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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: October 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
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock (par
value $.10 per share) is 6,080,106 (as of October 31, 2001).
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MET-PRO CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheet as of
October 31, 2001 and January 31, 2001....................................................... 2
Consolidated statement of operations for the nine-month and three-month
periods ended October 31, 2001 and 2000..................................................... 3
Consolidated statement of stockholders' equity for the
nine-month periods ended October 31, 2001 and 2000.......................................... 4
Consolidated statement of cash flows for the nine-month
periods ended October 31, 2001 and 2000..................................................... 5
Notes to consolidated financial statements........................................................ 6
Report of independent accountants................................................................. 9
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations................................................................... 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................................... 14
Item 2. Changes in Securities and Use of Proceeds................................................... 14
Item 3. Defaults Upon Senior Securities............................................................. 14
Item 4. Submissions of Matters to a Vote of Security Holders........................................ 14
Item 5. Other Information........................................................................... 14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-K......................................... 14
(b) Reports on Form 8-K..................................................................... 14
SIGNATURES............................................................................................... 15
-1-
MET-PRO CORPORATION
CONSOLIDATED BALANCE SHEET
(unaudited)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
October 31, January 31,
ASSETS 2001 2001
- ----------------------------------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $10,316,035 $8,510,045
Accounts receivable, net of allowance for doubtful
accounts of approximately $238,000 and
$218,000, respectively 11,445,923 14,208,689
Inventories - Note 3 14,220,332 13,085,969
Prepaid expenses, deposits and other current assets 931,788 958,722
Deferred income taxes 648,834 648,834
- ----------------------------------------------------------------------------------------------------------------
Total current assets 37,562,912 37,412,259
Property, plant and equipment, net 12,572,418 13,009,247
Costs in excess of net assets of businesses acquired, net 17,904,693 18,276,472
Other assets 389,392 453,363
- ----------------------------------------------------------------------------------------------------------------
Total assets $68,429,415 $69,151,341
================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------
Current liabilities
Current portion of long-term debt $1,220,036 $1,833,014
Accounts payable 3,500,122 4,284,687
Accrued salaries, wages and expenses 4,741,598 5,704,372
Payroll and other taxes payable 71,104 8,808
Dividend payable 516,809 517,669
Customers' advances 443,897 609,445
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 10,493,566 12,957,995
Long-term debt 7,200,000 8,100,000
Other non-current liabilities 565,704 499,395
Deferred income taxes 511,204 532,585
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 18,770,474 22,089,975
- ----------------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock, $.10 par value; 18,000,000 shares
authorized, 7,216,099 and 7,206,583 shares issued,
of which 1,135,993 and 1,116,428 shares were reacquired
and held in treasury at the respective dates 721,610 720,658
Additional paid-in capital 7,845,163 8,139,799
Retained earnings 55,165,291 51,880,800
Accumulated other comprehensive loss (588,891) (491,163)
Treasury stock, at cost (13,484,232) (13,188,728)
- ----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 49,658,941 47,061,366
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $68,429,415 $69,151,341
================================================================================================================
See accompanying notes to consolidated financial statements.
-2-
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Nine Months Ended Three Months Ended
October 31, October 31,
2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Net sales $54,291,770 $61,767,172 $16,363,945 $21,258,013
Cost of goods sold 35,587,902 40,654,436 11,006,537 14,065,415
- ----------------------------------------------------------------------------------------------------------------------------
Gross profit 18,703,868 21,112,736 5,357,408 7,192,598
Operating expenses
Selling 5,433,301 5,469,811 1,755,385 1,780,777
General and administrative 5,928,874 6,449,342 1,855,828 2,154,300
- ----------------------------------------------------------------------------------------------------------------------------
11,362,175 11,919,153 3,611,213 3,935,077
- ----------------------------------------------------------------------------------------------------------------------------
Income from operations 7,341,693 9,193,583 1,746,195 3,257,521
Interest expense (431,367) (534,376) (140,370) (173,695)
Other income, net 723,466 369,224 528,547 143,340
- ----------------------------------------------------------------------------------------------------------------------------
Income before taxes 7,633,792 9,028,431 2,134,372 3,227,166
Provision for taxes 2,786,333 3,327,649 779,047 1,210,187
- ----------------------------------------------------------------------------------------------------------------------------
Net income $4,847,459 $5,700,782 $1,355,325 $2,016,979
============================================================================================================================
Earnings per share, basic (1) $.79 $.92 $.22 $.33
Earnings per share, diluted (2) $.79 $.92 $.22 $.33
Cash dividend per share - declared (3) $.255 $.24 $.085 $.08
Cash dividend per share - paid (3) $.255 $.24 $.085 $.08
============================================================================================================================
(1) Basic earnings per share are based upon the weighted average number of
shares outstanding of 6,118,139 and 6,173,505 in the nine-month
periods ended October 31, 2001 and 2000, respectively, and 6,123,346
and 6,185,487 in three-month periods ended October 31, 2001 and 2000,
respectively.
