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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended April 30, 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, Box 144
Harleysville, Pennsylvania 19438
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 723-6751
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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The number of shares outstanding of the Registrant's common stock (par
value $0.10 per share) is 7,095,673 (as of April 30, 1997).
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MET-PRO CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheet as of
April 30, 1997 and January 31, 1997......................................................... 2
Condensed consolidated statement of operations for the three-month
periods ended April 30, 1997 and 1996 ...................................................... 3
Condensed consolidated statement of cash flows for the three-month
periods ended April 30, 1997 and 1996....................................................... 4
Notes to condensed consolidated financial statements................................................. 5
Report on review by independent accountants.......................................................... 6
Item 2. Management's discussion and analysis of financial condition
and results of operations.................................................................. 7
PART II - OTHER INFORMATION
Item 6(b). Reports on Form 8-K............................................................................. 10
SIGNATURES.................................................................................................... 10
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MET-PRO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
April 30, January 31,
ASSETS 1997 1997
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Current assets
Cash and cash equivalents $ 9,350,857 $ 9,070,976
Accounts receivable, net of allowance for doubtful
accounts of approximately $241,000 and
$233,000, respectively 10,675,092 10,570,528
Notes receivable, ESOT 200,000 400,000
Inventories 11,299,770 10,597,813
Prepaid expenses, deposits and other current assets 744,205 571,226
Deferred income taxes 878,003 878,003
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Total current assets 33,147,927 32,088,546
Property, plant and equipment, net 14,226,591 14,346,995
Costs in excess of net assets of businesses acquired, net 7,336,055 7,502,470
Other assets 1,786,788 2,141,380
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Total assets $56,497,361 $56,079,391
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities
Current portion of long-term debt $ 1,586,908 $ 1,585,087
Accounts payable 3,321,425 2,996,065
Accrued salaries, wages and expenses 6,862,172 6,424,709
Payroll and other taxes payable 8,431 19,685
Customers' advances 602,664 348,569
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Total current liabilities 12,381,600 11,374,115
Long-term debt 3,286,142 3,683,419
Other non-current liabilities 191,964 172,941
Deferred income taxes 455,349 495,990
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Total liabilities 16,315,055 15,726,465
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Stockholders' equity
Common stock, $.10 par value; 10,000,000 shares
authorized, 7,138,625 shares issued at both dates,
of which 42,952 and 95,189 shares were reacquired and
held in treasury at the respective dates 713,862 713,862
Additional paid-in capital 7,825,557 8,260,289
Retained earnings 32,247,758 32,467,223
Cumulative translation adjustment (89,136) 19,121
Treasury stock, at cost (515,735) (1,107,569)
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Net stockholders' equity 40,182,306 40,352,926
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Total liabilities and stockholders' equity $ 56,497,361 $56,079,391
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See accompanying notes to condensed consolidated financial statements.
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MET-PRO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended
April 30,
1997 1996
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Net sales $14,912,736 $13,731,982
Cost of goods sold 9,220,276 8,756,662
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Gross profit 5,692,460 4,975,320
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Operating expenses
Selling 1,387,587 1,255,845
General and administrative 1,701,440 1,503,515
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3,089,027 2,759,360
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Income from operations 2,603,433 2,215,960
Other income, net 177,496 133,523
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Income before taxes 2,780,929 2,349,483
Provision for taxes 1,084,562 928,046
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Net income $ 1,696,367 $ 1,421,437
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Earnings per share, primary and fully diluted (1) $ .24 $ .20
Cash dividend per share - declared (2) $ .27 $ .22
Cash dividend per share - paid (2) $ .27 $ .22
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(1) Based on weighted average number of common stock and common stock
equivalents outstanding during each three-month period (adjusted for
the 3-for-2 stock split completed on July 8, 1996). The weighted
average number of common shares outstanding was 7,149,331 and
7,042,427 in the three-month periods ended April 30, 1997 and 1996,
respectively.
(2) The Company declared a cash dividend of $.22 per share on February 26,
1996 payable on April 26, 1996 to shareholders of record on April
12, 1996. On February 24, 1997, the Company also declared a $.27 per
share cash dividend payable on April 25, 1997 to shareholders of
record on April 11, 1997.
See accompanying notes to condensed consolidated financial statements.
