SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549








FORM 10-Q








[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934








or








[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934








For the quarter ended: July 31, 2003
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. Employerincorporation or organization)

Identification No.)160 Cassell Road, P.O. Box 144Harleysville, Pennsylvania

19438(Address of principal executive offices)

(Zip Code)











Registrants telephone number, including area code: (215) 723-6751











Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.   Yes X No





Indicate by check mark whether the Registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act).


Yes XNo





The number of shares outstanding of the Registrants common stock (par value $.10 per share) is 6,216,369 (as of July 31, 2003).











**MET-PRO CORPORATION**




INDEX








PART I  FINANCIAL INFORMATION





**Item 1.**
Financial Statements





Consolidated balance sheet as of
July 31, 2003 and January 31, 2003
2Consolidated statement of operations for the six-month and three-month
periods ended July 31, 2003 and 2002
3Consolidated statement of shareholders equity for the
six-month periods ended July 31, 2003 and 2002
4Consolidated statement of cash flows for the six-month
periods ended July 31, 2003 and 2002
5Notes to consolidated financial statements
6Report of independent accountants
10







**Item 2.**
Managements Discussion and Analysis of Financial Condition
and Results of Operations
11**Item 3.**
Qualitative and Quantitative Disclosures about Market Risk
16**Item 4.**
Controls and Procedures
16








**PART II  OTHER INFORMATION**





**Item 1.**
Legal Proceedings
16**Item 2.**
Changes in Securities and Use of Proceeds
16**Item 3.**
Defaults Upon Senior Securities
16**Item 4.**
Submission of Matters to a Vote of Security Holders
16**Item 5.**
Other Information
17**Item 6.**
Exhibits and Reports on Form 8-K(a) Exhibits Required by Item 601 of Regulation S-K
17(b) Reports on Form 8-K
18





**SIGNATURES**
19


1MET-PRO CORPORATION





CONSOLIDATED BALANCE SHEET





(unaudited)





PART I  FINANCIAL INFORMATIONItem 1.*Financial Statements*July 31,

January 31,ASSETS
2003

2003Current assetsCash and cash equivalents
$15,662,356

$13,429,367Accounts receivable, net of allowance for doubtfulaccounts of approximately $317,000 and$263,000, respectively
13,598,013

12,217,315Inventories
13,646,612

13,374,128Prepaid expenses, deposits and other current assets
684,695

979,714Deferred income taxes
631,221

631,221Total current assets
44,222,897

40,631,745Property, plant and equipment, net
11,754,640

11,950,422Costs in excess of net assets of businesses acquired, net
20,798,913

20,798,913Other assets
341,995

373,591Total assets
$77,118,445

$73,754,671LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilitiesCurrent portion of long-term debt
$1,536,926

$1,536,926Accounts payable
3,268,031

2,810,002Accrued salaries, wages and expenses
6,101,933

4,827,241Dividend payable
559,473

559,167Customers' advances
639,537

16,973Total current liabilities
12,105,900

9,750,309Long-term debt
6,091,965

7,111,995Other non-current liabilities
37,719

36,621Deferred income taxes
844,423

809,861Total liabilities
19,080,007

17,708,786Shareholders' equityCommon stock, $.10 par value; 18,000,000 sharesauthorized, 7,226,303 shares issued at both dates,of which 1,009,934 shares were reacquiredand held in treasury at both dates
722,630

722,630Additional paid-in capital
8,196,782

8,196,782Retained earnings
61,504,142

59,705,267Accumulated other comprehensive loss
(348,281****
**)**
(541,959
)Treasury stock, at cost
(12,036,835****
**)**
(12,036,835
)Total shareholders' equity
58,038,438

56,045,885Total liabilities and shareholders' equity
$77,118,445

$73,754,671See accompanying notes to consolidated financial statements.

















2Back to IndexMET-PRO CORPORATION




CONSOLIDATED STATEMENT OF OPERATIONS





(unaudited)








Six Months Ended
July 31,
Three Months Ended
July 31,2003

2002

2003

2002Net sales
$35,628,478

$34,471,963

$18,626,209

$18,278,083Cost of goods sold
22,745,043

22,766,658

11,977,741

12,101,609Gross profit
12,883,435

11,705,305

6,648,468

6,176,474Operating expensesSelling and advertising
3,810,466

3,643,497

1,891,418

1,868,673General and administrative
4,555,488

3,847,768

2,337,171

2,023,6398,365,954

7,491,265

4,228,589

3,892,312Income from operations
4,517,481

4,214,040

2,419,879

2,284,162Interest expense
(227,797
)
(250,743
)
(111,719
**)**
(129,749
)Other income, net
131,720

