UNITED
STATES 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
For
the quarter ended: April 30, 2009
or
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
file number 001-07763
MET-PRO
CORPORATION
(Exact
name of registrant as specified in its charter)
Pennsylvania
|
|
23-1683282
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
|
|
|
160
Cassell Road, P.O. Box 144
|
|
|
Harleysville,
Pennsylvania
|
|
19438
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (215) 723-6751
Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (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 whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes
[ ] No
[ ]
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. Large accelerated filer
[ ] Accelerated filer [ X ] Non-accelerated filer
[ ] Smaller reporting company
[ ]
Indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
[ ] No [ X ]
As of April 30, 2009 the Registrant had
14,600,109 Common Shares, par value of $.10 per share, outstanding.
INDEX
CONSOLIDATED BALANCE SHEET
(unaudited)
PART
I – FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
Item
1.
Financial
Statements
|
|
|
|
|
|
|
|
|
|
|
April
30,
|
|
January
31,
|
|
ASSETS
|
2009
|
|
2009
|
|
Current
assets
|
|
|
|
|
Cash
and cash equivalents
|
$26,446,717
|
|
$21,749,653
|
|
Accounts
receivable, net of allowance for
|
|
|
|
|
doubtful
accounts of approximately
|
|
|
|
|
$210,000
and $167,000, respectively
|
14,522,548
|
|
20,177,672
|
|
Inventories
|
20,684,278
|
|
20,236,865
|
|
Prepaid
expenses, deposits and other current assets
|
1,722,518
|
|
1,997,542
|
|
Total
current assets
|
63,376,061
|
|
64,161,732
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
19,810,977
|
|
19,389,597
|
|
Costs
in excess of net assets of businesses acquired, net
|
20,798,913
|
|
20,798,913
|
|
Other
assets
|
406,423
|
|
402,062
|
|
Total
assets
|
$104,392,374
|
|
$104,752,304
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Current
portion of long-term debt
|
$924,821
|
|
$746,042
|
|
Accounts
payable
|
4,938,844
|
|
5,464,629
|
|
Accrued
salaries, wages and expenses
|
3,771,899
|
|
4,546,199
|
|
Dividend
payable
|
876,007
|
|
876,007
|
|
Customers’
advances
|
384,100
|
|
356,008
|
|
Deferred
income taxes
|
250,782
|
|
250,782
|
|
Total
current liabilities
|
11,146,453
|
|
12,239,667
|
|
|
|
|
|
|
Long-term
debt
|
3,962,517
|
|
3,753,228
|
|
Other
non-current liabilities
|
8,940,189
|
|
8,855,912
|
|
Deferred
income taxes
|
1,137,425
|
|
1,126,016
|
|
Total
liabilities
|
25,186,584
|
|
25,974,823
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
Common
shares, $.10 par value; 36,000,000 shares
|
|
|
|
|
authorized,
15,928,679 shares issued,
|
|
|
|
|
of
which 1,328,570 shares were reacquired
|
|
|
|
|
and
held in treasury at the respective dates
|
1,592,868
|
|
1,592,868
|
|
Additional
paid-in capital
|
2,630,070
|
|
2,465,193
|
|
Retained
earnings
|
89,803,750
|
|
89,727,308
|
|
Accumulated
other comprehensive loss
|
(4,137,303
|
)
|
(4,324,293
|
)
|
Treasury
shares, at cost
|
(10,683,595
|
)
|
(10,683,595
|
)
|
Total
shareholders’ equity
|
79,205,790
|
|
78,777,481
|
|
Total
liabilities and shareholders’ equity
|
$104,392,374
|
|
$104,752,304
|
|
See
accompanying notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
|
Three
Months Ended
|
|
April
30,
|
|
2009
|
|
2008
|
|
|
|
|
|
|
Net
sales
|
$19,641,008
|
|
$22,656,474
|
|
Cost
of goods sold
|
12,628,040
|
|
15,064,250
|
|
Gross
profit
|
7,012,968
|
|
7,592,224
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
Selling
|
2,528,532
|
|
2,252,076
|
|
General
and administrative
|
3,012,327
|
|
2,643,919
|
|
|
5,540,859
|
|
4,895,995
|
|
Income
from operations
|
1,472,109
|
|
2,696,229
|
|
|
|
|
|
|
Interest
expense
|
(53,823
|
|
(65,061
|
)
|
Other
income, net
|
13,965
|
|
175,815
|
|
Income
before taxes
|
1,432,251
|
|
2,806,983
|
|
|
|
|
|
|
Provision
for taxes
|
479,802
|
|
881,338
|
|
Net
income
|
$952,449
|
|
$1,925,645
|
|
Earnings
per share, basic
(1)
|
$.07
|
|
$.13
|
|
|
|
|
|
|
Earnings
per share, diluted
(2)
|
$.07
|
|
$.13
|
|
|
|
|
|
|
Cash
dividend per share – declared
(3)
|
$.06
|
|
$.055
|
|
|
|
|
|
|
Cash
dividend per share – paid
(3)
|
$.06
|
|
$.055
|
|
|
(1)
|
Basic
earnings per share are based upon the weighted average number of shares
outstanding of 14,600,109 and 15,038,900 for the three-month periods ended
April 30, 2009 and 2008, respectively.
|
|
|
|
|
(2)
|
Diluted
earnings per share are based upon the weighted average number of shares
outstanding of 14,645,792 and 15,313,389 for the three-month periods ended
April 30, 2009 and 2008, respectively.
|
|
|
|
|
(3)
|
The
Board of Directors declared quarterly dividends of $.06 per share payable
on March 12, 2009 and June 12, 2009 to shareholders of record as of
February 26, 2009 and May 29, 2009, respectively. Quarterly
dividends of $.055 per share were paid on March 11, 2008 and June 12, 2008
to shareholders of record as of February 26, 2008 and May 29, 2008,
respectively.
|
See
accompanying notes to consolidated financial
statements.
|
CONSOLIDATED STATEMENT OF SHAREHOLDERS'
EQUITY
(unaudited)
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
Retained
|
|
Comprehensive
|
|
Treasury
|
|
|
|
|
Shares
|
|
|
Capital
|
|
Earnings
|
|
Income/(Loss)
|
|
Shares
|
|
Total
|
|
Balances,
January 31, 2009
|
$1,592,868
|
|
|
$2,465,193
|
|
|
$89,727,308
|
|
|
($4,324,293
|
)
|
|
($10,683,595
|
)
|
|
$78,777,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
-
|
|
|
-
|
|
|
952,449
|
|
|
-
|
|
|
-
|
|
|
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
-
|
|
|
-
|
|
|
-
|
|
|
165,097
|
|
|
-
|
|
|
|
|
Interest
rate swap,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of tax of
($12,858)
|
-
|
|
|
-
|
|
|
-
|
|
|
21,893
|
|
|
-
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,139,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared, $.06 per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share
|
-
|
|
|
-
|
|
|
(876,007
|
)
|
|
-
|
|
|
-
|
|
|
(876,007
|
)
|
Stock-based
compensation
|
-
|
|
|
164,877
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
164,877
|
|
Balances,
April 30, 2009
|
$1,592,868
|
|
|
$2,630,070
|
|
|
$89,803,750
|
|
|
($4,137,303
|
)
|
|
($10,683,595
|
)
|
|
$79,205,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
Retained
|
|
Comprehensive
|
|
Treasury
|
|
|
|
|
Shares
|
|
|
Capital
|
|
Earnings
|
|
Income/(Loss)
|
|
Shares
|
|
Total
|
|
Balances,
January 31, 2008
|
$1,592,881
|
|
|
$1,897,655
|
|
|
$83,267,096
|
|
|
$1,340,427
|
|
|
($4,854,891
|
)
|
|
$83,243,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
-
|
|
|
-
|
|
|
1,925,645
|
|
|
-
|
|
|
-
|
|
|
|
|
Pension
measurement
|
-
|
|
|
-
|
|
|
7,970
|
|
|
-
|
|
|
-
|
|
|
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
-
|
|
|
-
|
|
|
-
|
|
|
282,487
|
|
|
-
|
|
|
|
|
Interest
rate swap,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of tax of
($12,630)
|
-
|
|
|
-
|
|
|
-
|
|
|
21,505
|
|
|
-
|
|
|
|
|
Securities
available for sale,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of tax of $202
|
-
|
|
|
-
|
|
|
-
|
|
|
(343
|
)
|
|
-
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,237,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared, $.055 per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share
|
-
|
|
|
-
|
|
|
(827,130
|
)
|
|
-
|
|
|
-
|
|
|
(827,130
|
)
|
Stock-based
compensation
|
-
|
|
|
108,051
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
108,051
|
|
Common
share adjustment
|
(13
|
)
|
|
13
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Balances,
April 30, 2008
|
$1,592,868
|
|
|
$2,005,719
|
|
|
$84,373,581
|
|
|
$1,644,076
|
|
|
($4,854,891
|
)
|
|
$84,761,353
|
|
See
accompanying notes to consolidated financial
statements.
