----

**SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

**[X]      QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(d)****OF THE SECURITIES EXCHANGE ACT OF 1934**

or

**[   ]      TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d)****OF THE SECURITIES EXCHANGE ACT OF 1934**

|                                                 |   |                                             |   |
|------------------------------------------------------|--------|--------------------------------------------------|--------|
| For the quarter ended:                April 30, 2003 |   | Commission file number:                001-07763 |   |

 

**MET-PRO CORPORATION**(Exact name of registrant as specified in its charter)

 

|                                                         |        |
|---------------------------------------------------------|--------|
| **Delaware**                                            |        | **23-1683282** |  |
| (State or other                jurisdiction of          |   | (I.R.S. Employer |   |
| incorporation or                organization)           |   | Identification No.) |   |
|                                                    |   |   |   |
||
| **160 Cassell Road, P.O.                Box 144**       |        | **** |   |
| **Harleysville,                Pennsylvania**           |        | **19438** |  |
| (Address of 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   X      No                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |              The                number of shares outstanding of the Registrant’s common stock                (par value $.10 per share) is 6,216,369                (as of  April 30, 2003).                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

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**MET-PRO CORPORATION**

**INDEX**

|   | **PART I - FINANCIAL                INFORMATION**                                                                     |
|--------|-----------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                  |   |   |
|   | ****  **Item 1.**                                                                                      | Financial Statements |   |
|   |                                                                                                                  |   |   |
|   |                          Consolidated                balance sheet as of |   |
|   |                                                                                                                  | April 30, 2003 and January                31, 2003 |  ** **2 **         **Consolidated                statement of operations for the three-month   periods ended                April 30, 2003 and 2002 
 ** **3 **         **                Consolidated statement of stockholders’ equity for the                   three-month periods ended April 30, 2003 and 2002
**  **4 **         **Consolidated                statement of cash flows for the three-month   periods ended                April 30, 2003 and 2002
5
 **         **Notes to                consolidated financial statements
6 **         **Report of                independent accountants
10     **  ****Item 2.**                Managements Discussion and Analysis of Financial Condition                   and Results of Operations 
11     **  Item 3.**                Qualitative and Quantitative Disclosures about Market Risk
15     **  ****Item 4.**Controls and Procedures
15         **PART II -                OTHER INFORMATION**      **  ****Item 1.**Legal Proceedings
15     **  ****Item 2.**Changes in                Securities and Use of Proceeds
15     **  ****Item 3.** Defaults Upon Senior                Securities
15     **  Item 4.**                Submission of Matters to a Vote of Security Holders
15     **  ****Item 5.**Other Information 
15     **  ****Item 6.**Exhibits and****                Reports on Form 8-K       (a)                Exhibits Required by Item 601 of Regulation S-K 
16  (b) Reports on Form 8-K 
16     **SIGNATURES** 
17    
1

