net of allowance for
doubtful accounts of approximately $225,000
and $261,000, respectively 13,733,256 14,492,082
Inventories 13,744,142 14,973,169
Prepaid expenses, deposits and other current assets 1,135,443 827,824
Deferred income taxes 778,574 944,009
- -----------------------------------------------------------------------------------------------
Total current assets 35,722,971 38,683,453
Property, plant and equipment, net 13,473,299 13,931,276
Costs in excess of net assets of businesses acquired, net 18,772,176 19,260,591
Other assets 673,537 1,013,321
- -----------------------------------------------------------------------------------------------
Total assets $68,641,983 $72,888,641
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------
Current liabilities
Current portion of long-term debt $ 2,008,940 $ 2,125,093
Accounts payable 4,989,810 5,213,770
Accrued salaries, wages and expenses 5,108,552 5,804,235
Payroll and other taxes payable 182,545 216,822
Dividend payable 511,299 -
Customers' advances 880,432 1,027,948
- -----------------------------------------------------------------------------------------------
Total current liabilities 13,681,578 14,387,868
Long-term debt 9,933,014 11,941,954
Other non-current liabilities 415,731 328,838
Deferred income taxes 405,327 304,874
- -----------------------------------------------------------------------------------------------
Total liabilities 24,435,650 26,963,534
- -----------------------------------------------------------------------------------------------
Commitments
Stockholders' equity
Common stock, $.10 par value; 18,000,000 shares
authorized, 7,189,194 and 7,138,625 shares issued,
of which 797,952 and 343,727 shares were reacquired
and held in treasury, at the respective dates 718,919 713,862
Additional paid-in capital 7,973,873 7,508,748
Retained earnings 46,087,476 42,718,355
Accumulated other comprehensive loss (403,993) (85,103)
Treasury stock, at cost (10,169,942) (4,930,755)
- -----------------------------------------------------------------------------------------------
Total stockholders' equity 44,206,333 45,925,107
- -----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $68,641,983 $72,888,641
===============================================================================================
</TABLE>
The notes to consolidated financial statements are an integral part of the above
statement.
16
<PAGE>
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended January 31,
2000 1999 1998
- ---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 7,072,642 $ 7,151,052 $ 7,116,481
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,415,856 2,088,011 1,830,630
Deferred income taxes 266,073 (9,185) (247,754)
(Gain) on sale of property and equipment, net (1,096) (6,590) (193,117)
Non-cash compensation expensed on
grant of stock options - - 122,595
Allowance for doubtful accounts (36,524) (18,827) 47,307
(Increase) decrease in operating assets,
net of acquisitions
Accounts receivable 681,168 (492,274) (229,602)
Notes receivable, ESOT - 200,000 200,000
Inventories 1,131,608 (1,007,069) (1,690,754)
Prepaid expenses and other current assets (320,752) 9,494 (158,739)
Other assets (24,187) 10,346 411,562
Increase (decrease) in operating liabilities,
net of acquisitions
Accounts payable, accrued expenses and taxes (918,189) (244,547) (231,737)
Customers' advances (148,743) 229,903 298,881
Other non-current liabilities 86,893 79,801 76,097
- ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 10,204,749 7,990,115 7,351,850
- ---------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from sale of property and equipment 14,690 6,600 1,308,995
Acquisitions of property and equipment (1,193,559) (1,191,616) (1,356,065)
Payment for purchase of acquisitions,
net of cash acquired (7,281) (15,811,625) -
- ---------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (1,186,150) (16,996,641) (47,070)
- ---------------------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from new borrowings - 12,000,000 -
Reduction of debt (2,125,093) (1,616,964) (1,584,495)
Exercise of stock options 15,000 362,229 516,685
Payment of dividends (2,694,860) (2,100,569) (1,915,832)
Purchase of treasury shares (5,281,367) (3,462,346) (2,113,890)
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (10,086,320) 5,182,350 (5,097,532)
- ---------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (47,092) 17,165 (24,844)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,114,813) (3,807,011) 2,182,404
Cash and cash equivalents at beginning of year 7,446,369 11,253,380 9,070,976
Cash and cash equivalents at end of year $ 6,331,556 $ 7,446,369 $11,253,380
===================================================================================================
</TABLE>
The notes to consolidated financial statements are an integral part of the above
statement.
