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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, 1997 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 principle 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 American 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 Registrants 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
7,095,673 as of April 11, 1997. The aggregate market value of the voting stock
held by non-affiliates of the Registrant was $88,695,913 as of April 11, 1997.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes __ No __
DOCUMENTS INCORPORATED BY REFERENCE
FORM 10-K
Part Number
-----------
Proxy Statement filed pursuant to Regulation 14A in
connection with Registrant's Annual Meeting of Stockholders
to be held on June 4, 1997.................................. III
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INDEX
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . 9
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . 13
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 29
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . 29
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . 30
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . 30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . 31
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2
PART I
Item 1. Business:
General:
Met-Pro Corporation (the "Company") was incorporated in the State of
Delaware on March 30, 1960. The Company was taken public on April 6, 1967 and
has been traded on the American Stock Exchange since July 25, 1978. The
Company's principal executive offices are located at 160 Cassell Road,
Harleysville, Pennsylvania and its 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 and its wholly owned
subsidiaries.
The Company manufactures and sells pollution control and allied
equipment for purification of air and liquids, and fluid handling equipment for
corrosive, abrasive and high temperature liquids.
On February 26, 1996, the Board of Directors declared a $.22 per share
annual cash dividend (value after the 3-for-2 stock split of July 8, 1996)
payable on April 26, 1996 to stockholders of record as of April 12, 1996.
On April 11, 1996, the Company adopted a program to repurchase 75,000
shares of its Common Stock during the next twelve months at prevailing prices
and in accordance with applicable rules in open market transactions. The
repurchase program was completed in October, 1996.
On June 5, 1996, the Company declared a 3-for-2 stock split payable on
July 8, 1996 to shareholders of record at the close of business on June 17,
1996.
On September 12, 1996, the Company, pursuant to an Agreement and Plan
of Merger, acquired the Common Stock of Strobic Air Corporation ("Strobic Air"),
a company involved in the air movement industry, effective as of July 31, 1996,
in a transaction accounted for as a purchase for approximately $5,000,000. The
acquisition was accomplished by issuing Common Stock from the treasury valued at
$2,400,020 (195,920 shares), a cash payment of $2,150,000, a promissory note
payable for $250,000, plus acquisition costs. The Company financed $3,500,000
with unsecured bank loans, paying the balance with internal funds.
On October 4, 1996, the Company ceased the manufacturing and assembly
operations of Mefiag of Puerto Rico, Inc., a wholly owned subsidiary, located in
Las Piedras, Puerto Rico, which was acquired on June 30, 1993, as part of a
major acquisition. The economic justification for maintaining the subsidiary no
longer proved evident due to changes in the federal tax laws and the expiration
of certain local tax holidays. The manufacturing operation previously conducted
by the subsidiary was consolidated into locations of the Company in Pennsylvania
and New York to maximize capacity and improve economies of scale.
On October 11, 1996, the Company adopted a program to repurchase
100,000 shares of its Common Stock during the next twelve months at prevailing
prices and in accordance with applicable rules in open market transactions
during the next twelve months. There were 46,600 shares repurchased under the
program as of January 31, 1997.
There were no other material changes in the nature of the business
conducted by the Company during the fiscal year ended January 31, 1997.
Products, Services and Markets:
The Stiles-Kem Division located in Waukegan, Illinois, is a leading
manufacturer of specialty chemicals for the control of lead and copper leaching,
scale, and the discoloration of drinking water caused by the presence of iron
and manganese in the source water. Stiles-Kem Division's products for drinking
water treatment are food grade and are certified to meet existing state, federal
and ANSI/NSF standards for health effects in drinking water. The products are
manufactured in the Division's plant in Waukegan, Illinois and are distributed
through a network of dealers and distributors located in the United States,
Mexico and Canada.
The 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 industry, electronics industry and
chemical processing industry. Sethco products are sold through a network of
non-exclusive distributors, as well as to original equipment manufacturers and
catalog houses.
3
Mefiag(R), operating through its 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 in the plating and metal finishing
industries and elsewhere. Worldwide sales are accomplished through qualified,
market-based distributors and original equipment manufacturers located
throughout Europe, the United States, South America and other major markets.
The Systems Division, located in West Chester, Pennsylvania, designs,
manufactures and installs major air and water pollution control systems. 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. These products also have a variety of applications in the painting,
pharmaceutical, chemical, electronics, food processing and printing industries.
Systems Division also manufactures a full range of catalytic converters for
stationary engines and cogeneration plants to greatly reduce smog producing and
toxic gases, such as NOx, CO and residual hydrocarbons, which are emitted from
these sources.
The Duall Division, located in Owosso, Michigan, is a leading
manufacturer of industrial and municipal air pollution control equipment. The
Division's major products include odor control systems, fume and emergency gas
scrubbers, stripping towers and exhaust fans and plating and process tanks. All
equipment is fabricated from corrosion resistant materials. 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, pharmaceutical, battery manufacturing and groundwater remediation
markets. Over ninety factory trained manufacturer's representatives sell Duall's
systems to industrial and municipal clients.
The 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 such diverse applications as the nuclear power industry, as 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.
The Fybroc Division, located in Telford, Pennsylvania, is a world
leader in the manufacture of fiberglass reinforced pumps. These pumps provide
excellent corrosion resistance for tough applications including pumping of
acids, brines, caustics, bleaches and a wide range of waste liquids. 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. Sales, engineering, and customer service are provided
through a worldwide distributor network.
The 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 manufacturing facility in Indianapolis, Indiana produces pumps which
are sold through an extensive network of distributors.
Strobic Air, located in Bensalem, Pennsylvania, designs, manufactures
and holds patents on specialty blowers and industrial fans for industrial
applications including laboratories, hospitals, semi-conductor manufacturing
clean rooms, pharmaceutical manufacturing and chemical and petrochemical plants.
Sales, engineering and customer service are provided through a distributor
network.
The Company markets its products through its own personnel,
distributors, representatives and agents based on the division or subsidiary
involved. The Company's products are sold worldwide primarily in industrial
markets.
The 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,
1997 1996 1995
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United States 87.6% 87.6% 88.4%
Foreign 12.4% 12.4% 11.6%
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Net Sales 100.0% 100.0% 100.0%
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4
Customers:
Over the past three years, no single customer accounted for 10% or more
of the total net sales of the Company in any year.
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 Corp., Goulds Pumps, Inc., and The Duriron Company, dominate the industry
with several smaller companies competing in selected product lines and niche
markets.
With respect to the Pollution Control Systems and Allied 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 business.
Research and Development:
The Company engages in research and development on an operational
basis. The research and development effort is not centralized due to the wide
range of products. 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 pollution control and
allied equipment, and fluid handling equipment; developing new products; and
providing technological support to the manufacturing operations.
Research and development expenses were $0.7 million in 1997, $0.6
million in 1996 and $0.5 million in 1995.
Patents and Trademarks:
The Company maintains a small number of patents and trademarks. The
Company considers these items important to the business, although it considers
no individual item material to its business.
Regulatory Matters:
The Company is subject to environmental laws and regulations concerning
air emissions, discharges to water processing facilities, and the generation,
handling, storage and disposal of waste materials in all operations. All of the
Company's production and manufacturing facilities are controlled under permits
issued by federal, state and local regulatory agencies. The Company believes it
is presently in substantial compliance with these laws and regulations.
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 are not subject to long-term
contracts, but to purchase orders 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
$6,017,795 and $6,302,625 as of January 31, 1997 and 1996, respectively.
5
Raw Materials:
The Company procures its raw materials and supplies from various
sources. The Company believes it could secure substitutes for the raw materials
and supplies should they become unavailable, but there are no assurances that
the substitutes would perform as well or be priced competitively. The Company
has not experienced difficulty in securing raw materials and supplies and does
not anticipate any difficulty in procurement in the coming year or foreseeable
future.