(2) Diluted earnings per share are based on the weighted average number of
shares outstanding of 6,155,894 and 6,189,773 in the nine-month
periods ended October 31, 2001 and 2000, respectively, and 6,165,022
and 6,200,884 in the three-month periods ended October 31, 2001 and
2000, respectively.
(3) The Board of Directors declared quarterly dividends of $.085 per share
payable on March 9, 2001, June 8, 2001, September 10, 2001 and
December 10, 2001 to stockholders of record as of February 23, 2001,
May 25, 2001, August 31, 2001 and November 30, 2001, respectively.
Quarterly dividends of $.08 per share were paid on March 10, 2000,
June 9, 2000 and September 11, 2000 to stockholders of record as of
February 25, 2000, May 26, 2000 and August 28, 2000, respectively.
See accompanying notes to consolidated financial statements.
-3-
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings (Loss) Stock Total
- ----------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 2001 $720,658 $8,139,799 $51,880,800 ($491,163) ($13,188,728) $47,061,366
Comprehensive income:
Net income 4,847,459
Foreign currency translation (97,728)
Total comprehensive income 4,749,731
Dividends paid, $.17 per share (1,046,159) (1,046,159)
Dividends declared, $.085 per share (516,809) (516,809)
Proceeds from issuance of
common stock under dividend
reinvestment plan (9,516
shares) 952 111,042 111,994
Stock option transactions (405,678) 1,497,931 1,092,253
Purchase of 145,590 shares of
treasury stock (1,793,435) (1,793,435)
- ----------------------------------------------------------------------------------------------------------------------------
Balances, October 31, 2001 $721,610 $7,845,163 $55,165,291 ($588,891) ($13,484,232) $49,658,941
============================================================================================================================
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings (Loss) Stock Total
- ----------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 2000 $718,919 $7,973,873 $46,087,476 ($403,993) ($10,169,942) $44,206,333
Comprehensive income:
Net income 5,700,782
Foreign currency translation (275,647)
Total comprehensive income 5,425,135
Dividends paid, $.16 per share (975,849) (975,849)
Dividends declared, $.08 per share (486,879) (486,879)
Proceeds from issuance of
common stock under dividend
reinvestment plan (13,155
shares) 1,316 122,325 123,641
Purchase of 318,412 shares of
treasury stock (3,018,127) (3,018,127)
- ----------------------------------------------------------------------------------------------------------------------------
Balances, October 31, 2000 $720,235 $8,096,198 $50,325,530 ($679,640) ($13,188,069) $45,274,254
============================================================================================================================
See accompanying notes to consolidated financial statements.
-4-
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Nine Months Ended
October 31,
2001 2000
- -----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net Income $4,847,459 $5,700,782
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,531,771 1,673,515
Deferred income taxes (21,374) (21,374)
(Gain) loss on sale of property and equipment, net (468,380) 9,584
Allowance for doubtful accounts 19,345 32,562
(Increase) decrease in operating assets
Accounts receivable 2,699,142 287,722
Inventories (1,158,100) (145,353)
Prepaid expenses and other current assets 97,559 176,945
Other assets (6,069) (59,209)
Increase (decrease) in operating liabilities
Accounts payable, accrued expenses and taxes (1,750,633) 1,040,400
Customers' advances (165,548) (476,781)
Other non-current liabilities 66,310 62,748
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,691,482 8,281,541
- -----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from sales of property and equipment 1,090,941 2,000
Acquisitions of property and equipment (1,291,302) (784,322)
- -----------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (200,361) (782,322)
- -----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Reduction of debt (1,512,978) (1,505,834)
Exercise of stock options 1,092,253 --
Payment of dividends (1,451,834) (1,363,507)
Purchase of treasury shares (1,793,435) (3,018,127)
- -----------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (3,665,994) (5,887,468)
- -----------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (19,137) (42,726)
- -----------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,805,990 1,569,025
Cash and cash equivalents at February 1 8,510,045 6,331,556
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at October 31 $10,316,035 $7,900,581
=================================================================================================================
See accompanying notes to consolidated financial statements.