|
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
April
30,
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
income
|
|
|
$952,449
|
|
$1,925,645
|
|
Adjustments
to reconcile net income to net
|
|
|
|
|
|
|
cash
provided by operating activities:
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
480,672
|
|
473,225
|
|
Deferred
income taxes
|
|
|
(597
|
)
|
4,686
|
|
(Gain)
loss on sale of property and equipment, net
|
|
|
(12,195
|
)
|
2,611
|
|
Stock-based
compensation
|
|
|
164,876
|
|
108,051
|
|
Allowance
for doubtful accounts
|
|
|
42,941
|
|
11,186
|
|
(Increase)
decrease in operating assets:
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
5,695,089
|
|
4,092,724
|
|
Inventories
|
|
|
(381,726
|
)
|
(531,236
|
)
|
Prepaid
expenses and deposits
|
|
|
558,434
|
|
-
|
|
Other
assets
|
|
|
(283,798
|
)
|
98,700
|
|
Increase
(decrease) in operating liabilities:
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
(1,378,851
|
)
|
(1,749,774
|
)
|
Customers’
advances
|
|
|
27,013
|
|
324,179
|
|
Other
non-current liabilities
|
|
|
84,276
|
|
14,986
|
|
Net
cash provided by operating activities
|
|
|
5,948,583
|
|
4,774,983
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
Proceeds
from sale of property and equipment
|
|
|
18,882
|
|
-
|
|
Acquisitions
of property and equipment
|
|
|
(797,497
|
)
|
(404,379
|
)
|
Net
cash used in investing activities
|
|
|
(778,615
|
)
|
(404,379
|
)
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
Proceeds
from new borrowing
|
|
|
485,336
|
|
-
|
|
Reduction
of debt
|
|
|
(104,440
|
)
|
(366,906
|
)
|
Payment
of dividends
|
|
|
(876,007
|
)
|
(827,136
|
)
|
Net
cash used in financing activities
|
|
|
(495,111
|
)
|
(1,194,042
|
)
|
Effect
of exchange rate changes on cash
|
|
|
22,207
|
|
(22,941
|
)
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
4,697,064
|
|
3,153,621
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at February 1
|
|
|
21,749,653
|
|
21,906,877
|
|
Cash
and cash equivalents at April 30
|
|
|
$26,446,717
|
|
$25,060,498
|
|
See
accompanying notes to consolidated financial statements.
|
|
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting
Pronouncements
:
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements”. SFAS No. 157 provides guidance for using fair value to
measure assets and liabilities. It also responds to investors’
requests for expanded information about the extent to which companies measure
assets and liabilities at fair value, the information used to measure fair
value, and the effect of the fair value measurements on
earnings. SFAS No. 157 applies whenever other standards require (or
permit) assets or liabilities to be measured at fair value, and does not expand
the use of fair value in any new circumstances. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and was adopted by the Company in the first quarter of fiscal
year 2009. The adoption of SFAS No. 157 did not have a material
impact on our financial position, results of operations or cash
flows.
In
September 2006, the FASB issued SFAS No. 158,
“
Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106 and 132(R)”
.
SFAS No. 158 requires that
we recognize the overfunded or underfunded status of our pension plans (the
Plans) as an asset or liability in the consolidated balance sheet, with changes
in the funded status recognized through other comprehensive income in the year
in which they occur, effective for our fiscal years beginning after February 1,
2006. SFAS No. 158 also requires us to measure the funded status of
the Plans as of the year end consolidated balance sheet date, effective for
fiscal years ending after December 15, 2008. The impact of adopting
SFAS No. 158 resulted in a decrease in the pension liabilities and an increase
in accumulated other comprehensive income of approximately $1.1 million, prior
to any deferred tax adjustment, in the fiscal year ended January 31, 2008, and
an increase in pension liabilities and a decrease in accumulated other
comprehensive income of approximately $7.6 million, prior to any deferred tax
adjustment, in the fiscal year ended January 31, 2009.
In
October 2006, the FASB issued Interpretation (“FIN”) No. 48, “Accounting for
Uncertainty in Income Taxes - An Interpretation of SFAS No. 109”. FIN
No. 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS No. 109, “Accounting
for Income Taxes”. FIN No. 48 also prescribes a recognition threshold
and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return. In addition, FIN No. 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. The provisions of FIN No. 48 are to be
applied to all tax positions upon initial adoption of this
standard. Only tax positions that meet the more-likely-than-not
recognition threshold at the effective date may be recognized or continue to be
recognized as an adjustment to the opening balance of retained earnings (or
other appropriate components of equity) for the fiscal year. The
provisions of FIN No. 48 are effective for fiscal years beginning after December
15, 2006. The Company adopted FIN No. 48 effective February 1,
2007. See Note 7 on page 9 for further information.
In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations”. This statement establishes principles and requirements
for how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree. SFAS No. 141(R) also
provides guidance for recognizing and measuring the goodwill acquired in the
business combination and determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial effects of the
business combination. It also changes the recognition of assets
acquired and liabilities assumed arising from contingencies, requires the
capitalization of in-process research and development at fair value, and
requires the expensing of acquisition-related costs as incurred. With
respect to the Company, SFAS No. 141(R) applies prospectively to business
combinations for which the acquisition date is on or after February 1,
2009. We expect SFAS No. 141(R) will have an impact on accounting for
future acquisitions by the Company.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities – an amendment of FASB Statement
No. 133”. This statement requires additional disclosures about
the objectives of the derivative instruments and hedging activities, the method
of accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, results of operations and cash
flows. SFAS No. 161 is effective for the Company beginning February 1,
2009. The adoption of SFAS No. 161 did not have a material impact on our
financial position, results of operations or cash flows.
In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. This Statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). This Statement shall be
effective 60 days following the SEC’s approval of the Public Company Accounting
Oversight Board (PCAOB) amendments to AU Section 411, “The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting
Principles”. The Company believes that the adoption of SFAS No. 162
will not have an effect on the Company’s financial position, results of
operations and cash flows.
NOTE
2 – PRINCIPLES OF
CONSOLIDATION
|
The
consolidated financial statements include the accounts of Met-Pro Corporation
(“Met-Pro” or the “Company”) and its wholly-owned subsidiaries, Mefiag B.V.,
Met-Pro Product Recovery/Pollution Control Technologies Inc., Strobic Air
Corporation, MPC Inc., Pristine Water Solutions Inc., Mefiag (Guangzhou) Filter
Systems Ltd., and Met-Pro (Hong Kong) Limited Company. Significant
intercompany accounts and transactions have been eliminated.
NOTE
3 – BASIS OF PRESENTATION
|
In
the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the financial position of
the Company as of April 30, 2009 and the results of operations, changes in
shareholders’ equity and cash flows for the three-month periods ended April 30,
2009 and 2008. The results of operations for the three-month periods ended April
30, 2009 and 2008 are not necessarily indicative of the results to be expected
for the full year. These consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and notes
thereto contained in the Company’s Annual Report on Form 10-K for the year ended
January 31, 2009.