**MET-PROCORPORATION**

**CONSOLIDATED BALANCE SHEET****(unaudited)**
**PART I -                        FINANCIAL INFORMATION**         **Item 1.                        *Financial                        Statements***          
**April                        30,** 
January                        31, **ASSETS**
**2003** 
2003 Current assets                                Cash and cash equivalents
**$14,717,552** 
$13,429,367      Accounts receivable,                        net of allowance for doubtful                                    accounts of approximately $291,000 and                                    $263,000, respectively
**13,487,376** 
12,217,315                             Inventories
**13,848,293** 
13,374,128      Prepaid expenses,                        deposits and other current assets
**860,609** 979,714                             Deferred income taxes
**631,221** 631,221                                    Total current assets**43,545,051** 40,631,745      Property,                        plant and equipment, net**11,921,353** 11,950,422 Costs in excess of net assets of businesses                        acquired, net**20,798,913** 20,798,913  Other assets**356,530** 373,591                                    **Total assets****$76,621,847** $73,754,671      **LIABILITIES AND STOCKHOLDERS' EQUITY**    Current liabilities                                Current portion of long-term debt**$1,536,926** $1,536,926      Accounts payable**3,699,059** 2,810,002                             Accrued salaries, wages and expenses**5,974,677** 4,827,241      Dividend payable**559,473** 559,167                             Customers' advances**221,848** 16,973                                    Total current liabilities**11,991,983** 9,750,309      Long-term                        debt**6,826,567** 7,111,995 Other non-current liabilities**37,170** 36,621 Deferred                        income taxes**804,770** 809,861                                     Total liabilities
**19,660,490** 
17,708,786                              Stockholders' equity                                Common stock, $.10 par value; 18,000,000 shares                                    authorized, 7,226,303 shares issued at both dates,                                    of which 1,009,934 shares were reacquired                                    and held in treasury at both dates
**722,630** 722,630                             Additional paid-in capital
**8,196,782** 8,196,782       Retained earnings
**60,495,575** 59,705,267                             Accumulated other comprehensive loss**(416,795****)**(541,959)     Treasury stock, at                        cost
**(12,036,835****)**(12,036,835)                                   Total stockholders' equity
**56,961,357** 56,045,885                                    **Total liabilities and stockholders' equity**
**$76,621,847** $73,754,671 See                        accompanying notes to consolidated financial statements.    
 

2

**MET-PRO CORPORATION**

**CONSOLIDATED STATEMENT OFOPERATIONS****(unaudited)**
 
**Three                        Months Ended** 
**April                        30,** 
**2003** 
2002 **Net sales**
**$17,002,269** 
$16,193,880 Cost of goods sold**10,767,302** 
10,665,049 Gross profit
**6,234,967** 
5,528,831      **Operating                        expenses**      Selling
**1,919,048** 
1,774,824                          General and administrative**2,218,317** 
1,824,129  **4,137,365** 
3,598,953      Income from operations**2,097,602** 
1,929,878      Interest expense
**(116,078****)**
(120,994                        )Other                        income, net
**64,063** 
66,318 Income                        before taxes
**2,045,587** 1,875,202      Provision                        for taxes
**695,499** 675,074 **Net                        income**
**$1,350,088** $1,200,128 **Earnings                        per share, basic (1)**
**$.22** $.20      **Earnings                        per share, diluted (2)**
**$.22** $.20      **Cash                        dividend per share - declared (3)**
**$.09** $.085      **Cash                        dividend per share - paid (3)**
**$.09** $.085  (1)Basic earnings per share are based upon the                        weighted average number of shares of Common Stock                        outstanding of 6,216,369 and 6,085,306 for the                        three-month periods ended April 30, 2003 and 2002,                        respectively.    (2)Diluted earnings per share are based upon                        the weighted average number of shares of Common Stock                        outstanding of 6,251,535 and 6,136,370 for the                        three-month periods ended April 30, 2003 and 2002,                        respectively.     (3)The Board of Directors declared quarterly                        dividends of $.09 per share payable on March 10, 2003                        and June 9, 2003 to stockholders of record as of                        February 21, 2003 and May 23, 2003, respectively.                        Quarterly dividends of $.085 per share were payable on                        March 8, 2002 and June 7, 2002 to stockholders of record                        as of February 22, 2002 and May 24, 2002, respectively.   See accompanying notes to                        consolidated financial statements.
 

