Item 1. Business:
General:
Met-Pro Corporation ("Met-Pro" or the "Company"), incorporated in the State of Delaware on March 30, 1966, manufactures and sells product recovery/pollution control equipment for purification of air and liquids, and fluid handling equipment for corrosive, abrasive and high temperature liquids. The Company markets its products through its own personnel, distributors, representatives and agents based on the division or subsidiary involved. The Company's products are sold worldwide primarily in industrial markets. The Company was taken public on April 6, 1967 and traded on the American Stock Exchange from July 25, 1978 until June 18, 1998, at which time the Company's Common Stock began trading on the New York Stock Exchange. The Company's principal executive offices are located at 160 Cassell Road, Harleysville, Pennsylvania and the telephone number at that location is (215) 723-6751. The Company operates through ten divisions and three wholly-owned subsidiaries. Except where otherwise indicated by the context used herein, references to the "Company" means Met-Pro Corporation and its wholly-owned subsidiaries.
Products, Services and Markets:
The Company operates in two segments, the Product Recovery/Pollution Control Equipment and the Fluid Handling Equipment Segment. To better reflect the significant contribution that the Flex-Kleen Division has made to our sales, we have changed the name of the former "Pollution Control and Allied Equipment" segment of our business to "Product Recovery/Pollution Control Equipment". For financial information concerning the Company's industry segments, reference is made to "Consolidated Business Segment Data" contained within the Company's Consolidated Financial Statements that form a part of this Report on Form 10-K. A narrative description of the Company's operations within these two segments is as follows:
Product Recovery/Pollution Control Equipment Segment
Flex-Kleen Division, located in Itasca, Illinois, operating with the Company's wholly-owned subsidiary, Flex-Kleen Canada Inc., is a leading supplier of product recovery and dry particulate collectors that are used primarily in the process of manufacturing food products and pharmaceuticals. While some of Flex-Kleen's products are also used for nuisance collection of particulates to conform to environmental concerns, the overwhelming portion of its sales activity is for product collection and is process driven. At present, Flex-Kleen's products are sold through 72 manufacturer's representatives in 32 offices located across the United States and 12 manufacturer's representatives located in four offices throughout Canada.
Stiles-Kem Division, located in Waukegan, Illinois, is a leading manufacturer of safe and reliable water treatment compounds which have been used in the public drinking water industry for more than 45 years. Stiles-Kem products are designed to eliminate problems created by high iron and manganese levels in municipal water systems and to reduce scaling and general corrosion tendencies within water distribution piping systems. These food grade products are NSF/ANSI approved for health considerations in municipal drinking water supplies and are certified to meet existing state and federal guidelines. The products are sold both directly through regional sales representatives and through a network of distributors located in the United States and Canada.
Sethco Division, located on Long Island, New York, designs, manufactures and sells corrosion resistant pumps, filter chambers and filter systems with flow rates to about 200 gallons per minute. These products are used in wastewater treatment systems and fume scrubbers for pollution control. They are also widely used in the metal finishing, electronics and chemical processing industries. Sethco's products are sold through a network of non-exclusive distributors, as well as to catalog houses and original equipment manufacturers. Our products are sold internationally through Met-Pro's International Division and our Mefiag B.V. subsidiary.
Strobic Air Corporation, located in Harleysville, Pennsylvania, designs, manufactures and holds patents on specialty blowers and industrial fans for industrial applications including university laboratories, hospitals, semiconductor manufacturers, government laboratories, pharmaceutical, chemical, petrochemical plants and other testing laboratory facilities. Sales, engineering and customer service are provided through a network of 225 manufacturer's representatives located throughout the United States and Canada. Strobic Air has established a manufacturing and sales office at the Company's Mefiag B.V. facility in Heerenveen, Holland.
Duall Division, located in Owosso, Michigan, is a leading manufacturer of industrial and municipal air and water quality control systems. The Division's major products include odor control systems, fume and emergency gas scrubbers, particulate collectors, air strippers, ducting and exhaust fans. All equipment is fabricated from corrosion resistant materials. Duall's support services include pilot studies, engineering, installation and performance testing. Duall products are sold both domestically and internationally to the metal finishing, wastewater treatment, composting, food processing, chemical, printed circuit, semiconductor, steel pickling, pharmaceutical, battery manufacturing and groundwater remediation markets. At present, 90 factory trained manufacturer's representatives sell Duall's engineered systems to industrial and municipal clients.
Systems Division, located in West Chester, Pennsylvania, is a leader in the supply of custom designed and manufactured air and water pollution control equipment. Systems Division's air pollution control capabilities include: carbon adsorption systems for the concentration and recovery of volatile solvents, thermal and catalytic oxidation systems and the supply of abatement catalysts. These systems are custom engineered for clients in the automotive, aerospace and furniture industries. Additional applications include painting, pharmaceutical, chemical, electronics, food processing and printing industries. Systems Division also manufactures a full range of catalyst products for the oxidation of pollutants, which include catalysts for the oxidation of chlorinated solvents, low temperature oxidation catalysts and a catalyst specially designed for regenerative catalytic oxidizer applications.
Fluid Handling Equipment Segment
Mefiag(R), operating with the Company's wholly-owned subsidiary, Mefiag B.V., located in Heerenveen, Holland, and the Mefiag Division, located in Harleysville, Pennsylvania, designs and manufactures filter systems utilizing horizontal disc technology for superior performance, particularly in high efficiency and high-flow applications. Mefiag(R) filters are used in tough, corrosive applications in the plating, metal finishing and printing industries. Worldwide sales are accomplished through qualified, market-based distributors and original equipment manufacturers located throughout Europe, United States, Asia and other major markets throughout the world.
Keystone Filter Division, located in Hatfield, Pennsylvania, is an established custom pleater and cartridge manufacturer in the United States. The Division provides custom designed and engineered products which are currently used in a diversity of applications such as the nuclear power industry, components in medical equipment and in indoor air quality equipment. Keystone Filter also provides standard filters for water purification and industrial applications. Sales and customer service are provided through a non-exclusive distributor network.
Dean Pump Division, located in Indianapolis, Indiana, designs and manufactures high quality pumps that handle a broad range of industrial applications. Users such as the chemical, petrochemical, refinery, pharmaceutical, plastics, pulp and paper, and food processing industries choose Dean Pump products particularly for their high temperature applications. The Division's products are sold worldwide through an extensive network of distributors.