NOTE
4 – STOCK-BASED COMPENSATION
Stock
Options:
We
grant stock options to our officers and directors, typically in December of each
year. On December 3, 2008, December 10, 2007 and December 15, 2006,
the Company issued 206,600, 215,800 and 238,667 stock options, respectively,
with one-third exercisable one year from the grant date and the remaining
two-thirds vesting two and three years from the grant date,
respectively. In the event of a “change of control”, any unvested
options shall become immediately exercisable. Typically, the duration of options
is for up to ten years from the date of grant, subject to earlier termination
under various conditions. On March 27, 2009, the Company issued 5,000
stock options, fully exercisable on the grant date for a three year period. The
fair value of options that we grant is amortized into compensation expense on a
straight-line basis over its respective vesting period, net of estimated
forfeitures. We estimate the fair value of options as of the grant
date using the Black-Scholes option valuation model. The per share fair value
weighted-averages at the date of grant for stock options granted during the
fiscal years ending January 31, 2010, 2009, 2008 and 2007 were $2.01, $3.41,
$3.06 and $3.02 per option, respectively.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
application of this valuation model relies on the following assumptions that are
judgmental and sensitive in the determination of the compensation
expense:
|
Three
Months Ended
|
|
April
30,
|
|
2009
|
|
2008
|
Expected
term (years)
|
3.0
- 5.0
|
|
5.0
|
Risk-free
interest rate
|
1.90%
- 4.50%
|
|
3.53%
- 4.50%
|
Expected
volatility
|
29%
- 39%
|
|
29%
|
Dividend
yield
|
1.86%
- 2.80%
|
|
1.86%
-
1.88%
|
Historical
information was the principal basis for the selection of the expected term and
dividend yield. The expected volatility is based on a weighted-average
combination of historical and implied volatilities over a time period that
approximates the expected term of the option. The risk-free interest rate was
selected based upon the U.S. Treasury Bill rates in effect at the time of grant
for the expected term of the option.
The
following table summarizes stock option transactions for the three-month period
ended April 30, 2009:
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
Average
|
|
|
|
|
Average
|
Remaining
|
Aggregate
|
|
|
Shares
|
Exercise
Price
|
Life
(years)
|
Intrinsic
Value
|
Options:
|
|
|
|
|
|
|
Outstanding
at February 1, 2009
|
1,193,533
|
$9.5374
|
|
7.28
|
|
|
Granted
|
5,000
|
8.5600
|
|
3.00
|
|
|
Forfeited
|
-
|
-
|
|
|
|
|
Expired
|
-
|
-
|
|
|
|
|
Exercised
|
-
|
-
|
|
|
|
|
Outstanding
at April 30, 2009
|
1,198,533
|
$9.5333
|
|
6.99
|
$1,480,582
|
|
|
|
|
|
|
|
|
Exercisable
at April 30, 2009
|
790,545
|
$8.5647
|
|
6.99
|
$1,480,582
|
There
were no options exercised during the three-month periods ended April 30, 2009
and April 30, 2008.
The
following table summarizes information about the options outstanding and options
exercisable as of April 30, 2009:
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
|
|
Weighted
Average
|
|
|
|
|
|
|
|
|
Remaining
|
Weighted
Average
|
|
|
|
Weighted
Average
|
|
|
Shares
|
Life
(years)
|
Exercise
Price
|
|
|
Shares
|
Exercise
Price
|
Range
of prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$4.11
– 4.99
|
|
9,956
|
|
0.63
|
|
$4.1659
|
|
|
|
9,956
|
|
$4.1659
|
|
$5.00
– 5.49
|
|
24,180
|
|
1.83
|
|
5.1047
|
|
|
|
24,180
|
|
5.1047
|
|
$5.50
– 6.99
|
|
146,259
|
|
3.37
|
|
5.5308
|
|
|
|
146,259
|
|
5.5308
|
|
$7.00
– 8.99
|
|
133,896
|
|
5.53
|
|
7.4539
|
|
|
|
133,896
|
|
7.4539
|
|
$9.00
– 9.99
|
|
282,237
|
|
5.92
|
|
9.3049
|
|
|
|
282,237
|
|
9.3049
|
|
$10.00
– 10.99
|
|
190,005
|
|
7.63
|
|
10.8975
|
|
|
|
125,554
|
|
10.8975
|
|
$11.00
– 11.99
|
|
412,000
|
|
9.12
|
|
11.5469
|
|
|
|
68,463
|
|
11.7500
|
|
|
|
1,198,533
|
|
6.99
|
|
$9.5333
|
|
|
|
790,545
|
|
$8.5647
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
As
of April 30, 2009, there was $1,112,552 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted under the
plans. The cost is expected to be recognized over a weighted-average period of
3.0 years.
NOTE
5 – INVENTORIES
Inventories
consisted of the following:
|
April
30,
2009
|
|
January
31,
2009
|
Raw
materials
|
$15,434,452
|
|
$15,416,249
|
Work
in progress
|
2,247,552
|
|
2,013,789
|
Finished
goods
|
3,002,274
|
|
2,806,827
|
|
$20,684,278
|
|
$20,236,865
|
NOTE
6 – SUPPLEMENTAL CASH FLOW INFORMATION
Net
cash flows from operating activities reflect cash payments for interest and
income taxes as follows:
|
Three
Months Ended
April
30,
|
|
2009
|
|
2008
|
Cash
paid during the period for:
|
|
|
|
Interest
|
$52,342
|
|
$73,370
|
Income
taxes
|
15,441
|
|
417,266
|
NOTE
7 – INCOME TAXES
The
Company adopted the provisions of FIN No. 48, “Accounting for Uncertainty in
Income Taxes”, on February 1, 2007. Previously, the Company accounted for
tax contingencies in accordance with SFAS No. 5, “Accounting for Contingencies”.
As required by FIN No. 48, which clarifies SFAS No. 109, “Accounting for Income
Taxes”, the Company recognizes the financial statement benefit of a tax position
only after determining that the relevant tax authority would more likely than
not sustain the position following an audit. For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the financial
statements is the largest benefit that has a greater than 50 percent
likelihood of being realized upon ultimate settlement with the relevant tax
authority. At the adoption date, the Company applied FIN No. 48 to all tax
positions for which the statute of limitations remained open.
As
of the fiscal year ended January 31, 2009, the Company had an unrecognized tax
benefit of $40,000 to account for federal and state tax matters in the United
States of which approximately $5,000 was accrued for the payment of interest and
penalties through January 31, 2009. As of April 30, 2009 the Company
re-evaluated its position with regards to the current federal and state tax
matters in the United States and has determined that there has been no changes
in tax positions which would impact the unrecognized tax benefit of
$40,000.
MET-PRO
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
A
reconciliation of the beginning and ending balances of the total amounts of
unrecognized tax benefits is as follows:
|
|
2009
|
Balance
at February 1, 2009
|
|
$40,000
|
Increases
in tax positions for prior years
|
|
-
|
Decreases
in tax positions for prior years
|
|
-
|
Increases
in tax positions for current year
|
|
-
|
Balance
at April 30, 2009
|
|
$40,000
|
The
Company and its subsidiaries are subject to income taxes in the U.S. federal
jurisdiction, and various states and foreign jurisdictions. Tax regulations
within each jurisdiction are subject to the interpretation of the related tax
laws and regulations and require significant judgment to apply. With few
exceptions, the Company and its subsidiaries are no longer subject to U.S.
federal, state and local, or non-U.S. income tax examinations by tax authorities
for the years before 2005.
The
Company and its subsidiaries have uncommitted domestic and foreign unsecured
lines of credit totaling $4,396,900 which can be used for working
capital. As of April 30, 2009, the Company’s Mefiag B.V. subsidiary
had borrowed $396,900 (300,000 Euro) from its available line of credit, which is
included in the table below.
