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Met-Pro Corporation (MPR)

Q4 2008 Earnings Call Transcript

February 26, 2009 11:00 am ET

Executives

Kevin Bittle – Creative Services

Ray De Hont – Chairman, President and CEO

Gary Morgan – VP Finance, CFO, Secretary and Treasurer

Analysts

Michael Gaugler – Brean Murray, Carret

Jinming Liu – Ardour Capital

Angie Featherstone [ph] – Maxim Group

Alvin Hoffman [ph] – Boenning & Scattergood

Leonard Cooper [ph]

Joseph Garner – Emerald Advisory

Jeanne [ph]

Presentation

Operator

Good morning. My name is Melissa and I will be your conference operator today. At this time, I would like to welcome everyone to the Met-Pro Fourth Quarter and Year Ending Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator instructions).

Thank you. Mr. Bittle, you may begin your conference.

Kevin Bittle

Good morning and welcome to Met-Pro Corporation’s earnings conference call for the fourth quarter and fiscal year ended January 31, 2009. My name is Kevin Bittle and I’m with the company’s Creative Services Department.

With me on our call this morning, are Ray De Hont, our Chairman and Chief Executive Officer, and Gary Morgan, our Senior Vice President of Finance and Chief Financial Officer. Shortly, you will hear comments from both of these individuals, but before we begin, I would like to make a few comments. First, during today’s call, we will be referring to adjusted net income and earnings. This is considered to be a non-GAAP financial measure since it excludes from net income and earnings the affects of certain nonrecurring items.

In today’s release, we provided a reconciliation of adjusted net income and earnings to our GAAP based results, together with the discussion of why we used adjusted net income and earnings. The earnings release along with the reconciliation is available on the Investor Relations page of our corporate website, www.met-pro.com. I’d also like to remind you that any statements made today with regard to our future expectations may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Please refer to our annual report for the fiscal year ended January 31, 2008, that was filed with the SEC for important factors that among others could cause our actual results to differ from any results which might be projected, forecasted or estimated in any of our forward-looking statements. And with that, I will now turn the call over to Ray. Ray?

Ray De Hont

Thank you, Kevin. Good morning, everyone, and welcome again from Harleysville, Pennsylvania.

Earlier this morning we released our financial results for the fourth quarter and the fiscal year ended January 31, 2009. In a moment, Gary Morgan will provide more specific comments on the quarter and fiscal year’s financial results, but prior to that I’d like to offer these general comments on our performance.

Despite the current global economic environment, this quarter’s sales and earnings were the second best fourth quarter results in the company’s history. Non-project revenues, including recurring demand for parts and consumables, remain strong throughout the fiscal year. Our efficiency initiatives, including facility consolidations, global sourcing, and more effective logistics continue to generate cost improvements, helping us expand margins, generate record cash flow from operating activities, and record full year earnings excluding the gain on real estate in fiscal 2008.

The global economic slowdown, however, did impact our business particularly in our product recovery pollution control technologies reporting segment. Whereas we have consistently noted throughout this year the time frame between quotations and order for projects continue to increase resulting in a decrease in fourth quarter and fiscal year 2009 revenues and fourth quarter earnings. Revenues for the fiscal year ended January 31, 2009, only included approximately $11.5 million in project revenues compared with approximately $21 million of project revenues for fiscal year 2008. Although many projects have been delayed, they still remain viable projects.

Fortunately, we enter the New Year with an extremely strong balance sheet and continue to anticipate strong cash flows from operating activities, which will allow us to support investments to further enhance efficiency initiatives, develop exciting new products, and expand into new growth markets. During the fiscal year ending January 31, 2010, we will launch several new products, which not only positively impact our equipment sales, but also provide aftermarket sales for some of our business units that historically have generated very little if any aftermarket business.

While there will be short-term disruptions, diversity of our products and end markets together with our international brand recognition, new product development capabilities, improving operating efficiencies, and strong balance sheet leave us well positioned to capitalize on the world wide trend towards a cleaner environment, lower energy consumption, and improved process performance which will help us deliver long-term growth and improve financial performance.

I would now like to ask Gary Morgan to review our recent financial performance in more detail, after which I will provide some concluding remarks before we take your questions. Gary?

Gary Morgan

Thank you, Ray. Met-Pro recorded fourth quarter net sales of $24.6 million, down from last year’s record fourth quarter net sales, which included a high margin $3.4 million product recovery and pollution control technologies reporting segment project located in South America. There were no similar large projects in this year’s fourth quarter. As a result, fourth quarter net sales in our product recovery and pollution control technologies reporting segment were down 26.6% from the fourth quarter a year ago. Net sales in our fluid handling technologies reporting segment were up 7.6% in the quarter, continuing the growth experienced over the course of the full year. Fluid handling is enjoying strong demand for its high performance pumps and steady increase in high margin recurring revenues from the increased need for aftermarket parts and consumables to service our expanding base of installed equipment.

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