-5-
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Met-Pro
Corporation and its wholly-owned subsidiaries, Strobic Air Corporation,
Flex-Kleen Canada Inc., and Mefiag B.V. (collectively "Met-Pro" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the financial position as of
October 31, 2001 and the results of operations for the nine-month and
three-month periods ended October 31, 2001 and 2000, and changes in
stockholders' equity and cash flows for the nine-month periods then ended. The
results of operations for the nine-month and three-month periods ended October
31, 2001 and 2000 are not necessarily indicative of the results to be expected
for the full year. These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended January
31, 2001.
NOTE 3 - INVENTORIES
Inventories consisted of the following:
October 31, January 31,
2001 2001
-------------- -------------
Raw materials $8,444,496 $7,770,874
Work in progress 1,710,228 1,573,802
Finished goods 4,065,608 3,741,293
-------------- -------------
$14,220,332 $13,085,969
============== =============
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
Net cash flow from operating activities reflect cash payments for interest and
income taxes as follows:
Nine Months Ended
October 31,
2001 2000
-------------- --------------
Cash paid during the period for:
Interest $434,209 $620,652
Income taxes $2,683,556 $2,595,536
-6-
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - OTHER INCOME, NET
Other income, net was comprised of the following:
Nine Months Ended Three Months Ended
October 31, October 31,
2001 2000 2001 2000
------------------------------ ---------------------------
Gain/(loss) on sale of property
and equipment $468,380 ($9,584) $459,126 ($3,621)
Other, primarily interest income 255,086 378,808 69,421 146,961
------------------------------ ---------------------------
$723,466 $369,224 $528,547 $143,340
============================== ===========================
NOTE 6 - 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 below:
Nine Months Ended October 31,
2001 2000
-------------------------------------
Net sales
Product recovery/pollution control equipment $34,388,322 $39,616,215
Fluid handling equipment 19,903,448 22,150,957
------------ ------------
$54,291,770 $61,767,172
============ ============
Income from operations
Product recovery/pollution control equipment $3,958,801 $5,325,510
Fluid handling equipment 3,382,892 3,868,073
------------ ------------
$7,341,693 $9,193,583
============ ============
October 31, January 31,
2001 2001
-------------------------------------
Identifiable assets
Product recovery/pollution control equipment $38,587,805 $40,274,449
Fluid handling equipment 18,727,330 18,785,577
------------ ------------
57,315,135 59,060,026
Corporate 11,114,280 10,091,315
------------ ------------
$68,429,415 $69,151,341
============ ============
-7-
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued FASB No.
141, "Business Combinations", and FASB No. 142, "Goodwill and Other Intangible
Assets". FASB No. 141, which is effective for business combinations completed
after June 30, 2001, requires among other things, that (1) the purchase method
of accounting be used for all business combinations, (2) specific criteria be
established for the recognition of intangible assets separately from goodwill
and (3) additional information about acquired intangible assets be provided.
FASB No. 142, which will become effective for the Company prospectively as of
February 1, 2002, primarily addresses the accounting for goodwill and intangible
assets subsequent to their acquisition. Among other things it requires that
goodwill not be amortized for financial statement purposes; instead, management
will be required to test goodwill for impairment at least annually. While the
company is still analyzing the effect of FASB No. 142 on the financial
statements, a preliminary estimate of the annual amortization of goodwill and
indefinite-lived intangible assets that will cease in the fiscal year ending
January 31, 2003 is approximately $0.5 million.
NOTE 8 - ACCOUNTANTS' 10-Q REVIEW
Margolis & Company P.C., the Company's independent accountants, has performed a
limited review of the financial information included herein. Their report on
such review accompanies this filing.