Short-term
and long-term debt consisted of the following:
|
April
30,
|
|
January
31,
|
|
2009
|
|
2009
|
|
|
|
|
Bond
payable, bank, payable in quarterly installments of
|
|
|
|
$58,460,
plus interest at a rate equal to the greater of
|
|
|
|
(i)
16 basis points below the ninety day LIBOR rate
|
|
|
|
or
(ii) 250 basis points (effective interest rate of 2.50%
|
|
|
|
at
April 30, 2009), maturing April, 2021, collateralized
|
|
|
|
by
the Telford, PA building
|
$2,806,102
|
|
$2,864,562
|
|
|
|
|
Note
payable, bank, payable in quarterly installments of
|
|
|
|
$33,075
(25,000 Euro), plus interest at a fixed rate of 3.82%,
|
|
|
|
maturing
January, 2016
|
893,025
|
|
896,350
|
|
|
|
|
Equipment
note, payable in monthly installments of
|
|
|
|
$13,482,
no interest, maturing March, 2012
|
471,854
|
|
-
|
|
|
|
|
Line
of credit, $396,900 (300,000 Euro), payable upon demand,
|
|
|
|
plus
interest at a rate of 70 basis points over the thirty day
|
|
|
|
EURIBOR
rate (effective interest rate of 1.64% at
|
|
|
|
April
30, 2009)
|
396,900
|
|
384,150
|
|
|
|
|
|
4,567,881
|
|
4,145,062
|
Less
current portion
|
924,821
|
|
746,042
|
|
3,643,060
|
|
3,399,020
|
Fair
market value of interest rate swap liability
|
319,457
|
|
354,208
|
Long-term
portion
|
$3,962,517
|
|
$3,753,228
|
The
notes payable and bond payable are subject to certain covenants, including
maintenance of prescribed amounts of leverage and fixed charge coverage
ratios.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company has an interest rate swap agreement to hedge against the potential
impact on earnings from increases in market interest rates. Effective
April 3, 2006, the Company entered into a fifteen-year interest rate swap
agreement for a notional amount equal to the balance on the bond payable
maturing April 2021. The Company swapped the ninety-day LIBOR for a
fixed rate of 4.87%. As of April 30, 2009 the effective fixed
interest rate was 5.95% as a result of the swap agreement plus the interest rate
floor provision of 250 basis points. The interest rate swap agreement
is accounted for as fair value hedge that qualifies for treatment under the
short-cut method of measuring effectiveness in accordance with SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities” as amended by
SFAS No. 138, “Accounting for Certain Derivative Instruments and Hedging
Activities – an Amendment to FASB Statement No. 133”. There was
no hedge ineffectiveness as of April 30, 2009. The fair value of the
interest rate swap agreement resulted in a decrease in equity of $201,258 (net
of tax) at April 30, 2009 and a decrease in equity of $223,151 (net of tax) at
January 31, 2009. These results are recorded in the accumulated other
comprehensive income (loss) section of shareholders’ equity.
The
bank has issued and has outstanding standby letters of credit to customers
totaling $601,209 as of April 30, 2009, which expire during the fiscal years
ending January 31, 2010 and 2011 in the amounts of $454,190 and $147,019,
respectively.
Maturities
of short-term and long-term debt are as follows:
Year
Ending
|
|
|
January
31,
|
|
|
2010
|
$792,843
|
|
2011
|
527,924
|
|
2012
|
527,924
|
|
2013
|
393,104
|
|
2014
|
366,140
|
|
Thereafter
|
1,959,946
|
|
|
$4,567,881
|
|
NOTE
9 – ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated
other comprehensive loss consisted of the following:
|
April
30,
|
|
January
31,
|
|
|
2009
|
|
2009
|
|
Interest
rate swap, net of tax
|
($201,258
|
)
|
($223,151
|
)
|
Foreign
currency translation adjustment
|
845,794
|
|
680,697
|
|
Minimum
pension liability adjustment, net of tax
|
(4,781,839
|
)
|
(4,781,839
|
)
|
|
($4,137,303
|
)
|
($4,324,293
|
)
|
NOTE
10 – OTHER INCOME, NET
Other
income, net was comprised of the following:
|
|
Three
Months Ended
April
30,
|
|
|
|
2009
|
|
2008
|
|
|
Interest
income
|
$24,184
|
|
$151,506
|
|
|
Other
miscellaneous income (expense)
|
(10,219
|
)
|
24,309
|
|
|
|
$13,965
|
|
$175,815
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
11 – EMPLOYEE BENEFIT PLANS
The
Company has several defined benefit pension plans covering eligible employees in
the United States. In the third quarter ended October 31, 2006, the
Company amended its defined benefit pension plans to freeze the accrual of
future benefits for all its salaried and non-union hourly employees effective on
December 31, 2006. As of December 31, 2008, the Company amended its defined
benefit pension plan to freeze the accrual of future benefits for union hourly
employees. The net periodic pension income and cost is based on
estimated values provided by independent actuaries. The following table provides
the components of net periodic pension income and cost:
|
Three
Months Ended
|
|
|
April
30,
|
|
|
2009
|
|
2008
|
|
Service
cost
|
$17,306
|
|
$34,187
|
|
Interest
cost
|
284,949
|
|
271,591
|
|
Expected return on plan assets
|
(187,079
|
)
|
(330,793
|
)
|
Amortization
of transition asset
|
-
|
|
(94
|
)
|
Amortization
of prior service (income) cost
|
(211
|
)
|
9,046
|
|
Recognized
net actuarial loss
|
59,316
|
|
3,342
|
|
Net
periodic benefit (income) cost
|
$174,281
|
|
($12,721
|
)
|
The
Company contributed $26,311 to the pension plans during the three-month period
ended April 30, 2009 and expects to make an additional contribution of
$1,678,328 during the nine-month period ending January 31, 2010.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
12 – BUSINESS SEGMENT DATA
The
segment discussion outlined below represents the segment structure as determined
by management in accordance with SFAS No. 131, “Disclosures about Segments of an
Enterprise and Related Information.”
As
reported in the Company’s Annual Report on Form 10-K as of January 31, 2009, the
Company has five operating segments which are aggregated into three reportable
segments: Product Recovery/Pollution Control Technologies, Fluid Handling
Technologies and Mefiag Filtration Technologies, and one other segment
(Filtration/Purification Technologies). The Filtration/Purification Technologies
segment is comprised of two operating segments that do not meet the criteria for
aggregation outlined in SFAS No. 131. The Company’s analysis is that SFAS No.
131 permits the aggregation of operating segments if, individually, each
operating segment does not meet any of the following quantitative thresholds:
(i) reported revenue is 10% or more of combined revenue of all reported
operating segments, (ii) the absolute amount of reported profit or loss is 10%
or more of the greater, in absolute amounts, of either the combined reported
profit of all operating segments that did not report a loss or the combined
reported loss of all operating segments that did report a loss, and (iii) its
assets are 10% or more of the combined assets of all operating
segments. As of the fiscal quarter ended April 30, 2009, none of the
operating segments included in the Filtration/Purification Technologies segment
met these criteria, and at least 75% of total consolidated revenue is included
in the Product Recovery/Pollution Control Technologies, Fluid Handling
Technologies and Mefiag Filtration reporting segments; therefore the Company
determined the aggregation of these operating segments into this other segment
was appropriate under SFAS No. 131.
The
Company expects, based upon the current financial performance of its business
units, the segmentation reporting will continue to be presented in future
periods using the three reportable segments and the one other
segment.
The
following is a description of each segment:
Product Recovery/Pollution Control
Technologies:
This reportable segment consists of one operating segment
that manufactures products for the purification of air or
liquids. Many of these products are custom designed and engineered to
solve a customer’s pollution control or product recovery issues. The
products are sold worldwide through Company sales personnel and a network of
manufacturer’s representatives. This reporting segment is comprised
of the Duall, Systems, Flex-Kleen, Met-Pro Product Recovery/Pollution Control
Technologies Inc. and Strobic Air business units.