119,330

67,657

53,012Income before taxes
4,421,404

4,082,627

2,375,817

2,207,425Provision for taxes
1,503,277

1,449,333

807,778

774,259Net income
$2,918,127

$2,633,294

$1,568,039

$1,433,166Earnings per share, basic(1)
$.47

$.43

$.25

$.23Earnings per share, diluted(2)
$.47

$.43

$.25

$.23Cash dividend per share  declared(3)
$.18

$.17

$.09

$.085Cash dividend per share  paid(3)
$.18

$.17

$.09

$.085




(1)
Basic earnings per share are based upon the weighted average number of shares outstanding of 6,216,369 and 6,146,130 in the six-month periods ended July 31, 2003 and 2002, respectively,
and 6,216,369 and 6,131,136 in the three-month periods ended July 31, 2003 and 2002, respectively.(2)
Diluted earnings per share are based on the weighted average number of shares outstanding of 6,262,786 and 6,193,553 in the six-month periods ended July 31, 2003 and 2002, respectively,
and 6,258,689 and 6,181,889 in the three-month periods ended July 31, 2003 and 2002, respectively.(3)
The Board of Directors declared quarterly dividends of $.09 per share payable on March 10, 2003, June 9, 2003 and September 9, 2003 to shareholders of record as of February 21, 2003, May 23, 2003 and August 27, 2003, respectively. Quarterly dividends of $.085 per share were payable on March 8, 2002, June 7, 2002 and September 6, 2002 to shareholders of record as of February 22, 2002, May 24, 2002 and August 23, 2002, respectively.See accompanying notes to consolidated financial statements.

















3Back to Index**MET-PRO CORPORATION**




CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY





(unaudited)




AccumulatedAdditional


OtherCommon
Paid-in
Retained

Comprehensive
TreasuryStock
Capita
Earnings

Income/(Loss)
Stock
TotalBalances, January 31, 2003
$722,630
$8,196,782
$59,705,267

($541,959
)
($12,036,835
)
$56,045,885Comprehensive income:Net income
-
-
2,918,127

-

-Cumulative translation adjustment
-
-
-

133,803

-Interest rate swap,
net of tax of $41,691
-
-
-

59,875

-Total comprehensive income








3,111,805Dividends paid, $.09 per share
-
-
(559,779
)
-

-

(559,779
)Dividends declared, $.09 pershare
-
-
(559,473
)
-

-

(559,473
)Balances, July 31, 2003
$722,630
$8,196,782
$61,504,142

($348,281
)
($12,036,835
)
$58,038,438AccumulatedAdditional


OtherCommon
Paid-in
Retained
Comprehensive
TreasuryStock
Capita
Earnings
Income/(Loss)
Stock
TotalBalances, January 31, 2002
$721,916
$7,879,368
$55,990,079

($827,737
)
($13,484,232
)
$50,279,394Comprehensive income:Net income
-
-
2,633,294

-

-Cumulative translation adjustment
-
-
-

368,412

-Interest rate swap,
net of tax of $71,387
-
-
-

(129,208
)
-Total comprehensive income








2,872,498Issuance of treasury stock
for acquisition of business
-
250,782
-

-

1,349,218

1,600,000Dividends paid, $.085 per share
-
-
(526,970
)
-

-

(526,970
)Dividends declared, $.085 per
share
-
-
(527,526
)
-

-

(527,526
)Proceeds from issuance ofcommon stock under dividendreinvestment plan (4,560shares)
456
67,604
-

-

-

68,060Stock option transactions
-
(36,251
)

-

346,870

310,619Purchase of 19,941 shares oftreasury stock
-
-
-

-

(289,218
)
(289,218
)Balances, July 31, 2002
$722,372
$8,161,503
$57,568,877

($588,533
)
($12,077,362
)
$53,786,857See accompanying notes to consolidated financial statements.



