3

**MET-PRO CORPORATION**

**CONSOLIDATED STATEMENT OFSTOCKHOLDERS' EQUITY****(unaudited)**
            **Accumulated**     **Additional** **Other**    **Common****Paid-in****Retained****Comprehensive****Treasury**   **Stock****Capital****Earnings****Income/(Loss)****Stock****Total** **Balances, January 31, 2003**$722,630$8,196,782$59,705,267 ($541,959)($12,036,835)$56,045,885           Comprehensive income:            Net                        income– **–**1,350,088 –  –      Cumulative translation adjustment– **–**–  148,033 –      Interest rate swap,    net of tax of $935– **–**–  (22,869)–          Total                        comprehensive income        1,475,252            Dividends declared, $.09 per  share– **–**(559,780)–  –  (559,780)**Balances, April 30, 2003**$722,630$8,196,782$60,495,575 ($416,795)($12,036,835)$56,961,357                             **Accumulated**     **Additional** **Other**    **Common****Paid-in****Retained****Comprehensive****Treasury**   **Stock****Capital****Earnings****Income/(Loss)****Stock****Total** **Balances, January 31, 2002**$721,916$7,879,368$55,990,079 ($827,737)($13,484,232)$50,279,394           Comprehensive income:            Net                        income**–****–**1,200,128 **–** **–**    Cumulative translation adjustment**–****–****–** 138,038 **–**                            Interest rate swap,    net of tax of $24,290**–****–****–** 42,258 **–**        Total                        comprehensive income        1,380,424           Dividends declared, $.085 per  share**–****–**(517,323)**–** **–** (517,323)Proceeds                        from issuance of           common stock under dividend                                   reinvestment plan (2,195           shares)22034,459**–** **–** **–** 34,679 Stock option                        transactions**–**1,100**–** **–** 118,900120,000 Purchase of 8,759 shares of                                   treasury stock**–****–****–** **–** (125,958)(125,958)**Balances,                        April 30, 2002**$722,136$7,914,927$56,672,884 ($647,441)($13,491,290)$51,171,216                         See accompanying notes to consolidated financial                        statements.    
 

4

**MET-PRO CORPORATION**

**CONSOLIDATED STATEMENT OF CASHFLOWS****(unaudited)**

**Three Months Ended**
**April                        30,**
**2003**
2002
**INCREASE (DECREASE) IN CASH AND CASH                        EQUIVALENTS**
**Cash flows from operating                        activities**  Net                        Income **$1,350,088** $1,200,128                           Adjustments to                        reconcile net income to net         cash provided by operating                        activities:                                  Depreciation and amortization  **384,237** 365,054                              Deferred income taxes**(4,156****)**19,828                             Gain on sale of property and equipment, net **–** (6,000)**     **Allowance                        for doubtful accounts **27,776**23,392**     **(Increase) decrease in operating assets:     **        **Accounts receivable **(1,258,163****)**(803,869)**        **Inventories **(432,860****)**(202,917)**        **Prepaid expenses and other current assets **123,078**(51,481)**        **Other assets **(1,890****)**(1,800)**     **Increase                        (decrease) in operating liabilities:**        **Accounts payable, accrued expenses and taxes **2,045,561** 1,450,005 **        **Customers’ advances**204,875**(502,463)**        **Other non-current liabilities **549** (551,999)**      **Net cash provided by operating activities **2,439,095** 937,878       **Cash flows from investing                        activities** ** **Proceeds from sale of                        property and equipment **–** 6,000 ** **Acquisitions of property and                        equipment**(299,947****)**(195,753)**      **Net cash (used in) investing activities **(299,947****)**(189,753)**Cash flows                        from financing activities**       Reduction of debt**(309,232****)**(316,199)  Exercise                        of stock options **–** 120,000   Payment of dividends**(559,473****)**(482,352)  Purchase                        of treasury shares **–** (125,958)**      **Net cash (used in) financing activities **(868,705****)**(804,509)Effect of                        exchange rate changes on cash **17,742** 40,146       **Net increase (decrease)                        in cash and cash equivalents****1,288,185**(16,238)                               Cash and cash equivalents at February 1**13,429,367**11,832,260**Cash and cash equivalents at April 30****$14,717,552**$11,816,022See accompanying notes to                        consolidated financial statements.
 

5

**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 three-month periods ended April        30, 2003 and 2002 is presented in the following table:
                         Three Months Ended April 30, 
2003 
2002  Net Income:
  
   As                        reported 
$1,350,088 
$1,200,128  Pro forma
1,311,382 
1,175,910Basic                        earnings per share:
     As reported
$.22 
$.20  Pro                        forma
.21 
.19Diluted earnings per share:
  
   As                        reported
$.22 
$.20  Pro forma
.21 
.19
The pro forma effects of applying SFAS No. 123 to the        three-month periods ended April 30, 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.