Fluid Handling Technologies:
This reportable segment consists of one operating segment that manufactures high
quality centrifugal pumps that are suitable for difficult applications including
the pumping of acids, brines, caustics, bleaches, seawater, high temperature
liquids and a wide variety of waste liquids. A variety of pump
configurations make these products adaptable to almost any pumping
application. These products are sold worldwide through an extensive
network of distributors. This reporting segment is comprised of the
Dean Pump, Fybroc and Sethco business units.
Mefiag Filtration
Technologies
: This reportable segment consists of one
operating segment that produces filter systems using horizontal disc technology
for tough, corrosive applications in the plating, metal finishing and printing
industries. These products are sold worldwide through Company sales
personnel and a network of distributors. This reporting segment is
comprised of the Mefiag USA, Mefiag B.V. and Mefiag (Guangzhou) Filter Systems
Ltd. business units.
Filtration/Purification
Technologies
: This other segment consists of two operating segments that
produce the following products: proprietary chemicals for the treatment of
municipal drinking water systems and boiler and cooling tower systems;
cartridges and filter housings; and filtration products for difficult industrial
air and liquid applications. This other segment is comprised of the
Keystone Filter and Pristine Water Solutions operating segments.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTES
The
accounting policies of the reporting segments are the same as those described in
the summary of significant accounting policies. The Company evaluates the
performance of these segments based on many factors including sales, sales
trends, margins and operating performance.
No
significant intercompany revenue is realized in these reporting segments.
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.
The
financial segmentation information, adjusted as a result of the SFAS No. 131
aggregation criteria, is shown below:
|
|
|
|
|
Three
Months Ended
|
|
|
April
30,
|
|
|
2009
|
|
|
2008
|
Net
sales
|
|
|
|
|
|
Product
recovery/pollution control technologies
|
|
$7,569,982
|
|
|
$9,504,792
|
Fluid
handling technologies
|
|
6,978,462
|
|
|
6,988,583
|
Mefiag
filtration technologies
|
|
2,487,250
|
|
|
3,255,155
|
Filtration/purification
technologies
|
|
2,605,314
|
|
|
2,907,944
|
|
|
$19,641,008
|
|
|
$22,656,474
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
|
|
|
|
Product
recovery/pollution control technologies
|
|
$145,203
|
|
|
$892,251
|
Fluid
handling technologies
|
|
1,306,005
|
|
|
1,379,954
|
Mefiag
filtration technologies
|
|
(15,403
|
)
|
|
159,128
|
Filtration/purification
technologies
|
|
36,304
|
|
|
264,896
|
|
|
$1,472,109
|
|
|
$2,696,229
|
|
|
April
30,
|
|
|
January
31,
|
|
|
2009
|
|
|
2009
|
Identifiable
assets
|
|
|
|
|
|
Product
recovery/pollution control technologies
|
|
$34,891,160
|
|
|
$39,623,284
|
Fluid
handling technologies
|
|
21,610,231
|
|
|
22,056,812
|
Mefiag
filtration technologies
|
|
11,623,897
|
|
|
11,410,677
|
Filtration/purification
technologies
|
|
9,444,864
|
|
|
9,369,905
|
|
|
77,570,152
|
|
|
82,460,678
|
Corporate
|
|
26,822,222
|
|
|
22,291,626
|
|
|
$104,392,374
|
|
$104,752,304
|
NOTE
13 – ACCOUNTANTS’ 10-Q REVIEW
Margolis
& Company P.C., the Company’s independent registered public accountants, has
performed a limited review of the financial information included herein. Their
report on such review accompanies this filing.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To
the Board of Directors
|
Met-Pro
Corporation
|
Harleysville,
Pennsylvania
|
We
have reviewed the accompanying consolidated balance sheet of Met-Pro Corporation
as of April 30, 2009, and the related consolidated statements of operations,
shareholders’ equity and cash flows for the three-month periods ended April 30,
2009 and 2008. These financial statements are the responsibility of
the Company’s management.
We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, 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 interim consolidated financial statements in order for
them to be in conformity with U.S. generally accepted accounting
principles.
We
have previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board, the consolidated balance sheet of Met-Pro
Corporation as of January 31, 2009, and the related consolidated statements of
operations, shareholders’ equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 20, 2009, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
January 31, 2009 is fairly stated, in all material respects, in relation to the
balance sheet from which it has been derived.
|
/s/ Margolis & Company
P.C.
|
|
Certified
Public Accountants
|
Bala
Cynwyd, Pennsylvania
May
18, 2009
Item 2.
Management’s Discussion and Analysis
of Financial Condition and Results of
Operations:
The
following table sets forth, for the three-month periods indicated, certain
financial information derived from the Company’s consolidated statement of
operations expressed as a percentage of net sales.
|
|
Three
Months Ended
|
|
|
April
30,
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
Net
sales
|
100.0
|
%
|
100.0
|
%
|
Cost
of goods sold
|
64.3
|
%
|
66.5
|
%
|
Gross
profit
|
35.7
|
%
|
33.5
|
%
|
|
|
|
|
|
Selling
expenses
|
12.9
|
%
|
9.9
|
%
|
General
and administrative expenses
|
15.3
|
%
|
11.7
|
%
|
Income
from operations
|
7.5
|
%
|
11.9
|
%
|
|
|
|
|
|
Interest
expense
|
(0.3
|
%)
|
(0.3
|
%)
|
Other
income, net
|
0.1
|
%
|
0.8
|
%
|
Income
before taxes
|
7.3
|
%
|
12.4
|
%
|
|
|
|
|
|
Provision
for taxes
|
2.4
|
%
|
3.9
|
%
|
Net
income
|
4.9
|
%
|
8.5
|
%
|
Three
Months Ended April 30, 2009 vs. Three Months Ended April 30, 2008:
Net
sales for the three-month period ended April 30, 2009 were $19,641,008 compared
with $22,656,474 for the three-month period ended April 30, 2008, a decrease of
$3,015,466 or 13.3%.
Sales
in the Product Recovery/Pollution Control Technologies reporting segment were
$7,569,982, or $1,934,810 lower than the $9,504,792 of sales for the three-month
period ended April 30, 2008, a decrease of 20.4%. The sales decrease
in the Product Recovery/Pollution Control Technologies reporting segment was due
primarily to lower sales for our thermal and catalytic oxidation equipment, our
chemical and biological odor control systems and our particulate collection
equipment, as a result of a global slowdown which is causing delays between
quotation and order placement for larger capital projects on account of customer
capital spending plans being resized or put on hold.
Sales
in the Fluid Handling Technologies reporting segment totaled $6,978,462, or
$10,121 lower than the $6,988,583 of sales for the three-month period ended
April 30, 2008, a decrease of 0.1% due to a decrease in demand for our
centrifugal pumps that handle a broad range of industrial
applications.
Sales
in the Mefiag Filtration Technologies reporting segment were $2,487,250, or
$767,905 lower than the $3,255,155 of sales for the three-month period ended
April 30, 2008, a decrease of 23.6%. The sales decrease in the Mefiag
Filtration Technologies reporting segment was due to a decreased demand for our
horizontal disc filter systems, attributable primarily to a slowdown in the
automotive and housing industries served by this segment.
Sales
in the Filtration/Purification Technologies segment were $2,605,314, or $302,630
lower than the $2,907,944 of sales for the three-month period ended April 30,
2008, a decrease of 10.4%. This decrease was due primarily to
decreased demand for our filters, cartridges and filter housings designed for
industrial and residential air and liquid filtration applications, as a result
of a general weakness in the markets served due to the global economic
slowdown.
