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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, 2001 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
6,099,364 as of April 30, 2001. The aggregate market value of the voting stock
held by non-affiliates of the Registrant was $77,156,955 as of April 30, 2001.
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 20, 2001...................... III
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INDEX
PART I
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 . . . . . . . . . 10
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
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FACTORS THAT MAY AFFECT FUTURE RESULTS
Met-Pro's prospects are subject to certain uncertainties and risks. This Annual
Report on Form 10-K also contains certain forward-looking statements within the
meaning of the Federal securities laws. Met-Pro's future results may differ
materially from its current results and actual results could differ materially
from those projected in the forward-looking statements as a result of certain
risk factors. Readers should pay particular attention to the considerations
described in the section of this report entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operation - Factors that May
Affect Future Results." Readers should also carefully review the risk factors
described in the other documents Met-Pro files from time to time with the
Securities and Exchange Commission.
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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,
which operates through ten divisions and three wholly-owned subsidiaries,
markets and sells 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. Except
where otherwise indicated by the context used herein, references to the
"Company" means Met-Pro Corporation, its divisions and its wholly-owned
subsidiaries.
Products, Services and Markets:
The Company operates in two segments, the Product Recovery/Pollution
Control Equipment Segment 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
This segment is composed of the following six divisions and subsidiaries of
the Company: Flex-Kleen Division; Stiles-Kem Division; Sethco Division; Strobic
Air Corporation; Duall Division; and Systems Division.
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 46 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.
1
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 offers 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
This segment is composed of the following six divisions and subsidiaries of
the Company: Mefiag; Keystone Filter Division; Dean Pump Division; and Fybroc
Division.
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 year, Fybroc continued to
expand the FRP centrifugal magnetic drive pump line which now offers two sizes
available in both our standard vinyl ester resin and our EY-2 epoxy resin. Our
ability to manufacture these pumps in EY-2 makes them the only FRP thermoset
centrifugal magnetic drive pumps capable of handling corrosive liquids from
acids to solvents. 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.
2
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,
2001 2000 1999
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United States 79.5% 83.7% 83.4%
Foreign 20.5% 16.3% 16.6%
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Net Sales 100.0% 100.0% 100.0%
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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
Co. (a subsidiary of Flowserve Corporation), Goulds Industrial Pumps, Inc. (a
subsidiary of ITT Industries), and Durco Pumps, Inc. (a subsidiary of Flowserve
Corporation), dominate the industry with several smaller companies, including
Met-Pro, 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, for each of the years
ended January 31, 2001, 2000 and 1999, respectively.
Patents and Trademarks:
The Company has 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.
3
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.
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 $9,529,541 and $11,660,840 as of January 31, 2001 and 2000,
respectively. This does not include an additional $5,469,863 and $4,069,610 of
orders in-house as of January 31, 2001 and 2000, respectively, which, according
to our longstanding policy, are not included in the backlog until completed
drawings have been approved. The Company expects that substantially all of the
backlog that existed as of January 31, 2001 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 any significant difficulty in securing raw materials and
supplies, and does not anticipate any significant difficulty in procurement in
the coming year or foreseeable future.
Employees:
As of January 31, 2001, the Company employed 398 people, of whom 153 were
involved in manufacturing, and 245 were engaged in administration, sales,
engineering, supervision and clerical work. The Company has had no work
stoppages during the past 19 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. 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 20.
4
Executive Officers of the Registrant:
The following table sets forth certain information regarding the executive
officers of the Company:
William L. Kacin, age 69, 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.
Raymond J. De Hont, age 47, is Chief Operating Officer of the Company, to
which office he was elected in June 2000. Mr. De Hont has served as Vice
President and General Manager of the Company's Fybroc Division since 1995. In
October 1999, he also assumed the responsibilities of General Manager for the
Company's Dean Pump Division. Prior to joining Met-Pro Corporation, Mr. De
Hont's management position at Air and Water Technologies included Vice President
and General Manager of Flex-Kleen Corporation, which is now a division of
Met-Pro Corporation.
Gary J. Morgan, CPA, age 46, 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 51, 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.
James G. Board, age 47, is Vice President and General Manager of the
Company's Dean Pump and Fybroc Divisions, to which office he was elected in
December 2000. For more than five years prior thereto, Mr. Board was employed by
Tuthill Energy Systems since September 1997, as Director of Sales and prior to
joining Tuthill Energy Systems held the position as Salesman for Oliver and
Laughten Equipment Company, Inc. since September 1982.
Thomas V. Edwards, age 47, 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 47, 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.
Hans J. D. Huizinga, age 50, 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 46, 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 47, 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 60, 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 42, 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.
Richard J. Wilmoth, age 54, is a Vice President of the Company and General
Manager of the Flex-Kleen Division, to which office he was elected in April
2001. For more than five years prior thereto, Mr. Wilmoth was employed by UOP
LLC, as Managing Director of the UOPAsia joint venture.
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
Item 2. Properties:
The following manufacturing and production facilities were owned or leased
by the Company at January 31, 2001:
Name Structure Property/Location Status
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
(1) Flex-Kleen Division's lease for the operation in Itasca, Illinois expires
on November 30, 2002. The term of this lease may be renewed by Flex-Kleen
Division for an additional five year period.
(2) Flex-Kleen Division's lease for the warehouse in Sharpsburg, North Carolina
expires on October 29, 2001. The term of this lease may be renewed by
Flex-Kleen Division for an additional two year period.