 

6

**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 April 30, 2003 and the        results of operations, changes in stockholder’s equity and cash flows        for the three-month periods ended April 30, 2003 and 2002. The results        of operations for the three-month periods ended April 30, 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 three-month period ended        April 30, 2002 as if the Company had acquired Pristine on February 1,        2002:

 
Net sales                                $16,981,417Income before taxes1,956,712Net income                                1,252,294Earnings per share,                                basic                                $.21Earnings per share, diluted$.20
 

 

7

**MET-PRO CORPORATION**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE 5 - INVENTORIES**

Inventories consisted of the following:
 
April 30,                        2003 
January                        31, 2003  Raw materials$7,316,826 $7,066,298Work in                        progress1,414,561 1,366,127Finished goods5,116,906 4,941,703   $13,848,293 $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:
                          Three Months Ended April 30, 
2003 
2002  Cash paid during the period                        for:                             Interest$102,179 $120,994   Income taxes77,993 38,216
 

**NOTE 7 - OTHER INCOME, NET**

Other income, net was comprised of the        following:

 
                          Three Months Ended April 30, 
2003 
2002                          Gain on sale of property and equipment
$–  
$6,000Other, primarily interest                        income
64,063 60,318   
$64,063 $66,318  
   

8

**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:

 
  
                        Three Months Ended April 30, 
2003 
2002 **Net sales**                              Product recovery/pollution control equipment
$11,451,879 
$10,309,621    Fluid                        handling equipment
5,550,390 
5,884,259   
$17,002,269 $16,193,880      **Income from operations**       Product                        recovery/pollution control equipment 
$1,524,294 $1,243,500                           Fluid handling equipment
573,308 686,378   
$2,097,602 $1,929,878           
April 30, January 31, 
2003 
2003 **Identifiable assets**                              Product recovery/pollution control equipment$42,850,571 $41,396,626    Fluid                        handling equipment18,296,013 18,417,187   61,146,584 59,813,813                           Corporate15,475,263 13,940,858   $76,621,847 $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.

 

9

**REPORT OFINDEPENDENT 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 April 30, 2003, and the related consolidated statements of        operations, stockholders’ equity, and cash flows for the three-month        periods ended April 30, 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,        stockholders’ 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, PennsylvaniaMay 19, 2003

 

 

 

 

 

10

**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 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,** 
**2003** 
2002Net sales
**100.0****%** 
100.0%Cost of                        goods sold
**63.3****%** 
65.9%Gross profit
**36.7****%** 
34.1%      Selling                        expenses
**11.3****%** 
11.0%General and administrative expenses
**13.1****%** 
11.2%Income from operations
**12.3****%** 
11.9% 
   
  Interest expense
**(.7****%)** 
(.7%)Other                        income, net
**.4****%** 
.4%Income                        before taxes
**12.0****%** 
11.6%Provision for taxes
**4.1****%** 
4.2%Net income
**7.9****%** 
7.4%
***Three Months Ended April        30, 2003 vs Three Months Ended April 30, 2002***

Net sales for        the three-month period ended April 30, 2003 were $17,002,269 compared to        $16,193,880 for the three-month period ended April 30, 2002, an increase        of $808,389 or 5.0%. Sales in the Product Recovery/Pollution Control        Equipment segment were $11,451,879 or 11.1% higher than the three-month        period ended April 30, 2002. Sales in the Fluid Handling Equipment        segment were $5,550,390 or 5.7% lower than the three-month period ended        April 30, 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        April 30, 2003 totaled $8,925,816 compared to $9,306,079 at April 30,        2002. In addition, at April 30, 2003, the Company had orders of        $8,442,817 compared to $4,987,777 at April 30, 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 three-month period ended April 30, 2003 was $1,350,088 compared to        $1,200,128 for the three-month period ended April 30, 2002, an increase        of $149,960 or 12.5%. 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 three-month period ended April 30, 2003 was 36.7% versus        34.1% for the same period in the prior year due to higher gross margins        experienced in both operating segments. 