Fybroc Division, located in Telford, Pennsylvania, is a world leader in the manufacture of fiberglass reinforced plastic ("FRP") centrifugal pumps. These pumps provide excellent corrosion resistance for tough applications including pumping of acids, brines, caustics, bleaches, seawater and a wide variety of waste liquids. Fybroc's second generation epoxy resin, EY-2, allows the Company to offer the first corrosion resistant and high temperature FRP thermoset pumps suitable for solvent applications. The EY-2 material also expands Fybroc's pumping capabilities to include certain acid applications such as high concentration sulfuric acid (75-98%). During the past year, Fybroc introduced the first of a series of FRP centrifugal magnetic drive pumps which will dramatically increase the scope of potential markets for Fybroc, especially for the solvent-based chemical market. Fybroc pumps are sold to many markets including the chemical, steel, pulp and paper, electric utility, aquaculture, aquarium, and industrial and municipal waste treatment industries. Fybroc's EY-2 material is expected to allow it to enter new markets such as pharmaceutical, petrochemical, fertilizer and pesticides. A worldwide distributor network provides sales, engineering and customer service.
The following table sets forth certain data concerning total net sales to customers by geographic area in the past three years:
Percentage of Net Sales Fiscal Year Ended January 31, 2000 1999 1998 -------------------------------- United States 83.7% 83.4% 83.5% Foreign 16.3% 16.6% 16.5% -------------------------------- Net Sales 100.0% 100.0% 100.0% ================================
Customers:
During each of the past three fiscal years, no single customer accounted for 10% or more of the total net sales of the Company in any year. The Company does not believe that it would be materially adversely affected by the loss of any single customer.
Seasonality:
The Company does not consider its business to be seasonal in nature.
Competition:
The Company experiences competition from a variety of sources with respect to virtually all of its products. The Company knows of no single entity that competes with it across the full range of its products and systems. The lines of business in which the Company is engaged are highly competitive. Competition in the markets served is based on a number of considerations, which may include price, technology, applications experience, know-how, reputation, product warranties, service and distribution.
With respect to the Fluid Handling Equipment segment, specifically the pump manufacturing operations, several companies, including Ingersoll Dresser Pumps Corporation (a joint venture of Ingersoll-Rand Company and Dresser Industries), Goulds Industrial Pumps, Inc. (a subsidiary of ITT Industries), and Durco Pumps, Inc. (a subsidiary of Flow Serve Corporation), dominate the industry with several smaller companies competing in selected product lines and niche markets.
With respect to the Product Recovery/Pollution Control Equipment segment, there are numerous competitors of both comparable and larger size which may have greater resources than the Company, but there are no companies that dominate the market.
The Company is unable to state with certainty its relative market position in all aspects of its businesses.
Research and Development:
The Company engages in research and development on an operational basis. Due to the wide range of the Company's products, the research and development effort is not centralized. Research is directed towards the development of new products related to current product lines, and the improvement and enhancement of existing products.
The principal goals of the Company's research programs are maintaining the Company as a technological leader in the production of product recovery/pollution control equipment, and fluid handling equipment; developing new products; and providing technological support to the manufacturing operations.
Research and development expenses were $0.8 million, $0.8 million and $0.7 million in the years ended January 31, 2000, 1999 and 1998, respectively.
Patents and Trademarks:
The Company maintains a small number of patents and trademarks. The Company considers these rights important to its business, although it considers no individual right material to its business.
Regulatory Matters:
The Company is subject to environmental laws and regulations concerning air emissions, discharges to water processing facilities, and the generation, handling, storage and disposal of waste materials in all operations. All of the Company's production and manufacturing facilities are controlled under permits issued by federal, state and local regulatory agencies. The Company believes it is presently in compliance in all material respects with these laws and regulations. To date, compliance with federal, state and local provisions relating to protection of the environment has had no material effect upon capital expenditures, earnings or the competitive position of the Company.
Backlog:
Generally, the Company's customers do not enter into long-term contracts, but rather issue purchase orders that are accepted by the Company. The rate of booking new orders varies from month to month. In addition, the orders have varying delivery schedules, and the Company's backlog as of any particular date may not be representative of actual revenues for any succeeding period. The dollar amount of the Company's backlog of orders, considered to be firm, totalled $11,660,840 and $13,085,678 as of January 31, 2000 and 1999, respectively. The Company expects that substantially all of the backlog that existed as of January 31, 2000 will be shipped during the ensuing fiscal year.
Raw Materials:
The Company procures its raw materials and supplies from various sources. The Company believes it could secure substitutes for the raw materials and supplies should they become unavailable, but there are no assurances that the substitutes would perform as well or be priced competitively. The Company has not experienced difficulty in securing raw materials and supplies, and does not anticipate any difficulty in procurement in the coming year or foreseeable future.
Employees:
As of January 31, 2000, the Company employed 400 people, of whom 160 were involved in manufacturing, and 240 were engaged in administration, sales, engineering, supervision and clerical work. The Company has had no work stoppages during the past 17 years and considers its employee relations to be good.
Foreign Operations:
Most of the Company's operations and assets are located in the United States. The Company also owns a manufacturing operation in Heerenveen, Holland through its wholly-owned subsidiary, Mefiag B.V. and operates a sales office and warehouse in Markham, Ontario, Canada through its wholly-owned subsidiary, Flex-Kleen Canada Inc.
Large export sales are typically made on the basis of confirmed irrevocable letters of credit or time drafts to selected customers in U.S. dollars. Therefore, the Company believes that currency fluctuation and political and economic instability do not constitute substantial risks to its business.
For information concerning foreign net sales on a segment basis, reference is made to the Consolidated Business Segment Data contained on page 19.
Executive Officers of the Registrant:
The following table sets forth certain information regarding the executive officers of the Company:
William L. Kacin, age 68, is Chairman of the Board of Directors, Chief Executive Officer and President of the Company. He was elected Chairman of the Board of Directors in June 1999 and Chief Executive Officer, President and Director in February 1993. Prior to that, he was Vice President and General Manager of the Company's Sethco Division for seventeen years.
Gary J. Morgan, CPA, age 45, is Vice President-Finance, Chief Financial Officer, Secretary, Treasurer and a Director of the Company. He was elected Vice President-Finance, Chief Financial Officer, Secretary and Treasurer in October 1997, and a Director of the Company in February 1998. Mr. Morgan joined the Company in 1980 and served as the Company's Corporate Controller immediately prior to October 1997.
Mark A. Betchaver, age 50, is a Vice President of the Company and General Manager of the Sethco Division, to which office he was elected in June 1993. He joined the Company in 1972.