(3) Flex-Kleen Canada Inc.'s lease for the sales and warehouse facility in
Markham, Ontario, Canada expires on March 31, 2003.
6
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, 2001.
7
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.
Quarter ended
Year ended January 31, 2001 April July October January
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Price range of common stock:
High $10.19 $10.63 $10.45 $11.72
Low 8.75 8.38 9.56 9.75
Cash dividend paid .08 .08 .08 .08
Year ended January 31, 2000 April July October January
- -------------------------------------------------------------------------------------------------------
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
There were 724 registered stockholders at January 31, 2001, and the Company
estimates that there are approximately 2,000 additional stockholders with stock
held in street name.
The Board of Directors declared quarterly dividends of $.08 per share
payable on March 10, 2000, June 9, 2000, September 11, 2000 and December 8, 2000
to stockholders of record as of February 25, 2000, May 26, 2000, August 28, 2000
and November 24, 2000.
During the first quarter of fiscal year ended 2001, 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 May 11, 1999.
On February 21, 2000, the Board of Directors authorized an additional
350,000 share stock buyback program. The Company repurchased an aggregate of
318,476 shares under the combined stock buyback programs during the year ended
January 31, 2001.
On December 15, 2000, the Board of Directors authorized an additional
300,000 share stock buyback program after the balance of the shares remaining
from the Company's February 21, 2000 stock buyback program are purchased.
8
Item 6. Selected Financial Data:
Years ended January 31,
2001 2000 1999 1998 1997
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Selected Operating Statement Data
Net sales $81,203,550 $78,449,992 $67,390,488 $62,387,870 $60,853,278
Income from operations 12,513,886 11,410,679 11,199,867 11,021,314 9,457,301
Net income 7,773,720 7,072,642 7,151,052 7,116,481 6,096,002
EBITDA (a) 14,736,541 13,826,535 13,287,878 12,851,944 11,164,848
Earnings per share, basic 1.26 1.08 1.04 1.01 .87
Earnings per share, diluted 1.26 1.08 1.03 1.00 .86
Selected Balance Sheet Data
Current assets $37,412,259 $35,722,971 $38,683,453 $36,067,260 $32,088,546
Current liabilities 12,957,995 13,681,578 14,387,868 11,267,545 11,374,115
Working capital 24,454,264 22,041,393 24,295,585 24,799,715 20,714,431
Current ratio 2.9 2.6 2.7 3.2 2.8
Total assets 69,151,341 68,641,983 72,888,641 57,984,240 56,079,391
Long-term obligations 8,100,000 9,933,014 11,941,954 2,242,047 3,683,419
Total stockholders' equity 47,061,366 44,206,333 45,925,107 43,840,829 40,352,926
Total capitalization 55,161,366 54,139,347 57,867,061 46,082,876 44,036,345
Return on average total assets, % 11.3 10.0 10.9 12.5 11.8
Return on average stockholders' equity, % 17.0 15.7 15.9 16.9 16.2
Other Financial Data
Net cash flows from operating activities $10,047,845 $10,204,749 $7,990,115 $7,351,850 $7,203,258
Capital expenditures 1,023,682 1,193,559 1,191,616 1,356,065 1,811,833
Stockholders' equity per share 7.73 6.92 6.76 6.27 5.73
Cash dividends paid per share (b) .32 .48 .30 .27 .22
Average common shares, basic 6,152,325 6,542,210 6,907,654 7,053,071 6,989,717
Average common shares, diluted 6,173,437 6,576,820 6,955,892 7,144,931 7,096,214
Shares of common stock outstanding 6,090,155 6,391,242 6,794,898 6,993,473 7,043,436
(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.
9
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere in this
Form 10-K together with "Factors that May Affect Future Results" elsewhere in
the Management's Discussion and Analysis of Financial Condition and Result of
Operations.
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.
Results of Operations:
The following table sets forth for the periods indicated the percentage of
total net sales that such items represent in the Consolidated Statement of
Operations.
Years ended January 31,
2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 65.6% 65.8% 64.3%
- -------------------------------------------------------------------------------------------------------------------
Gross profit 34.4% 34.2% 35.7%
Selling, general and administrative expense 19.0% 19.6% 19.1%
- -------------------------------------------------------------------------------------------------------------------
Income from operations 15.4% 14.6% 16.6%
Interest expense (.8%) (1.1%) (.6%)
Other income, net .6% .6% .9%
- -------------------------------------------------------------------------------------------------------------------
Income before taxes 15.2% 14.1% 16.9%
Provision for taxes 5.6% 5.1% 6.3%
- -------------------------------------------------------------------------------------------------------------------
Net income 9.6% 9.0% 10.6%
===================================================================================================================
FYE 2001 vs FYE 2000:
Net sales for the fiscal year ended January 31, 2001 set a new record of
$81.2 million compared to $78.4 million for the fiscal year ended January 31,
2000, or an increase of $2.8 million. This is the eighth consecutive year that
net sales have achieved a new record. Sales in the Product Recovery/Pollution
Control Equipment segment decreased slightly to $51.7 million due primarily to
decreased demand for our product recovery equipment. Sales in the Fluid Handling
Equipment segment were $29.6 million or 11.2% higher than the prior fiscal year,
due to an increased demand for our specialty pump equipment.