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MET-PRO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Three Months Ended
April 30,
1997 1996
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Net cash provided by operating activities $ 2,726,808 $ 1,275,134
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Cash flows from investing activities
Proceeds from sale of property and equipment 11,139 573
Acquisitions of property and equipment (255,240) (813,078)
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Net cash (used in) investing activities (244,101) (812,505)
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Cash flows from financing activities
Reduction of debt (395,456) (293,795)
Exercise of stock options 430,425 109,838
Payment of dividends (1,915,832) (1,530,693)
Purchase of treasury shares (305,918) (293,215)
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Net cash (used in) financing activities (2,186,781) (2,007,865)
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Effect of exchange rate changes on cash (16,045) (2,816)
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Net increase (decrease) in cash and cash equivalents 279,881 (1,548,052)
Cash and cash equivalents at February 1 9,070,976 7,415,375
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Cash and cash equivalents at April 30 $ 9,350,857 $ 5,867,323
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SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 87,527 $ 46,794
Income taxes $ 427,565 $ 177,119
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See accompanying notes to condensed consolidated financial statements.
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MET-PRO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include Met-Pro Corporation and
its wholly owned subsidiaries, Strobic Air Corporation ("Strobic Air") and
Mefiag B.V. All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2 - PRO-FORMA INFORMATION
In connection with the Company's acquisition of Strobic Air in September, 1996,
the pro-forma results of operations for the three-month period ended April 30,
1996 would have been as follows, if the acquisition had been made as of February
1, 1996:
Net sales $15,185,688
Income before taxes on income 2,475,195
Net income 1,472,741
Earnings per share $ .21
NOTE 3 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments necessary to present fairly the financial
position as of April 30, 1997 and the results of operations for the three-month
periods ended April 30, 1997 and 1996 and the statement of cash flows for the
three-month periods then ended. The results of operations for the three-month
period ended April 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
Margolis & Company P.C., the Company's auditors, has performed a limited review
of the financial information included herein. Their report on such review
accompanies this filing.
NOTE 4 - INVENTORIES
Inventories were comprised of the following:
April 30, January 31,
1997 1997
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Raw material $ 5,101,078 $ 4,784,192
Work in progress 1,828,762 1,715,157
Finished goods 4,369,930 4,098,464
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$11,299,770 $10,597,813
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Met-Pro Corporation and its Wholly Owned Subsidiaries
Harleysville, Pennsylvania
We have reviewed the accompanying condensed consolidated balance sheet of
Met-Pro Corporation and its wholly owned subsidiaries as of April 30, 1997 and
the related condensed consolidated statements of operations and cash flows for
the three-month periods ended April 30, 1997 and 1996. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of January 31, 1997 and the related statements
of operations, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 28, 1997, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of January 31, 1997 is fairly stated, in all material respects, in relation
to the balance sheet from which it has been derived.
Certified Public Accountants
Bala Cynwyd, Pennsylvania
May 12, 1997
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MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations
Results of Operations:
Three Months Ended April 30, 1997 vs Three Months Ended April 30, 1996.
Net sales for the three-month period ended April 30, 1997 were $14,912,736
compared to $13,731,982 for the three-month period ended April 30, 1996, an
increase of $1,180,754 or 8.6%. This increase was due to higher sales in both
the Fluid Handling and the Pollution Control Systems and Allied Equipment
segments of the business, plus the impact of the Strobic Air acquisition which
was effective July 31, 1996. The length of time required to design, engineer,
manufacture and ship products, especially in the Pollution Control Systems and
Allied Equipment segment of our business, combined with contract requirements,
will cause shipments to vary from quarter to quarter.
The backlog at April 30, 1997 was 38.5% higher compared to the backlog at the
beginning of the fiscal year. Bookings of new orders were 13.2% higher for the
three-month period ended April 30, 1997 than for the three-month period ended
April 30, 1996.
Net income for the three-month period ended April 30, 1997 was $1,696,367
compared to $1,421,437 for the three-month period ended April 30, 1996, an
increase of $274,930 or 19.3%. The increase in net income is related to the
higher sales volume of $1,180,754 for the three-month period ended April 30,
1997, the improvement in gross margin and the impact of the Strobic Air
acquisition.
The gross margin for the three-month period ended April 30, 1997 was 38.2%
compared to 36.2% for the same period last year. The improvement in the gross
margin can be attributed to a combination of capacity utilization, product mix
and production efficiencies in both business segments.
Selling expense increased $131,742 during the three-month period ended April 30,
1997 compared to the same period last year. This is due to increased staffing
levels required to position our diversified businesses for future growth, plus
the impact of the Strobic Air acquisition. Selling expense as a percentage of
sales was 9.3% for the three-month period ended April 30, 1997, virtually flat
compared to the three-month period ended April 30, 1996.