Employees:
The Company employs approximately 396 persons, of whom 207 are involved
in manufacturing, and 189 are engaged in administration, sales, engineering,
supervision and clerical work. The Company has negotiated to terminate a
collective bargaining contract involving the Systems Division's operation in
Harleysville, Pennsylvania. The Systems Division's manufacturing activities were
outsourced as of January 2, 1997. The Company has had no work stoppages during
the past 14 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.
Large export sales are made on the basis of confirmed irrevocable
letters of credit or time drafts to selected customers in U.S. dollars.
Therefore, the Company believes that currency fluctuation, and political and
economic instability do not constitute substantial risks to the business.
6
Item 2. Properties:
The Company owns and operates twelve manufacturing and production
facilities as described below:
Division Structure Property/Location Status
Executive Offices, 73,000 square feet, cement 17 acres in Harleysville, Owned
International Division, building, with finestone facing, Pennsylvania
and Mefiag Division built 1976
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 and 15,000 square feet, cement 2 acres in West Chester, Owned
Catalytic Department 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
7,000 square feet, metal 5.61 acres in Owosso, Leased
and masonry building Michigan
Stiles-Kem Division 20,000 square feet, cement 2.55 acres in Owned
block building, built 1996 Waukegan, Illinois
Subsidiaries
Mefiag B.V. 17,200 square feet, metal 1.1 acres in Owned
and masonry building Heerenveen, Holland
Strobic Air Corporation 20,000 square feet, metal 2.3 acres in Owned
and masonry building; Bensalem, Pennsylvania
16,000 square feet, metal 2.0 acres in Leased
and masonry building Bensalem, Pennsylvania
The Company also owns 1.42 acres in Las Piedras, Puerto Rico on which
there is a 10,000 square foot masonry and metal building which formerly housed
the Mefiag of Puerto Rico, Inc. operation. This facility is held for sale.
7
During the fiscal year ended January 31, 1997, the Company sold idle
land located in Indianapolis, Indiana on which it formerly maintained a foundry
operation for the Dean Pump Division. The Company also sold a 20,000 square
foot, metal building located on 3.5 acres in Forest City, North Carolina which
formerly housed the Duall Division's manufacturing operations which were
consolidated into existing facilities in Owosso, Michigan in 1990. In addition,
the Duall Division also sold a 34,166 square foot, metal building located on
5.61 acres in Owosso, Michigan which had previously housed its fiberglass
overlay operations. The Duall Division has leased a part of that facility until
April 30, 1997 to allow for an orderly transfer of operations.
The Company believes that the current manufacturing facilities are
adequate for near term operations. The Company does not intend to renew Strobic
Air's lease of a 16,000 square foot building, as the operations are expected to
be transferred to an existing facility.
Item 3. Legal Proceedings:
Subsequent to January 31, 1997, the Company was served with a Complaint
filed against the Company and several other corporations and individuals in the
United States District Court for the Eastern District of Pennsylvania. The
plaintiff, F. P. Woll, Inc., is the present owner of land and building ("Site")
in Lansdale, Pennsylvania which was occupied by the Company and its predecessor
for approximately 20 years prior to 1976. The other defendants identified in the
Complaint are entities which owned or occupied the Site or neighboring
properties at various times, or which insured entities that owned or occupied
the Site. The Complaint alleges that the plaintiff has been ordered by the
Pennsylvania Department of Environmental Protection to take remedial action with
respect to petroleum contamination allegedly detected on the Site. The Complaint
seeks declaratory relief and monetary damages under federal and state statutes
and the common law to recover from the defendants all or some portion of the
expenses which the plaintiff has incurred or may incur in connection with the
condition of the Site. The Company intends to defend against the Complaint
vigorously. The Company has not yet answered the Complaint and intends to move
to dismiss the Complaint, which motion will be consolidated with similar motions
filed by other defendants. Because this case is in its preliminary stages and
because no discovery has been taken, it is not possible to assess the strength
of the plaintiff's claims or the nature of the Company's defense.
There are no other material pending legal proceedings to which the
Company or any of its wholly owned subsidiaries 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, 1997.
8
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters:
The Company's Common Stock is traded on the American 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 American
Stock Exchange, are shown below. The price of Common Stock and annual cash
dividend have been adjusted to reflect the 3-for-2 stock splits occurring on
July 8, 1996 and May 12, 1995, respectively.
Quarter ended
Year ended January 31, 1997 April July October January
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Price range of common stock:
High $11.50 $13.92 $13.38 $14.25
Low 9.75 11.33 11.88 12.88
Cash dividend paid .22 - - -
Year ended January 31, 1996 April July October January
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Price range of common stock:
High $8.59 $9.42 $9.75 $10.09
Low 7.67 8.33 9.00 8.42
Cash dividend paid .20 - - -
There were 738 registered stockholders at January 31, 1997, and the
Company estimates that there are approximately 500 additional stockholders with
stock held in street name.
The Company has paid either a cash or stock dividend for twenty-one
consecutive years.
Item 6. Selected Financial Data:
Years ended January 31,
1997 1996 1995 1994 1993
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Selected Operating Statement Data
Net sales $60,853,278 $54,067,320 $50,005,577 $41,199,444 $38,318,138
Income from operations 9,157,131 7,663,957 6,281,437 3,952,510 3,004,211
Net income 6,096,002 4,893,885 3,830,042 2,517,155 1,975,012
Earnings per share .86 .69 .54 .35 .28
Selected Balance Sheet Data
Current assets $32,088,546 $28,268,561 $26,595,928 $21,987,515 $21,268,454
Current liabilities 11,374,115 10,250,506 9,506,301 7,177,206 5,876,660
Working capital 20,714,431 18,018,055 17,089,627 14,810,309 15,391,794
Current ratio 2.8 2.8 2.8 3.1 3.6
Total assets 56,079,391 47,626,587 45,168,544 40,917,481 35,551,151
Long-term obligations 3,683,419 1,692,962 2,877,386 4,048,119 1,890,400
Total stockholders' equity 40,352,926 35,012,578 32,084,010 29,187,306 27,574,624
Total capitalization 44,036,345 36,705,540 34,961,396 33,235,425 29,465,024
Return on average total assets, % 11.8 10.5 8.9 6.6 5.6
Return on average stockholders' equity, % 16.2 14.6 12.5 8.9 7.3
Other Financial Data
Capital expenditures $1,811,833 $2,436,419 $1,098,893 $2,415,385 $1,236,115
Stockholders' equity per share 5.73 5.03 4.61 4.15 3.92
Cash dividends paid per share .22 .20 .11 .11 .11
Average common shares, fully diluted 7,096,214 7,051,527 7,063,920 7,079,057 7,065,467
Shares of common stock outstanding 7,043,436 6,956,535 6,964,403 7,034,108 7,039,283
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.
General:
The Company acquired Strobic Air, effective as of July 31, 1996. The
acquisition was accounted for as a purchase transaction. Accordingly, the
consolidated financial data for the year ended January 31, 1997 incorporates
Strobic Air's operations for a six-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,
1997 1996 1995
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Net sales 100.0% 100.0% 100.0%
Cost of goods sold 66.0% 65.9% 66.9%
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Gross profit 34.0% 34.1% 33.1%
Selling, general and administrative expense 19.0% 19.9% 20.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Income from operations 15.0% 14.2% 12.6%
Other income 1.5% 1.0% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Income before taxes 16.5% 15.2% 13.0%
Provision for taxes 6.5% 6.2% 5.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 10.0% 9.0% 7.7%
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FYE 1997 vs FYE 1996:
Net sales for the year ended January 31, 1997 were $60.9 million, a new
record, exceeding net sales for the year ended January 31, 1996 by $6.8 million,
an increase of 12.6%. This is the fourth consecutive year that net sales have
achieved a new record. Sales in the Pollution Control Systems and Allied
Equipment segment were $3.5 million or 12.4% higher than the prior fiscal year
due to the acquisition of Strobic Air Corporation ("Strobic Air"), effective as
of July 31, 1996, coupled with higher demand primarily for our fume and odor
control equipment. Sales in the Fluid Handling Equipment segment were $3.3
million or 12.7% higher compared to the prior year due primarily to increased
demand for our specialty pump equipment.