Foreign sales increased to $16.6 million for the fiscal year ended January
31, 2001, which is 30.4% higher than the prior year. This increase was due to
higher sales in Europe and Pacific Rim markets. Foreign sales increased 26.9% in
the Fluid Handling Equipment segment from the prior fiscal year, and the Product
Recovery/Pollution Control Equipment segment sales were 34.7% higher than the
prior fiscal year due to higher demand for our fume and odor control equipment.
Net income of $7.8 million for the fiscal year ended January 31, 2001 was
the highest in the Company's history, or 9.9% higher than the earnings level of
the prior year.
The gross margin for the fiscal year ended January 31, 2001 increased to
34.4% versus 34.2% for the prior year. This increase can be attributed to higher
gross margins experienced in the Fluid Handling Equipment segment.
Selling expense was $7.0 million for the fiscal year ended January 31, 2001
or a slight decrease from the prior fiscal year. Selling expense as a percentage
of net sales was 8.7% compared to 9.1% for the prior fiscal year.
10
General and administrative expense was $8.4 million for the fiscal year
ended January 31, 2001 compared to $8.3 million in the prior fiscal year.
General and administrative expense as a percentage of net sales was 10.3% for
the fiscal year ended January 31, 2001 compared to 10.5% for the prior fiscal
year.
Interest expense was $0.7 million for the fiscal year ended January 31,
2001 compared to $0.8 million in the prior fiscal year. During the fiscal year
ended January 31, 2001, the Company reduced its long-term debt by $2.0 million.
Other income was $0.5 million for each fiscal year ended January 31, 2001
and 2000. Other income consisted primarily of interest income on short-term
investments in both years.
The effective tax rate increased to 37.0% for the fiscal year ended January
31, 2001 from 36.1% for the prior year.
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 was the seventh consecutive year that net
sales 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 was 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 Equipment 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.
Liquidity:
Cash and cash equivalents were $8.5 million on January 31, 2001, an
increase of $2.2 million over the previous year. This increase is the net result
of positive cash flows provided by operating activities of $10.0 million, offset
by the payment of cash dividends amounting to $1.8 million (net of $0.2 million
of dividends returned to the Company in the form of stock purchases under the
Company's Dividend Reinvestment Plan), payments of scheduled debt totalling $2.0
million, purchase of treasury stock amounting to $3.0 million and investment in
property and equipment amounting to $1.0 million.
11
Accounts receivable were $14.2 million at January 31, 2001, an increase of
$0.5 million compared to the prior year. The size of orders, the timing of
shipments to meet customer requirements and retainage on contracts will
influence accounts receivable balances at any point in time.
Inventories totalled $13.1 million at January 31, 2001, a decrease of $0.7
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 $13.7 million at January 31, 2000 to
$13.0 million at January 31, 2001, 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. As of
January 31, 2001 and January 31, 2000, working capital was $24.5 million and
$22.0 million, respectively, and the current ratio was 2.9 and 2.6,
respectively.
Capital Resources and Requirements:
Cash flows provided by operating activities during the fiscal year ended
January 31, 2001 amounted to $10.0 million compared to $10.2 million during the
prior fiscal year. This slight decrease from the record high cash flows provided
by operating activities for last year was due to a $0.5 million increase in
accounts receivable during the fiscal year ended January 31, 2001 compared to a
$0.7 million decrease in accounts receivable in the fiscal year ended January
31, 2000. Per share, our cash flows from operating activities increased to a
record high $1.63 per share compared to $1.55 per share for the prior year.
Cash flows used in investing activities during the fiscal year ended
January 31, 2001 amounted to $1.0 million compared to $1.2 million during the
fiscal year ended January 31, 2000. The Company's investing activities for the
fiscal year ended January 31, 2001, principally represent the acquisition of
property, plant and equipment in the two operating segments. 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 that we
serve.
Financing activities during the fiscal year ended January 31, 2001 used
$6.8 million of available resources compared to $10.1 million during the prior
fiscal year. The $3.3 million decrease in cash flows used in financing
activities is primarily due to a $2.3 million reduction in stock repurchases and
a $.9 million decrease in dividend payments to stockholders. As a result of
changing from an annual dividend to a quarterly dividend effective September
1999, stockholders received a total of $.32 and $.48 per share in the fiscal
years ended January 31, 2001 and 2000, respectively.
The Company paid $2.0 million of scheduled debt during the current fiscal
year. The percentage of long-term debt to equity at January 31, 2001 decreased
to 17.2% compared to 22.5% at January 31, 2000.
During the fiscal year ended 2001, the Company continued to repurchase
shares outstanding on the open market at prevailing prices under the 350,000
share stock repurchase program authorized on May 11, 1999 which was completed on
April 12, 2000, following which the Company began to make additional purchases
under an additional stock repurchase program authorized on February 21, 2000.
For the fiscal year ended January 31, 2001, the Company repurchased 318,476
shares, 253,501 shares under the plan effective February 21, 2000 and 64,975
shares under the plan effective May 11, 1999. The Company announced an
additional 300,000 share stock repurchase program on December 15, 2000, which
will begin after the Company's February 21, 2000 stock repurchase program is
complete.
The Board of Directors declared dividends of $.08 per share payable on
March 10, 2000, June 9, 2000, September 11, 2000 and December 8, 2000 to
stockholders of record at the close of business on February 25, 2000, May 26,
2000, August 28, 2000 and November 24, 2000, respectively. On December 15, 2000,
the Board of Directors declared a quarterly dividend of $.085 per share, or an
increase of 6%, which was paid on March 9, 2001 to stockholders of record at the
close of business on February 23, 2001.
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, 2001
and 2000.