General and administrative expense was $1,701,440 for the three-month period
ended April 30, 1997 compared to $1,503,515 for the same period last year, an
increase of $197,925. General and administrative expense as a percentage of
sales increased to 11.4% for the three-month period ended April 30, 1997 from
10.9% for the same period last year. The increase is related primarily to the
acquisition of Strobic Air.
Other income, net, increased $43,973 for the three-month period ended April 30,
1997 compared to the three-month period ended April 30, 1996, due to interest
earned on higher cash balances.
The effective tax rate for the three-month period ended April 30, 1997 was 39.0%
compared to 39.5% for the three-month period ended April 30, 1996. The change in
the effective tax rate had virtually no effect on earnings per share.
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MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations continued...
Liquidity:
The Company's cash and cash equivalents was $9,350,857 on April 30, 1997
compared to $9,070,976 on January 31, 1997, an increase of $279,881. This
increase is the net result of positive cash flow provided by operating
activities of $2,726,808, proceeds received from the exercise of stock options
of $430,425, proceeds received from the sale of property and equipment of
$11,139, offset by payment of the annual cash dividend amounting to $1,915,832,
payments on long-term debt totalling $395,456, purchase of treasury stock
amounting to $305,918 and investment in property and equipment amounting to
$255,240. The Company's cash flows from operating activities are influenced by
the timing of shipments and negotiated standard payment terms, including
retention associated with major projects.
Accounts receivable (net) amounted to $10,675,092 on April 30, 1997 compared to
$10,570,528 on January 31, 1997, which represents an increase of $104,564. The
timing and size of shipments and retainage on contracts, especially in the
Pollution Control Systems and Allied Equipment segment will influence accounts
receivable balances at any point in time.
Inventories were $11,299,770 on April 30, 1997 compared to $10,597,813 on
January 31, 1997, an increase of $701,957. Inventory balances fluctuate
depending upon market demand, the size and timing of orders and long lead times
required.
Current liabilities amounted to $12,381,600 on April 30, 1997 compared to
$11,374,115 on January 31, 1997, an increase of $1,007,485. Accounts payable,
current portion of long-term debt, accrued expenses, and payroll and other taxes
payable accounted for $753,390 of the increase, combined with higher customer
progress payments amounting to $254,095.
The Company has consistently maintained a high current ratio and has not
utilized either the domestic line of credit or the foreign line of credit
totalling $5.0 million, which are available for working capital purposes. Funds,
in general, have exceeded the current needs of the Company. The Company
presently foresees no change in this situation.
Capital Resources and Requirements:
Cash flows provided by operating activities during the three-month period ended
April 30, 1997 amounted to $2,726,808 compared with $1,275,134 in the
three-month period ended April 30, 1996, an increase of $1,451,674. The increase
is attributable to higher sales activity in both business segments, the timing
of the payment of current obligations, customers' advances on projects in
progress, offset by higher accounts receivable and inventories balances.
Cash flows used in investing activities during the three-month period ended
April 30, 1997 amounted to $244,101 compared with $812,505 for the three-month
period ended April 30, 1996. The Company's investing activities principally
represent the acquisition of property, plant and equipment in the combined
operations.
Financing activities during the three-month period ended April 30, 1997 utilized
$2,186,781 of available resources compared to $2,007,865 for the three-month
period ended April 30, 1996. The 1997 activity is the result of the payment of
the annual cash dividend amounting to $1,915,832, reduction of long-term debt
totalling $395,456, plus the purchase of treasury stock totalling $305,918,
offset by proceeds provided by the exercise of stock options totalling to
$430,425.
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MET-PRO CORPORATION
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations continued...
On February 24, 1997, the Board of Directors declared a $.27 per share annual
cash dividend (compared to the $.22 per share cash dividend paid in June, 1996,
as adjusted for a 3-for-2 stock split declared on June 5, 1996) payable on April
25, 1997 to stockholders of record on April 11, 1997. The dividend paid on the
Common Stock represented 31.4% of the prior fiscal year earnings.
Consistent with past practices, the Company will continue to invest in new
product development programs, and to make capital expenditures to support the
on-going operations during the coming year. The Company expects to finance all
capital expenditure requirements through cash flows generated from operations.
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MET-PRO CORPORATION
PART II - OTHER INFORMATION
Item 6(b). Reports on Form 8-K
There were no reports on Form 8-K filed for the three-month period ended
April 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Met-Pro Corporation
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(Registrant)
May 16, 1997 /s/ William L. Kacin
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William L. Kacin,
President,
Chief Executive Officer and Director
May 16, 1997 /s/ William F. Moffitt
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William F. Moffitt,
Vice President of Finance,
Secretary and Treasurer, Chief
Financial Officer, Chief Accounting Officer,
and Director
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