4Back to Index**MET-PRO CORPORATION**




CONSOLIDATED STATEMENT OF CASH FLOWS





(unaudited )


Six Months EndedJuly 31,2003

2002





INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS





Cash flows from operating activitiesNet Income


$2,918,127

$2,633,294Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization


779,082

778,783Deferred income taxes


(7,129
**)**
(80,311
)Gain on sale of property and equipment, net


-

(1,591
)Allowance for doubtful accounts


53,813

56,086(Increase) decrease in operating assets,
net of acquisition of business:Accounts receivable


(1,388,503
**)**
(1,923,440
)Inventories


(214,657
**)**
41,897Prepaid expenses and other current assets


299,032

46,084Other assets


(4,674
**)**
(4,494
)Increase (decrease) in operating liabilities,
net of acquisition of business:Accounts payable, accrued expenses and taxes


1,692,272

1,608,059Customers advances


622,565

(73,213
)Other non-current liabilities


1,098

1,099Net cash provided by operating activities


4,751,026

3,082,253Cash flows from investing activitiesProceeds from sale of property and equipment


-

10,000Acquisitions of property and equipment


(505,488
**)**
(522,214
)Payment for acquisition of business


-

(463,369
)Net cash (used in) investing activities


(505,488
**)**
(975,583
)Cash flows from financing activitiesProceeds from new borrowing


-

16,373Reduction of debt


(918,463
**)**
(546,124
)Exercise of stock options


-

310,619Payment of dividends


(1,118,947
**)**
(975,979
)Purchase of treasury shares


-

(289,218
)Net cash (used in) financing activities


(2,037,410
**)**
(1,484,329
)Effect of exchange rate changes on cash


24,861

97,334Net increase in cash and cash equivalents


2,232,989

719,675Cash and cash equivalents at February 1


13,429,367

11,832,260Cash and cash equivalents at July 31


$15,662,356

$12,551,935See accompanying notes to consolidated financial statements.





5Back to Index**MET-PRO CORPORATION**


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS











NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Stock Options: The Company accounts for stock options under the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees", and related interpretations. Accounting for the issuance of stock options under the provisions of APB No. 25 typically does not result in compensation expense for the Company since the exercise price of options is normally established at the market price of the Companys Common Stock on the date granted. Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", provides that the related expense may be recorded in the basic financial statements or the pro forma effect on earnings may be disclosed in the financial statements.





Pro forma information regarding net income and earnings per share is required by SFAS No. 123, which requires that the information be determined as if we had accounted for our stock options under the fair-value method. The fair value for these options was established at the date of grant using the Black-Scholes pricing model with the following assumptions: risk-free interest rates ranging from 2.8% to 2.9%, dividend yield ranging from 2.9% to 3.9%, expected volatility of the market price of the Companys Common Stock of 28%, and an expected option life of five years.





The risk-free interest rate is based on five-year treasury bill rates. For the purpose of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options vesting period.





The pro forma information compared to reported information for the six-month and three-month periods ended July 31, 2003 and 2002 is presented in the following table:





Six Months Ended July 31,

Three Months Ended July 31,2003

2002

2003

2002Net Income:As reported
$2,918,127

$2,633,294

$1,568,039

$1,433,166Pro forma
2,840,714

2,583,722

1,529,333

1,407,812Basic earnings per share:As reported
$.47

$.43

$.25

$.23Pro forma
$.46

$.42

$.25

$.23Diluted earnings per share:As reported
$.47

$.43

$.25

$.23Pro forma
$.45

$.42

$.24

$.23








The pro forma effects of applying SFAS No. 123 to the six-month and three-month periods ended July 31, 2003 and 2002, may not be representative of the pro forma effects in future periods. Based on the vesting schedule of the Companys stock option grants, the pro forma effects on earnings are most pronounced in the early years following each grant. The timing and magnitude of any future grants is at the discretion of the Companys Board of Directors and cannot be assured.





Non-employee directors and consultants of the Company are eligible to receive stock options for Common Stock. These stock options are accounted for the same as stock options granted to employees.





Recent accounting pronouncements: In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based Compensation  Transition Disclosure", which provides alternative methods of transition for a voluntary change to a fair value based method of accounting for stock-based employee compensation as prescribed in SFAS No. 123. Additionally, SFAS No. 148 requires more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. The provisions of this Statement are effective for fiscal years ending after December 15, 2002. Management does not expect the adoption of this Statement to have a material impact on the Companys financial condition or results of operations.
















6Back to Index**MET-PRO CORPORATION**




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS











NOTE 2  PRINCIPLES OF CONSOLIDATION





The consolidated financial statements include the accounts of Met-Pro Corporation and its wholly-owned subsidiaries, Strobic Air Corporation, Flex-Kleen Canada Inc., Mefiag B.V., MPC Inc. and Pristine Hydrochemical Inc. (collectively "Met-Pro" or the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation.

