The Company will continue to invest in new product development to maintain
and enhance our market position as leaders in the markets in which we
participate. Capital expenditures will be made to support operations and expand
our capacity to meet market demands. The Company intends to finance capital
expenditures in the coming year through cash flows from operations and will
secure third party financing, when deemed appropriate.
12
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.
Factors that May Affect Future Results:
Met-Pro's prospects are subject to certain uncertainties and risk. This
Annual Report on Form 10-K also contains certain forward-looking statements
within the meaning of the Federal securities laws. Met-Pro's results may differ
material from its current results and actual could differ materially from those
suggested in the forward-looking statements as a result of certain risk factors,
including but not limited to those set forth below, other important factors
disclosed previously and from time to time in Met-Pro's Other filings with the
Securities and Exchange Commission.
The following important factors, along with those discussed elsewhere in
this Annual Report, could affect future results and could cause those results to
differ materially from those expressed in the forward-looking statements:
o materially adverse changes in economic conditions in the markets served by
us or in significant customers of ours;
o material changes in available technology;
o failure in execution of aquisition strategy;
o losses related to international sales;
o changes in our accounting rules promulgated by regulatory agencies,
including the SEC, which could result in an impact on earnings;
o unexpected results in our product development activities;
o changes in our existing management;
o unexpected changes in our execution of customers orders; and
o changes in federal or state laws.
Item 7A. Quantitative and Qualitative Disclosure About Market Risks:
Not Applicable
13
Item 8. Financial Statements and Supplementary Data:
Index to Consolidated Financial Statements and Supplementary Data:
Consolidated Financial Statements: Page
----
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Consolidated Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Consolidated Business Segment Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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, 2001 and 2000,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended January 31, 2001.
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, 2001 and 2000 and the
results of their operations and their cash flows for each of the three years in
the period ended January 31, 2001 in conformity with generally accepted
accounting principles.
/s/ Margolis & Company P.C.
---------------------------
Bala Cynwyd, Pennsylvania
February 22, 2001
14
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15
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Years ended January 31,
2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $81,203,550 $78,449,992 $67,390,488
Cost of goods sold 53,242,396 51,645,593 43,316,656
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 27,961,154 26,804,399 24,073,832
- ------------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Selling 7,043,540 7,128,258 5,880,080
General and administrative 8,403,728 8,265,462 6,993,885
- ------------------------------------------------------------------------------------------------------------------------------------
15,447,268 15,393,720 12,873,965
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations 12,513,886 11,410,679 11,199,867
Interest expense (694,112) (815,805) (398,051)
Other income, net 524,729 471,008 618,707
- ------------------------------------------------------------------------------------------------------------------------------------
Income before taxes 12,344,503 11,065,882 11,420,523
Provision for taxes 4,570,783 3,993,240 4,269,471
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $7,773,720 $7,072,642 $7,151,052
====================================================================================================================================
Earnings per share
Basic $1.26 $1.08 $1.04
Diluted $1.26 $1.08 $1.03
====================================================================================================================================
Average number of common and
common equivalent shares outstanding
Basic 6,152,325 6,542,210 6,907,654
Diluted 6,173,437 6,576,820 6,955,892
====================================================================================================================================
The notes to consolidated financial statements are an integral part of the above
statement.
16
MET-PRO CORPORATION
CONSOLIDATED BALANCE SHEET
January 31,
ASSETS 2001 2000
- ---------------------------------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $8,510,045 $6,331,556
Accounts receivable, net of allowance for
doubtful accounts of approximately $218,000
and $225,000, respectively 14,208,689 13,733,256
Inventories 13,085,969 13,744,142
Prepaid expenses, deposits and other current assets 958,722 1,135,443
Deferred income taxes 648,834 778,574
- ---------------------------------------------------------------------------------------------------------------
Total current assets 37,412,259 35,722,971
Property, plant and equipment, net 13,009,247 13,473,299
Costs in excess of net assets of businesses acquired, net 18,276,472 18,772,176
Other assets 453,363 673,537
- ---------------------------------------------------------------------------------------------------------------
Total assets $69,151,341 $68,641,983
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------
Current liabilities
Current portion of long-term debt $1,833,014 $2,008,940
Accounts payable 4,284,687 4,989,810
Accrued salaries, wages and expenses 5,704,372 5,108,552
Payroll and other taxes payable 8,808 182,545
Dividend payable 517,669 511,299
Customers' advances 609,445 880,432
- ---------------------------------------------------------------------------------------------------------------
Total current liabilities 12,957,995 13,681,578
Long-term debt 8,100,000 9,933,014
Other non-current liabilities 499,395 415,731
Deferred income taxes 532,585 405,327
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 22,089,975 24,435,650
- ---------------------------------------------------------------------------------------------------------------
Commitments
Stockholders' equity
Common stock, $.10 par value; 18,000,000 shares 720,658 718,919
Authorized, 7,206,583 and 7,189,194 shares issued,
of which 1,116,428 and 797,952 shares were reacquired
and held in treasury, at the respective dates
Additional paid-in capital 8,139,799 7,973,873
Retained earnings 51,880,800 46,087,476
Accumulated other comprehensive loss (491,163) (403,993)
Treasury stock, at cost (13,188,728) (10,169,942)
- ---------------------------------------------------------------------------------------------------------------
Total stockholders' equity 47,061,366 44,206,333
- ---------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $69,151,341 $68,641,983
===============================================================================================================
The notes to consolidated financial statements are an integral part of the above
statement.