Selling expense        increased $144,224 during the three-month period ended April 30, 2003        compared to the same period last year. Selling expense as a percentage        of net sales was 11.3% for the three-month period ended April 30, 2003        compared to 11.0% for the three-month period ended April 30, 2002.

11

**MET-PRO CORPORATION**

 
**Item 2.*****Management’s Discussion and                        Analysis of Financial Condition and Results of Operations continued...***  
General and administrative        expense was $2,218,317 for the three-month period ended April 30, 2003        compared to $1,824,129 for the same period last year, an increase of        $394,188. This increase is principally related to legal expenses        involving 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 13.1% for the three-month period ended April 30, 2003 compared        to 11.2% for the same period last year. 

Interest        expense was $116,078 for the three-month period ended April 30, 2003        compared to $120,994 for the same period in the prior year, a decrease        of $4,916. 

Other income,        net, decreased $2,255 for the three-month period ended April 30, 2003        compared to the three-month period ended April 30, 2002.

The effective        tax rates for the three-month periods        ended April 30, 2003 and April 30, 2002 were 34.0% and 36.0%,        respectively.

***Liquidity:***

The Company’s        cash and cash equivalents were $14,717,552 on April 30, 2003 compared to        $13,429,367 on January 31, 2003, an increase of $1,288,185. This        increase is the net result of the positive cash flows provided by        operating activities of $2,439,095, offset by payment of the quarterly        cash dividend amounting to $559,473, payments on long-term debt totaling        $309,232, and investment in property and equipment amounting to        $299,947. 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 $13,487,376 on April 30, 2003 compared to        $12,217,315 on January 31, 2003, which represents an increase of        $1,270,061. 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 $13,848,293 on April 30, 2003 compared to $13,374,128 on January        31, 2003, an increase of $474,165. 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 $11,991,983 on April 30, 2003 compared to        $9,750,309 on January 31, 2003, an increase of $2,241,674. 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 $5.0 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 April 30, 2003 and January 31, 2003, working        capital was $31,553,068 and $30,881,436, respectively, and the current        ratio was 3.6 and 4.2, respectively.

 

 

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**MET-PRO CORPORATION**

 
**Item 2.*****Management’s Discussion and                        Analysis of Financial Condition and Results of Operations continued...***  
***Capital Resources and        Requirements:***

Cash flows        provided by operating activities during the three-month period ended        April 30, 2003 amounted to $2,439,095 compared with $937,878 in the        three-month period ended April 30, 2002, an increase of $1,501,217. This        increase in cash flows from operating activities was due principally to        an increase in accounts payable and customers’ advances, offset by an        increase in accounts receivables and inventories.

Cash flows used        in investing activities during the three-month period ended April 30,        2003 amounted to $299,947 compared with $189,753 for the three-month        period ended April 30, 2002. The Company’s investing activities        principally represent the acquisitions of property, plant and equipment        in the two operating segments.

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 three-month period ended April 30, 2003 utilized        $868,705 of available resources compared to $804,509 for the three-month        period ended April 30, 2002. The 2003 activity is the result of the        payment of the quarterly cash dividend amounting to $559,473 and the        reduction of long-term debt totaling $309,232.

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

***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.

  

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**MET-PRO CORPORATION**

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

***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 on earnings;
- 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.

 

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**MET-PRO CORPORATION**

 
**Item 3.*****Qualitative and Quantitative Disclosures about Market                        Risk Operations continued...***
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***
Recently        there appears to have been a significant increase, in certain states, in        asbestos-related litigation claims against numerous industrial        companies, particularly in the pump and fluid handling industries.        During the last year, the Company was named as one of many defendants in        a number of such cases filed in one of these states, Mississippi.        The Company, along with the other defendants, is alleged        to have sold products containing asbestos, although as of April 30,        2003, none of the Company’s products have been determined in any of        these cases to be a cause of the alleged injuries. The Company believes that it has defenses to the        claims that have been asserted. Although the Company is vigorously        defending all of these cases, the amount expended by the Company to date        in responding to these cases has not been material, as most of the costs        have been paid by insurance. Given the current status of these cases, it        is not possible to determine the Company’s potential liability, if any,        and no provision has been made in the Company’s financial statements for        any such claims.