Raymond J. De Hont, age 46, is a Vice President of the Company and General Manager of the Fybroc Division, to which office he was elected in June 1995 when he joined the Company as well as General Manager of the Dean Pump Division, to which he was elected in September 1999. For more than five years prior thereto, Mr. De Hont was employed by Air and Water Technologies and served in various capacities. His last position was Executive Vice President of their Service Group.
Thomas V. Edwards, age 46, is a Vice President of the Company and General Manager of the Systems Division, to which office he was elected in December 1998. Mr. Edwards joined the Company in June 1995 and prior to his present position, held the position of Assistant to the President. For more than five years prior thereto, Mr. Edwards was employed by Lockheed Martin as Engineering Manager.
Sonja M. Haggert, age 46, is a Vice President of the Company and General Manager of the Keystone Filter Division, to which office she was elected in February 1993. She joined the Company in 1978, and prior to her present position, held the position of Distributor Sales Manager of the Division.
William G. Hughes, age 53, is Vice President of the Company and General Manager of the Flex-Kleen Division, to which office he was elected in October 1998. For more than five years prior thereto, Mr. Hughes was employed by the Flex-Kleen subsidiary of Research Cottrell, a subsidiary of Air and Water Technologies, as Vice President and General Manager.
Hans J. D. Huizinga, age 49, is the Managing Director of Mefiag B.V., a wholly-owned subsidiary of the Company, located in Heerenveen, Holland, an office to which he was elected in August 1993. He was employed by Mefiag B.V. (formerly Systems Engineering and Manufacturing Corp. Nederland B.V.) for over five years as Managing Director prior to becoming an employee of the Company's subsidiary on June 30, 1993, when Registrant acquired that company.
Gregory C. Kimmer, age 45, is Vice President of the Company and General Manager of the Duall Division, to which office he was elected in October 1989. For more than five years prior thereto, Mr. Kimmer was employed by Duall Industries, Inc. in various capacities.
William F. Mersch, age 46, is a Vice President of the Company and General Manager of the Stiles-Kem Division, to which office he was elected in October 1996. He joined the Company in June 1995 as National Sales Manager. For more than five years prior thereto, Mr. Mersch was employed by ANCO Corporation, in which his last position was Vice President Sales and Marketing.
Robert P. Replogle, age 59, is Vice President of the Company and Director of the International Sales Division and the Mefiag Division, to which offices he was elected in December 1995. He joined the Company in December 1973 and prior to his present position, held the position of Director of the International Sales Division and the Mefiag Division.
Paul A. Tetley, age 41, is a Vice President of the Company and General Manager of Strobic Air Corporation, to which office he was elected in December 1999. Mr. Tetley joined the Company in 1996 in connection with the Company's acquisition of Strobic Air Corporation and prior to his present position held the position of Director of Operations. For more than five years prior thereto, Mr. Tetley was employed by the predecessor entity as a Plant Manager.
There is no family relationship between any of the Directors or executive officers of the Company. Each officer serves at the pleasure of the Board of Directors.
Item 2.
Item 2. Properties:
The following manufacturing and production facilities were owned or leased by the Company at January 31, 2000:
(1) Flex-Kleen Division's lease for the operation in Itasca, Illinois expires on November 30, 2002.
(2) Flex-Kleen Division's lease for the warehouse in Sharpsburg, North Carolina expires on October 28, 2001.
(3) Flex-Kleen Canada Inc.'s lease for the sales and warehouse facility in Markham, Ontario, Canada expires on March 31, 2003.
Item 3.
Item 3. Legal Proceedings:
There are no material pending legal proceedings to which the Company is a party as of the date of this Annual Report.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders:
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended January 31, 2000.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters:
The Company's Common Stock is traded on the New York Stock Exchange under the symbol "MPR". The high and low selling prices of the Common Stock for each quarterly period for the last two fiscal years, as reported on the New York Stock Exchange, are shown below.
There were 707 registered stockholders at January 31, 2000, and the Company estimates that there are approximately 2,000 additional stockholders with stock held in street name.
On February 22, 1999, the Board of Directors declared a $.32 per share annual cash dividend payable on April 23, 1999 to stockholders of record as of April 9, 1999.
Due to strong cash flows generated from operating activities, the Company announced the change from an annual dividend, which was traditionally paid during the month of April, to an expected quarterly dividend. Payment of future dividends will depend on future earnings and capital requirements of the Company and is at the discretion of the Board of Directors.
The Board of Directors declared quarterly dividends of $.08 per share payable on September 10, 1999, December 10, 1999 and March 10, 2000 to stockholders of record as of August 20, 1999, November 26, 1999 and February 25, 2000.
During the second quarter of fiscal year ended 1999, the Company completed the purchase of 350,000 shares of its Common Stock, which was authorized under a stock buyback program approved by the Board of Directors on June 3, 1998.
On May 11, 1999, the Board of Directors authorized an additional 350,000 share stock buyback program. The Company repurchased an aggregate of 457,225 shares under the combined programs during the year ended January 31, 2000.
On February 21, 2000, the Board of Directors authorized an additional 350,000 share stock buyback program after the balance of the shares remaining from the Company's May 11, 1999 stock buyback program are purchased.
Item 6.
Item 6. Selected Financial Data:
(a) EBITDA represents income from operations before taxes, interest expense, interest income, and depreciation and amortization expenses. (b) Fiscal year ended January 31, 2000 included an annual dividend of $.32 per share payable on April 23, 1999 and quarterly dividends of $.08 per share payable on September 10, 1999 and December 10, 1999.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations:
The following discussion should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K.
General:
The Company acquired substantially all of the operating assets of Flex-Kleen Corporation and Flex-Kleen Canada Limited (collectively "Flex-Kleen") effective as of October 1, 1998, pursuant to an Asset Purchase Agreement. The acquisition was accounted for as a purchase transaction. Accordingly, the consolidated financial data for the year ended January 31, 1999 incorporates Flex-Kleen's operations for a four-month period.
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.
FYE 2000 vs FYE 1999:
Net sales for the year ended January 31, 2000 were $78.4 million, a new record, exceeding net sales for the year ended January 31, 1999 by $11.0 million, an increase of 16.4%. This is the seventh consecutive year that net sales have achieved a new record. Sales in the Product Recovery/Pollution Control Equipment segment were $51.9 million or 29.3% higher than the prior fiscal year due to the acquisition of Flex-Kleen Corporation and Flex-Kleen Canada Limited (collectively "Flex-Kleen"), effective as of October 1, 1998, coupled with higher demand primarily for our fume and odor control equipment. Sales in the Fluid Handling Equipment segment were $26.6 million or $0.7 million lower compared to the prior year due primarily to decreased demand for our specialty pump equipment.