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 as of July 31, 2003 and the results of operations for the six-month and three-month periods ended July 31, 2003 and 2002, and changes in shareholders equity and cash flows for the six-month periods then ended. The results of operations for the six-month and three-month periods ended July 31, 2003 and 2002 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, 2003.

















NOTE 4  ACQUISITION OF BUSINESS





Effective May 22, 2002, the Company, pursuant to an Agreement and Plan of Merger, acquired 100% of the Common Stock of Pristine Hydrochemical Inc. ("Pristine") for a purchase price of approximately $3,200,000. The results of Pristines operations have been included in the consolidated financial statements since that date. The acquisition was accounted for as a purchase transaction. Pristine sells water treatment chemicals and services to municipal water utilities, and boiler and water cooling chemicals and services to industrial and commercial markets. It is expected that Pristine will complement the operations of the Companys Stiles-Kem Division.





The acquisition was completed by issuing Common Stock from the treasury valued at $1,600,000 (113,475 shares), a cash payment of $400,000, promissory notes payable for $1,200,000, plus acquisition costs. The notes are payable over a four-year period in installments of $300,000 annually, plus interest at a fixed rate of 4.75%. Goodwill totaling approximately $3,018,000 was acquired.





The following unaudited pro forma summary presents the consolidated results of operations for the six-month period ended July 31, 2002 as if the Company had acquired Pristine on February 1, 2002:











Net sales


$35,733,902Income before taxes


4,340,063Net income


2,799,340Earnings per share, basic


$.46Earnings per share, diluted


$.45














7Back to Index**MET-PRO CORPORATION**




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS











NOTE 5  INVENTORIES





Inventories consisted of the following:





July 31,
2003

January 31,
2003Raw materials
$7,205,411

$7,066,298Work in progress
1,391,945

1,366,127Finished goods
5,049,256

4,941,703$13,646,612

$13,374,128

















NOTE 6  SUPPLEMENTAL CASH FLOW INFORMATION





Net cash flows from operating activities reflect cash payments for interest and income taxes as follows:





Six Months Ended July 31,2003

2002Cash paid during the period for:Interest
$205,699

$173,857Income taxes
1,252,279

1,264,302











NOTE 7  OTHER INCOME, NET





Other income, net was comprised of the following:




Six Months Ended July 31,

Three Months Ended July 31,2003

2002

2003

2002Gain/(loss) on sale of property and equipment
$0

$1,591

$0

($4,409
)Other, primarily interest income
131,720

117,739

67,657

57,421$131,720

$119,330

$67,657

$53,012























8Back to Index**MET-PRO CORPORATION**




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS











NOTE 8  BUSINESS SEGMENT DATA





The Companys operations are conducted in two business segments as follows: the manufacture and sale of product recovery/pollution control equipment, and the manufacture and sale of fluid handling equipment.





No significant intercompany revenue is realized by either business segment. Interest income and expense are not included in the measure of segment profit reviewed by management. Income taxes are also not included in the measure  of segment operating profit reviewed by management.








Financial information by business segment is shown below:




Six Months Ended July 31,

Three Months Ended July 31,2003

2002

2003

2002Net salesProduct recovery/pollution control equipment
$23,758,091

$22,568,507

$12,306,212

$12,258,886Fluid handling equipment
11,870,387

11,903,456

6,319,997

6,019,197$35,628,478

$34,471,963

$18,626,209

$18,278,083Income from operationsProduct recovery/pollution control equipment
$3,192,833

$2,707,279

$1,668,539

$1,463,779Fluid handling equipment
1,324,648

1,506,761

751,340

820,383$4,517,481

$4,214,040

$2,419,879

$2,284,162


July 31,

January 31,2003

2003Identifiable assetsProduct recovery/pollution control equipment
$41,888,221

$41,396,626Fluid handling equipment
19,025,091

18,417,18760,913,312

59,813,813Corporate
16,205,133

13,940,858$77,118,445

$73,754,671












NOTE 9  ACCOUNTANTS 10-Q REVIEW





Margolis & Company P.C., the Companys independent accountants, has performed a limited review of the financial information included herein. Their report on such review accompanies this filing.











9Back to Index**MET-PRO CORPORATION**




REPORT OF INDEPENDENT ACCOUNTANTS





















To the Board of Directors


Met-Pro Corporation


Harleysville, Pennsylvania





We have reviewed the accompanying consolidated balance sheet of Met-Pro Corporation and its wholly-owned subsidiaries as of July 31, 2003, and the related consolidated statements of operations for the six-month and three-month periods ended July 31, 2003 and 2002 and shareholders equity and cash flows for the six-month periods ended July 31, 2003 and 2002. These financial statements are the responsibility of the Companys management.