Item
2.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
continued…
The
Company’s backlog of orders totaled $14,510,283 and $22,803,686 as of April 30,
2009 and 2008, respectively. This reflects a decrease in new orders
received during the quarter, although the rate of the Company’s bookings of new
orders varies from month to month. Orders have varying delivery
schedules, and as of any particular date, the Company’s backlog may not be
predictive of actual revenues for any succeeding specific period, in part due to
potential customer requested delays in delivery of which the extent and duration
may vary widely from period to period. We have also observed a trend
over the last several years where larger projects are more frequently booked and
shipped in the same quarter in which we received the customer purchase order due
to improved project execution and shorter lead times, resulting in such projects
not appearing in publicly disclosed annual or quarterly backlog
figures. Additionally, the Company’s customers typically have the
right to cancel a given order, although the Company has historically experienced
a very low rate of cancellation. The Company expects that
substantially all of the backlog that existed as of April 30, 2009 will be
shipped during the current fiscal year.
Income
from operations for the three-month period ended April 30, 2009 was $1,472,109
compared with $2,696,229 for the three-month period ended April 30, 2008, a
decrease of $1,224,120, or 45.4%.
Income
from operations in the Product Recovery/Pollution Control Technologies reporting
segment was $145,203, or $747,048 lower than the $892,251 for the three-month
period ended April 30, 2008, a decrease of 83.7%. The decrease in
income from operations in the Product Recovery/Pollution Control Technologies
reporting segment was primarily related to lower sales and gross margins of our
particulate collection equipment and lower sales of our chemical and biological
odor control systems.
Income
from operations in the Fluid Handling Technologies reporting segment totaled
$1,306,005, or $73,949 lower than the $1,379,954 for the three-month period
ended April 30, 2008, a decrease of 5.4%.
Income
(loss) from operations in the Mefiag Filtration Technologies reporting segment
totaled ($15,403), or $174,531 lower than the $159,128 for the three-month
period ended April 30, 2008, a decrease of 109.7%. The decrease in
income from operations in the Mefiag Filtration Technologies reporting segment
was due to lower sales of our horizontal disc filter systems.
Income
from operations in the Filtration/Purification Technologies segment was $36,304
or $228,592 lower than the $264,896 for the three-month period ended April 30,
2008, a decrease of 86.3%. The decrease in income from operations in
the Filtration/Purification Technologies segment was related to decreased sales
and lower gross margins of our filters, cartridges, filter housings and
filtration products.
Net
income for the three-month period ended April 30, 2009 was $952,449 compared
with $1,925,645 for the three-month period ended April 30, 2008, a decrease of
$973,196, or 50.5%.
The
gross margin for the three-month periods ended April 30, 2009 and April 30, 2008
was 35.7% and 33.5%, respectively. Gross margins in our Product
Recovery/Pollution Control, Fluid Handling and Mefiag Filtration Technologies
reporting segments were higher than the same period last year, partially offset
by lower gross margins in the Filtration/Purification Technologies segment as
compared with the same period last year.
Selling
expense was $2,528,532 for the three-month period ended April 30, 2009, an
increase of $276,456 compared with the first quarter of last
year. This increase was primarily due to higher representative and
distributor commission expense as well as the prior year’s first quarter
expenses being reduced by $300,000 in proceeds from the settlement of a
dispute. Selling expense as a percentage of net sales was 12.9% for
the three-month period ended April 30, 2009 compared with 9.9% for the same
period last year. Selling expense may vary quarter-to-quarter, in
part as a result of variations which result in some sales being commissionable
and others not.
General
and administrative expense was $3,012,327 for the three-month period ended April
30, 2009 compared with $2,643,919 for the same period last year, an increase of
$368,408. This increase was primarily related to higher healthcare,
pension, and stock option expenses. General and administrative
expense as a percentage of net sales was 15.3% for the three-month period ended
April 30, 2009, compared with 11.7% for the same period last year.
Interest
expense was $53,823 for the three-month period ended April 30, 2009, compared
with $65,061 for the same period in the prior year, a decrease of
$11,238. This decrease was due principally to a reduction in
long-term debt.
Item
2.
Management’s Discussion and
Analysis of Financial Condition and Results of Operations
continued…
Other
income, net, was $13,965 for the three-month period ended April 30, 2009
compared with $175,815 for the same period in the prior year, a decrease of
$161,850. Other income, net, consisted primarily of interest income,
which was affected by a decrease in interest rates.
The
effective tax rates for the three-month periods ended April 30, 2009 and 2008
were 33.5% and 31.4%, respectively. The change in the effective tax
rate between the three-month periods was a result of first quarter 2008 having a
33.5% effective tax rate for normal operations, offset by an adjustment of 2.1%
due to a reevaluation of the Company’s FIN No. 48 accrual.
Liquidity:
The
Company’s cash and cash equivalents were $26,446,717 on April 30, 2009 compared
with $21,749,653 on January 31, 2009, an increase of $4,697,064. This
increase is the net result of the positive cash flows provided by operating
activities of $5,948,583 and proceeds from a new borrowing of $485,336, offset
by payment of the quarterly cash dividends amounting to $876,007, payments on
long-term debt totaling $104,440, and the investment in property and equipment
amounting to $797,497. The Company’s cash flows from operating
activities are influenced, in part, by the timing of shipments and negotiated
standard payment terms, including retention associated with major projects, as
well as other factors including changes in inventories and accounts receivable
balances.
Accounts
receivable (net) totaled $14,522,548 on April 30, 2009 compared with $20,177,672
on January 31, 2009, which represents a decrease of $5,655,124. This
reflects the lower sales for the current fiscal quarter, although the timing and
size of shipments and retainage on contracts, especially in the Product
Recovery/Pollution Control Technologies reporting segment, also will, among
other factors, influence accounts receivable balances at any given point in
time.
Inventories
were $20,684,278 on April 30, 2009 compared with $20,236,865 on January 31,
2009, an increase of $447,413. This increase is primarily
attributable to inventory purchased during the three-month period ended April
30, 2009 for projects which are expected to ship in the next six-month
period. Inventory balances fluctuate depending on market demand and
the timing and size of shipments, especially when major systems and contracts
are involved.
Current
liabilities amounted to $11,146,453 on April 30, 2009, compared with $12,239,667
on January 31, 2009, a decrease of $1,093,214. This reduction is due
to decreases in accounts payable and accrued salaries, wages and expenses,
offset by an increase in the current portion of long-term debt.
The
Company has consistently maintained a high current ratio and it and its
subsidiaries maintain uncommitted domestic and foreign lines of credit totaling
$4,396,900, all of which are available for working capital purposes, except for
$396,900 outstanding as of April 30, 2009 borrowed by the Company’s Mefiag B.V.
subsidiary in the fiscal year 2006 to partially finance an expansion and
renovation of its facility located in The Netherlands. Cash flows, in
general, have exceeded the current needs of the Company. The Company
presently foresees no change in this situation in the immediate
future. As of April 30, 2009 and January 31, 2009, working capital
was $52,229,608 and $51,922,065, respectively, and the current ratio was 5.7 and
5.2, respectively.
Capital
Resources and Requirements:
Cash
flows provided by operating activities during the three-month period ended April
30, 2009 amounted to $5,948,583 compared with $4,774,983 in the three-month
period ended April 30, 2008, an increase of $1,173,600. This increase
in cash flows from operating activities, as compared with the same period last
year, was due principally to decreases in accounts receivable, inventory,
prepaid expenses and deposits and increases in accounts payable and accrued
expenses, offset by increases in other assets and decreases in customers’
advances.
Cash
flows used in investing activities during the three-month period ended April 30,
2009 amounted to $778,615 compared with cash used in investing activities of
$404,379 for the three-month period ended April 30, 2008, an increase of
$374,236.
Consistent
with past practices, the Company intends to continue to invest in new product
development programs and to make capital expenditures required to support the
ongoing operations during the coming fiscal year. The Company expects
to finance all routine capital expenditure requirements through cash flows
generated from operations.
Item 2.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
continued…
Financing
activities during the three-month period ended April 30, 2009 utilized $495,111
of available resources, compared with $1,194,042 utilized during the three-month
period ended April 30, 2008. The 2009 activity is the result of the
payments of the quarterly cash dividends amounting to $876,007 and the reduction
of long-term debt totaling $104,440, offset by proceeds from a new borrowing of
$485,336. The new borrowing is a result of the Company’s purchase of
a new enterprise resource planning (ERP) system. The financing of the
ERP system is over a three year period with no interest. The Company
anticipates the full implementation of the new ERP system to be completed by
fiscal year 2012.