Foreign sales increased to $12.8 million for the fiscal year ended January 31, 2000, which is 14.3% higher than the prior year. This increase was due to higher sales in Canada and Europe. Foreign sales increased 2.0% in the Fluid Handling segment from the prior fiscal year, and the Product Recovery/Pollution Control Equipment segment sales were 33.7% higher than the prior fiscal year due to the impact of the Flex-Kleen acquisition and higher demand for our fume and odor control equipment.
Net income of $7.1 million for the fiscal year ended January 31, 2000 was slightly lower than the earnings level of the prior year.
The gross margin for the fiscal year ended January 31, 2000 decreased to 34.2% from 35.7% for the prior year due to lower gross margins experienced in the Product Recovery/Pollution Control Equipment segment.
Selling expense increased approximately $1.2 million or 21.2% over the prior fiscal year. The increase in selling expense is attributed to the inclusion of Flex-Kleen operations for the year ended January 31, 2000, which in the previous year only included four months for the comparative period. Selling expense as a percentage of net sales was 9.1% for the fiscal year ended January 31, 2000, which was slightly higher than the prior fiscal year.
General and administrative expense was $8.3 million for the fiscal year ended January 31, 2000 compared to $7.0 million in the prior fiscal year. The $1.3 million increase was due to amortization and other administrative expenses connected with the inclusion of Flex-Kleen, which in the previous year only included four months for the comparative period. General and administrative expense as a percentage of net sales was 10.5% for the fiscal year ended January 31, 2000 compared to 10.4% for the prior fiscal year.
Interest expense was $0.8 million for the fiscal year ended January 31, 2000 compared to $0.4 million in the prior fiscal year. The increase can be attributed to the $12.0 million borrowing having a ten-year term with a fixed interest rate swap of 5.98% made in connection with the acquisition of certain assets of Flex-Kleen.
Other income was $0.5 million for the fiscal year ended January 31, 2000 compared to $0.6 million in the prior fiscal year. Other income consisted primarily of interest income on short-term investments in both years.
The effective tax rate for the fiscal year ended January 31, 2000 was 36.1% compared to 37.4% for the prior year.
FYE 1999 vs FYE 1998:
Net sales for the year ended January 31, 1999 were $67.4 million, a new record, exceeding net sales for the year ended January 31, 1998 by $5.0 million, an increase of 8.0%. This was the sixth consecutive year that net sales have achieved a new record. Sales in the Product Recovery/Pollution Control Equipment segment were $40.1 million or 19.8% higher than the prior fiscal year due to the acquisition of certain assets of Flex-Kleen, effective as of October 1, 1998, coupled with higher demand primarily for our fume and odor control equipment. Sales in the Fluid Handling Equipment segment were $27.3 million or 5.7% lower compared to the prior year due primarily to decreased demand for our specialty pump equipment from the Pacific Rim countries.
Foreign sales increased to $11.2 million for the fiscal year ended January 31, 1999 which was 8.6% higher than the prior year. This increase was due to higher sales in Canada and Europe, offset by lower sales in the Pacific Rim countries. Foreign sales decreased 21.2% in the Fluid Handling Equipment segment versus the prior fiscal year, while the Product Recovery/Pollution Control Equipment segment were 170.4% higher than the prior fiscal year due to the impact of the Flex-Kleen acquisition and higher demand for our fume and odor control, and catalytic oxidizer equipment.
Net income of $7.2 million for the fiscal year ended January 31, 1999 was slightly above the earnings level of the prior year. This was the sixth consecutive year of increased earnings.
The gross margin for the fiscal year ended January 31, 1999 decreased to 35.7% versus 36.2% for the prior year. This slight decline in gross margin can be attributed to product mix and the recent acquisition of Flex-Kleen.
Selling expense increased approximately $0.5 million or 10.3% over the prior fiscal year. The Flex-Kleen acquisition accounted for substantially all of the increase. Selling expense as a percentage of net sales was 8.7% for the fiscal year ended January 31, 1999, which was slightly higher than the prior fiscal year.
General and administrative expense was $7.0 million for the fiscal year ended January 31, 1999 compared to $6.3 million in the prior fiscal year. The $0.7 million increase can be attributed entirely to the operations of Flex-Kleen. General and administrative expense as a percentage of net sales was 10.4% for the fiscal year ended January 31, 1999 compared to 10.0% for the prior fiscal year.
Interest expense was $0.4 million for the fiscal year ended January 31, 1999 compared to $0.3 million in the prior fiscal year.
Other income of $0.6 million for the fiscal year ended January 31, 1999 consisted primarily of interest income earned on short-term investments. Other income of $1.0 million for the fiscal year ended January 31, 1998 consisted primarily of interest income on short-term investments and a $0.2 million net gain on the disposal of certain properties.
The effective tax rate for the fiscal year ended January 31, 1999 was 37.4% compared to 39.0% for the prior year.
Liquidity:
Cash and cash equivalents were $6.3 million on January 31, 2000, a decrease of $1.1 million over the previous year. This decrease is the net result of the payment of cash dividends amounting to $2.7 million (net of $0.5 million of dividends returned to the Company in the form of stock purchases under the Company's Dividend Reinvestment Plan), payments on long-term debt totalling $2.1 million, purchase of treasury stock amounting to $5.3 million and investment in property and equipment amounting to $1.2 million, offset by positive cash flows provided by operating activities of $10.2 million.
Accounts receivable were $13.7 million at January 31, 2000, a decrease of $0.8 million compared to the prior year. The size of orders, the timing of shipments to meet customer requirements and retainage on contracts, combined with increased sales volume in the Product Recovery/Pollution Control Equipment segment, will influence accounts receivable balances at any point in time.
Inventories totalled $13.7 million at January 31, 2000, a decrease of $1.2 million compared to the prior year. Inventory balances will fluctuate depending on the size and timing of orders and market demand, especially when major systems and contracts are involved.
Current liabilities decreased from $14.4 million at January 31, 1999 to $13.7 million at January 31, 2000, or $0.7 million.
The Company has consistently maintained a high current ratio and has not utilized either the domestic line of credit or the foreign line of credit totalling $5.0 million which are available for working capital purposes. The current ratio was 2.6 and 2.7 at January 31, 2000 and 1999, respectively.
Capital Resources and Requirements:
Cash flows provided by operating activities during the fiscal year ended January 31, 2000 amounted to $10.2 million compared to $8.0 million during the prior fiscal year.