-8-
MET-PRO CORPORATION
To the Board of Directors
Met-Pro Corporation
Harleysville, Pennsylvania
We have reviewed the accompanying consolidated balance sheet of Met-Pro
Corporation and its wholly-owned subsidiaries as of October 31, 2001 and the
related consolidated statements of operations for the nine-month and three-month
periods ended October 31, 2001 and 2000 and stockholders' equity and cash flows
for the nine-month periods ended October 31, 2001 and 2000. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 31, 2001 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report dated February 22,
2001, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of January 31, 2001 is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
/s/ Margolis & Company P.C.
----------------------------
Certified Public Accountants
Bala Cynwyd, Pennsylvania
November 16, 2001
-9-
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations
Results of Operations:
The following table sets forth, for the nine and three-month periods indicated,
certain financial information derived from the Company's consolidated statement
of operations expressed as a percentage of net sales.
Nine Months Ended Three Months Ended
October 31, October 31,
2001 2000 2001 2000
-----------------------------------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 65.6% 65.8% 67.3% 66.2%
-----------------------------------------------------------------------------------------------------------
Gross profit 34.4% 34.2% 32.7% 33.8%
Selling 10.0% 8.9% 10.7% 8.4%
General and administrative 10.9% 10.4% 11.3% 10.1%
-----------------------------------------------------------------------------------------------------------
Income from operations 13.5% 14.9% 10.7% 15.3%
Interest expense (.8%) (.9%) (.9%) (.8%)
Other income, net 1.3% .6% 3.2% .7%
-----------------------------------------------------------------------------------------------------------
Income before taxes 14.0% 14.6% 13.0% 15.2%
Provision for taxes 5.1% 5.4% 4.7% 5.7%
-----------------------------------------------------------------------------------------------------------
Net income 8.9% 9.2% 8.3% 9.5%
-----------------------------------------------------------------------------------------------------------
Nine Months Ended October 31, 2001 vs Nine Months Ended October 31, 2000
Net sales for the nine-month period ended October 31, 2001 were $54,291,770
compared to $61,767,172 for the nine-month period ended October 31, 2000, a
decrease of $7,475,402 or 12.1%. Sales in the Product Recovery/Pollution Control
Equipment segment were $34,388,322 or $5,227,893 lower than the nine-month
period ended October 31, 2000. Sales in the Fluid Handling Equipment segment
were $19,903,448 or $2,247,509 lower compared to the nine-month period ended
October 31. We believe that the decreased demand in both business segments is
attributed to a slowing economy.
Backlog at October 31, 2001 totaled $10,951,097 compared to $11,358,413 at
October 31, 2000. In addition, at October 31, 2001, the Company had $4,003,234
of orders which are not included in our backlog due to the Company's
long-standing policy of not including these orders in backlog until engineering
drawings are approved, compared to $4,245,571 at October 31, 2000.
Net income for the nine-month period ended October 31, 2001 was $4,847,459
compared to $5,700,782 for the nine-month period ended October 31, 2000, a
decrease of $853,323 or 15.0%. The decrease in net income is principally related
to the lower sales in both of the Company's business segments during the period.
The gross margin for the nine-month period ended October 31, 2001 was 34.4%
versus 34.2% for the same period in the prior year.
Selling expense decreased $36,510 during the nine-month period ended October 31,
2001 compared to the same period last year. Selling expense as a percentage of
net sales was 10.0% for the nine-month period ended October 31, 2001 compared to
8.9% for the nine-month period ended October 31, 2000.
-10-
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
General and administrative expense was $5,928,874 for the nine-month period
ended October 31, 2001 compared to $6,449,342 for the same period last year, a
decrease of $520,468. General and administrative expense as a percentage of net
sales was 10.9% for the nine-month period ended October 31, 2001 compared to
10.4% for the same period last year. This reduction is related to the overall
reduction in compensation expense and amortization expenses for certain
intangible assets which are fully amortized.
Interest expense was $431,367 for the nine-month period ended October 31, 2001
compared to $534,376 for the same period in the prior year, a decrease of
$103,009. The reduction is the result of lower principal balances on the
scheduled repayment of debt.
Other income, net, totaling $723,466 at October 31, 2001 consisted of interest
income on short-term investments and a $468,380 net gain on the sale of property
and equipment. In September 2001, the Company sold property and equipment
associated with the Systems Division's operations in West Chester, Pennsylvania
resulting in the majority of this gain. These operations were relocated to a
leased facility in Towamencin, Pennsylvania. Other income, net, of $369,224 at
October 31, 2000 consisted primarily of interest income on short-term
investments.