17
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended January 31,
2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net income $7,773,720 $7,072,642 $7,151,052
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,222,655 2,415,856 2,088,011
Deferred income taxes 256,998 266,073 (9,185)
(Gain) loss on sale of property and equipment, net 12,656 (1,096) (6,590)
Allowance for doubtful accounts (6,576) (36,524) (18,827)
(Increase) decrease in operating assets,
net of acquisitions
Accounts receivable (515,006) 681,168 (492,274)
Notes receivable, ESOT - - 200,000
Inventories 631,810 1,131,608 (1,007,069)
Prepaid expenses and other current assets 92,357 (320,752) 9,494
Other assets (52,309) (24,187) 10,346
Increase (decrease) in operating liabilities,
net of acquisitions
Accounts payable, accrued expenses and taxes (181,137) (918,189) (244,547)
Customers' advances (270,987) (148,743) 229,903
Other non-current liabilities 83,664 86,893 79,801
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 10,047,845 10,204,749 7,990,115
- ------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from sale of property and equipment 2,000 14,690 6,600
Acquisitions of property and equipment (1,023,682) (1,193,559) (1,191,616)
Payment for purchase of acquisitions,
net of cash acquired - (7,281) (15,811,625)
- -----------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (1,021,682) (1,186,150) (16,996,641)
- -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from new borrowings - - 12,000,000
Reduction of debt (2,008,940) (2,125,093) (1,616,964)
Exercise of stock options - 15,000 362,229
Payment of dividends (1,806,361) (2,694,860) (2,100,569)
Purchase of treasury shares (3,018,786) (5,281,367) (3,462,346)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (6,834,087) (10,086,320) 5,182,350
- -----------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (13,587) (47,092) 17,165
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,178,489 (1,114,813) (3,807,011)
Cash and cash equivalents at beginning of year 6,331,556 7,446,369 11,253,380
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $8,510,045 $6,331,556 $7,446,369
===========================================================================================================
The notes to consolidated financial statements are an integral part of the above
statement.
18
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Income/(Loss) Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
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
Comprehensive income:
Net income - - 7,773,720 - -
Cumulative translation adjustment - - - (87,170) -
Total comprehensive income 7,686,550
Dividends paid, $.32 per share - - (1,462,727) - - (1,462,727)
Dividend declared, $.085 per share - - (517,669) - - (517,669)
Proceeds from issuance of common
stock under dividend reinvestment
plan (17,389 shares) 1,739 165,926 - - - 167,665
Purchase of 318,476 shares of treasury stock - - - - (3,018,786) (3,018,786)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 2001 $720,658 $8,139,799 $51,880,800 ($491,163) ($13,188,728) $47,061,366
====================================================================================================================================
The notes to consolidated financial statements are an integral part of the above
statement.
19
MET-PRO CORPORATION
CONSOLIDATED BUSINESS SEGMENT DATA
Years ended January 31,
2001 2000 1999
- -----------------------------------------------------------------------------------------------
Net sales to unaffiliated customers
Product recovery/pollution control equipment $51,650,730 $51,883,604 $40,128,412
Fluid handling equipment 29,552,820 26,566,388 27,262,076
- -----------------------------------------------------------------------------------------------
$81,203,550 $78,449,992 $67,390,488
- -----------------------------------------------------------------------------------------------
Includes foreign sales of:
Product recovery/pollution control equipment $7,787,437 $5,780,112 $4,323,506
Fluid handling equipment 8,846,889 6,971,799 6,837,293
- -----------------------------------------------------------------------------------------------
$16,634,326 $12,751,911 $11,160,799
===============================================================================================
Income from operations
Product recovery/pollution control equipment $7,066,793 $7,431,748 $6,818,554
Fluid handling equipment 5,447,093 3,978,931 4,381,313
- -----------------------------------------------------------------------------------------------
$12,513,886 $11,410,679 $11,199,867
===============================================================================================
Depreciation and amortization expense
Product recovery/pollution control equipment $1,450,025 $1,633,097 $1,250,163
Fluid handling equipment 772,630 782,759 837,848
- -----------------------------------------------------------------------------------------------
$2,222,655 $2,415,856 $2,088,011
===============================================================================================
Capital expenditures
Product recovery/pollution control equipment $442,662 $571,629 $893,003
Fluid handling equipment 448,685 531,435 269,585
- -----------------------------------------------------------------------------------------------
891,347 1,103,064 1,162,588
Corporate 132,335 90,495 29,028
- -----------------------------------------------------------------------------------------------
$1,023,682 $1,193,559 $1,191,616
===============================================================================================
Identifiable assets at January 31
Product recovery/pollution control equipment $40,274,449 $42,803,505 $44,137,192
Fluid handling equipment 18,785,577 18,662,280 20,321,860
- -----------------------------------------------------------------------------------------------
59,060,026 61,465,785 64,459,052
Corporate 10,091,315 7,176,198 8,429,589
- -----------------------------------------------------------------------------------------------
$69,151,341 $68,641,983 $72,888,641
===============================================================================================
The Company follows the practice of allocating general corporate expenses,
including depreciation and amortization expense, among the segments.
20
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999
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
3).
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 4).
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 $17,693,959, 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 $1,344,231, $1,289,803 and $1,151,535 for the years ended January
31, 2001, 2000 and 1999, respectively.
Research and development:
Research and development costs are charged to operations in the year
incurred and were $788,777, $798,507 and $752,648 for the years ended
January 31, 2001, 2000 and 1999, respectively.