Cash flows used in investing activities during the fiscal year ended January 31, 2000 amounted to $1.2 million compared to $17.0 million during the fiscal year ended January 31, 1999. The Company's investing activities principally represent the acquisition of property, plant and equipment in the two operating segments, combined with acquisition of businesses. One of those acquisitions occurred in October 1998, when the Company acquired all operating assets of Flex-Kleen for approximately $15.0 million together with the assumption of ordinary business liabilities. Flex-Kleen is a manufacturer of dry particulate dust collectors that are used primarily in the process of manufacturing food products and pharmaceuticals. The Company continues to invest in machinery and equipment, tooling, patterns and molds to improve efficiency and maintain our position as leaders in the markets in which we serve.
Financing activities during the fiscal year ended January 31, 2000 used $10.1 million of available resources compared to providing $5.2 million during the prior fiscal year.
The Company paid $2.1 million of scheduled long-term debt during the current fiscal year. The percentage of long-term debt to equity at January 31, 2000 was 22.5% compared to 26.0% at January 31, 1999.
During the fiscal year ended 2000, the Company continued to repurchase shares outstanding on the open market at prevailing prices under the 350,000 share stock buyback program authorized on June 3, 1998 which was completed on May 13, 1999, following which the Company began to make additional purchases under an additional stock buyback program authorized on May 11, 1999. For the fiscal year ended January 31, 2000, the Company repurchased 457,225 shares, 285,025 shares under the plan effective May 11, 1999 and 172,200 shares under the plan effective June 3, 1998.
On February 22, 1999, the Board of Directors declared a $.32 per share annual cash dividend payable on April 23, 1999 to stockholders of record on April 9, 1999.
Due to strong cash flows generated from operating activities, the Company announced the change from an annual dividend which was traditionally paid during the month of April to an expected quarterly dividend.
The Board of Directors declared quarterly dividends of $.08 per share payable on September 10, 1999, December 10, 1999 and March 10, 2000 to stockholders of record at the close of business on August 20, 1999, November 26, 1999 and February 25, 2000, respectively.
As part of our commitment to the future, the Company expended $0.8 million on research and development for each of the fiscal years ended January 31, 2000 and 1999.
The Company will continue to invest in new product development to maintain and enhance our market position as leaders in the markets in which we participate. Capital expenditures will be made to support operations and expand our capacity to meet market demands. The Company intends to finance capital expenditures in the coming year through cash flows from operations and will secure third party financing, when deemed appropriate.
Recent Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This pronouncement is effective for the fiscal years beginning after June 15, 2000. The adoption of this pronouncement is expected to have no significant impact on Met-Pro's consolidated results of operations, financial position, or cash flows.
Year 2000 Compliance:
The conversion from calendar year 1999 to calendar year 2000 occurred without any disruption to the Company's critical business systems. Since 1997, the Company has been upgrading its information systems with Year 2000 (Y2K) compliant software and hardware. These actions have minimized Y2K related capital costs and expenses. The Company will continue to monitor Y2K related exposures both internally and with its suppliers, customers and other business partners. Such monitoring will be ongoing and encompassed in normal operations and associated costs are not expected to be significant.
Cautionary Statement Regarding Forward-Looking Statements:
As a cautionary note to investors, the Company and its representatives may make oral or written statements from time to time that are "forward-looking statements". This would include information concerning possible or assumed future activities, plans, results of operations of the Company and statements preceded by, followed by or that include the words "believes", "expects", "anticipates", "intends", "foreseeable future", "goal", "estimates", "projects", "projection", "plans", "scheduled", "should" or similar expressions. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
There are a number of important factors which could cause actual results to differ materially from those anticipated. The Company believes that its future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the cyclical nature of both the business segments and the markets addressed by the Company's products, price erosion, competitive factors, the timing of new product introductions, changes in product mix, the availability and extent of utilization of manufacturing capacity, product obsolescence and the ability to develop and implement new technologies. The Company's operating results could also be impacted by sudden fluctuations in customer requirements, currency exchange rate fluctuations and other economic conditions affecting customer demand and the cost of operations in one or more of the global markets in which the Company does business. As a participant in the product recovery/pollution control and fluid handling industries, the Company operates in a rapidly changing and highly competitive environment. The Company sells both custom products to customers, and industrial products; accordingly, changes in the conditions or composition of any of the Company's customers may have an impact on the Company. While the Company cannot predict what effect these various factors may have on its financial results, the aggregate effect of these and other factors could result in volatility in the Company's future performance and stock price.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risks:
Not Applicable
Item 8.
Item 8. Financial Statements and Supplementary Data:
Index to Consolidated Financial Statements and Supplementary Data:
Page ---- Consolidated Financial Statements: Independent Auditor's Report .................................... 14 Consolidated Statement of Operations ........................... 15 Consolidated Balance Sheet ...................................... 16 Consolidated Statement of Cash Flows ........................... 17 Consolidated Statement of Stockholders' Equity .................. 18 Consolidated Business Segment Data .............................. 19 Notes to Consolidated Financial Statements ..................... 20
Supplementary Data: Quarterly Financial Data ....................................... 32
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders Met-Pro Corporation Harleysville, Pennsylvania
We have audited the accompanying consolidated balance sheet of Met-Pro Corporation and its wholly-owned subsidiaries as of January 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended January 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Met-Pro Corporation and its wholly owned subsidiaries as of January 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2000 in conformity with generally accepted accounting principles.
/s/ Margolis & Company P.C. ---------------------------
Bala Cynwyd, Pennsylvania
February 25, 2000
MET-PRO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
The notes to consolidated financial statements are an integral part of the above statement.
MET-PRO CORPORATION CONSOLIDATED BALANCE SHEET
The notes to consolidated financial statements are an integral part of the above statement.
MET-PRO CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
The notes to consolidated financial statements are an integral part of the above statement.
MET-PRO CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
The notes to consolidated financial statements are an integral part of the above statement.
MET-PRO CORPORATION CONSOLIDATED BUSINESS SEGMENT DATA
The Company follows the practice of allocating general corporate expenses, including depreciation and amortization expense, among the segments.
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations:
The Company manufactures and sells product recovery/pollution control equipment for purification of air and liquids, and fluid handling equipment for corrosive, abrasive and high temperature liquids.
Basis of presentation:
The consolidated financial statements include the accounts of Met-Pro Corporation ("Met-Pro" or the "Company") and its wholly-owned subsidiaries, Mefiag B.V., Flex-Kleen Canada Inc. and Strobic Air Corporation ("Strobic Air"). Significant intercompany accounts and transactions have been eliminated. Accounts denominated in foreign currencies have been remeasured into the functional currency in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation," using the U.S. dollar as the functional currency.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Inventories:
Inventories generally are stated at the lower of cost (principally first-in, first-out) or market except for the inventory at the Dean Pump Division which is determined on the last-in, first-out basis (see Note 4).