The effective tax rate for the nine-month period ended October 31, 2001 was
36.5% compared to 36.9% for the nine-month period ended October 31, 2000.
Three Months Ended October 31, 2001 vs Three Months Ended October 31, 2000
Net sales for the three-month period ended October 31, 2001 were $16,363,945
compared to $21,258,013 for the three-month period ended October 31, 2000, a
decrease of $4,894,068. Sales in the Product Recovery/Pollution Control
Equipment segment were $10,183,488 or $3,492,461 lower than the three-month
period ended October 31, 2000. Sales in the Fluid Handling Equipment segment
were $6,180,457 or $1,401,607 lower compared to the three-month period ended
October 31, 2000.
Net income for the three-month period ended October 31, 2001 was $1,355,325
compared to $2,016,979 for the three-month period ended October 31, 2000, a
decrease of $661,654 or 32.8%. The decrease in net income is related to the
lower sales volume in both the Product Recovery/Pollution Control Equipment and
Fluid Handling Equipment segments for the three-month period ended October 31,
2001.
The gross margin for the three-month period ended October 31, 2001 was 32.7%
compared to 33.8% for the same period last year. The decrease is related to
lower gross margins in the Product Recovery/Pollution Control Equipment segment
for the three-month period ended October 31, 2001.
Selling expenses decreased $25,392 during the three-month period ended October
31, 2001 compared to the same period last year. As a percentage of net sales,
selling expense increased to 10.7% for the three-month period ended October 31,
2001 from 8.4% for the three-month period ended October 31, 2000.
General and administrative expense was $1,855,828 for the three-month period
ended October 31, 2001 compared to $2,154,300 for the three-month period ended
October 31, 2000, a decrease of $298,472. General and administrative expense for
the three-month period ended October 31, 2001 was 11.3% of net sales, compared
to 10.1% of net sales for the same period last year.
Interest expense was $140,370 for the three-month period ended October 31, 2001
compared to $173,695 for the same period in the prior year, a decrease of 19.2%.
Other income, net, totaling $528,547 for the three months ended October 31, 2001
consisted of interest income on short-term investments and a $459,126 net gain
on the sale of property and equipment associated with the Systems Division's
operations in West Chester, Pennsylvania. Other income, net, of $143,340 for the
three months ended October 31, 2000 consisted primarily of interest income on
short-term investments.
-11-
MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
The effective tax rate for the three-month period ended October 31, 2001 was
36.5% compared to 37.5% for the three-month period ended October 31, 2000.
Liquidity:
The Company's cash and cash equivalents were $10,316,035 on October 31, 2001
compared to $8,510,045 on January 31, 2001, an increase of $1,805,990. This
increase is the net result of the following occurring during this nine-month
period: cash flows provided by operating activities of $5,691,482, proceeds
received from the exercise of stock options totaling $1,092,253 and proceeds
received from the sale of property and equipment amounting to $1,090,941, offset
by the payment of quarterly cash dividends amounting to $1,451,834 (net of
$111,994 of dividends utilized by stockholders for stock purchases under the
Dividend Reinvestment Plan), payments on long-term debt totalling $1,512,978,
purchases of treasury stock amounting to $1,793,435, investment in property and
equipment amounting to $1,291,302 and exchange rate changes of $19,137. The
Company's cash flows from operating activities are influenced by the timing of
shipments and negotiated standard payment terms, including retention associated
with major projects.
Accounts receivable (net) amounted to $11,445,923 on October 31, 2001 compared
to $14,208,689 on January 31, 2001, a decrease of $2,762,766. The timing and
size of shipments and retainage on contracts, especially in the Product
Recovery/Pollution Control Equipment segment combined with lower sales, resulted
in this decrease.
Inventories were $14,220,332 on October 31, 2001 compared to $13,085,969 on
January 31, 2001, an increase of $1,134,363. Inventory balances fluctuate
depending upon market demand, the size and timing of orders, and varying lead
times required.
Current liabilities amounted to $10,493,566 on October 31, 2001 compared to
$12,957,995 on January 31, 2001, a decrease of $2,464,429. A reduction in
accounts payable and accrued expenses, current portion of long-term debt and
customer advances accounted for the decrease.