17
<PAGE>
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
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 - - 7,116,481 - -
Cumulative translation adjustment - - - (238,136) -
Total comprehensive income 6,878,345
Dividends paid, $.27 per share - - (1,915,832) - - (1,915,832)
Stock option transactions - (391,932) - - 1,031,212 639,280
Purchase of 134,300 shares of treasury stock - - - - (2,113,890) (2,113,890)
- -----------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 1998 713,862 7,868,357 37,667,872 (219,015) (2,190,247) 43,840,829
Comprehensive income:
Net income - - 7,151,052 - -
Cumulative translation adjustment - - - 133,912 -
Total comprehensive income 7,284,964
Dividends paid, $.30 per share - - (2,100,569) - - (2,100,569)
Stock option transactions - (359,609) - - 721,838 362,229
Purchase of 246,300 shares of treasury stock - - - - (3,462,346) (3,462,346)
- -----------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 1999 713,862 7,508,748 42,718,355 (85,103) (4,930,755) 45,925,107
Comprehensive income:
Net income - - 7,072,642 - -
Cumulative translation adjustment - - - (318,890) -
Total comprehensive income 6,753,752
Dividends paid, $.48 per share - - (3,192,222) - - (3,192,222)
Dividend declared, $.08 per share - - (511,299) - - (511,299)
Proceeds from issuance of common
stock under dividend reinvestment
plan (50,569 shares) 5,057 492,305 - - - 497,362
Stock option transactions - (27,180) - - 42,180 15,000
Purchase of 457,225 shares of treasury stock - - - - (5,281,367) (5,281,367)
- -----------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 2000 $718,919 $7,973,873 $46,087,476 ($403,993) ($10,169,942) $44,206,333
===================================================================================================================================
</TABLE>
The notes to consolidated financial statements are an integral part of the above
statement.
18
<PAGE>
MET-PRO CORPORATION
CONSOLIDATED BUSINESS SEGMENT DATA
<TABLE>
<CAPTION>
Years ended January 31,
2000 1999 1998
- -----------------------------------------------------------------------------------------------
Net sales to unaffiliated customers
<S> <C> <C> <C>
Product recovery/pollution control equipment $51,883,604 $40,128,412 $33,483,034
Fluid handling equipment 26,566,388 27,262,076 28,904,836
- -----------------------------------------------------------------------------------------------
$78,449,992 $67,390,488 $62,387,870
Includes foreign sales of:
Product recovery/pollution control equipment $ 5,780,112 $ 4,323,506 $ 1,598,778
Fluid handling equipment 6,971,799 6,837,293 8,679,624
- -----------------------------------------------------------------------------------------------
$12,751,911 $11,160,799 $10,278,402
===============================================================================================
Income from operations
Product recovery/pollution control equipment $ 7,431,748 $ 6,818,554 $ 6,205,543
Fluid handling equipment 3,978,931 4,381,313 4,815,771
- -----------------------------------------------------------------------------------------------
$11,410,679 $11,199,867 $11,021,314
===============================================================================================
Depreciation and amortization expense
Product recovery/pollution control equipment $ 1,633,097 $ 1,250,163 $ 980,869
Fluid handling equipment 782,759 837,848 849,761
- -----------------------------------------------------------------------------------------------
$ 2,415,856 $ 2,088,011 $ 1,830,630
===============================================================================================
Capital expenditures
Product recovery/pollution control equipment $ 571,629 $ 893,003 $ 817,732
Fluid handling equipment 531,435 269,585 456,283
- -----------------------------------------------------------------------------------------------
1,103,064 1,162,588 1,274,015
Corporate 90,495 29,028 82,050
- -----------------------------------------------------------------------------------------------
$ 1,193,559 $ 1,191,616 $ 1,356,065
===============================================================================================
Identifiable assets at January 31
Product recovery/pollution control equipment $42,803,505 $44,137,192 $24,625,574
Fluid handling equipment 18,662,280 20,321,860 19,826,486
- -----------------------------------------------------------------------------------------------
61,465,785 64,459,052 44,452,060
Corporate 7,176,198 8,429,589 13,532,180
- -----------------------------------------------------------------------------------------------
$68,641,983 $72,888,641 $57,984,240
===============================================================================================
</TABLE>
The Company follows the practice of allocating general corporate expenses,
including depreciation and amortization expense, among the segments.
19
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations:
The Company manufactures and sells product recovery/pollution control
equipment for purification of air and liquids, and fluid handling
equipment for corrosive, abrasive and high temperature liquids.
Basis of presentation:
The consolidated financial statements include the accounts of Met-Pro
Corporation ("Met-Pro" or the "Company") and its wholly-owned
subsidiaries, Mefiag B.V., Flex-Kleen Canada Inc. and Strobic Air
Corporation ("Strobic Air"). Significant intercompany accounts and
transactions have been eliminated. Accounts denominated in foreign
currencies have been remeasured into the functional currency in
accordance with Statement of Financial Accounting Standards ("SFAS")
No. 52, "Foreign Currency Translation," using the U.S. dollar as the
functional currency.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Inventories:
Inventories generally are stated at the lower of cost (principally
first-in, first-out) or market except for the inventory at the Dean
Pump Division which is determined on the last-in, first-out basis (see
Note 4).
Property, plant and equipment:
Property, plant and equipment are stated at cost. Depreciation is
computed principally by the straight-line method over estimated useful
lives. Expenditures for maintenance and repairs are charged to expense
as incurred. Renewals and betterments are capitalized (see Note 5).