Property, plant and equipment:
Property, plant and equipment are stated at cost. Depreciation is computed principally by the straight-line method over estimated useful lives. Expenditures for maintenance and repairs are charged to expense as incurred. Renewals and betterments are capitalized (see Note 5).
Costs in excess of net assets of businesses acquired:
Costs in excess of net assets of businesses acquired prior to November 1, 1970, totalling $582,513, are not being amortized because management believes that there has been no impairment in value. Costs in excess of net assets of businesses acquired subsequent to October 31, 1970, totalling $18,189,663, are being amortized over 40 years. The Company monitors the recoverability of goodwill using a fair value approach.
Revenue recognition:
Revenues are generally recognized when products are shipped.
Advertising:
Advertising costs are charged to operations in the year incurred and were $1,289,803, $1,151,535 and $1,111,724 for the years ended January 31, 2000, 1999 and 1998, respectively.
Research and development:
Research and development costs are charged to operations in the year incurred and were $798,507, $752,648 and $726,278 for the years ended January 31, 2000, 1999 and 1998, respectively.
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Earnings per share:
Basic earnings per share are computed based on the weighted average number of common shares actually outstanding during each year.
Diluted earnings per share are computed based on the weighted average number of shares actually outstanding plus all potential dilutive common shares outstanding (stock options) during each year.
Dividends:
On December 16, 1999, the Board of Directors declared an $.08 per share quarterly cash dividend payable on March 10, 2000 to stockholders of record on February 25, 2000, amounting to $511,299.
Concentrations of credit risk:
The Company believes concentrations of credit risk are limited due to the number of customers, and dispersion among the business segments and geographic areas. The Company had no significant concentrations of credit risk as of January 31, 2000 and 1999.
Supplemental cash flow information:
2000 1999 1998 ----------------------------------------------------------------- Cash paid during the year for: Interest $ 826,635 $ 415,893 $ 314,735 ----------------------------------------------------------------- Income taxes $3,885,098 $4,691,163 $4,530,301 -----------------------------------------------------------------
Recent accounting pronouncements:
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which will be effective for the fiscal years beginning after June 15, 2000. This standard requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in fair value of derivatives will be recorded each period in current earnings or comprehensive income. The adoption of this pronouncement will have no significant impact on Met-Pro's consolidated results of operations, financial position, or cash flows.
Reclassifications:
Certain reclassifications have been made to the financial statements for the fiscal years ended January 31, 1999 and 1998 to conform to the presentation of the financial statements for the fiscal year ended January 31, 2000.
MET-PRO CORPORATION NOTES TO Consolidated FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
NOTE 2: SIGNIFICANT ACQUISITION
Flex-Kleen:
During October 1998, the Company, pursuant to an Asset Purchase Agreement, purchased all of the operating assets of Flex-Kleen Corporation and Flex-Kleen Canada Limited (collectively "Flex-Kleen") for a purchase price of approximately $15,000,000 plus the assumption of ordinary business liabilities. The acquisition was accounted for as a purchase transaction. Flex-Kleen is a manufacturer of dry particulate collectors that are used primarily in the process of manufacturing food products and pharmaceuticals. The consolidated statement of operations for the fiscal year ended January 31, 1999 includes the operations of Flex-Kleen for the period since October 1, 1998.
The acquisition was completed by a cash payment of approximately $15,000,000, plus acquisition costs, which resulted in approximately $12,150,000 of goodwill. A bank loan totalling $12,000,000 having a ten-year term with a fixed interest rate swap of 5.98% was used to finance the acquisition. Payments of principal and interest are payable on a quarterly basis (see Note 6).
On an unaudited pro forma basis, consolidated results of operations for the year ended January 31, 1999 would have been as follows if the acquisition had been made as of February 1, 1998:
------------------------------------------------------------ Net sales $79,315,488 Income before taxes 12,538,227 Net income 7,844,029
Earnings per share, basic $1.14 Earnings per share, diluted $1.13
NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents:
Short-term investments at January 31, 2000 and 1999 were valued at cost (approximating market) and amounted to $4,186,461 and $5,911,046, respectively. Short-term investments consist principally of commercial paper with an original maturity of three months or less, and money market funds, both of which are considered to be cash equivalents. The Company evaluates the creditworthiness of the financial institutions and financial instruments in which it invests.
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Debt:
The fair value and carrying amount of long-term debt was as follows:
January 31, 2000 1999 ---------------------------------------------------------------------- Fair value $11,261,578 $13,891,334 Carrying amount 11,941,954 14,067,047
Valuations for long-term debt are determined based on borrowing rates currently available to the Company for loans with similar terms and maturities.
The Company uses an interest rate swap (see Note 6) to minimize its exposure to fluctuations in interest rates. The interest rate differential to be paid or received under this agreement is recognized over the term of the loan and is included in interest expense.
The Company's financial instruments are not held for trading purposes.
NOTE 4: INVENTORIES
Inventories consisted of the following:
January 31, 2000 1999 ---------------------------------------------------------------------- Raw material $ 6,755,944 $ 7,246,379 Work in process 2,016,612 2,435,351 Finished goods 4,971,586 5,291,439 ---------------------------------------------------------------------- $13,744,142 $14,973,169 ======================================================================
At January 31, 2000 and 1999, inventories valued at the last-in, first-out method ("LIFO") were $2,389,238 and $2,989,763, respectively. The LIFO value of inventories was lower than replacement cost by $875,558 and $868,015 at January 31, 2000 and 1999, respectively.
The book basis of LIFO inventories exceeded the tax basis by approximately $1,026,000 at both January 31, 2000 and 1999 as a result of applying the provisions of Accounting Principles Board Opinion ("APB") No. 16, "Business Combinations", to an acquisition completed in a prior year.
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
January 31, 2000 1999 ------------------------------------------------------------- Land $ 1,793,795 $ 1,802,386 Buildings and improvements 11,353,232 11,374,411 Machinery and equipment 11,207,542 10,655,454 Furniture and fixtures 3,062,990 2,954,289 Automotive equipment 1,023,219 1,031,960 Leasehold improvements - 3,710 Construction in progress 15,448 56,680 ------------------------------------------------------------- 28,456,226 27,878,890 Less accumulated depreciation 14,982,927 13,947,614 ------------------------------------------------------------- $13,473,299 $13,931,276 =============================================================
Depreciation of property, plant and equipment charged to operations amounted to $1,556,191, $1,443,458 and $1,353,857 for the years ended in 2000, 1999 and 1998, respectively.