We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.





Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.





We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of January 31, 2003, 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 21, 2003, 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, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.














/s/ Margolis & Company P.C.


Certified Public Accountants














Bala Cynwyd, Pennsylvania


August 19, 2003










10Back to Index**MET-PRO CORPORATION**









Item 2.*Managements Discussion and Analysis of Financial Condition and Results of Operations*








Results of Operations:





The following table sets forth, for the six-month and three-month periods indicated, certain financial information derived from the Companys consolidated statement of operations expressed as a percentage of net sales.





**Six Months **Ended****

**Three Months **Ended******July 31,**

**July 31,****2003**

**2002**

**2003**

**2002**Net sales

100.0%

100.0%

100.0%

100.0%Cost of goods sold

63.8%

66.0%

64.3%

66.2%Gross profit

36.2%

34.0%

35.7%

33.8%Selling and advertising expenses

10.7%

10.6%

10.2%

10.2%General and administrative expenses

12.8%

11.1%

12.5%

11.1%Income from operations

12.7%

12.3%

13.0%

12.5%Interest expense

(.6%
**)**
(.8%
)
(.6%
**)**
(.7%
)Other income, net

.3%

.3%

.4%

.3%Income before taxes

12.4%

11.8%

12.8%

12.1%Provision for taxes

4.2%

4.2%

4.4%

4.3%Net income

8.2%

7.6%

8.4%

7.8%


Six Months Ended July 31, 2003 vs Six Months Ended July 31, 2002





Net sales for the six-month period ended July 31, 2003 were $35,628,478 compared to $34,471,963 for the six-month period ended July 31, 2002, an increase of $1,156,515 or 3.4%. Sales in the Product Recovery/Pollution Control Equipment segment were $23,758,091 or 5.3% higher than the six-month period ended July 31, 2002. Sales in the Fluid Handling Equipment segment were $11,870,387 or slightly lower than the six-month period ended July 31, 2002. We believe that the decreased demand in the Fluid Handling Equipment segment is attributed to a slow economy, which resulted in lower demand for our specialty pump equipment.





Backlog at July 31, 2003 totaled $10,294,479 compared to $9,354,974 at July 31, 2002. In addition, at July 31, 2003, the Company had orders of $9,725,346 compared to $7,673,760 at July 31, 2002, which are not included in our backlog due to the Companys long-standing policy of not including these orders in backlog until engineering drawings are approved.





Net income for the six-month period ended July 31, 2003 was $2,918,127 compared to $2,633,294 for the six-month period ended July 31, 2002, an increase of $284,833 or 10.8%. The increase in net income is principally related to the higher sales in the Product Recovery/Pollution Control Equipment segment combined with higher gross margins in both operating segments.





The gross margin for the six-month period ended July 31, 2003 was 36.2% versus 34.0% for the same period in the prior year due to higher gross margins experienced in both operating segments.





Selling expense increased $166,969 during the six-month period ended July 31, 2003 compared to the same period last year. Selling expense as a percentage of net sales was 10.7% for the six-month period ended July 31, 2003 compared to 10.6% for the same period last year.











11Back to Index**MET-PRO CORPORATION**





**Item 2.** ***Managements Discussion and Analysis of Financial Condition and Results of***


***Operations continued...***








General and administrative expense was $4,555,488 for the six-month period ended July 31, 2003 compared to $3,847,768 for the same period last year, an increase of $707,720. This increase is principally related to legal expenses incurred in defending against allegations that products sold by one of the Companys divisions infringe a competitors intellectual property rights, combined with an increase in accruals for our management incentive program. General and administrative expense as a percentage of net sales was 12.8% for the six-month period ended July 31, 2003 compared to 11.1% for the same period last year.





Interest expense was $227,797 for the six-month period ended July 31, 2003 compared to $250,743 for the same period in the prior year, a decrease of $22,946. This decrease was due principally to a reduction of existing long-term debt.





Other income, net, increased $12,390 for the six-month period ended July 31, 2003 compared to the six-month period ended July 31, 2002, principally because of the increase in cash balances.





The effective tax rates for the six-month periods ended July 31, 2003 and July 31, 2002 were 34.0% and 35.5%, respectively.