Costs in excess of net assets of businesses acquired:
Costs in excess of net assets of businesses acquired prior to November
1, 1970, totalling $582,513, are not being amortized because management
believes that there has been no impairment in value. Costs in excess of
net assets of businesses acquired subsequent to October 31, 1970,
totalling $18,189,663, are being amortized over 40 years. The Company
monitors the recoverability of goodwill using a fair value approach.
Revenue recognition:
Revenues are generally recognized when products are shipped.
Advertising:
Advertising costs are charged to operations in the year incurred and
were $1,289,803, $1,151,535 and $1,111,724 for the years ended January
31, 2000, 1999 and 1998, respectively.
Research and development:
Research and development costs are charged to operations in the year
incurred and were $798,507, $752,648 and $726,278 for the years ended
January 31, 2000, 1999 and 1998, respectively.
20
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Earnings per share:
Basic earnings per share are computed based on the weighted average
number of common shares actually outstanding during each year.
Diluted earnings per share are computed based on the weighted average
number of shares actually outstanding plus all potential dilutive
common shares outstanding (stock options) during each year.
Dividends:
On December 16, 1999, the Board of Directors declared an $.08 per share
quarterly cash dividend payable on March 10, 2000 to stockholders of
record on February 25, 2000, amounting to $511,299.
Concentrations of credit risk:
The Company believes concentrations of credit risk are limited due to
the number of customers, and dispersion among the business segments and
geographic areas. The Company had no significant concentrations of
credit risk as of January 31, 2000 and 1999.
Supplemental cash flow information:
2000 1999 1998
-----------------------------------------------------------------
Cash paid during the year for:
Interest $ 826,635 $ 415,893 $ 314,735
-----------------------------------------------------------------
Income taxes $3,885,098 $4,691,163 $4,530,301
-----------------------------------------------------------------
Recent accounting pronouncements:
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities",
which will be effective for the fiscal years beginning after June 15,
2000. This standard requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in fair
value of derivatives will be recorded each period in current earnings
or comprehensive income. The adoption of this pronouncement will have
no significant impact on Met-Pro's consolidated results of operations,
financial position, or cash flows.
Reclassifications:
Certain reclassifications have been made to the financial statements
for the fiscal years ended January 31, 1999 and 1998 to conform to the
presentation of the financial statements for the fiscal year ended
January 31, 2000.
21
<PAGE>
MET-PRO CORPORATION
NOTES TO Consolidated FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
NOTE 2: SIGNIFICANT ACQUISITION
Flex-Kleen:
During October 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 consolidated statement of operations
for the fiscal year ended January 31, 1999 includes the operations of
Flex-Kleen for the period since October 1, 1998.
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 (see Note 6).
On an unaudited pro forma basis, consolidated results of operations for
the year ended January 31, 1999 would have been as follows if the
acquisition had been made as of February 1, 1998:
1999
------------------------------------------------------------
Net sales $79,315,488
Income before taxes 12,538,227
Net income 7,844,029
Earnings per share, basic $1.14
Earnings per share, diluted $1.13
NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents:
Short-term investments at January 31, 2000 and 1999 were valued at cost
(approximating market) and amounted to $4,186,461 and $5,911,046,
respectively. Short-term investments consist principally of commercial
paper with an original maturity of three months or less, and money
market funds, both of which are considered to be cash equivalents. The
Company evaluates the creditworthiness of the financial institutions
and financial instruments in which it invests.
22
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Debt:
The fair value and carrying amount of long-term debt was as follows:
January 31,
2000 1999
----------------------------------------------------------------------
Fair value $11,261,578 $13,891,334
Carrying amount 11,941,954 14,067,047
Valuations for long-term debt are determined based on borrowing rates
currently available to the Company for loans with similar terms and
maturities.
The Company uses an interest rate swap (see Note 6) to minimize its
exposure to fluctuations in interest rates. The interest rate
differential to be paid or received under this agreement is recognized
over the term of the loan and is included in interest expense.
The Company's financial instruments are not held for trading purposes.
NOTE 4: INVENTORIES
Inventories consisted of the following:
January 31,
2000 1999
----------------------------------------------------------------------
Raw material $ 6,755,944 $ 7,246,379
Work in process 2,016,612 2,435,351
Finished goods 4,971,586 5,291,439
----------------------------------------------------------------------
$13,744,142 $14,973,169
======================================================================
At January 31, 2000 and 1999, inventories valued at the last-in,
first-out method ("LIFO") were $2,389,238 and $2,989,763, respectively.
The LIFO value of inventories was lower than replacement cost by
$875,558 and $868,015 at January 31, 2000 and 1999, respectively.
The book basis of LIFO inventories exceeded the tax basis by
approximately $1,026,000 at both January 31, 2000 and 1999 as a result
of applying the provisions of Accounting Principles Board Opinion
("APB") No. 16, "Business Combinations", to an acquisition completed in
a prior year.