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
NOTE 6: DEBT
Short-term debt:
The Company has available both domestic and foreign unsecured lines of credit totalling $5,000,000 which can be used for working capital. The lines of credit were not used during either year.
Long-term debt:
Long-term debt consisted of the following:
January 31, 2000 1999 --------------------------------------------------------------------- Note payable, bank, payable in quarterly installments of $300,000, plus interest at a fixed rate swap of 5.98%, maturing October, 2008 $10,500,000 $11,700,000
Notes payable, bank, payable in quarterly installments of $87,500, plus interest at a fixed rate of 7.51%, maturing September, 2001 612,500 962,500
Notes payable, bank, payable in quarterly installments of $87,500, plus interest at a variable rate ranging from 6.25% to 6.87%, maturing September, 2001 612,500 962,500
Notes payable, acquisition escrow accounts, balloon payments in the amounts of $50,000 and $75,000 were paid on April 8, 1999 and June 11, 1999, plus interest at a fixed rate of 5.9% - 125,000
Mortgage note payable, collateralized by property, payable $10,267 monthly (including principal and interest), at a fixed interest rate of 8.5%, maturing January, 2002 216,954 317,047 --------------------------------------------------------------------- 11,941,954 14,067,047 Less current portion 2,008,940 2,125,093 --------------------------------------------------------------------- $ 9,933,014 $11,941,954 =====================================================================
These notes are subject to certain covenants, including maintenance of prescribed amounts of leverage and fixed charge coverage ratios.
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Maturities of long-term debt are as follows:
Year Ending January 31, ----------------------------------------------------------- 2001 $ 2,008,940 2002 1,833,014 2003 1,200,000 2004 1,200,000 2005 1,200,000 Thereafter 4,500,000 ----------------------------------------------------------- $11,941,954 ===========================================================
Interest expense was $815,805, $398,051 and $325,718 for the years ended in 2000, 1999 and 1998, respectively.
NOTE 7: STOCKHOLDERS' EQUITY
On May 11, 1999, the Company announced a new 350,000 share stock repurchase authorization, and completed the previous 350,000 share stock repurchase program. During the fiscal year ended January 31, 2000, the Company repurchased 457,225 shares of its Common Stock at a cost of $5.3 million. At January 31, 2000, 64,975 shares of the new 350,000 share authorization were outstanding.
The Company has a Shareholder's Rights Plan, under which the Company's Board of Directors declared a dividend of one Right for each share of Company common stock owned. The Plan provides, under certain conditions involving acquisition of the Company's common stock, that holders of Rights, except for the acquiring entity, would be entitled to purchase shares of common stock of the Company, or acquiring company, having a value of twice the Rights' exercise price. The Rights under the Plan expire in 2010.
NOTE 8: INCOME TAXES
The provision for income taxes was comprised of the following:
2000 1999 1998 -------------------------------------------------------------- Current Federal $2,859,285 $3,216,200 $3,718,205 State 556,607 878,903 933,080 Foreign 311,275 183,553 146,351 -------------------------------------------------------------- 3,727,167 4,278,656 4,797,636 Deferred 266,073 (9,185) (247,754) -------------------------------------------------------------- $3,993,240 $4,269,471 $4,549,882 ==============================================================
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the net deferred tax assets were as follows:
2000 1999 ------------------------------------------------------------------- Deferred tax assets Inventory cost capitalization $215,686 $233,572 Pension cost 911,611 982,444 Non-compete agreements 498,980 431,383 Other 51,479 128,190 ------------------------------------------------------------------- Total deferred tax assets 1,677,756 1,775,589 -------------------------------------------------------------------
Deferred tax liabilities Accelerated depreciation 512,407 522,596 Inventory - Dean Pump Division 400,202 400,197 Excess of book over tax basis of property acquired in acquisitions 66,678 96,001 Goodwill 325,222 117,660 ------------------------------------------------------------------- Total deferred tax liabilities 1,304,509 1,136,454 -------------------------------------------------------------------
Net deferred tax assets $373,247 $639,135 ===================================================================
A reconciliation of the federal statutory rate and the Company's effective tax rate is presented as follows:
NOTE 9: LEASES AND OTHER COMMITMENTS
The Company has various real estate operating leases for warehouse space and office space for sales, general and administrative purposes. Future minimum lease payments under these non-cancelable operating leases at January 31, 2000 were as follows:
2001 $264,438 2002 247,234 2003 167,764
Rental expense for the above operating leases during the years ended in 2000, 1999 and 1998, was $408,487, $153,711 and $76,407, respectively.
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
NOTE 10: EMPLOYEE BENEFIT PLANS
Pension Plans:
The Company has several tax-qualified defined benefit pension plans covering eligible employees in the United States. The Company contributes amounts to the plans equal to the amounts that are tax deductible.
Net periodic pension cost (income) included the following components:
The following table sets forth the Plans' change in benefit obligations, change in plan assets and amounts recognized in the Company's balance sheet at January 31, 2000 and 1999:
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
Assumptions used in the accounting for pension cost were:
Directors' Benefit Plan:
The Company also provides a non-qualified pension plan for Directors which is unfunded. The plan is designed to provide pension benefits based on the category of the Director and length of service. The benefit obligation was $598,064 and $601,600 at January 31, 2000 and 1999, respectively. The amounts applicable are included in the tables above. This Plan was discontinued in December 1999 as to non-vested Directors.
Defined Contribution Plan:
Effective April 1, 1999, the Company implemented a 401(k) profit sharing plan. Substantially all employees of the Company in the United States are eligible to participate in the Plan following completion of one year of service and attaining age 21. Pursuant to this plan, employees can contribute up to 15% of their compensation to the Plan. The Company will match, in the form of Met-Pro common stock, up to 50% of the employee's contribution up to 4% of compensation.
Employees' Stock Ownership Trust:
The Company sponsors an employee stock ownership plan under which it makes discretionary contributions to the trust either in cash or in stock of the Company for salaried employees in the United States eligible to participate in the Plan. The Company provided for cash contributions to the Employees' Stock Ownership Trust of $0, $225,000 and $200,000 in the years ended in 2000, 1999 and 1998, respectively. All shares are considered to be allocated to participants or to be released for allocation to participants, and are included in the earnings per share computations.
Incentive Stock Option Plans:
The Company accounts for employee stock options in accordance with APB No. 25, "Accounting for Stock Issued to Employees", and related Interpretations. The pro forma disclosures required by SFAS No. 123, "Accounting for Stock-Based Compensation", are not presented since the impact on the Company's financial statements for the periods presented is de minimis.