21
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (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 15, 2000, the Board of Directors declared an $.085 per share
quarterly cash dividend payable on March 9, 2001 to stockholders of
record on February 23, 2001, amounting to $517,669.
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, 2001 and 2000.
Supplemental cash flow information:
2001 2000 1999
-----------------------------------------------------------------------
Cash paid during the year for:
Interest $819,054 $826,635 $415,893
Income taxes $3,689,100 $3,885,098 $4,691,163
=======================================================================
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 for the fiscal year ended January 31,
2002.
22
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
NOTE 2: FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents:
Short-term investments at January 31, 2001 and 2000 were valued at cost
(approximating market) and amounted to $6,480,666 and $4,186,461,
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.
Debt:
The fair value and carrying amount of long-term debt was as follows:
January 31,
2001 2000
------------------------------------------------------------------------
Fair value $9,764,997 $11,261,578
Carrying amount 9,933,014 11,941,954
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 5) 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 3: INVENTORIES
Inventories consisted of the following:
January 31,
2001 2000
------------------------------------------------------------------------
Raw materials $7,770,874 $6,755,944
Work in process 1,573,802 2,016,612
Finished goods 3,741,293 4,971,586
------------------------------------------------------------------------
$13,085,969 $13,744,142
========================================================================
At January 31, 2001 and 2000, inventories valued at the last-in,
first-out method ("LIFO") were $2,284,381 and $2,389,238, respectively.
The LIFO value of inventories was lower than replacement cost by
$899,223 and $875,558 at January 31, 2001 and 2000, respectively.
The book basis of LIFO inventories exceeded the tax basis by
approximately $1,026,000 at both January 31, 2001 and 2000 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
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
NOTE 4: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
January 31,
2001 2000
-------------------------------------------------------------
Land $1,794,088 $1,793,795
Buildings and improvements 11,378,228 11,353,232
Machinery and equipment 11,605,401 11,207,542
Furniture and fixtures 3,158,346 3,062,990
Automotive equipment 985,818 1,023,219
Construction in progress 154,266 15,448
-------------------------------------------------------------
29,076,147 28,456,226
Less accumulated depreciation 16,066,900 14,982,927
-------------------------------------------------------------
$13,009,247 $13,473,299
=============================================================
Depreciation of property, plant and equipment charged to operations
amounted to $1,454,467, $1,556,191 and $1,443,458 for the years ended in
2001, 2000 and 1999, respectively.
24
MET-PRO CORPORATION
NOTES TO Consolidated FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
NOTE 5: 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,
2001 2000
-----------------------------------------------------------------------------
Note payable, bank, payable in
quarterly installments of $300,000,
plus interest at a fixed rate swap of
5.98%, maturing October, 2008 $9,300,000 $10,500,000
Notes payable, bank, payable in
quarterly installments of $87,500,
plus interest at a fixed rate of
7.51%, maturing September, 2001 262,500 612,500
Notes payable, bank, payable in
quarterly installments of $87,500,
plus interest at a variable rate
ranging from 6.87% to 7.33%,
maturing September, 2001 262,500 612,500
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 108,014 216,954
-----------------------------------------------------------------------------
9,933,014 11,941,954
Less current portion 1,833,014 2,008,940
-----------------------------------------------------------------------------
$8,100,000 $9,933,014
=============================================================================
These notes are subject to certain covenants, including maintenance of
prescribed amounts of leverage and fixed charge coverage ratios.
25
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
Maturities of long-term debt are as follows:
Year Ending
January 31,
---------------------------------------------------------------
2002 $1,833,014
2003 1,200,000
2004 1,200,000
2005 1,200,000
2006 1,200,000
Thereafter 3,300,000
---------------------------------------------------------------
$9,933,014
===============================================================
Interest expense was $694,112, $815,805 and $398,051 for the years ended
in 2001, 2000 and 1999, respectively.
NOTE 6: STOCKHOLDERS' EQUITY
On February 21, 2000 the Company announced a 350,000 share stock
repurchase program, which began after the Company's May 11, 1999 stock
repurchase program was completed. In addition, the Company announced an
additional 300,000 share stock repurchase program on December 15, 2000,
which will begin after the Company's February 21, 2000 stock repurchase
program is completed. During the fiscal year ended January 31, 2001, the
Company repurchased 318,476 shares of its Common Stock at a cost of $3.0
million. At January 31, 2001, the Company had the authority to
repurchase 96,499 shares under the February 21, 2000 stock repurchase
program and 300,000 shares under the December 15, 2000 stock repurchase
program.