23
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
January 31,
2000 1999
-------------------------------------------------------------
Land $ 1,793,795 $ 1,802,386
Buildings and improvements 11,353,232 11,374,411
Machinery and equipment 11,207,542 10,655,454
Furniture and fixtures 3,062,990 2,954,289
Automotive equipment 1,023,219 1,031,960
Leasehold improvements - 3,710
Construction in progress 15,448 56,680
-------------------------------------------------------------
28,456,226 27,878,890
Less accumulated depreciation 14,982,927 13,947,614
-------------------------------------------------------------
$13,473,299 $13,931,276
=============================================================
Depreciation of property, plant and equipment charged to operations
amounted to $1,556,191, $1,443,458 and $1,353,857 for the years ended
in 2000, 1999 and 1998, respectively.
24
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
NOTE 6: DEBT
Short-term debt:
The Company has available both domestic and foreign unsecured lines of
credit totalling $5,000,000 which can be used for working capital. The
lines of credit were not used during either year.
Long-term debt:
Long-term debt consisted of the following:
January 31,
2000 1999
---------------------------------------------------------------------
Note payable, bank, payable in
quarterly installments of $300,000,
plus interest at a fixed rate swap of
5.98%, maturing October, 2008 $10,500,000 $11,700,000
Notes payable, bank, payable in
quarterly installments of $87,500,
plus interest at a fixed rate of
7.51%, maturing September, 2001 612,500 962,500
Notes payable, bank, payable in
quarterly installments of $87,500,
plus interest at a variable rate
ranging from 6.25% to 6.87%,
maturing September, 2001 612,500 962,500
Notes payable, acquisition escrow
accounts, balloon payments in the
amounts of $50,000 and $75,000
were paid on April 8, 1999 and
June 11, 1999, plus interest at a
fixed rate of 5.9% - 125,000
Mortgage note payable, collateralized
by property, payable $10,267
monthly (including principal
and interest), at a fixed interest
rate of 8.5%, maturing
January, 2002 216,954 317,047
---------------------------------------------------------------------
11,941,954 14,067,047
Less current portion 2,008,940 2,125,093
---------------------------------------------------------------------
$ 9,933,014 $11,941,954
=====================================================================
These notes are subject to certain covenants, including maintenance
of prescribed amounts of leverage and fixed charge coverage ratios.
25
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Maturities of long-term debt are as follows:
Year Ending
January 31,
-----------------------------------------------------------
2001 $ 2,008,940
2002 1,833,014
2003 1,200,000
2004 1,200,000
2005 1,200,000
Thereafter 4,500,000
-----------------------------------------------------------
$11,941,954
===========================================================
Interest expense was $815,805, $398,051 and $325,718 for the years ended
in 2000, 1999 and 1998, respectively.
NOTE 7: STOCKHOLDERS' EQUITY
On May 11, 1999, the Company announced a new 350,000 share stock
repurchase authorization, and completed the previous 350,000 share stock
repurchase program. During the fiscal year ended January 31, 2000, the
Company repurchased 457,225 shares of its Common Stock at a cost of $5.3
million. At January 31, 2000, 64,975 shares of the new 350,000 share
authorization were outstanding.
The Company has a Shareholder's Rights Plan, under which the Company's
Board of Directors declared a dividend of one Right for each share of
Company common stock owned. The Plan provides, under certain conditions
involving acquisition of the Company's common stock, that holders of
Rights, except for the acquiring entity, would be entitled to purchase
shares of common stock of the Company, or acquiring company, having a
value of twice the Rights' exercise price. The Rights under the Plan
expire in 2010.
NOTE 8: INCOME TAXES
The provision for income taxes was comprised of the following:
2000 1999 1998
--------------------------------------------------------------
Current
Federal $2,859,285 $3,216,200 $3,718,205
State 556,607 878,903 933,080
Foreign 311,275 183,553 146,351
--------------------------------------------------------------
3,727,167 4,278,656 4,797,636
Deferred 266,073 (9,185) (247,754)
--------------------------------------------------------------
$3,993,240 $4,269,471 $4,549,882
==============================================================
26
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the net deferred tax assets were as
follows:
2000 1999
-------------------------------------------------------------------
Deferred tax assets
Inventory cost capitalization $215,686 $233,572
Pension cost 911,611 982,444
Non-compete agreements 498,980 431,383
Other 51,479 128,190
-------------------------------------------------------------------
Total deferred tax assets 1,677,756 1,775,589
-------------------------------------------------------------------
Deferred tax liabilities
Accelerated depreciation 512,407 522,596
Inventory - Dean Pump Division 400,202 400,197
Excess of book over tax basis of
property acquired in acquisitions 66,678 96,001
Goodwill 325,222 117,660
-------------------------------------------------------------------
Total deferred tax liabilities 1,304,509 1,136,454
-------------------------------------------------------------------
Net deferred tax assets $373,247 $639,135
===================================================================
A reconciliation of the federal statutory rate and the Company's
effective tax rate is presented as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed expected
tax expense
(federal) $3,762,400 34.0% $3,882,978 34.0% $3,966,563 34.0%
State income taxes,
net of federal
income tax benefit 367,361 3.3 580,076 5.1 615,833 5.3
Foreign tax differential (30,703) (.3) (5,277) - (23) -
Foreign tax credit (5,606) - (10,924) (.1) (5,786) -
Other (100,212) (.9) (177,382) (1.6) (26,705) (.3)
-----------------------------------------------------------------------------------------------------------
Effective income taxes $3,993,240 36.1% $4,269,471 37.4% $4,549,882 39.0%
===========================================================================================================
</TABLE>
NOTE 9: LEASES AND OTHER COMMITMENTS
The Company has various real estate operating leases for warehouse space
and office space for sales, general and administrative purposes. Future
minimum lease payments under these non-cancelable operating leases at
January 31, 2000 were as follows:
2001 $264,438
2002 247,234
2003 167,764
Rental expense for the above operating leases during the years ended in
2000, 1999 and 1998, was $408,487, $153,711 and $76,407, respectively.