In        addition, the Company is party to various legal proceedings arising out        of the ordinary course of business. Management does not currently        believe that these proceedings will materially impact the Company’s        results of operations, liquidity or financial condition. One of such        cases at the present time involves allegations that  products sold        by one of the Company’s divisions infringe a competitor’s intellectual        property rights. 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***
None 
**Item 5.*****Other Information***
None

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**MET-PRO CORPORATION**
**Item 6.*****Exhibits and                        Reports on Form 8-K***  
(a) 
                        Exhibits Required by Item 601 of Regulation S-K     
 
Exhibit No.
Description                                                                             
 
99.1
Certification Pursuant                        to 18 
 
 
U.S.C. Section 1350,                        as Adopted  
 
 
Pursuant to Section                        906 of the 
 
 
Sarbanes-Oxley Act of                        2002     
 
99.2
Certification Pursuant                        to 18 
 
 
U.S.C. Section 1350,                        as Adopted  
 
 
Pursuant to Section                        906 of the 
 
 
Sarbanes-Oxley Act of                        2002     
(b)
Reports on Form 8-K
       On February 26, 2003, the Company filed a                        Current Report on Form 8-K announcing the issuance of a                        press release stating the Company’s fourth quarter and                        fiscal year financial results for the period ended                        January 31, 2003.
 

 

 

 

 

 

 

 

 

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**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)      June 3, 2003                        /s/ Raymond J. De                        Hont                                                                             **Raymond J. De Hont** **President,                        Chief Executive** **Officer and                        Director**        June 3, 2003/s/ Gary J. Morgan                                                                                      **Gary J. Morgan** **Vice President of                        Finance,** **Secretary and                        Treasurer, Chief** **Financial                        Officer, Chief Accounting** **Officer and                        Director**
 

 

 

 

 

 

 

 

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**MET-PRO CORPORATION**

CERTIFICATION UNDERSECTION 302OF THE SARBANES-OXLEY ACT OF 2002

 
 I, Raymond J. De Hont, certify that:         1.                                 I have reviewed                        this Quarterly Report on Form 10-Q of Met-Pro                        Corporation;    2.                                 Based on my                        knowledge, this Quarterly Report does not contain any                        untrue statement of a material fact or omit to   state a material                        fact necessary to make the statements made, in light of                        the circumstances under which such   statements were                        made, not misleading with respect to the period covered                        by this Quarterly Report;    3.                                 Based on my                        knowledge, the financial statements, and other financial                        information included in this Quarterly   Report, fairly                        present in all material respects the financial                        condition, results of operations and cash flows of the                          registrant as of,                        and for, the periods presented in this Quarterly Report;                           4.                                 The registrant‘s                        other certifying officers and I are responsible for                        establishing and maintaining disclosure   controls and                        procedures (as defined in Exchange Act Rules 13a-14 and                        15d-14) for the registrant and we have:    a) designed such                        disclosure controls and procedures to ensure that                        material information relating to the registrant,                        including its consolidated subsidiaries, is made known                        to us by others within those entities, particularly                        during the period in which this Quarterly Report is                        being prepared;    b) evaluated the                        effectiveness of the registrant‘s disclosure controls                        and procedures as of a date within ninety (90) days                        prior to the filing date of this Quarterly Report (the                        “Evaluation Date”); and    c) presented in this                        Quarterly Report our conclusions about the effectiveness                        of the disclosure controls and procedures based                        on our evaluation as of the Evaluation Date;     5.       The registrant’s                        other certifying officers and I have disclosed, based on                        our most recent evaluation, to the registrant’s                        auditors and the audit committee of registrant’s board                        of directors (or persons performing the  equivalent                        function):     a)                            all significant                        deficiencies in the design or operation of internal                        controls which could adversely affect the registrant’s                        ability to record, process, summarize and report                        financial data and have identified for the registrant’s                        auditors any material weaknesses in internal controls;                        and    b)any fraud, whether                        or not material, that involves management or other                        employees who have a significant role in the                        registrant’s internal controls; and      6.                                                       The registrant’s other certifying officers and I have                        indicated in this Quarterly Report whether or                             not there were significant changes in internal controls                        or in other factors that could significantly                            affect internal controls subsequent to the date of our                        most recent evaluation, including any                            corrective actions with regard to significant                        deficiencies and material weaknesses   
/s/ Raymond J. De Hont                                                                June 3, 2003 Raymond J. De Hont  Chief Executive                        Officer 
 