Foreign sales increased to $7.5 million for the fiscal year ended
January 31, 1997 which is a 12.7% increase over the prior year. This increase
was due to higher sales in the Middle East region, Pacific Rim and the European
Common Market. Foreign sales increased 16.5% in the Fluid Handling segment
versus the prior fiscal year, while the Pollution Control Systems and Allied
Equipment segment were flat versus the prior fiscal year due to the timing of
fume and odor control orders.
Net income of $6.1 million for the fiscal year ended January 31, 1997
was $1.2 million or 24.6% above the earnings level of the prior year. This is
the fourth consecutive year of increased earnings.
The gross margin was 34.0% for the fiscal year ended January 31, 1997,
equal to the prior year. The consistent gross margin is related to higher sales
volume and product mix in both business segments, and includes $0.3 million of
costs associated with the relocation of the Puerto Rico operations and the
out-sourcing of the Systems Division's manufacturing operations.
Selling expense increased approximately $0.4 million or 8.1% over the
prior fiscal year. The Strobic Air acquisition accounted for $0.1 million of the
increase, combined with increased staffing and marketing efforts in existing
operations to position the Company for future growth. Selling expense as a
percentage of net sales was 8.0% for the fiscal year ended January 31, 1997,
virtually equal to the prior fiscal year.
10
General and administrative expense was $6.7 million for the fiscal year
ended January 31, 1997 compared to $6.3 million in the prior fiscal year. The
$0.4 million increase can be attributed entirely to the acquisition of Strobic
Air. General and administrative expense as a percentage of net sales was 11.0%
for the fiscal year ended January 31, 1997 compared to 11.6% for the prior
fiscal year.
Other income of $0.9 million for the fiscal year ended January 31, 1997
consisted primarily of interest income earned on short-term investments and a
$0.4 million net gain on the disposal of certain properties. Other income of
$0.6 million at January 31, 1996 consisted primarily of interest income on
short-term investments.
The effective tax rate for the fiscal year ended January 31, 1997 was
39.5% compared to 40.5% for the prior year. Earnings per share for the fiscal
year ended January 31, 1997 increased approximately $.01 as a result of the
decline in the effective tax rate compared to the prior year.
FYE 1996 vs FYE 1995:
Net sales for the year ended January 31, 1996 were $54.1 million, a new
record, exceeding net sales for the year ended January 31, 1995 by 8.1%. Sales
in the Pollution Control Systems and Allied Equipment segment were $28.1
million, an increase of 8.9% over the prior fiscal year. The increase was
primarily attributable to continued demand for our Aquadene(TM) products
manufactured to prevent lead and copper leaching into drinking water, combined
with improved results in the fume and odor control product lines. Sales in the
Fluid Handling Equipment segment of the business totalled $26.0 million or 7.3%
higher than the prior fiscal year, as a result of the continuing demand for our
specialty pump equipment and related products.
Foreign sales increased to $6.7 million for the year ended January 31,
1996 which is a 14.9% increase over the prior fiscal year. The increase can be
attributed to expanded sales efforts in both the Pacific Rim region and the
European Common Market. Foreign sales increased 32.9% in the Pollution Control
Systems and Allied Equipment segment, and 11.7% in the Fluid Handling Equipment
segment versus the prior year.
Net income of $4.9 million for the fiscal year ended January 31, 1996
was $1.1 million or 27.8% above the record earnings for the prior year. This was
the second consecutive year of record earnings.
The gross margin for the fiscal year ended January 31, 1996 increased
to 34.1% versus 33.1% for the prior fiscal year. This was the fourth consecutive
year that the gross margin has increased. The improvement was due to a
combination of factors, including higher sales volume, product mix, and
production efficiencies.
Selling expense increased approximately $0.5 million or 11.2% over the
prior year due to the expansion of the sales force in both market segments which
was required to position our diversified businesses for future growth. Selling
expense as a percentage of net sales was 8.3% for the fiscal year ended January
31, 1996, virtually flat compared to the prior year.
General and administrative expense was $6.3 million or 11.6% as a
percentage of net sales for the fiscal year ended January 31, 1996. This
represented a 1.0% decline in general and administrative expense as a percentage
of net sales compared to the prior year.
Other income of $0.6 million for the fiscal year ended January 31, 1996
consisted primarily of interest earned on short-term investments.
The effective tax rate for the year ended January 31, 1996 was 40.5%
compare to 41.0% for the prior year. Earnings per share for the fiscal year
ended January 31, 1996 increased by $.01, as a result of the decline in the
effective tax rate compared to the prior year.
Liquidity:
The cash and short-term investment position was $9.1 million on January
31, 1997, an increase of $1.7 million over the previous year. The improvement is
the result of cash flows generated from operations combined with the decision to
finance the Strobic Air acquisition.
Accounts receivable were $10.6 million at January 31, 1997, an increase
of $1.6 million compared to the prior year. Strobic Air accounted for $1.2
million of the increase in accounts receivable. The size of orders, the timing
of shipments to meet customer requirements and retainage on contracts, combined
with increased sales volume, especially in the Pollution Control and Allied
Equipment segment, will influence accounts receivable balances at any point in
time.
Inventories totalled $10.6 million at January 31, 1997, an increase of
$0.3 million compared to the prior year. Strobic Air's inventory of $0.8 million
was offset by lower inventory levels in existing operations. Inventory balances
will fluctuate depending upon the size and timing of orders and market demand
especially when major systems and contracts are involved.
11
Current liabilities increased from $10.3 million at January 31, 1996 to
$11.4 million at January 31, 1997 or $1.1 million. Strobic Air's operations
accounted for $0.8 million of the increase, while debt financing associated with
the acquisition amounted to $0.4 million.
The Company has consistently maintained a high current ratio and has
not utilized lines of credit totalling $5.0 million which are available for
working capital purposes. The current ratio was 2.8 at both January 31, 1997 and
January 31, 1996.
Capital Resources and Requirements:
Cash flows provided by operating activities during the fiscal year
ended January 31, 1997 amounted to $7.2 million compared to $6.3 million during
the prior fiscal year. The increase of $0.9 million can be attributed to the
higher sales activity.
Investing activities during the fiscal year ended January 31, 1997
amounted to $3.8 million compared to $2.4 million during the fiscal year ended
January 31, 1996. The Company completed the construction of a 22,000 square foot
facility for the Stiles-Kem Division. The total investment in the facility,
constructed over two years, is $2.0 million. The Company invested $0.3 million
in capital equipment and tooling at the Keystone Filter Division to increase the
range of products manufactured and to develop a new product line. Machinery and
equipment totalling $0.4 million was purchased for the Dean Pump Division to
expand capacity and improve efficiency. The Company continues to invest in
machinery and equipment, tooling, patterns and molds to improve efficiency and
maintain our position as leaders in the markets in which we serve.
The Company acquired the Common Stock of Strobic Air on September 12,
1996, pursuant to an Agreement and Plan of Merger, effective as of July 31, 1996
for approximately $5.0 million. The acquisition was accounted for as a purchase
transaction. As part of the transaction, the Company entered into a non-compete
agreement having a four-year term and a three-year employment agreement with the
former President of Strobic Air.
Financing activities during the fiscal year ended January 31, 1997
utilized $1.7 million of available resources compared to $3.1 million during the
prior fiscal year.