27
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
NOTE 10: EMPLOYEE BENEFIT PLANS
Pension Plans:
The Company has several tax-qualified defined benefit pension plans
covering eligible employees in the United States. The Company
contributes amounts to the plans equal to the amounts that are tax
deductible.
Net periodic pension cost (income) included the following components:
<TABLE>
<CAPTION>
2000 1999 1998
--------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $597,400 $527,196 $466,000
Interest cost on projected
benefit obligation 750,170 708,083 664,202
Return on assets (2,009,740) (1,707,281) (2,675,240)
Amortization (210,591) (195,466) (118,868)
Deferred gain
on investments 840,679 769,701 1,924,069
--------------------------------------------------------------------------
($ 32,082) $102,233 $260,163
==========================================================================
</TABLE>
The following table sets forth the Plans' change in benefit obligations,
change in plan assets and amounts recognized in the Company's balance
sheet at January 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
-----------------------------------------------------------------------------
Change in benefit obligation:
<S> <C> <C>
Benefit obligation at beginning of year $10,334,600 $ 9,456,813
Service cost 597,400 527,196
Interest cost 750,170 708,083
Actuarial loss/(gain) (1,457,537) 133,720
Benefits paid (599,569) (491,212)
-----------------------------------------------------------------------------
Benefit obligation at end of year $ 9,625,064 $10,334,600
-----------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year $13,171,597 $11,888,269
Actual return on plan assets 2,009,740 1,707,281
Employer contribution 121,221 67,259
Benefits paid (599,569) (491,212)
-----------------------------------------------------------------------------
Fair value of plan assets at end of year $14,702,989 $13,171,597
-----------------------------------------------------------------------------
Funded status $ 5,077,925 $ 2,836,997
Unrecognized actuarial (gain) (7,465,147) (5,419,671)
Unrecognized transition (asset) (144,465) (154,980)
Unrecognized prior service costs 180,855 212,701
------------------------------------------------------------------------------
Net amount recognized ($ 2,350,832) ($ 2,524,953)
-------------------------------------------------------------------------------
Amounts recognized in the balance
sheet consist of:
Accrued benefit liability ($2,350,832) ($2,524,953)
-------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Assumptions used in the accounting for pension cost were:
<TABLE>
<CAPTION>
2000 1999 1998
----------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.00% 7.00% 7.25%
Rate of increase in
compensation levels
(where applicable) 4.50% 4.50% 6.00%
Expected long-term rate of
return on assets 9.00% 8.00% 8.00%
</TABLE>
Directors' Benefit Plan:
The Company also provides a non-qualified pension plan for Directors
which is unfunded. The plan is designed to provide pension benefits
based on the category of the Director and length of service. The benefit
obligation was $598,064 and $601,600 at January 31, 2000 and 1999,
respectively. The amounts applicable are included in the tables above.
This Plan was discontinued in December 1999 as to non-vested Directors.
Defined Contribution 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 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, in the form of Met-Pro common stock, up to 50% of the employee's
contribution up to 4% of compensation.
Employees' Stock Ownership Trust:
The Company sponsors an employee stock ownership plan under which it
makes discretionary contributions to the trust either in cash or in
stock of the Company for salaried employees in the United States
eligible to participate in the Plan. The Company provided for cash
contributions to the Employees' Stock Ownership Trust of $0, $225,000
and $200,000 in the years ended in 2000, 1999 and 1998, respectively.
All shares are considered to be allocated to participants or to be
released for allocation to participants, and are included in the
earnings per share computations.
Incentive Stock Option Plans:
The Company accounts for employee stock options in accordance with APB
No. 25, "Accounting for Stock Issued to Employees", and related
Interpretations. The pro forma disclosures required by SFAS No. 123,
"Accounting for Stock-Based Compensation", are not presented since the
impact on the Company's financial statements for the periods presented
is de minimis.