In 1987 ("1987 Plan"), the Company adopted an incentive stock option plan under which 100,000 shares (354,375 after stock splits and stock dividends) of the Company's Common Stock were reserved for employees as selected by the Board of Directors. Effective April 9, 1997, the 1987 Plan terminated and the remaining shares available for grant expired. In 1991, the Board of Directors of the Company approved a stock option plan covering 100,000 shares (increased to 225,000 shares after giving effect to stock splits and stock dividends), that was approved by the Company's stockholders at the 1992 meeting of stockholders (the "1992 Plan"). In 1997, the Board of Directors of the Company approved a stock option plan covering 350,000 shares that was approved by the Company's stockholders at the 1997 meeting of stockholders (the "1997 Plan"). Both of these plans contain anti-dilution provisions that apply to stock splits and stock dividends declared by the Company.
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
The status of the Plans was as follows:
MET-PRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JANUARY 31, 2000, 1999 AND 1998 (Continued)
The weighted average exercise prices of the Company's stock option plans were as follows:
NOTE 12: BUSINESS SEGMENT DATA
The Company's operations are conducted in two business segments as follows: the manufacture and sale of product recovery/pollution control equipment, and the manufacture and sale of fluid handling equipment.
No significant intercompany revenue is realized by either business segment. Interest income and expense are not included in the measure of segment profit reviewed by management. Income taxes are also not included in the measure of segment operating profit reviewed by management.
Financial information by business segment is shown on page 19.
NOTE 13: GEOGRAPHIC INFORMATION
Transfers between geographic areas are accounted for at cost and consistent with rules and regulations of governing tax authorities. Such transfers are eliminated in the consolidated financial statements. Income from operations by geographic segment includes an allocation of general corporate expenses. Identifiable assets are those that can be directly associated with the geographic area. Geographic information for the three years ended January 31 is presented in the following table:
2000 1999 1998 ----------------------------------------------------------------------- Net sales: United States $65,698,081 $56,229,689 $52,109,468 Foreign 12,751,911 11,160,799 10,278,402 ----------------------------------------------------------------------- $78,449,992 $67,390,488 $62,387,870 =======================================================================
Income from operations: United States $10,144,373 $10,017,987 $10,036,520 Foreign 1,266,306 1,181,880 984,794 ----------------------------------------------------------------------- $11,410,679 $11,199,867 $11,021,314 =======================================================================
Total assets: United States $63,774,777 $68,284,881 $53,995,274 Foreign 4,867,206 4,603,760 3,988,966 ----------------------------------------------------------------------- $68,641,983 $72,888,641 $57,984,240 =======================================================================
QUARTERLY FINANCIAL DATA (Unaudited)
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure:
During the fiscal year ended January 31, 2000, there has been no change in accountants and no disagreements on accounting and financial disclosure.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant:
The information required by this Item (except for the information set forth on page 5 with respect to Executive Officers of the Registrant) is hereby incorporated by reference to the information set forth under the captions "Election of Directors" and "Security Ownership of Certain Beneficial Owners and Management" contained in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.
Item 11.
Item 11. Executive Compensation:
The information required by this Item is hereby incorporated by reference to the information set forth under the caption "Executive Compensation and Other Information" contained in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management:
The information required by this Item is hereby incorporated by reference to the information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" contained in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.
Item 13.
Item 13. Certain Relationships and Related Transactions:
The information required by this Item is hereby incorporated by reference to the information set forth under the captions "Election of Directors" and "Certain Business Relationships" contained in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K:
A. Financial statements:
Financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements and Supplementary Data on page 14.
B. Exhibits:
The following exhibits are filed herewith or incorporated by reference:
(2)(a) Agreement and Plan of Merger dated September 12, 1996 by and between Met-Pro Corporation, Met-Pro Acquisition Corporation, Strobic Air Corporation, Lynn T. Secrest, Ronald H. Secrest, Richard P. Secrest and John W. Stone, III. Incorporated by reference to Registrant's Registration Statement on Form S-3 (File No. 333-13929), declared effective December 31, 1996.
(2)(b) Asset Purchase Agreement dated October 29, 1998 among Flex-Kleen Corporation, Flex-Kleen Canada Limited, Aqua Alliance, Inc., AWT Air Company Inc., 1321249 Ontario Limited and Met-Pro Corporation. Incorporated by reference to Company's Registration Statement on Form 8-K filed on November 13, 1998 and amended on January 12, 1999.
(3)(a) Restated Certificate of Incorporation (incorporated by reference to Company's Registration Statement on Form 8-A filed June 12, 1998).
(3)(b) Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Company's annual report on Form 10-K filed April 24, 1998).
(3)(c) By-Laws as amended through February 7, 1968 (incorporated by reference to Company's Registration Statement No. 2-26979, declared effective October 15, 1968).
(3)(d) Amendments to By-Laws adopted June 3, 1987, July 18, 1978 and June 15, 1977 (incorporated by reference to Company's Registration Statement on Form 8-A filed June 12, 1998).
(3)(e) Amendments to By-Laws adopted February 21, 2000.
(4) Stockholder's Rights Plan (incorporated by reference to Company's Current Report on Form 8-K filed on January 6, 2000).
(11) Statement Re-computation of Per Share Earnings. See page 15 of Item 8.
(21) List of Subsidiaries of Registrant:
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule.
The following exhibits required under Item 601 of Regulation S-K promulgated by the Securities & Exchange Commission have been omitted because they are either inapplicable or non-existent:
(9) Voting trust agreements. (10) Material contracts. (12) Statements re computation of ratios. (13) Annual report to security holders. (16) Letter re change in certifying accountant. (18) Letter re change in accounting principles. (22) Published report regarding matters submitted to vote of security holders. (24) Power of attorney. (99) Additional exhibits.
C. Reports on Form 8-K:
The Company filed a Report on Form 8-K with the Securities and Exchange Commission on January 6, 2000 pertaining to the authorization and declaration of a dividend distribution of one Common Stock Purchase Right (a "Right") for each outstanding share of common stock of the Company, to the stockholders of record at the close of business on January 14, 2000. The description and terms of the Rights are set forth in the Rights Agreement, dated as of January 6, 2000 between the Company and American Stock Transfer and Trust Company, as Rights Agent, which were filed within this Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MET-PRO CORPORATION
April 27, 2000 By: /S/ William L. Kacin - ---------------------- ------------------------------ Date William L. Kacin Chairman, Chief Executive Officer, and President
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.