The
Board of Directors declared quarterly dividends of $.06 per share payable on
March 12, 2009 and June 12, 2009 to shareholders of record as of February 26,
2009 and May 29, 2009, respectively.
Critical
Accounting Policies and Estimates:
Management’s
Discussion and Analysis of Financial Position and Results of Operations are
based upon the Company’s consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses and related disclosure of contingent
assets and liabilities. The significant accounting policies which we
believe are the most critical to aid in fully understanding and evaluating our
reported financial results include the following:
The
Company recognizes revenues from product sales or services provided when the
following revenue recognition criteria are met: persuasive evidence of an
arrangement exists, delivery has occurred or services have been rendered, the
selling price is fixed or determinable and collectibility is reasonably
assured. The Securities and Exchange Commission’s Staff Accounting
Bulletin (“SAB”) No. 104, “Revenue Recognition”, provides guidance on the
application of generally accepted accounting principles to selected revenue
recognition issues. The Company has concluded that its revenue
recognition policy is appropriate and in accordance with generally accepted
accounting principles and SAB No. 104.
Property,
plant and equipment, intangible and certain other long-lived assets are
depreciated and amortized over their useful lives. Useful lives are based on
management’s estimates of the period that the assets will generate revenue.
Intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
In
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142,
“Goodwill and Other Intangible Assets”, which supersedes Accounting Principles
Board (“APB”) Opinion No. 17, “Intangible Assets”, effective February 1, 2002,
the Company’s unamortized goodwill balance is being assessed, at least annually,
for impairment. The Company performs its annual impairment test for each
reporting unit using a fair value approach. The test for goodwill impairment
involves significant judgment in estimating projections of fair value generated
through future performance of each of the business units, which comprise our
operating segments. In calculating the fair value of the business units using
the present value of estimated future cash flows method, we rely on a number of
assumptions including sales and related gross margin projections, operating
margins, anticipated working capital requirements and market rate of returns
used in discounting projected cash flows. These assumptions were based upon
market and industries outlooks, our business plans and historical data. Inherent
uncertainties exist in determining and applying such factors. The discount rate
used in the projection of fair value represents a weighted average cost of
capital applicable to the Company.
The
determination of our obligation and expense for pension benefits is dependent on
our selection of certain assumptions used by actuaries in calculating such
amounts. These assumptions include, among others, the discount rate
and expected long-term rate of return on plan assets. In accordance
with generally accepted accounting principles, actual results that differ from
our assumptions are accumulated and amortized over future periods and therefore
generally affect our recognized expense and recorded obligation in such future
periods. While we believe that our assumptions are appropriate,
significant differences in our actual experience or significant changes in our
assumptions may materially affect our pension obligations and our future
expense.
Item
2.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
continued…
Cautionary
Statement Concerning Forward-Looking Statements:
Our
prospects are subject to certain uncertainties and risk. This
Quarterly Report on Form 10-Q also contains certain forward-looking statements
within the meaning of the Federal securities laws. These
forward-looking statements may be identified by words describing our belief or
expectation, such as where we say that we “believe”, “expect” or “anticipate”,
or where we characterize something in a manner in which there is an express or
implicit reference to the future, such as “non-recurring” or “unusual,” or where
we express that our view is based upon the “current status” of a given matter,
or upon facts as we know them as of the date of the statement. The
content and/or context of other statements that we make may indicate that the
statement is “forward-looking”. We claim the “safe harbor” provided
by The Private Securities Reform Act of 1995 for all forward-looking
statements.
Results
may differ materially from our current results and actual results could differ
materially from those suggested in the forward-looking statements as a result of
certain risk factors, including but not limited to those set forth below, other
one time events, other important factors disclosed previously and from time to
time in Met-Pro’s other filings with the Securities and Exchange
Commission.
The
following important factors, along with those discussed elsewhere in this
Quarterly Report on Form 10-Q, could affect our future financial condition and
results of operations, and could cause our future financial condition and
results of operations to differ materially from those expressed in our SEC
filings and in our forward-looking statements:
·
|
the
write-down of costs in excess of net assets of businesses acquired
(goodwill), as a result of the determination that the acquired business is
impaired. Our Flex-Kleen business unit, which initially
performed well after being acquired by Met-Pro, thereafter had several
years of declining performance which we attributed primarily to a general
weakness in its served markets, followed by improved performance in the
fiscal years ended January 31, 2007, 2008 and 2009. During the
fiscal year ended January 31, 2009, we performed an impairment analysis of
the $11.1 million of goodwill that the Company carries for Flex-Kleen and
concluded that no impairment had occurred. Additionally, for
the fiscal year ended January 31, 2009, the actual net sales and operating
profit for our Flex-Kleen business unit have exceeded the projections used
in our annual impairment model. However, based upon the results
for the three-months ended April 30, 2009, Flex-Kleen’s net sales and
operating profit are below that which is required by our impairment model
for the fiscal year 2010. We believe Flex-Kleen’s current performance is a
reflection of the downturn in US and international business and economic
conditions during this period of time and is not due to any new
development particular to Flex-Kleen. The impairment test that we will
conduct in December 2009 will be determinative as to whether it is
necessary for us to write down any of Flex-Kleen’s goodwill, and if
projected net sales and operating profit for the fiscal year 2010 at such
time are less than what is required by our impairment model, we will be
required to write down such amount of the goodwill as the test indicates
is impaired. We are hopeful that general business conditions will improve
and will lead to an improvement in Flex-Kleen’s performance, but as of the
date of the filing of this report, we are not able to state whether or not
a write-down of Flex-Kleen’s goodwill will be
required;
|
·
|
materially
adverse changes in economic conditions (i) in the markets served by us or
(ii) in significant customers of
ours;
|
·
|
material
changes in available technology;
|
·
|
adverse
developments in the asbestos cases that have been filed against the
Company, including without limitation the exhaustion of insurance
coverage, the imposition of punitive damages or other adverse developments
in the availability of insurance
coverage;
|
·
|
changes
in accounting rules promulgated by regulatory agencies, including the SEC,
which could result in an impact on
earnings;
|
·
|
the
cost of compliance with Sarbanes-Oxley and other applicable legal and
listing requirements, and the unanticipated possibility that Met-Pro may
not meet these requirements;
|
Item
2.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
continued…
·
|
weaknesses
in our internal control over financial reporting, which either alone or
combined with actions by our employees intended to circumvent our internal
control over financial reporting, to violate our policies, or to commit
fraud or other bad acts, could lead to incorrect reporting of financial
results. We believe that our internal control over financial
reporting as of April 30, 2009 is effective, however there are limits to
any control system and we cannot give absolute assurance that our internal
control is effective or that financial statement misstatements will not
occur or that policy violations and/or fraud within the Company will not
occur;
|
·
|
unexpected
results in our product development
activities;
|
·
|
changes
in product mix and the cost of materials, with effect on
margins;
|
|
changes
in our existing management;
|
|
exchange
rate fluctuations;
|
|
changes
in federal laws, state laws and
regulations;
|
|
lower
than anticipated return on investments in the Company’s defined benefit
plans, which could affect the amount of the Company’s pension
liabilities;
|
|
the
assertion of litigation claims that the Company’s products, including
products produced by companies acquired by the Company, infringe third
party patents or have caused injury, loss or
damage;
|
·
|
the
effect of acquisitions and other strategic
ventures;
|
·
|
failure
to properly quote and/or execute customer orders, including
misspecifications, design, engineering or production
errors;
|
·
|
the
cancellation or delay of purchase orders or
shipments;
|
·
|
losses
related to sales; and/or
|
·
|
failure
in execution of acquisition
strategy.
|
Item 3.