In 1987 ("1987 Plan"), the Company adopted an incentive stock option
plan under which 100,000 shares (354,375 after stock splits and stock
dividends) of the Company's Common Stock were reserved for employees as
selected by the Board of Directors. Effective April 9, 1997, the 1987
Plan terminated and the remaining shares available for grant expired. In
1991, the Board of Directors of the Company approved a stock option plan
covering 100,000 shares (increased to 225,000 shares after giving effect
to stock splits and stock dividends), that was approved by the Company's
stockholders at the 1992 meeting of stockholders (the "1992 Plan"). In
1997, the Board of Directors of the Company approved a stock option plan
covering 350,000 shares that was approved by the Company's stockholders
at the 1997 meeting of stockholders (the "1997 Plan"). Both of these
plans contain anti-dilution provisions that apply to stock splits and
stock dividends declared by the Company.
29
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
The status of the Plans was as follows:
<TABLE>
<CAPTION>
1987 Plan 2000 1999 1998
------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at February 1 - - 65,087
Grants - - -
Exercises - - 65,087
Options outstanding at January 31 - - -
Options price range at January 31 - - $3.38
to
$7.17
Options exercisable at January 31 - - -
------------------------------------------------------------------
Options available for grant
at January 31 0 0 0
==================================================================
1992 Plan 2000 1999 1998
------------------------------------------------------------------
Options outstanding at February 1 135,525 183,250 202,500
Grants - - -
Exercises 3,000 47,725 19,250
Cancellations 11,500 - -
Options outstanding at January 31 121,025 135,525 183,250
Options price range at January 31 $5.00 $5.00 $5.00
to to to
$13.13 $13.13 $13.13
Options exercisable at January 31 121,025 131,025 171,750
------------------------------------------------------------------
Options available for grant
at January 31 0 0 0
==================================================================
1997 Plan 2000 1999 1998
------------------------------------------------------------------
Options outstanding at February 1 33,500 20,000 -
Grants 118,450 23,500 20,000
Exercises - - -
Cancellations 17,000 10,000 -
Options outstanding at January 31 134,950 33,500 20,000
Options price range at January 31 $9.98 $12.00 $12.00
to to
$15.50 $15.50
Options exercisable at January 31 55,151 22,500 20,000
------------------------------------------------------------------
Options available for grant
at January 31 188,050 306,500 330,000
==================================================================
</TABLE>
30
<PAGE>
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
The weighted average exercise prices of the Company's stock option plans
were as follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at February 1 $ 9.68 $ 8.84 $ 7.75
Grants $10.12 $13.69 $12.00
Exercises $ 5.00 $ 7.59 $ 6.13
Cancellations $11.31 $12.00 -
Options outstanding at January 31 $ 9.76 $ 9.68 $ 8.84
NOTE 11: OTHER INCOME, NET
Other income, net, was comprised of the following:
2000 1999 1998
------------------------------------------------------------------
Gain on sale of property
and equipment $ 1,096 $ 6,590 $193,117
Other, primarily interest income 469,912 612,117 777,650
------------------------------------------------------------------
$471,008 $618,707 $970,767
==================================================================
</TABLE>
NOTE 12: BUSINESS SEGMENT DATA
The Company's operations are conducted in two business segments as
follows: the manufacture and sale of product recovery/pollution control
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 on page 19.
NOTE 13: GEOGRAPHIC INFORMATION
Transfers between geographic areas are accounted for at cost and
consistent with rules and regulations of governing tax authorities. Such
transfers are eliminated in the consolidated financial statements.
Income from operations by geographic segment includes an allocation of
general corporate expenses. Identifiable assets are those that can be
directly associated with the geographic area. Geographic information for
the three years ended January 31 is presented in the following table:
2000 1999 1998
-----------------------------------------------------------------------
Net sales:
United States $65,698,081 $56,229,689 $52,109,468
Foreign 12,751,911 11,160,799 10,278,402
-----------------------------------------------------------------------
$78,449,992 $67,390,488 $62,387,870
=======================================================================
Income from operations:
United States $10,144,373 $10,017,987 $10,036,520
Foreign 1,266,306 1,181,880 984,794
-----------------------------------------------------------------------
$11,410,679 $11,199,867 $11,021,314
=======================================================================
Total assets:
United States $63,774,777 $68,284,881 $53,995,274
Foreign 4,867,206 4,603,760 3,988,966
-----------------------------------------------------------------------
$68,641,983 $72,888,641 $57,984,240
=======================================================================
31
<PAGE>
QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
Earnings Earnings
Per Share, Per Share,
1999 Net Sales Gross Profit Net Income Basic Diluted
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Quarter $14,940,888 $5,709,419 $1,737,544 $.25 $.25
Second Quarter 14,588,843 5,467,167 1,752,962 .25 .25
Third Quarter 17,087,560 6,185,012 1,794,956 .26 .26
Fourth Quarter 20,773,197 6,712,234 1,865,590 .28 .27
Earnings Earnings
Per Share, Per Share,
2000 Net Sales Gross Profit Net Income Basic Diluted
--------------------------------------------------------------------------------
First Quarter $20,828,028 $7,101,713 $1,871,842 $.28 $.28
Second Quarter 20,538,207 6,967,618 1,877,136 .28 .28
Third Quarter 17,846,269 6,318,206 1,701,663 .26 .26
Fourth Quarter 19,237,488 6,416,862 1,622,001 .25 .25
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure:
During the fiscal year ended January 31, 2000, there has been no
change in accountants and no disagreements on accounting and financial
disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant:
The information required by this Item (except for the information
set forth on page 5 with respect to Executive Officers of the
Registrant) is hereby incorporated by reference to the information set
forth under the captions "Election of Directors" and "Security Ownership
of Certain Beneficial Owners and Management" contained in the Company's
definitive Proxy Statement for its 2000 Annual Meeting of Stockholders,
to be filed with the Securities and Exchange Commission within 120 days
following the end of the Company's fiscal year.