The Strobic Air acquisition was financed through unsecured bank loans
consisting of two separate $1.75 million notes, payable with fixed and floating
interest rates. The Company also disposed of certain idle properties in Indiana,
Michigan and North Carolina, generating net proceeds of approximately $1.5
million and a net gain of $0.4 million.
The Company paid $1.9 million of scheduled long-term debt during the
current fiscal year. The long-term debt to equity ratio at January 31, 1997 was
9.1% compared to 4.8% at January 31, 1996.
A total of 48,088 stock options were exercised during the year ended
January 31, 1997 which provided cash proceeds of approximately $0.3 million.
The Company continued to repurchase shares outstanding on the open
market at prevailing prices under the stock buyback program announced on June 7,
1995. The Board of Directors also authorized two separate buyback programs
totalling 175,000 shares during the fiscal year ended January 31, 1997. The
Company repurchased 156,900 shares at a cost of approximately $2.0 million under
the combined programs during the year ended January 31, 1997.
The Board of Directors also declared a cash dividend of $.22 (adjusted
for stock split) per share which was paid on April 26, 1996. This represented a
10% increase in the dividend payout rate, amounting to $1.5 million or 31.3% of
prior year earnings.
On June 5, 1996, the Board of Directors announced a 3-for-2 stock split
which was paid to shareholders of record on July 8, 1996. This resulted in an
increase of approximately 2.4 million shares outstanding, and is the second
consecutive year that a 3-for-2 stock split was executed.
During the fiscal year ended January 31, 1997, the Company expended
approximately $0.7 on research and development compared to $0.6 million during
the prior fiscal year as part of our commitment to the future.
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
Certain Trends and Uncertainties:
As a cautionary note to investors, the Company and its representatives
may make oral or written statements from time to time that are "forward-looking
statements". This would include information concerning possible or assumed
future activities, plans, results or operations of the Company and those
preceded by, followed by or that include the words "believes", "expects",
"anticipates", "intends" or similar expressions. For those statements, the
Company claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
There are a number of important factors which could cause actual
results to differ materially from those anticipated. The Company believes that
its future operating results will continue to be subject to quarterly variations
based upon a wide variety of factors, including the cyclical nature of both the
business segments and the markets addressed by the Company's products, price
erosion, competitive factors, the timing of new product introductions, changes
in product mix, the availability and extent of utilization of manufacturing
capacity, product obsolescence and the ability to develop and implement new
technologies. The Company's operating results could also be impacted by sudden
fluctuations in customer requirements, currency exchange rate fluctuations and
other economic conditions affecting customer demand and the cost of operations
in one or more of the global markets in which the Company does business. As a
participant in the pollution control and fluid handling industries, the Company
operates in a rapidly changing and highly competitive environment. The Company
sells both custom products to customers, and industrial products; accordingly,
changes in the conditions or composition of any of the Company's customers may
have an impact on the Company. While the Company cannot predict what effect
these various factors may have on its financial results, the aggregate effect of
these and other factors could result in volatility in the Company's future
performance and stock price.
Item 8. Financial Statements and Supplementary Data:
Index to Consolidated Financial Statements and Supplementary Data:
Page
Consolidated Financial Statements:
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Statement of Consolidated Stockholder's Equity . . . . . . . . . . . . . . . . . . . . . . . 16
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Consolidated Business Segment Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 19
Supplementary Data:
Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Met-Pro Corporation and its Wholly Owned Subsidiaries
Harleysville, Pennsylvania
We have audited the accompanying consolidated balance sheet of Met-Pro
Corporation and its wholly owned subsidiaries as of January 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended January 31, 1997.
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, 1997 and 1996 and the
results of their operations and their cash flows for each of the three years in
the period ended January 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Margolis & Company P.C.
----------------------------
Certified Public Accountants
Bala Cynwyd, Pennsylvania
February 28, 1997
14
MET-PRO CORPORATION
CONSOLIDATED BALANCE SHEET
January 31,
ASSETS 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents - Note 3 $9,070,976 $7,415,375
Accounts receivable, net of allowance for
doubtful accounts of approximately $233,000
and $195,000, respectively 10,570,528 8,941,157
Notes receivable, ESOT - Note 4 400,000 400,000
Inventories - Note 5 10,597,813 10,302,844
Prepaid expenses, deposits and other current assets 571,226 559,238
Deferred income taxes - Note 8 878,003 649,947
- ----------------------------------------------------------------------------------------------------------------------------------
Total current assets 32,088,546 28,268,561
Property, plant and equipment, net -
Notes 6 and 7 14,346,995 14,433,565
Costs in excess of net assets of businesses acquired, net 7,502,470 3,725,118
Other assets 2,141,380 1,199,343
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $56,079,391 $47,626,587
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
Current liabilities
Current portion of long-term debt - Note 7 $1,585,087 $1,178,177
Accounts payable 2,996,065 2,307,034
Accrued salaries, wages and expenses - Note 10 6,424,709 6,347,912
Payroll and other taxes payable 19,685 5,974
Customers' advances 348,569 411,409
- ----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 11,374,115 10,250,506
Long-term debt - Note 7 3,683,419 1,692,962
Other non-current liabilities 172,941 101,345
Deferred income taxes - Note 8 495,990 569,196
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 15,726,465 12,614,009
- ----------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies - Notes 9, 10 and 14
Stockholders' equity - Note 10
Common stock, $.10 par value; 10,000,000 shares
authorized, 7,138,625 and 4,759,221 shares issued,
respectively, of which 95,189 and 121,531 shares were
reacquired and held in treasury at the respective dates 713,862 475,922
Additional paid-in capital 8,260,289 7,442,810
Retained earnings 32,467,223 28,142,539
Cumulative translation adjustment 19,121 209,333
Treasury stock, at cost (1,107,569) (1,258,026)
- ----------------------------------------------------------------------------------------------------------------------------------
Net stockholders' equity 40,352,926 35,012,578
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $56,079,391 $47,626,587
- ----------------------------------------------------------------------------------------------------------------------------------
The notes to consolidated financial statements are an integral part of the above
statement.
15
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Years ended January 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales $60,853,278 $54,067,320 $50,005,577
Cost of goods sold 40,157,752 35,625,610 33,472,665
- -----------------------------------------------------------------------------------------------------------------------------------
Gross profit 20,695,526 18,441,710 16,532,912
- -----------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Selling 4,854,845 4,489,905 4,037,676
General and administrative 6,683,550 6,287,848 6,213,799
- -----------------------------------------------------------------------------------------------------------------------------------
11,538,395 10,777,753 10,251,475
- -----------------------------------------------------------------------------------------------------------------------------------
Income from operations 9,157,131 7,663,957 6,281,437
Other income, net - Note 11 918,905 561,060 210,158
- -----------------------------------------------------------------------------------------------------------------------------------
Income before taxes 10,076,036 8,225,017 6,491,595
Provision for taxes - Note 8 3,980,034 3,331,132 2,661,553
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $6,096,002 $4,893,885 $3,830,042
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share, primary and fully diluted $.86 $.69 $.54
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Additional Cumulative
Common Paid-in Retained Translation Treasury
Stock Capital Earnings Adjustment Stock Total
- --------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 1994 $319,342 $7,392,546 $21,766,568 ($63,071) ($228,079) $29,187,306
Net income - - 3,830,042 - - 3,830,042
Dividends paid, $.11 per share - - (780,068) - - (780,068)
Stock option transactions - Note 10 - 9,095 - - 5,155 14,250
Purchase of 31,980 shares of treasury stock - - - - (464,351) (464,351)
Cumulative translation adjustment - - - 296,831 - 296,831
- --------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 1995 319,342 7,401,641 24,816,542 233,760 (687,275) 32,084,010
Net income - - 4,893,885 - - 4,893,885
Dividends paid, $.20 per share - - (1,409,322) - - (1,409,322)
Stock split, 50% 156,580 - (156,580) - - -
Cash in lieu of fractional shares - - (1,986) - - (1,986)
Stock option transactions - Note 10 - 41,169 - - 265,570 306,739
Purchase of 61,003 shares of treasury stock - - - - (836,321) (836,321)
Cumulative translation adjustment - - - (24,427) - (24,427)
- --------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 1996 475,922 7,442,810 28,142,539 209,333 (1,258,026) 35,012,578
Net income - - 6,096,002 - - 6,096,002
Dividends paid, $.22 per share - - (1,530,693) - - (1,530,693)
Stock split, 50% 237,940 - (237,940) - - -
Cash in lieu of fractional shares - - (2,685) - - (2,685)
Stock option transactions - Note 10 - 143,514 - - 406,813 550,327
Purchase of 156,900 shares of treasury stock - - - - (1,982,411) (1,982,411)
Acquisition of Strobic Air Corporation - Note 2 - 673,965 - - 1,726,055 2,400,020
Cumulative translation adjustment - - - (190,212) - (190,212)
- --------------------------------------------------------------------------------------------------------------------------------
Balances, January 31, 1997 $713,862 $8,260,289 $32,467,223 $19,121 ($1,107,569) $40,352,926
- --------------------------------------------------------------------------------------------------------------------------------
The notes to consolidated financial statements are an integral part of the above
statement.