The Company has consistently maintained a high current ratio and has not
utilized either the domestic line of credit or the foreign line of credit
totalling $5.0 million, which are available for working capital purposes. Cash
flows, in general, have exceeded the current needs of the Company. The Company
anticipates no change in this situation in the immediate future.
Capital Resources and Requirements:
Cash flows provided by operating activities for the nine-month period ended
October 31, 2001 amounted to $5,691,482, compared with $8,281,541 for the
nine-month period ended October 31, 2000, a decrease of $2,590,059. This
decrease in cash flows from operating activities was due principally to the
increase in inventories and a decrease in net income and accrued expenses for
the period ended October 31, 2001, offset by an increase in accounts receivable
collections.
Cash flows used in investing activities for the nine-month period ended October
31, 2001 amounted to $200,361, compared with $782,322 for the nine-month period
ended October 31, 2000. The Company's investing activities for the nine-month
period ended October 31, 2001 consisted of the acquisitions of property and
equipment in both business segments, offset by proceeds received from the sale
of property and equipment associated with the Systems Division's operations in
West Chester, Pennsylvania. The Company continues to invest in machinery and
equipment, tooling, patterns and molds to improve efficiency and maintain our
position in the markets in which we serve.
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MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations continued...
Financing activities for the nine-month period ended October 31, 2001 utilized
$3,665,994 of available resources compared to $5,887,468 for the nine-month
period ended October 31, 2000. The 2001 activity is the result of the payment of
quarterly cash dividends amounting to $1,451,834 (net of $111,994 of dividends
utilized by stockholders for stock purchases under the Dividend Reinvestment
Plan), reduction of long-term debt totaling $1,512,978, and the purchase of
treasury stock totaling $1,793,435, offset by proceeds received by the exercise
of stock options amounting to $1,092,253.
The Company paid $1,512,978 of scheduled debt during the nine-month period ended
October 31, 2001. The percentage of long-term debt to equity at October 31, 2001
decreased to 14.5% compared to 17.2% at January 31, 2001.
The Board of Directors declared quarterly dividends of $.085 per share payable
on March 9, 2001, June 8, 2001, September 10, 2001 and December 10, 2001 to
stockholders of record as of February 23, 2001, May 25, 2001, August 31, 2001
and November 30, 2001, respectively.
During the nine-month period ended October 31, 2001, the Company had repurchased
a total of 145,590 shares consisting of 96,499 shares under the Stock Repurchase
Program authorized on February 21, 2000 and 49,091 shares under the Stock
Repurchase Program authorized on December 15, 2000, at a cost of $1,793,435,
which was charged to stockholders' equity.
Consistent with past practices, the Company intends to continue to invest in new
product development programs and to make capital expenditures to support the
ongoing operations during the coming year. The Company expects to finance all
capital expenditure requirements through cash flows generated from operations.
Cautionary Statement Concerning Forward-Looking Statements:
In this Management's Discussion and Analysis, and elsewhere in this Quarterly
Report, we have made forward-looking statements. These statements are based on
our estimates and assumptions and are subject to risk and uncertainties.
Forward-looking statements include the information concerning our possible or
assumed future results of operations. Forward-looking statements also include
those preceded or followed by the words "anticipates", "believes", "estimates",
"hopes" or other similar expressions. For those statements, we claim protection
of the safe harbor for all forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
The following important factors, along with those discussed elsewhere in our
filings with the Securities and Exchange Commission including without limitation
our Annual Report on Form 10-K for the year ended January 31, 2001, 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 changes in our accounting rules promulgated by regulatory agencies,
including the Securities and Exchange Commission and the Financial
Accounting Standards Board, 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.
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MET-PRO CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-K
None
(b) Reports on Form 8-K
There were no Reports on Form 8-K filed during the nine-month period
ended October 31, 2001.
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MET-PRO CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Met-Pro Corporation
-----------------------------------
(Registrant)
December 4, 2001 /s/ William L. Kacin
-----------------------------------
William L. Kacin,
Chairman, President and
Chief Executive Officer
December 4, 2001 /s/ Gary J. Morgan
-----------------------------------
Gary J. Morgan,
Vice President of Finance,
Secretary and Treasurer, Chief
Financial Officer, Chief Accounting
Officer and Director
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