Item 11. Executive Compensation:
The information required by this Item is hereby incorporated by
reference to the information set forth under the caption "Executive
Compensation and Other Information" contained in the Company's
definitive Proxy Statement for its 2000 Annual Meeting of Stockholders,
to be filed with the Securities and Exchange Commission within 120 days
following the end of the Company's fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management:
The information required by this Item is hereby incorporated by
reference to the information set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management" contained in the
Company's definitive Proxy Statement for its 2000 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange Commission
within 120 days following the end of the Company's fiscal year.
Item 13. Certain Relationships and Related Transactions:
The information required by this Item is hereby incorporated by
reference to the information set forth under the captions "Election of
Directors" and "Certain Business Relationships" contained in the
Company's definitive Proxy Statement for its 2000 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange Commission
within 120 days following the end of the Company's fiscal year.
32
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K:
A. Financial statements:
Financial statements filed as part of this report are listed in the
Index to Consolidated Financial Statements and Supplementary Data on
page 14.
B. Exhibits:
The following exhibits are filed herewith or incorporated by
reference:
(2)(a) Agreement and Plan of Merger dated September 12, 1996 by
and between Met-Pro Corporation, Met-Pro Acquisition
Corporation, Strobic Air Corporation, Lynn T. Secrest,
Ronald H. Secrest, Richard P. Secrest and John W. Stone,
III. Incorporated by reference to Registrant's
Registration Statement on Form S-3 (File No. 333-13929),
declared effective December 31, 1996.
(2)(b) Asset Purchase Agreement dated October 29, 1998 among
Flex-Kleen Corporation, Flex-Kleen Canada Limited, Aqua
Alliance, Inc., AWT Air Company Inc., 1321249 Ontario
Limited and Met-Pro Corporation. Incorporated by reference
to Company's Registration Statement on Form 8-K filed on
November 13, 1998 and amended on January 12, 1999.
(3)(a) Restated Certificate of Incorporation (incorporated by
reference to Company's Registration Statement on Form 8-A
filed June 12, 1998).
(3)(b) Certificate of Amendment of Certificate of Incorporation
(incorporated by reference to Company's annual report on
Form 10-K filed April 24, 1998).
(3)(c) By-Laws as amended through February 7, 1968 (incorporated
by reference to Company's Registration Statement No.
2-26979, declared effective October 15, 1968).
(3)(d) Amendments to By-Laws adopted June 3, 1987, July 18, 1978
and June 15, 1977 (incorporated by reference to Company's
Registration Statement on Form 8-A filed June 12, 1998).
(3)(e) Amendments to By-Laws adopted February 21, 2000.
(4) Stockholder's Rights Plan (incorporated by reference to
Company's Current Report on Form 8-K filed on January 6,
2000).
(11) Statement Re-computation of Per Share Earnings. See page
15 of Item 8.
(21) List of Subsidiaries of Registrant:
<TABLE>
<CAPTION>
Corporate Jurisdiction of Name under which Business
Name Incorporation is Conducted
--------- --------------- -------------------------
<S> <C> <C>
Mefiag B.V The Netherlands Mefiag B.V., a wholly
owned subsidiary of
Met-Pro Corporation
Flex-Kleen Canada Inc. Ontario, Canada Flex-Kleen Canada Inc.,
a wholly owned subsidiary of
Met-Pro Corporation
Strobic Air Corporation Delaware Strobic Air Corporation,
a wholly owned subsidiary of
Met-Pro Corporation
</TABLE>
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule.
33
<PAGE>
The following exhibits required under Item 601 of Regulation S-K
promulgated by the Securities & Exchange Commission have been omitted
because they are either inapplicable or non-existent:
(9) Voting trust agreements.
(10) Material contracts.
(12) Statements re computation of ratios.
(13) Annual report to security holders.
(16) Letter re change in certifying accountant.
(18) Letter re change in accounting principles.
(22) Published report regarding matters submitted to vote of
security holders.
(24) Power of attorney.
(99) Additional exhibits.