16
MET-PRO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended January 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net income $6,096,002 $4,893,885 $3,830,042
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,707,547 1,613,391 1,619,098
Deferred income taxes (379,520) (222,131) (354,198)
(Gain)/loss on sale of property and equipment, net (369,100) (4,217) 85,726
Non-cash compensation expensed on
exercise of stock options 286,733 - 3,500
Allowance for doubtful accounts 38,014 10,528 93,444
(Increase) decrease in operating assets,
net of acquisition of Strobic Air Corporation:
Accounts receivable (617,027) (833,030) (557,147)
Notes receivable, ESOT - (400,000) 75,000
Inventories 496,743 400,946 (1,258,406)
Prepaid expenses and other current assets 82,789 89,169 -
Other assets (40,968) (38,929) (165,656)
Increase (decrease) in operating liabilities,
net of acquisition of Strobic Air Corporation:
Accounts payable, accrued expenses and taxes (106,710) 596,986 2,107,095
Customers' advances (62,840) 139,022 171,009
Other non-current liabilities 71,595 66,498 17,997
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 7,203,258 6,312,118 5,667,504
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from sale of property and equipment 1,498,747 4,881 4,274
Acquisitions of property and equipment (1,811,833) (2,436,419) (1,098,893)
Payment for purchase of Strobic Air Corporation,
net of cash acquired (3,535,898) - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (3,848,984) (2,431,538) (1,094,619)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from new borrowings 3,500,000 - -
Reduction of debt (1,919,659) (1,177,068) (1,165,012)
Exercise of stock options 263,594 306,739 10,750
Payment of dividends (1,530,693) (1,409,322) (780,068)
Cash in lieu of fractional shares (2,685) (1,986) -
Purchase of treasury shares (1,982,411) (836,321) (464,351)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (1,671,854) (3,117,958) (2,398,681)
- ----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (26,819) 4,373 48,829
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,655,601 766,995 2,223,033
Cash and cash equivalents at beginning of year 7,415,375 6,648,380 4,425,347
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $9,070,976 $7,415,375 $6,648,380
- ----------------------------------------------------------------------------------------------------------------------------------
The notes to consolidated financial statements are an integral part of the above
statement.
17
MET-PRO CORPORATION
CONSOLIDATED BUSINESS SEGMENT DATA
Years ended January 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Net sales to unaffiliated customers
Pollution control systems and allied equipment $31,578,749 $28,090,728 $25,802,405
Fluid handling equipment 29,274,529 25,976,592 24,203,172
- -------------------------------------------------------------------------------------------------------------------
$60,853,278 $54,067,320 $50,005,577
Includes foreign sales of:
Pollution control systems and allied equipment $ 1,106,077 $ 1,164,509 $ 875,966
Fluid handling equipment 6,431,167 5,521,619 4,945,125
- -------------------------------------------------------------------------------------------------------------------
$ 7,537,244 $ 6,686,128 $ 5,821,091
- -------------------------------------------------------------------------------------------------------------------
Income from operations
Pollution control systems and allied equipment $ 5,048,313 $ 4,269,701 $ 3,489,710
Fluid handling equipment 4,108,818 3,394,256 2,791,727
- -------------------------------------------------------------------------------------------------------------------
$ 9,157,131 $ 7,663,957 $ 6,281,437
- -------------------------------------------------------------------------------------------------------------------
Depreciation and amortization expense
Pollution control systems and allied equipment $ 750,677 $ 506,260 $ 502,254
Fluid handling equipment 956,870 1,107,131 1,116,844
- -------------------------------------------------------------------------------------------------------------------
$ 1,707,547 $ 1,613,391 $ 1,619,098
- -------------------------------------------------------------------------------------------------------------------
Capital expenditures
Pollution control systems and allied equipment $ 797,799 $ 1,693,342 $ 319,468
Fluid handling equipment 922,724 660,377 678,316
- -------------------------------------------------------------------------------------------------------------------
1,720,523 2,353,719 997,784
Corporate 91,310 82,700 101,109
- -------------------------------------------------------------------------------------------------------------------
$ 1,811,833 $ 2,436,419 $ 1,098,893
- -------------------------------------------------------------------------------------------------------------------
Identifiable assets at January 31
Pollution control systems and allied equipment $24,530,682 $16,370,893 $16,466,133
Fluid handling equipment 20,601,654 21,726,465 21,046,118
- -------------------------------------------------------------------------------------------------------------------
45,132,336 38,097,358 37,512,251
Corporate 10,947,055 9,529,229 7,656,293
- -------------------------------------------------------------------------------------------------------------------
$56,079,391 $47,626,587 $45,168,544
- -------------------------------------------------------------------------------------------------------------------
The Company follows the practice of allocating general corporate expenses,
including depreciation and amortization expense, among the segments.
18
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. 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.
Nature of operations:
The Company manufactures and sells pollution control and allied
equipment for purification of air and liquids, and fluid handling
equipment for corrosive, abrasive and high temperature liquids.
Inventories:
Inventories generally are stated at the lower of cost or market
(principally first-in, first-out) except for the inventory at the Dean
Pump Division which is determined on the last-in, first-out basis (see
Note 5).
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 6).
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 $6,919,957, are being amortized over 40 years. The Company
monitors the recoverability of goodwill using a fair value approach.
Revenue recognition:
Revenues are recognized when products are shipped.
Advertising:
Advertising costs are charged to operations in the year incurred and
were $809,476, $767,507 and $709,977 for the years ended January 31,
1997, 1996 and 1995, respectively.
Research and development:
Research and development costs are charged to expense in the year
incurred. The amounts charged were $670,336, $584,191 and $506,139 in
the years ending in 1997, 1996 and 1995, respectively.
19
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
Earnings per share:
Earnings per share is computed based on the weighted average number of
shares of common stock and common stock equivalents outstanding during
each year. The weighted average number of common shares outstanding was
7,096,214, 7,051,527 and 7,063,920 during each of the years ended in
1997, 1996 and 1995, respectively.
Stock splits and cash dividends:
On May 12, 1995, the Company issued 1,565,803 shares of Common Stock in
connection with the 3-for-2 stock split, and on July 8, 1996, the
Company issued 2,379,197 shares of Common Stock in connection with a
second 3-for-2 stock split. Both stock splits were in the form of a 50%
stock dividend. Per share figures and other information included in the
financial statements and notes are based on the increased number of
shares after giving affect to the stock splits.