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 7: INCOME TAXES
The provision for income taxes was comprised of the following:
2001 2000 1999
-----------------------------------------------------------------------
Current
Federal $3,408,005 $2,859,285 $3,216,200
State 662,757 556,607 878,903
Foreign 243,023 311,275 183,553
-----------------------------------------------------------------------
4,313,785 3,727,167 4,278,656
Deferred 256,998 266,073 (9,185)
-----------------------------------------------------------------------
$4,570,783 $3,993,240 $4,269,471
=======================================================================
26
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (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:
2001 2000
------------------------------------------------------------------------
Deferred tax assets
Inventory cost capitalization $169,848 $215,686
Pension cost 757,001 911,611
Non-compete agreements 525,952 498,980
Other 127,333 51,479
------------------------------------------------------------------------
Total deferred tax assets 1,580,134 1,677,756
------------------------------------------------------------------------
Deferred tax liabilities
Accelerated depreciation 493,256 512,407
Inventory - Dean Pump Division 400,257 400,202
Excess of book over tax basis of
property acquired in acquisitions 37,582 66,678
Goodwill 532,790 325,222
------------------------------------------------------------------------
Total deferred tax liabilities 1,463,885 1,304,509
------------------------------------------------------------------------
Net deferred tax assets $116,249 $373,247
========================================================================
A reconciliation of the federal statutory rate and the Company's
effective tax rate is presented as follows:
2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
Computed expected
tax expense
(federal) $4,197,131 34.0% $3,762,400 34.0% $3,882,978 34.0%
State income taxes,
net of federal
income tax benefit 403,528 3.2 367,361 3.3 580,076 5.1
Foreign tax differential (7,293) - (30,703) (.3) (5,277) -
Foreign tax credit (11,831) (.1) (5,606) - (10,924) (.1)
Other (10,752) (.1) (100,212) (.9) (177,382) (1.6)
----------------------------------------------------------------------------------------------------------------------
Effective income taxes $4,570,783 37.0% $3,993,240 36.1% $4,269,471 37.4%
======================================================================================================================
NOTE 8: 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, 2001 were as follows:
2002 $339,373
2003 265,204
2004 10,938
Rental expense for the above operating leases during the years ended in
2001, 2000 and 1999, was $411,929, $408,487 and $153,711, respectively.
27
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
NOTE 9: EMPLOYEE BENEFIT PLANS
Pension Plans:
The Company has several 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:
2001 2000 1999
----------------------------------------------------------------------------------
Service cost - benefits earned
during the period $583,387 $597,400 $527,196
Interest cost on projected
benefit obligation 788,141 750,170 708,083
Return on assets (765,117) (2,009,740) (1,707,281)
Amortization (515,449) (210,591) (195,466)
Deferred gain/(loss)
on investments (393,568) 840,679 769,701
----------------------------------------------------------------------------------
($302,606) ($32,082) $102,233
==================================================================================
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, 2001 and 2000:
2001 2000
------------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $9,625,064 $10,334,600
Service cost 583,387 597,400
Interest cost 788,141 750,170
Actuarial (gain) (145,217) (1,457,537)
Benefits paid (594,139) (599,569)
Other 274,852 -
------------------------------------------------------------------------------------
Benefit obligation at end of year $10,532,088 $9,625,064
------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year $14,702,989 $13,171,597
Actual return on plan assets 765,117 2,009,740
Employer contribution 129,360 121,221
Benefits paid (594,139) (599,569)
------------------------------------------------------------------------------------
Fair value of plan assets at end of year $15,003,327 $14,702,989
------------------------------------------------------------------------------------
Funded status $4,471,239 $5,077,925
Unrecognized actuarial (gain) (6,894,792) (7,465,147)
Unrecognized transition (asset) (133,950) (144,465)
Unrecognized prior service costs 410,966 180,855
Unrecognized net loss 190,508 -
Contribution after measurement
date, prior year 15,000 -
------------------------------------------------------------------------------------
Net amount recognized ($1,941,029) ($2,350,832)
------------------------------------------------------------------------------------
Amounts recognized in the balance
sheet consist of:
Accrued benefit liability ($1,941,029) ($2,350,832)
====================================================================================
28
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
Assumptions used in the accounting for pension cost were:
2001 2000 1999
-----------------------------------------------------------------------
Discount rate 7.75% 7.00% 7.00%
Rate of increase in
compensation levels
(where applicable) 4.50% 4.50% 4.50%
Expected long-term rate of
return on assets 8.00% 9.00% 8.00%
Directors' Benefit Plan:
The Company also provides a non-qualified pension plan for Directors
which is unfunded. The plan is designed to provide pension benefits
based on the category of the Director and length of service. The
aggregate benefit obligation payable in the future under the terms of
the plan was $659,997 and $598,064 at January 31, 2001 and 2000,
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.
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, $0, and
$225,000 in the years ended in 2001, 2000 and 1999, 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.
Stock Option Plans:
The Company accounts for 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 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
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
The status of the plans was as follows:
1992 Plan 2001 2000 1999
-----------------------------------------------------------------------------------------
Options outstanding at February 1 121,025 135,525 183,250
Grants - - -
Exercises - 3,000 47,725
Cancellations - 11,500 -
Options outstanding at January 31 121,025 121,025 135,525
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 31 121,025 121,025 131,025
-----------------------------------------------------------------------------------------
Options available for grant
at January 31 0 0 0
=========================================================================================
1997 Plan 2001 2000 1999
-----------------------------------------------------------------------------------------
Options outstanding at February 1 134,950 33,500 20,000
Grants 1,325 118,450 23,500
Exercises - - -
Cancellations 4,200 17,000 10,000
Options outstanding at January 31 132,075 134,950 33,500
Options price range at January 31 $9.75 $9.98 $12.00
to to to
$15.50 $15.50 $15.50
Options exercisable at January 31 95,324 55,151 22,500
-----------------------------------------------------------------------------------------
Options available for grant
at January 31 186,725 188,050 306,500
=========================================================================================
The weighted average exercise prices of the Company's stock option plans
were as follows:
2001 2000 1999
-----------------------------------------------------------------------------------------
Options outstanding at February 1 $9.76 $9.68 $8.84
Grants $9.75 $10.12 $13.69
Exercises - $5.00 $7.59
Cancellations $9.88 $11.31 $12.00
Options outstanding at January 31 $9.75 $9.76 $9.68
30
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999 (Continued)
NOTE 10: OTHER INCOME, NET
Other income, net, was comprised of the following:
2001 2000 1999
------------------------------------------------------------------
Gain/(loss) on sale of property
and equipment ($12,656) $1,096 $6,590
Other, primarily interest income 537,385 469,912 612,117
------------------------------------------------------------------
$524,729 $471,008 $618,707
==================================================================
NOTE 11: 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 20.