Qualitative and Quantitative
Disclosures About Market Risk:
We are exposed to certain market risks, primarily changes in
interest rates. There have been no significant changes in our
exposure to market risks since January 31, 2009. Refer to
“Item 7A. Quantitative and Qualitative Disclosure About Market Risks” of
the Company’s Annual Report on Form 10-K for the fiscal year ended
January 31, 2009 for additional information.
Item
4.
Controls and
Procedures
:
As
of the end of the period covered by this report, the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, evaluated the
Company’s disclosure controls and procedures related to the recording,
processing, summarizing and reporting of information in the Company’s periodic
reports that it files with the SEC. These disclosure controls and
procedures have been designed by the Company to ensure that (a) material
information relating to the Company, including its consolidated subsidiaries, is
accumulated and made known to the Company’s management, including its Chief
Executive Officer and Chief Financial Officer, by other employees of the Company
and its subsidiaries as appropriate to allow timely decisions regarding required
disclosure, and (b) this information is recorded, processed, summarized,
evaluated and reported, as applicable, within the time periods specified in the
SEC’s rules and forms. Due to the inherent limitations of control
systems, not all misstatements may be detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of a simple error or mistake, or
because of intentional acts designed to circumvent controls.
Accordingly,
as of April 30, 2009 the Chief Executive Officer and Chief Financial Officer of
the Company concluded that the disclosure controls and procedures were effective
to accomplish their objectives. The Company continually strives to
improve its disclosure controls and procedures to enhance the quality of its
financial reporting and to maintain dynamic systems that change as conditions
warrant.
PART II – OTHER INFORMATION
Item 1.
Legal
Proceedings
Certain
of the statements made in this Item 1 (and elsewhere in this Report) are
“forward-looking” statements which are subject to the considerations set forth
in “Cautionary Statement Regarding Forward-Looking Statements” located in the
Management’s Discussion and Analysis of Financial Condition and Results of
Operations section of this Report, and we refer you to these
considerations.
Beginning
in 2002, the Company and/or one of its business units began to be named as one
of many defendants in asbestos-related lawsuits filed predominantly in
Mississippi on a mass basis by large numbers of plaintiffs against a large
number of industrial companies including, in particular, those in the pump and
fluid handling industries. The complaints filed against the Company and/or this
business unit have been vague, general and speculative, alleging that the
Company, and/or the business unit, along with the numerous other defendants,
sold unidentified asbestos-containing products and engaged in other related
actions which caused injuries (including death) and loss to the
plaintiffs. More recent cases typically allege more serious claims of
mesothelioma. The Company believes that it and/or the business unit
have meritorious defenses to the cases which have been filed and that none of
its and/or the business unit’s products were a cause of any injury or loss to
any of the plaintiffs. The Company’s insurers have hired attorneys
who, together with the Company, are vigorously defending these
cases. The Company and/or the business unit have been dismissed from
or settled a number of these cases. The sum total of all payments through April
30, 2009 to settle these cases was $355,000, all of which has been paid by the
Company’s insurers including legal expenses, except for corporate counsel
expenses, with an average cost per settled claim, excluding legal fees, of
approximately $24,000. As of April 30, 2009, there were a total of 61 cases
pending against the Company (with a majority of those cases pending in New York,
Mississippi and Maryland), as compared with 55 cases that were pending as of
January 31, 2009. For the three-month period ended April 30, 2009, 10 new cases
were filed against the Company, and the Company was dismissed from four
cases. Most of the pending cases have not advanced beyond the early
stages of discovery, although a number of cases are on schedules leading to, or
are scheduled for trial. The Company believes that its insurance
coverage is adequate for the cases currently pending against the Company and for
the foreseeable future assuming a continuation of the current volume and nature
of cases; however, the Company has no control over the number and nature of
cases that are filed against it nor as to the financial health of its insurers
or their position as to coverage. The Company also presently believes
that none of the pending cases will have a material adverse impact upon the
Company’s results of operations, liquidity or financial condition.
At
any given time, the Company is typically also party to a small number of other
legal proceedings arising in the ordinary course of
business. Although the ultimate outcome of any legal matter cannot be
predicted with certainty, based upon the present information, including the
Company’s assessment of the facts of each particular claim as well as accruals,
the Company believes that no pending proceeding will have a material adverse
impact upon the Company’s results of operations, liquidity, or financial
condition.
Item 1A.
Risk Factors
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in
our Annual Report on Form 10-K for the year ended January 31, 2009 as filed
with the Securities and Exchange Commission on April 10, 2009, which could
materially affect our business, financial condition, financial results or future
performance. Additionally, we refer you to Part I, “Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Cautionary Statement Concerning Forward-Looking Statements” of this
report, and in particular the first item as to the potential for a write-down of
goodwill of our Flex-Kleen business unit.
Item 2.
Unregistered Sales of Equity
Securities and Use of Proceeds
(a)
|
During
the first quarter ended April 30, 2009, we did not sell any of our equity
securities that were not registered under the Securities Act of
1933.
|
|
|
(b)
|
Not
applicable.
|
|
|
(c)
|
The
following table summarizes Met-Pro’s purchases of its Common Shares for
the quarter ended April 30, 2009:
|
Issuer
Purchases of
Equity
Securities
Period
|
|
Total
Number
of
Shares
Purchased
|
|
Average
Price
Paid
Per
Share
|
|
Total
Number
of
Shares
Purchased
As
Part of
Publicly
Announced
Plans
or
Programs
|
|
Maximum
Number
of
Shares
That
May
Yet
be
Purchased
Under
the
Plan
or
Programs
|
(1)
|
|
|
|
|
|
|
|
|
|
|
February
1-28, 2009
|
|
0
|
|
$ -
|
|
0
|
|
300,000
|
|
March
1-31, 2009
|
|
0
|
|
-
|
|
0
|
|
300,000
|
|
April
1-30, 2009
|
|
0
|
|
-
|
|
0
|
|
300,000
|
|
Total
|
|
0
|
|
$ -
|
|
0
|
|
300,000
|
|
(1)
|
On
November 3, 2008, our Board of Directors authorized a stock repurchase
program that was publicly announced on November 5, 2008, for up to 300,000
shares. The program has no fixed expiration
date.
|
Item
3.
Defaults Upon
Senior Securities
None.
Item 4.
Submission of Matters to a Vote of
Security Holders
None.
Item 5.
Other
Information
None.
Item
6.
|
Exhibits
|
|
|
|
|
(a)
|
Exhibits
Required by Item 601 of Regulation S-K
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
|
|
(31.1)
|
|
|
|
|
|
|
Pursuant
to Section 302 of the
|
|
|
|
|
Sarbanes-Oxley
Act of 2002.*
|
|
|
|
|
|
|
|
(31.2)
|
|
|
|
|
|
|
Pursuant
to Section 302 of the
|
|
|
|
|
Sarbanes-Oxley
Act of 2002.*
|
|
|
|
|
|
|
|
(32.1)
|
|
|
|
|
|
|
Pursuant
to 18 U.S.C. Section 1350, as adopted
|
|
|
|
|
Pursuant
to Section 906 of Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
|
|
(32.2)
|
|
|
|
|
|
|
Pursuant
to 18 U.S.C. Section 1350, as adopted
|
|
|
|
|
Pursuant
to Section 906 of Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
* Filed
herewith.
|
|
|
SIGNATURES
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
|
|
Met-Pro
Corporation
|
|
|
(Registrant)
|
|
|
|
|
|
|
June
3, 2009
|
|
/s/
Raymond J. De Hont
|
|
|
Raymond
J. De Hont
|
|
|
Chairman,
President and Chief Executive
|
|
|
Officer
|
|
|
|
|
|
|
June
3, 2009
|
|
/s/
Gary J. Morgan
|
|
|
Gary
J. Morgan
|
|
|
Senior
Vice President of Finance,
|
|
|
Secretary
and Treasurer, Chief
|
|
|
Financial
Officer, Chief Accounting
|
|
|
Officer
and Director
|
|
|
|
|
|
|
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