On February 24, 1997, the Board of Directors declared a $.27 per share
annual cash dividend payable on April 25, 1997 to stockholders of
record on April 11, 1997.
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, 1997 and 1996.
Contract retainage:
Accounts receivable at January 31, 1997 and 1996 included retainage on
contracts of $276,000 and $528,000, respectively.
Supplemental cash flow information:
1997 1996 1995
-----------------------------------------------------------------------
Cash paid during the year for:
Interest $228,841 $258,297 $287,112
-----------------------------------------------------------------------
Income taxes $4,039,248 $3,148,038 $2,443,099
-----------------------------------------------------------------------
NOTE 2: ACQUISITION OF BUSINESS
The Company, pursuant to an Agreement and Plan of Merger, acquired the
Common Stock of Strobic Air for a purchase price of approximately
$5,000,000. The acquisition was accounted for as a purchase
transaction. Strobic Air designs, manufactures and markets the patented
Tri-Stack(R) direct drive mixed flow exhaust fans which are
state-of-the-art design.
The acquisition was completed by issuing Common Stock from the treasury
valued at $2,400,020 (195,920 shares), a cash payment of $2,150,000, a
promissory note payable for $250,000, plus acquisition costs. As part
of the transaction, the Company entered into a non-compete agreement in
the amount of $1,000,000 having a four-year term. Bank loans totalling
$3,500,000, consisting of two $1,750,000 notes, one with a floating
interest rate and one with a fixed interest rate (see Note 7), were
used to finance the purchase of Strobic Air. Goodwill totalling
$3,914,602 was acquired and will be amortized over 40 years.
On December 31, 1996, the Securities and Exchange Commission declared
effective the Company's Registration Statement on Form S-3 pursuant to
which the Company registered an aggregate of 195,920 shares of Common
Stock issued to the former stockholders of Strobic Air in connection
with the acquisition. The shares registered may be sold pursuant to the
plan of distribution described therein. An aggregate of 193,544 of such
shares are subject, through December 11, 1997, to certain contractual
restrictions.
20
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
The following unaudited pro forma summary presents the consolidated
results of operations as if the Company had acquired Strobic Air at the
start of the year in which the acquisition occurred and the immediately
preceding year:
1997 1996
------------------------------------------------------------------
Net sales $64,060,415 $59,621,240
Income before taxes 10,327,460 8,686,542
Net income 6,214,483 5,172,751
Earnings per share (fully diluted) $.88 $.71
NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents:
Short-term investments at January 31, 1997 and 1996 were valued at cost
(approximating market) and amounted to $8,495,100 and $6,955,338,
respectively. Short-term investments consist principally of commercial
paper maturing within three months and money market funds, 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,
1997 1996
---------------------------------------------------------------------
Fair value $5,276,656 $2,905,748
Carrying amount 5,268,506 2,871,139
Valuations for long-term debt are determined based on borrowing rates
currently available to the Company for loans with similar terms and
maturities.
NOTE 4: NOTES RECEIVABLE, ESOT
The Company has advanced a total of $400,000 to the Employee Stock
Ownership Trust to acquire shares of the Company's stock, which are
evidenced by four demand notes with interest rates ranging from 4.95%
to 5.64% per annum.
NOTE 5: INVENTORIES
Inventories were comprised of the following:
January 31,
1997 1996
------------------------------------------------------------------
Raw material $4,784,192 $4,277,065
Work in process 1,715,157 2,053,626
Finished goods 4,098,464 3,972,153
------------------------------------------------------------------
$10,597,813 $10,302,844
------------------------------------------------------------------
At January 31, 1997 and 1996, inventories valued at the last-in,
first-out method (LIFO) were $2,548,477 and $2,921,430, respectively.
The LIFO value of inventories was lower than replacement cost by
$746,485 and $719,000 at January 31, 1997 and 1996, respectively.
21
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
The book basis of LIFO inventories exceeded the tax basis by
approximately $1,026,000 at both January 31, 1997 and 1996, 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.
NOTE 6: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment was comprised of the following:
January 31,
1997 1996
---------------------------------------------------------------------
Land $1,906,387 $2,028,934
Buildings and improvements 11,444,189 12,456,649
Machinery and equipment 11,614,730 9,094,165
Furniture and fixtures 2,599,240 2,321,768
Automotive equipment 928,420 877,124
Leasehold improvements 3,710 -
---------------------------------------------------------------------
28,496,676 26,778,640
Less accumulated depreciation 14,149,681 12,345,075
---------------------------------------------------------------------
$14,346,995 $14,433,565
---------------------------------------------------------------------
Depreciation of property, plant and equipment charged to operations
amounted to $1,295,483, $1,160,717 and $1,157,483 for the years ended
in 1997, 1996 and 1995, respectively.
22
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
NOTE 7: 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 was comprised of the following:
January 31,
1997 1996
-----------------------------------------------------------------------------------------------------
Notes payable, bank, payable in quarterly installments ranging
from $87,500 to $100,000, plus interest at fixed rates
ranging from 6.15% to 7.51%, maturing July, 1998 and September,
2001 $2,262,500 $1,000,000
Notes payable, bank, payable in quarterly installments ranging
from $87,500 to $100,000, plus interest at variable rates
ranging from 6.375% to 6.625%, maturing July, 1998 and September,
2001 2,262,500 1,000,000
Note payable, acquisition escrow account, balloon payment due
on April 2, 1998, plus interest at a fixed rate of 5.90% 250,000 -
Mortgage note payable, secured by property, payable in $10,267
monthly installments (including principal and interest), at
a fixed interest rate of 8.50%, maturing February, 2001 493,506 571,139
Mortgage note payable, secured by property, payable in $25,000
monthly installments, plus interest, at a variable rate of
6.281% - 300,000
------------------------------------------------------------------------------------------------------
5,268,506 2,871,139
Less current portion 1,585,087 1,178,177
------------------------------------------------------------------------------------------------------
$3,683,419 $1,692,962
------------------------------------------------------------------------------------------------------
Interest expense was $300,170, $266,113, and $285,710 for the years
ending in 1997, 1996 and 1995, respectively.
The aggregate maturities of long-term debt for each of the five years
subsequent to January 31, 1997 are as follows: 1998, $1,585,087; 1999,
$1,442,608; 2000, $800,794; 2001, $809,703; 2002, $630,314; and
thereafter, none.
23
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
NOTE 8: INCOME TAXES
The provision for income taxes was comprised of the following:
1997 1996 1995
--------------------------------------------------------------------
Current
Federal $3,048,214 $2,545,999 $2,037,642
State 982,353 824,518 818,781
Foreign 250,729 207,366 127,130
--------------------------------------------------------------------
4,281,296 3,577,883 2,983,553
Deferred (301,262) (246,751) (322,000)
--------------------------------------------------------------------
$3,980,034 $3,331,132 $2,661,553
--------------------------------------------------------------------
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:
1997 1996
-----------------------------------------------------------------------
Deferred tax assets
Inventory cost capitalization $183,897 $191,927
Pension cost 901,131 748,488
Non-compete agreements 334,999 275,557
Write-down of property, plant and equipment - 36,000
Other 203,439 120,000
-----------------------------------------------------------------------
Total deferred tax assets 1,623,466 1,371,972
-----------------------------------------------------------------------
Deferred tax liabilities
Accelerated depreciation 568,128 535,085
Inventory - Dean Pump Division 410,463 410,468
Excess of book over tax basis of
property acquired in acquisitions 213,011 309,732
Goodwill 49,851 35,936
-----------------------------------------------------------------------
Total deferred tax liabilities 1,241,453 1,291,221
-----------------------------------------------------------------------
Net deferred tax assets $382,013 $80,751
-----------------------------------------------------------------------
A reconciliation of the federal statutory rate and the Company's
effective tax rate is presented as follows:
1997 1996 1995
------------------------------------------------------------------------------------------------
Computed expected
tax expense
(federal) $3,425,852 34.0% $2,796,506 34.0% $2,207,142 34.0%
State income taxes,
net of federal
income tax benefit 648,353 6.4 544,180 6.6 540,395 8.3
Foreign tax differential (59,709) (.6) (5,500) (.1) (39,951) (.6)
Foreign tax credit (5,140) - (3,861) - (11,427) (.2)
Other (29,322) (.3) (193) - (34,606) (.5)
------------------------------------------------------------------------------------------------
Effective income taxes $3,980,034 39.5% $3,331,132 40.5% $2,661,553 41.0%
------------------------------------------------------------------------------------------------
24
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
NOTE 9: LEASES AND OTHER COMMITMENTS
The Company leases two facilities under operating leases which expire
on April 15 and October 31, 1997. The operating leases will not be
renewed at expiration. Minimum rental commitments under these
non-cancelable leases amount to $39,750.