***Three Months Ended July 31, 2003 vs Three Months Ended July 31, 2002***





Net sales for the three-month period ended July 31, 2003 were $18,626,209 compared to $18,278,083 for the three-month period ended July 31, 2002, an increase of $348,126. Sales in the Product Recovery/Pollution Control Equipment segment were $12,306,212 or $47,326 higher than the three-month period ended July 31, 2002. Sales in the Fluid Handling Equipment segment were $6,319,997 or $300,800 higher compared to the three-month period ended July 31, 2002.





Net income for the three-month period ended July 31, 2003 was $1,568,039 compared to $1,433,166 for the three-month period ended July 31, 2002, an increase of $134,873 or 9.4%. The increase in net income is related to the higher sales in both of the Companys operating segments during the period.





The gross margin for the three-month period ended July 31, 2003 was 35.7% compared to 33.8% for the same period last year, due to higher gross margins experienced in the Product Recovery/Pollution Control Equipment segment.





Selling expenses increased $22,745 during the three-month period ended July 31, 2003 compared to the same period last year. As a percentage of net sales, selling expenses were 10.2% for both of the three-month periods ended July 31, 2003 and 2002.





General and administrative expense was $2,337,171 for the three-month period ended July 31, 2003 compared to $2,023,639 for the three-month period ended July 31, 2002, an increase of $313,532. General and administrative expense for the three-month period ended July 31, 2003 was 12.5% of net sales, compared to 11.1% of net sales for the same period last year. This increase is principally related to legal expenses incurred in defending against allegations that products sold by one of the Companys divisions infringe a competitors intellectual property rights, combined with an increase in accruals for our management incentive program.





Interest expense was $111,719 for the three-month period ended July 31, 2003 compared to $129,749 for the same period in the prior year, a decrease of 13.9%. This decrease was due principally to a reduction of existing long-term debt.





Other income, net, increased $14,645 for the three-month period ended July 31, 2003 compared to the three-month period ended July 31, 2002, principally because of the increase in cash balances.





The effective tax rate for the three-month period ended July 31, 2003 was 34.0% compared to 35.1% for the three-month period ended July 31, 2002.







12Back to Index**MET-PRO CORPORATION**







**Item 2.** ***Managements Discussion and Analysis of Financial Condition and Results of***


***Operations continued...***








Liquidity:





The Companys cash and cash equivalents were $15,662,356 on July 31, 2003 compared to $13,429,367 on January 31, 2003, an increase of $2,232,989. This increase is the net result of the positive cash flows provided by operating activities of $4,751,026, offset by payment of the quarterly cash dividend amounting to $1,118,947, payments on long-term debt totaling $918,463, and investment in property and equipment amounting to $505,488. The Companys cash flows from operating activities are influenced by the timing of shipments and negotiated standard payment terms, including retention associated with major projects.





Accounts receivable (net) amounted to $13,598,013 on July 31, 2003 compared to $12,217,315 on January 31, 2003, which represents an increase of $1,380,698. The timing and size of shipments and retainage on contracts, especially in the Product Recovery/Pollution Control Equipment segment, will influence accounts receivable balances at any point in time.





Inventories were $13,646,612 on July 31, 2003 compared to $13,374,128 on January 31, 2003, an increase of $272,484. Inventory balances fluctuate depending on the size and timing of orders, and market demand, especially when major systems and contracts are involved.





Current liabilities amounted to $12,105,900 on July 31, 2003 compared to $9,750,309 on January 31, 2003, an increase of $2,355,591. An increase in accounts payable, accrued expenses and customers advances accounted for this increase.





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 together totaling $5 million, which are available for working capital purposes. 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 July 31, 2003 and January 31, 2003, working capital was $32,116,997 and $30,881,436, respectively, and the current ratio was 3.7 and 4.2, respectively.





Capital Resources and Requirements:





Cash flows provided by operating activities during the six-month period ended July 31, 2003 amounted to $4,751,026 compared with $3,082,253 in the six-month period ended July 31, 2002, an increase of $1,668,773. This increase in cash flows from operating activities was due principally to an increase in net income and customers advances and a smaller increase in accounts receivable, offset by an increase in inventories.





Cash flows used in investing activities during the six-month period ended July 31, 2003 amounted to $505,488 compared with $975,583 for the six-month period ended July 31, 2002. The Companys investing activities principally represent the acquisitions of property, plant and equipment in the two operating segments during both years, and the acquisition of a business during the six-month period ended July 31, 2002.