C. Reports on Form 8-K:
The Company filed a Report on Form 8-K with the Securities and
Exchange Commission on January 6, 2000 pertaining to the
authorization and declaration of a dividend distribution of one
Common Stock Purchase Right (a "Right") for each outstanding share of
common stock of the Company, to the stockholders of record at the
close of business on January 14, 2000. The description and terms of
the Rights are set forth in the Rights Agreement, dated as of January
6, 2000 between the Company and American Stock Transfer and Trust
Company, as Rights Agent, which were filed within this Form 8-K.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MET-PRO CORPORATION
April 27, 2000 By: /S/ William L. Kacin
- ---------------------- ------------------------------
Date William L. Kacin
Chairman, Chief
Executive Officer,
and President
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ William L. Kacin Chairman, Chief April 27, 2000
- ---------------------------- Executive Officer
William L. Kacin and President
/S/ Gary J. Morgan Vice President-Finance, April 27, 2000
- ---------------------------- Secretary, Treasurer,
Gary J. Morgan Chief Financial Officer,
Chief Accounting Officer
and Director
/S/ Thomas F. Hayes Director April 27, 2000
- ----------------------------
Thomas F. Hayes
/S/ Alan Lawley Director April 27, 2000
- ----------------------------
Alan Lawley
/S/ Nicholas DeBenedictis Director April 27, 2000
- ----------------------------
Nicholas DeBenedictis
/S/ Jeffrey H. Nicholas Director April 27, 2000
- ----------------------------
Jeffrey H. Nicholas
/S/ Michael J. Morris Director April 27, 2000
- ----------------------------
Michael J. Morris
</TABLE>
35
Exhibit (3)(e)
AMENDMENTS TO BY-LAWS
Adopted February 21, 2000
Section 13.
(a) At an Annual Meeting, only such business shall be conducted, and only
such proposals shall be acted upon, as shall have been brought before the Annual
Meeting (i) by, or at the direction of, the Board of Directors or (ii) by any
stockholder of the Corporation who complies with the notice procedures set forth
in this Section of these Bylaws. For a proposal to be properly brought before an
Annual Meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at, the
principal executive offices of the Corporation not less than ninety (90) days
prior to the scheduled Annual Meeting, regardless of any postponements,
deferrals or adjournments of that meeting to a later date; provided, however,
that if less than seventy (70) days' notice or prior public disclosure of the
date of the scheduled Annual Meeting is given or made, notice by the stockholder
to be timely must be so delivered or received not later than the close of
business on the tenth (10th) day following the earlier of the day on which such
notice of the date of the scheduled Annual Meeting was mailed or the day on
which such public disclosure was made.
A stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the Annual Meeting (i) a brief
description of the proposal desired to be brought before the Annual Meeting and
the reasons for conducting such business at the Annual Meeting, (ii) the name
and address, as they appear on the Corporation's books, of the stockholder
proposing such business and any other stockholders known by such stockholder to
be supporting such proposal, (iii) the class and number of shares of the
Corporation's stock which are beneficially owned by the stockholder on the date
of such stockholder notice and by any other stockholders known by such
stockholder to be supporting such proposal on the date of such stockholder
notice, and (iv) any financial interest of the stockholder in such proposal.
(b) If the presiding officer of the Annual Meeting determines that a
stockholder proposal was not made in accordance with the terms of this Section,
he shall so declare at the Annual Meeting and any such proposal shall not be
acted upon at the Annual Meeting.
(c) This provision shall not prevent the consideration and approval or
disapproval at the Annual Meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports, no
business shall be acted upon at such Annual Meeting unless stated, filed and
received as herein provided.
Exhibit (23)
CONSENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 25, 2000 included or incorporated by reference in this
annual report on Form 10-K, into the Company's previously filed: Form S-8
Registration Statement, File Number 333-44471; Form S-3 Registration Statement,
File Number 333-13929; and Form S-3 Registration Statement, File Number
333-74481.
/s/ Margolis & Company P.C.
----------------------------
Margolis & Company P.C.
Certified Public Accountants
Bala Cynwyd, Pennsylvania
April 19, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 6,331,556
<SECURITIES> 0
<RECEIVABLES> 13,733,256
<ALLOWANCES> 224,942
<INVENTORY> 13,744,142
<CURRENT-ASSETS> 35,722,971
<PP&E> 28,456,226
<DEPRECIATION> 14,982,927
<TOTAL-ASSETS> 68,641,983
<CURRENT-LIABILITIES> 13,681,578
<BONDS> 11,941,954
<COMMON> 718,919
0
0
<OTHER-SE> 43,487,414
<TOTAL-LIABILITY-AND-EQUITY> 68,641,983
<SALES> 78,449,992
<TOTAL-REVENUES> 78,449,992
<CGS> 51,645,593
<TOTAL-COSTS> 67,039,313
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 815,805
<INCOME-PRETAX> 11,065,882
<INCOME-TAX> 3,993,240
<INCOME-CONTINUING> 7,072,642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,072,642
<EPS-BASIC> 1.08
<EPS-DILUTED> 1.08
</TABLE>