Rental expense under all operating leases was $50,622, $60,335 and
$74,161 during the years ended in 1997, 1996 and 1995, respectively.
NOTE 10: EMPLOYEE BENEFIT PLANS
Pension Plans:
The Company has several tax-qualified defined benefit pension plans
covering eligible employees in the United States. The Company
contributes amounts to the plans equal to the amounts that are tax
deductible.
Net periodic pension cost included the following components:
1997 1996 1995
---------------------------------------------------------------------------------------------------
Service cost-benefits earned
during the period $461,000 $414,100 $458,500
Interest cost on projected
benefit obligation 625,083 562,387 487,152
Return on assets (1,624,484) (1,499,590) (56,541)
Amortization 58,205 (31,546) (47,428)
Deferred gain/(loss)
on investments 984,187 962,487 (489,546)
---------------------------------------------------------------------------------------------------
$503,991 $407,838 $352,137
---------------------------------------------------------------------------------------------------
25
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
The following table sets forth the Plans' funded status and amounts
recognized in the Company's balance sheet at January 31, 1997 and 1996:
1997 1996
--------------------------------------------------------------------------------------------------------------
Overfunded Underfunded Overfunded Underfunded
Plan Plans Plan Plans
--------------------------------------------------------------------------------------------------------------
Actuarial present value of
benefit obligations:
Vested $4,679,000 $2,208,200 $4,344,000 $2,073,300
Non-vested 131,000 91,700 142,000 94,100
--------------------------------------------------------------------------------------------------------------
Accumulated benefit
obligation $4,810,000 $2,299,900 $4,486,000 $2,167,400
--------------------------------------------------------------------------------------------------------------
Projected benefit
obligation $6,269,000 $2,299,900 $5,867,000 $2,167,400
Plan assets at fair value 7,585,508 1,908,531 6,505,476 1,571,989
--------------------------------------------------------------------------------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation 1,316,508 (391,369) 638,476 (595,411)
Unrecognized net gain (2,897,814) (456,947) (1,989,709) (224,557)
Unrecognized transition
(obligation) asset (381,958) 205,948 (413,788) 244,700
Unrecognized prior
service cost 64,828 168,093 63,707 264,174
--------------------------------------------------------------------------------------------------------------
Accrued pension expense
included in accounts
payable and accrued
expenses ($1,898,436) ($474,275) ($1,701,314) ($311,094)
--------------------------------------------------------------------------------------------------------------
Assumptions used in the accounting for pension cost were:
1997 1996 1995
----------------------------------------------------------------------
Discount rate 7.50% 7.50% 7.75%
Rate of increase in
compensation levels
(where applicable) 6.00% 6.00% 6.00%
Expected long-term rate of
return on assets 8.00% 8.00% 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
amounts applicable are included in the tables above.
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 $200,000,
$200,000 and $150,000 in the years ended in 1997, 1996 and 1995,
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.
26
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
Incentive Stock Option Plans:
The Company accounts for employee stock options in accordance with
APB No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations. The Company will apply APB No. 25 for purposes of
accounting for its employee stock options. 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.
During 1987 ("1987 Plan"), the Company adopted an incentive stock
option plan under which 100,000 shares (354,375 after stock splits and
dividends) of the Company's Common Stock were reserved for employees as
selected by the Board of Directors. At the Company's annual meeting
held June 3, 1992, a similar resolution for an additional 100,000
shares (225,000 after stock splits and dividends), as adopted by the
Board of Directors on October 10, 1991 ("1992 Plan"), was approved.
Each of the Plans provides for anti-dilution provisions.
The status of the Plans was as follows:
1987 Plan 1997 1996 1995
-------------------------------------------------------------------------------------------------
Options outstanding at February 1 60,300 108,338 109,463
Grants 40,500 27,000 -
Exercises 35,713 75,038 1,125
Options outstanding at January 31 65,087 60,300 108,338
Options price range at January 31 $ 3.38 $ 3.38 $ 3.38
to to to
$ 7.17 $ 7.17 $ 7.17
Options exercisable at January 31 65,087 33,300 108,338
-------------------------------------------------------------------------------------------------
Options available for grant
at January 31 1,238 41,738 68,738
-------------------------------------------------------------------------------------------------
1992 Plan 1997 1996 1995
-------------------------------------------------------------------------------------------------
Options outstanding at February 1 197,625 73,125 45,000
Grants 21,000 133,500 29,250
Exercises 12,375 9,000 1,125
Cancellations 3,750 - -
Options outstanding at January 31 202,500 197,625 73,125
Options price range at January 31 $ 5.00 $ 5.00 $ 5.00
to to to
$ 13.13 $ 9.08 $ 6.00
Options exercisable at January 31 143,251 59,625 48,375
-------------------------------------------------------------------------------------------------
Options available for grant
at January 31 0 17,250 150,750
-------------------------------------------------------------------------------------------------
The weighted average exercise prices for both of the Company's stock
option plans were as follows:
1997 1996 1995
-----------------------------------------------------------------------------------------------------
Options outstanding at February 1 $7.19 $4.33 $4.18
Grants $8.40 $8.56 $5.23
Exercises $5.48 $3.65 $4.78
Cancellations $9.08 - -
Options outstanding at January 31 $7.75 $7.19 $4.33
27
MET-PRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995 - (Continued)
NOTE 11: OTHER INCOME, NET
Other income, net, was comprised of the following:
1997 1996 1995
-----------------------------------------------------------------------------------------------
Gain/(loss) on sale of property
and equipment $369,100 $4,217 ($85,726)
Other, primarily interest income 549,805 556,843 295,884
-----------------------------------------------------------------------------------------------
$918,905 $561,060 $210,158
-----------------------------------------------------------------------------------------------
NOTE 12: BUSINESS SEGMENT DATA
The Company operates in two business segments as shown on page 18.
NOTE 13: GEOGRAPHIC INFORMATION
Transfers between geographic areas are accounted for at cost and
consistent with rules and regulations of governing tax authorities.
Such transfers are eliminated in the consolidated financial statements.
Income from operations by geographic segment includes an allocation of
general corporate expenses. Identifiable assets are those that can be
directly associated with the geographic area. Geographic information
for three years ended January 31 is presented in the following table:
1997 1996 1995
----------------------------------------------------------------------------------------------------
Net sales:
United States $53,316,034 $47,381,192 $44,184,486
Foreign 7,537,244 6,686,128 5,821,091
----------------------------------------------------------------------------------------------------
$60,853,278 $54,067,320 $50,005,577
----------------------------------------------------------------------------------------------------
Income from operations:
United States $8,499,378 $7,119,170 $5,897,020
Foreign 657,753 544,787 384,417
----------------------------------------------------------------------------------------------------
$9,157,131 $7,663,957 $6,281,437
----------------------------------------------------------------------------------------------------
Total assets:
United States $51,916,885 $43,348,162 $41,154,326
Foreign 4,162,506 4,278,425 4,014,218
----------------------------------------------------------------------------------------------------
$56,079,391 $47,626,587 $45,168,544
----------------------------------------------------------------------------------------------------
NOTE 14: CONTINGENT LIABILITIES
Subsequent to January 31, 1997, the Company was served a complaint
relating to environmental remediation costs for a property which it had
occupied prior to 1976. The Company believes that the outcome of any
resultant litigation will not have a materially adverse effect on the
Company's financial condition.