Consistent with past practices, the Company intends to continue to invest in new product development programs and to make capital expenditures to support the ongoing operations during the coming year. The Company expects to finance all routine capital expenditure requirements through cash flows generated from operations.





Financing activities during the six-month period ended July 31, 2003 utilized $2,037,410 of available resources compared to $1,484,329 for the six-month period ended July 31, 2002. The 2003 activity is the result of the payment of the quarterly cash dividend amounting to $1,118,947 and the reduction of long-term debt totaling $918,463.





The Board of Directors declared quarterly dividends of $.09 per share payable on March 10, 2003, June 9, 2003 and September 9, 2003 to shareholders of record as of February 21, 2003, May 23, 2003 and August 27, 2003, respectively.








13Back to Index**MET-PRO CORPORATION**







**Item 2.**    ***Managements Discussion and Analysis of Financial Condition and Results of***
***Operations continued...***








Critical Accounting Policies and Estimates:





Managements discussion and analysis of the Companys financial position and results of operations is based upon the Companys consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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s revenues are recognized when products are shipped to unaffiliated customers. The Securities and Exchange Commissions Staff Accounting Bulletin (SAB) No. 101, "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. 101.





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") No. 17, "Intangible Assets", effective February 1, 2002, the Companys unamortized goodwill balance is not being amortized over its estimated useful life; rather, it is being assessed annually for impairment.





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, expected long-term rate of return on plan assets and rates of increase in compensation. 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.






























































14Back to Index**MET-PRO CORPORATION**








**Item 2.**    ***Managements Discussion and Analysis of Financial Condition and Results of***
***Operations continued...***








Cautionary Statement Concerning Forward-Looking Statements:





In this Managements Discussion and Analysis, and elsewhere in this Quarterly Report, we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risk and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words "anticipates", "plans", "believes", "expects", "estimates", "hopes" or other similar expressions. For those statements, we claim protection of the safe harbor for all forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.





The following important factors, along with those discussed elsewhere in our filings with the Securities and Exchange Commission including without limitation our Annual Report on Form 10-K for the year ended January 31, 2003, could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements:





- materially adverse changes in economic conditions in the markets served by us or in significant customers of ours;
- material changes in available technology;
- changes in accounting rules promulgated by regulatory agencies, including the SEC, which could result in an impact onearnings;
- 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;
- unexpected results in our product development activities;
- loss of key customers;
- changes in product mix;
- changes in our existing management;
- exchange rate fluctuations;
- changes in federal laws, state laws and regulations;
- lower than anticipated return on investments, 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;
- adverse developments in the asbestos cases that have been filed against the Company, including without limitation adverse developments in the availability of insurance coverage in these cases;
- the effect of acquisitions and other strategic ventures;
- failure to properly quote and/or execute customer orders, including misspecifications, design, engineering or product errors;
- losses related to international sales; and/or
- failure in execution of acquisition strategy.





































15Back to Index**MET-PRO CORPORATION**








Item 3. Qualitative and Quantitative Disclosures about Market Risk





We have no disclosure to make with respect to this Item.





Item 4. Controls and Procedures





Within the ninety (90) day period prior to the date of this report, we carried out an evaluation, under the supervision of and with the participation of our management including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls are effective in timely alerting them to material information relating to us, including our consolidated subsidiaries, required to be included in this Exchange Act filing.





There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date we carried out our evaluation.








PART II  OTHER INFORMATION





Item 1. ****Legal Proceedings





There appears to have been a significant increase during the last several years in asbestos-related litigation claims filed in particular states on a mass basis by large numbers of plaintiffs against a large number of industrial companies in the pump and fluid handling industries, and beginning in 2002, the Company began to be named as one of many defendants in a number of such cases in Mississippi. The allegations against the Company are vague, general and speculative, but in general allege that the Company, along with the numerous other defendants, sold asbestos-containing products that caused injuries and loss to the plaintiffs. Most of these cases have not advanced beyond the early stages of discovery, and as of the date of the filing of this Report, none of the Companys products have been determined to be a cause of any alleged injuries. The Companys insurers have hired attorneys who together with the Company are vigorously defending these cases. The Company believes that these cases are without merit and that none of its products were a cause of any injury or loss to any of the plaintiffs. Given the current status of these cases, the Company does not presently believe that these proceedings will have a material adverse impact upon the Companys results of operations, liquidity or financial condition.