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**MET-PRO CORPORATION**

        CERTIFICATION UNDER SECTION 302        OF THE SARBANES-OXLEY ACT OF 2002

 
 I,                        Gary J. Morgan, certify that:         1.                                 I have reviewed                        this Quarterly Report on Form 10-Q of Met-Pro                        Corporation;    2.                                 Based on my                        knowledge, this Quarterly Report does not contain any                        untrue statement of a material fact or omit to   state a material                        fact necessary to make the statements made, in light of                        the circumstances under which such   statements were                        made, not misleading with respect to the period covered                        by this Quarterly Report;    3.                                 Based on my                        knowledge, the financial statements, and other financial                        information included in this Quarterly   Report, fairly                        present in all material respects the financial                        condition, results of operations and cash flows of the                          registrant as of,                        and for, the periods presented in this Quarterly Report;                           4.                                 The registrant‘s                        other certifying officers and I are responsible for                        establishing and maintaining disclosure   controls and                        procedures (as defined in Exchange Act Rules 13a-14 and                        15d-14) for the registrant and we have:    a) designed such                        disclosure controls and procedures to ensure that                        material information relating to the registrant,                        including its consolidated subsidiaries, is made known                        to us by others within those entities, particularly                        during the period in which this Quarterly Report is                        being prepared;    b) evaluated the                        effectiveness of the registrant‘s disclosure controls                        and procedures as of a date within ninety (90) days                        prior to the filing date of this Quarterly Report (the                        “Evaluation Date”); and    c) presented in this                        Quarterly Report our conclusions about the effectiveness                        of the disclosure controls and procedures based                        on our evaluation as of the Evaluation Date;     5.       The registrant’s                        other certifying officers and I have disclosed, based on                        our most recent evaluation, to the registrant’s                        auditors and the audit committee of registrant’s board                        of directors (or persons performing the  equivalent                        function):     a)                            all significant                        deficiencies in the design or operation of internal                        controls which could adversely affect the registrant’s                        ability to record, process, summarize and report                        financial data and have identified for the registrant’s                        auditors any material weaknesses in internal controls;                        and    b)any fraud, whether                        or not material, that involves management or other                        employees who have a significant role in the                        registrant’s internal controls; and      6.                                                       The registrant’s other certifying officers and I have                        indicated in this Quarterly Report whether or                             not there were significant changes in internal controls                        or in other factors that could significantly                            affect internal controls subsequent to the date of our                        most recent evaluation, including any                            corrective actions with regard to significant                        deficiencies and material weaknesses  */s/* Gary J. Morgan                                           June 3, 2003                         Gary J. Morgan                          Chief Financial Officer 
 

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**MET-PROCORPORATION**

 

**Exhibit Index**

 
**Exhibit No.**
**Description**                          99.1                         Certification Pursuant to 18 U.S.C. Section 1350, as                        Adopted Pursuant to Section 906 of the Sarbanes-Oxley                        Act of 2002                          99.2                         Certification Pursuant to 18 U.S.C. Section 1350, as                        Adopted Pursuant to Section 906 of the Sarbanes-Oxley                        Act of 2002
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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