28
QUARTERLY FINANCIAL DATA (Unaudited)
Earnings
1996 Net Sales Gross Profit Net Income Per Share
------------------------------------------------------------------------------------------------------------------------
First Quarter $13,131,816 $4,488,449 $1,100,959 $.15
Second Quarter 13,615,141 4,603,636 1,158,741 .17
Third Quarter 14,089,960 4,826,286 1,268,331 .18
Fourth Quarter 13,230,403 4,523,339 1,365,854 .19
Earnings
1997 Net Sales Gross Profit Net Income Per Share
------------------------------------------------------------------------------------------------------------------------
First Quarter $13,731,982 $4,975,320 $1,421,437 $.20
Second Quarter 14,759,594 5,000,697 1,457,021 .21
Third Quarter 16,255,744 5,431,110 1,567,402 .22
Fourth Quarter 16,105,958 5,288,399 1,650,142 .23
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure:
There has been no change in accountants and no disagreements on
accounting and financial disclosures.
PART III
Item 10. Directors and Executive Officers of the Registrant:
Information required by this Item (other than the information regarding
executive officers set forth below) is incorporated by reference to the material
appearing under the captions "Election of Directors" and "Security Ownership" in
the Company's Proxy Statement for its 1997 Annual Meeting of Stockholders.
The executive officers of Registrant are as follows:
Walter A. Everett, age 75, is Chairman and a Director of the Company.
He is the former President and Chief Executive Officer. Except for a brief
period prior to August 15, 1990, he has been a Director of the Company for the
past twenty-seven years.
William L. Kacin, age 65, is President, Chief Executive Officer and a
Director of the Company. He was elected to this position in February, 1993.
Prior to that, he was Vice President and General Manager of the Company's Sethco
Division for seventeen years.
William F. Moffitt, C.P.A., age 47, is Vice President-Finance,
Secretary and Treasurer, Chief Financial Officer and a Director. He has held
these positions since 1986, and was elected a Director in August, 1993. Prior to
that, he was employed by IU International as a Vice President and Treasurer of a
subsidiary.
Mark A. Betchaver, age 47, is a Vice President of Registrant and
General Manager of the Sethco Division, to which he was elected in June, 1993.
He joined the Registrant in 1972 and was most recently Sales Manager of the
Division and was elected a Vice President in June, 1993.
Carl W. Dean, age 50, is a Vice President of Registrant and General
Manager of the Dean Pump Division, to which office he was elected in February,
1987. He was employed by Dean Brothers Pumps, Inc. in 1972 and became an
employee of Registrant when that entity was acquired in July, 1984. He
previously held the position of Sales Manager of the Division.
Raymond J. De Hont, age 43, is a Vice President of Registrant and
General Manager of the Fybroc Division, to which office he was elected in June,
1995. He joined the Registrant in June, 1995. For more than five years prior
thereto, Mr. De Hont was employed by Air and Water Technologies and served in
various capacities. His last position was Executive Vice President of their
Service Group.
29
Sonja M. Haggert, age 43, is a Vice President of Registrant and General
Manager of the Keystone Filter Division, to which office she was elected in
February, 1993. She joined the Registrant in 1978 and previously held the
position of Distributor Sales Manager of the Division.
Hans J. D. Huizinga, age 46, is the Managing Director of Mefiag B.V., a
wholly owned subsidiary of Registrant, 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
Registrant's subsidiary on June 30, 1993, when Registrant acquired that company.
Gregory C. Kimmer, age 42, is Vice President 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 43, is a Vice President of Registrant and
General Manager of the Stiles-Kem Division, to which office he was elected in
October, 1996. He joined the Registrant in June, 1995 as National Sales Manager.
For more than five years prior thereto, Mr. Mersch was employed by ANCO
Corporation. His last position was Vice President Sales and Marketing.
Robert P. Replogle, age 56, is Vice President and Director of the
International Sales Division and the Mefiag Division, to which office he was
elected in December, 1995. He joined the Registrant in December, 1973 and
previously held the position of Director of the International Sales Division and
the Mefiag Division.
Lynn T. Secrest, age 59, is a Vice President of Registrant and General
Manager of Strobic Air Corporation, to which office he was elected in October,
1996. He became an employee of the Registrant when that entity was acquired in
September, 1996. For more than five years prior thereto, Mr. Secrest was
employed by Strobic Air Corporation as President.
There is no family relationship between any of the Directors or
executive officers of Registrant. The term of office for each officer is subject
to the pleasure of the Board of Directors for up to one year and will expire on
June 4, 1997, the date of Registrant's forthcoming Annual Meeting of
Stockholders.
Item 11. Executive Compensation:
Information required by this Item is incorporated by reference to the
material appearing under the heading "Executive Compensation and Other
Information" in the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management:
Information required by this Item is incorporated by reference to the
material appearing under the heading "Principal Security Holders" in the
Company's definitive Proxy Statement for its 1997 Annual Meeting of
Stockholders.
Item 13. Certain Relationships and Related Transactions:
Information required by this Item is incorporated by reference to the
material appearing under the headings "Election of Directors" and "Certain
Transactions" in the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Stockholders.
30
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 13.
B. Exhibits:
The following exhibits are filed herewith or incorporated by
reference:
(2) Agreement and Plan of Merger dated September 12, 1996
by and between Met-Pro Corporation, Met-Pro
Acquisition Corporation, Strobic Air Corporation,
Lynn T. Secrest, Ronald H. Secrest, Richard P.
Secrest and John W. Stone, III. Incorporated by
reference to Registrant's Registration Statement on
Form S-3 (File No. 333-13929), declared effective
December 31, 1996.
(3) Certificate of Incorporation, as amended.
(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
Strobic Air Corporation Delaware Strobic Air Corporation,
a wholly owned subsidiary of
Met-Pro Corporation
(23) Independent Auditors' Consent.
(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.
(4) Instruments defining the rights of security holders.
(9) Voting trust agreements.
(10) Material contracts.
(12) Statements re computation of ratios.
(13) Annual report to security holders.
(16) Letter re change in certifying accountant.
(18) Letter re change in accounting principles.
(22) Published report regarding matters submitted to vote
of security holders.
(24) Power of attorney.
(28) Information from reports furnished to state insurance
regulatory authorities.
(99) Additional exhibits.
C. Reports on Form 8-K:
No reports on Form 8-K were filed during the three month
period ended January 31, 1997.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MET-PRO CORPORATION
April 25, 1997 By: /S/ William L. Kacin
- ----------------------- -----------------------------------
Date William L. Kacin
President, Chief Executive Officer
and Director
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 President, Chief Executive April 25, 1997
- ----------------------------- Officer and Director
William L. Kacin
/S/ William F. Moffitt Vice President-Finance April 25, 1997
- ----------------------------- Secretary and Treasurer
William F. Moffitt Chief Financial Officer
Chief Accounting Officer
Director
/S/ Walter A. Everett Director, Chairman April 25, 1997
- -----------------------------
Walter A. Everett
/S/ Thomas F. Hayes Director April 25, 1997
- -----------------------------
Thomas F. Hayes
/S/ Richard P. Klopp Director April 25, 1997
- -----------------------------
Richard P. Klopp
/S/ Alan Lawley Director April 25, 1997
- -----------------------------
Alan Lawley
32