The Company is also party to a small number of other legal proceedings arising out of the ordinary course of business or other proceedings that the Company does not presently believe will have a material adverse impact upon the Companys results of operations, liquidity or financial condition, except that the legal fees incurred in defending one such case, which involves allegations that products sold by one of the Companys divisions infringe a competitors intellectual property rights, are likely to be material in the current fiscal year. The Company believes this case is without merit and is vigorously defending this lawsuit.





Item 2. Changes in Securities and Use of Proceeds





None





Item 3. ****Defaults Upon Senior Securities





None





Item 4. Submission of Matters to a Vote of Security Holders





The annual meeting of the Companys shareholders was held on June 11, 2003. At that meeting, four proposals were submitted to a vote of the Companys shareholders. Proposal 1 was a proposal to elect two Directors (with Alan Lawley and Gary J. Morgan being the nominees) to serve until the 2006 Annual Meeting of Shareholders. Proposal 2 was to approve the change in the Companys state of incorporation from Delaware to Pennsylvania. Proposal 3, which was subject to approval of Proposal 2, was to approve the inclusion of Pennsylvanias "anti-greenmail" disgorgement provisions in the Pennsylvania Articles of Incorporation. Proposal 4 was to ratify the selection of Margolis & Company P.C. as independent certified public accountants for the Companys fiscal year ending January 31, 2004.







16Back to Index**MET-PRO CORPORATION**


Item 4. Submission of Matters to a Vote of Security Holders continued.





At the close of business on the record date for the meeting (which was April 18, 2003), there were 6,216,369 shares of common stock outstanding and entitled to be voted at the meeting. Holders of 5,637,768 shares of common stock (representing a like number of votes) were present at the meeting, either in person or by proxy.





The following table sets forth the results of the voting on each of the proposals:





Number of VotesAbstain/ BrokerProposals

For

Against

Non VoteProposal 1 -
Election of DirectorsAlan Lawley
5,079,819

557,949

-Gary J. Morgan
5,142,173

495,595

-Proposal 2 -
Change State of Incorporation fromDelaware to Pennsylvania
3,167,284

482,256

1,988,288Proposal 3 -
Inclusion of "Anti-Greenmail" Provisionsin Pennsylvania Articles of Incorporation
2,770,627

903,098

1,964,043Proposal 4 -
Selection of Margolis & Company P.C. asIndependent Certified Public Accountants
5,572,897

5,350

59,521
   In its solicitation of proxies for the meeting, the Company advised its shareholders that it considered Proposal 3 to be in the nature of an amendment to the Pennsylvania Articles of Incorporation, which under Pennsylvania law required the affirmative vote of a majority of the votes cast for approval. Consequently, all proposals were adopted by the shareholders.





Item 5. Other Information





None





Item 6. Exhibits and Reports on Form 8-K





(a)
Exhibits Required by Item 601 of Regulation S-KExhibit No.

Description31.1

Certification Under Section 302of the Sarbanes-Oxley Act of 200231.2

Certification Under Section 302of the Sarbanes-Oxley Act of 200232.1

Certification Pursuant to 18U.S.C. Section 1350, AdoptedPursuant to Section 906 of theSarbanes-Oxley Act of 200232.2

Certification Pursuant to 18U.S.C. Section 1350, AdoptedPursuant to Section 906 of theSarbanes-Oxley Act of 2002






























17Back to Index**MET-PRO CORPORATION**








Item 6. Exhibits and Reports on Form 8-K continued.





(b)
Reports on Form 8-KThe following Current Reports on Form 8-K were furnished to the Securities and Exchange Commission ("SEC") during the quarterly period covered by this report and thereafter:On May 20, 2003, the Company filed a Report on Form 8-K covering its press release announcing the Companys first quarter financial results for the first quarter ended April 30, 2003, as required by SEC Release 33-8216.On August 6, 2003, the Company filed a Report on Form 8-K covering the Companys change in incorporation from Delaware to Pennsylvania effective July 31, 2003.On August 20, 2003, the Company filed a Report on Form 8-K covering its press release announcing the Companys second quarter financial results for the second quarter ended July 31, 2003, as required by SEC Release 33-8216.

















































































































































18Back to Index**MET-PRO CORPORATION**




SIGNATURES








Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.






















**Met-Pro Corporation**(Registrant)
     September 8, 2003

/s/ Raymond J. De Hont**Raymond J. De Hont****Chairman, President and****Chief Executive Officer**
     September 8, 2003

/s/ Gary J. Morgan**Gary J. Morgan**Vice President of Finance,**Secretary and Treasurer, Chief****Financial Officer, Chief Accounting****Officer and Director**




















































































19Back to Index