NOTE 12: 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:
2001 2000 1999
---------------------------------------------------------------------------------------------------
Net sales:
United States $64,569,224 $65,698,081 $56,229,689
Foreign 16,634,326 12,751,911 11,160,799
---------------------------------------------------------------------------------------------------
$81,203,550 $78,449,992 $67,390,488
===================================================================================================
Income from operations:
United States $10,822,911 $10,144,373 $10,017,987
Foreign 1,690,975 1,266,306 1,181,880
---------------------------------------------------------------------------------------------------
$12,513,886 $11,410,679 $11,199,867
===================================================================================================
Total assets:
United States $64,620,734 $63,774,777 $68,284,881
Foreign 4,530,607 4,867,206 4,603,760
---------------------------------------------------------------------------------------------------
$69,151,341 $68,641,983 $72,888,641
===================================================================================================
31
QUARTERLY FINANCIAL DATA (Unaudited)
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
Earnings Earnings
Per Share, Per Share,
2001 Net Sales Gross Profit Net Income Basic Diluted
- -----------------------------------------------------------------------------------------------------------------------
First Quarter $20,250,931 $6,777,556 $1,753,284 $.28 $.28
Second Quarter 20,258,228 7,142,582 1,930,519 .31 .31
Third Quarter 21,258,013 7,192,598 2,016,979 .33 .33
Fourth Quarter 19,436,378 6,848,418 2,072,938 .34 .34
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure:
During the fiscal year ended January 31, 2001, 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 2001
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 2001
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 2001 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 2001 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
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. Incorpora ted 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 R egistration 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,
incorporated by reference to the Company's annual report
on Form 10-K filed April 27, 2000.
(4) Stockholders' Rights Plan, incorporated by reference to
Company's Current Report on Form 8-K filed on January 6,
2000.
(10)(a) The 1992 Stock Option Plan*, incorporated by reference
to Company's Registration Statement on Form S-8 filed
June 13, 2000.
(10)(b) The 1997 Stock Option Plan*, incorporated by reference
to Company's Registration Statement on Form S-8 filed
January 16, 1998.
(10)(c) Amendment No. 1 to the 1992 Stock Option Plan.*
(10)(d) Amendment No. 1 to the 1997 Stock Option Plan.*
(10)(e) Key Employee Severance Agreement between Met-Pro
Corporation and William L. Kacin.*
(10)(f) Key Employee Severance Agreement between Met-Pro
Corporation and Gary J. Morgan.*
(10)(g) Key Employee Severance Agreement between Met-Pro
Corporation and Raymond J. De Hont.*
(10)(h) Amendment to Key Employee Severance Agreement between
Met-Pro Corporation and William L. Kacin.*
(10)(i) Amendment to Key Employee Severance Agreement between
Met-Pro Corporation and Gary J. Morgan.*
33
(10)(j) The Company's Director's Pension Plan.*
(10)(k) Amendment 1 of the Company's Director's Pension Plan.*
(10)(l) Amendment 2 of the Company's Director's Pension Plan.*
(10)(m) Restoration Plan, effective February 1, 2000.*
(10)(n) Amendment 1 of the Company's Restoration Plan.*
(10)(o) Additional 1% Supplemental Executive Retirement Plan,
effective February 1, 2000.*
(11) Statement Re-computation of Per Share Earnings. See page
16 of Item 8.
(21) List of Subsidiaries of Registrant:
Corporate Jurisdiction of Name under which Business
Name Incorporation is Conducted
--------- --------------- -------------------------
Mefiag B.V. The Netherlands Mefiag B.V., a wholly-
owned subsidiary of
Met-Pro Corporation
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
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule.
The following exhibits required under Item 601 of Regulation S-K
promulgated by the Securities & Exchange Commission have been
omitted because they are either inapplicable or non-existent:
(9) Voting trust agreements.
(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.
- Notes -
* Indicates management contract or compensatory plan or
arrangement.
C. Reports on Form 8-K:
No reports on Form 8-K were filed during the three month period
ended January 31, 2001.
34
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
May 4, 2001 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.
Signature Title Date
--------- ----- ---------
/s/ William L. Kacin Chairman, Chief May 4, 2001
- ---------------------------- Executive Officer
William L. Kacin and President
/s/ Gary J. Morgan Vice President-Finance, May 4, 2001
- ---------------------------- Secretary, Treasurer,
Gary J. Morgan Chief Financial Officer,
Chief Accounting Officer
and Director
/s/ Thomas F. Hayes Director May 4, 2001
- ----------------------------
Thomas F. Hayes
/s/ Alan Lawley Director May 4, 2001
- ----------------------------
Alan Lawley
/s/ Nicholas DeBenedictis Director May 4, 2001
- ----------------------------
Nicholas DeBenedictis
/s/ Jeffrey H. Nicholas Director May 4, 2001
- ----------------------------
Jeffrey H. Nicholas
/s/ Michael J. Morris Director May 4, 2001
- ----------------------------
Michael J. Morris
35
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