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Good morning. My name is Christy and I will be your conference operator today. At this time, I would like to welcome everyone to the Met-Pro fourth-quarter and fiscal year-end 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.

It is now my pleasure to hand the program over to Mr. Kevin Bittle. Please go ahead.

Good morning, and welcome to Met-Pro Corporation's earnings conference call for the fourth quarter and fiscal year ended January 31, 2013. 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 Chief Executive Officer and President; and Neal Murphy, Vice President of Finance and the Chief Financial Officer.

Before we begin, I'd like to remind everyone 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 year-end report for the fiscal year ended January 31, 2013 that will be filed with the SEC, for important factors that, among others, could cause our actual results to differ from any results that might be projected, forecasted or estimated in any of our forward-looking statements.

With that, I will now turn the call over to Ray. Ray?

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

Earlier this morning, we released our fiscal year 2013 financial results for the fourth-quarter and full-year, which ended on January 31, 2013. I hope all of you have had the opportunity to review them. In a moment, Neal Murphy will provide more specific comments on our financial results. But first, I would like to offer my perspective on our performance.

Overall, fiscal 2013 was a solid year, as we experienced double-digit growth in both earnings and net sales when compared with fiscal 2012. Fiscal 2013 also marked the third consecutive year with both earnings and net sales growth. These results reflect the steady progress being made, as our sales and marketing strategy, together with the productivity and efficiency enhancements implemented within our organization, continue to translate into improved financial performance.

In the fourth quarter, compared to the prior year, gross margins were up, while total Selling, General and Administrative expenses as a percentage of sales were down, another indication of the steady progress being made improving operating efficiency. On the strength of our strong second half, we were able to restore fiscal year gross margins back to within their historical range at 34.4% for the year.

As a sign of the growing global strength of the Met-Pro brand and the continued success of our marketing strategy, quotation activity remains strong, while our pipeline of potential opportunities continues to grow. Though hesitation in releasing large capital projects kept new orders and backlog in the fourth quarter down from a year ago, new orders for large capital projects booked in January and February exceeded $7.5 million, providing optimism regarding future market demand.

We previously guided that our largest segment, Product Recovery/Pollution Control Technologies, would be profitable for the full-year, and that SG&A would trend in the 22% to 23% of revenue range on an annualized basis by the end of the year. As you can see today, we met both of these commitments.

Before turning the call over to Neal, I am pleased to announce the Company's Board of Directors declared a quarterly dividend of [$0.0725] per share, representing a 2% increase compared to the dividend for the same quarter a year ago. The dividend was paid on March 15, 2013 to shareholders of record at the close of business on March 1, 2013. This is the 22nd consecutive year that Met-Pro Corporation has paid a cash dividend.

Neal?

Thank you, Ray, and good morning, everyone. In the course of my remarks, I'm going to switch back and forth between the fourth quarter and the full year as I speak to our operating performance.

With that, let's turn to sales. Our consolidated net sales in the fourth quarter were $27 million, down 5% from the fourth quarter last year; while for the full year, net sales were up 10% to a record $110 million. And I'll speak to the drivers in more detail as I discuss each segment.

Fourth-quarter net sales in our Product Recovery/Pollution Control Technologies segment were $11.8 million, down 14% from a year ago fourth quarter. But despite lower net sales, segment operating profits were up 53% from year-ago fourth-quarter to $1 million or an 8.6% operating margin, which reflects improved project margins as well as execution. For the full year, net sales in this segment were up 12% to $49 million, while operating profit was $1 million, down slightly compared to the prior year. And this was primarily due to a weak first half of the year, where income from operations in this segment was a loss of $900,000. In the second half of this year, we earned $1.9 million in this segment, so it really speaks to the turnabout.

Turning next to our Fluid Handling segment, fourth-quarter net sales were up 4% to $9.3 million. Fluid Handling continues to produce our strongest operating margins at 22.4% for the quarter, although down from 26% a year ago. For the full year, Fluid Handling net sales were up 13% to $38 million, while operating income rose 21% to $10 million, or 26% of net sales, which is up from 24.7% operating margin in 2012.

Next, our Mefiag Filtration Technologies segment. Fourth-quarter net sales were up approximately $250,000 from the prior-year fourth quarter on the strength of our US and Asian markets. Operating profits increased 47% due to higher volume, effective cost management, and an improved product mix in the quarter. For the year, Mefiag's net sales totaled $13 million, which is essentially flat with the prior year, and results from sales increases in our North American and China operations, offset by a sales decrease in our European operation. And this sales decrease is attributable to unfavorable foreign exchange translation, where the US dollar strengthened about 7% on average against the euro year-over-year. Operating earnings in this segment were up 3% to $806,000 for an operating margin of 6% for the full year.

Finally, fourth-quarter net sales in our Filtration Purification Technologies segment decreased approximately $100,000 from the prior-year fourth-quarter, principally due to weak municipal demand in our Pristine Water Solutions business unit. This Filtration Purification Technologies segment recorded an operating loss of $33,000 in the quarter. For the year, the Filtration Purification Technologies net sales were essentially unchanged from a year ago at $10.2 million, while operating earnings were down around $300,000 year-over-year.

We had some restructuring costs in this segment, which, while not material to Met-Pro as a whole, did impact year-over-year earnings trends for this smallest of our segments. The international net sales for the full year increased $2.7 million over the prior year. And this represents 28% of our net sales, as products continue to gain global market acceptance.

Turning next to our gross margins, for the fourth quarter, we reported consolidated gross margins of 35.1%, up 50 basis points from 34.6% in the year-ago fourth quarter. Improvement in margins over a year ago is attributable to mix, basically a higher proportion of profitable Fluid Handling net sales, as well as improved margins in our Product Recovery/Pollution Control business, and generally better execution and cost control. For the year, we reported gross margin as a 34.4%, down from 35.3% a year ago. And almost all of this decrease is attributable to a small number of projects earlier in the year in our Pollution Control/Product Recovery business. And in the aggregate, these projects resulted in negative gross margin. And that was really a second-quarter event, that we've discussed.

Selling, General and Administrative expenses in the fourth quarter were 22.3% of net sales, down from 23.1% in the fourth quarter of last year. Compared to a year ago, fourth-quarter SG&A is down nearly $550,000 in absolute dollar terms, primarily due to lower selling expenses. For the full year, SG&A was 23.6% of revenue, 110 basis point improvement from a year ago, with much of the improvement achieved over the second half of the year.

Over the past several quarters, controllable General and Administrative expenses have been relatively flat, while selling expenses have fluctuated in line with new orders and variable sales commissions. We expect to continue to reduce our SG&A percentage in fiscal year 2014 through a combination of cost control and revenue growth. And over the next three years, we are targeting 20% SG&A for Met-Pro. We achieved operating margins of 12.8% for the quarter, up nicely from 11.6% a year ago on the strength of improved product mix and lower operating costs.

Turning to our tax rate, our rate for the fourth quarter was 31.3%, as we were able to benefit from the US government's extension of research and development tax credits. Fed income for the quarter was $2.4 million, up 11% from a year ago, with EPS of $0.16, a 7% increase from $0.15 last year. For the full year, we earned a little over $8 million, a 13% increase over last year. Diluted earnings per share were up 15% to $0.55 as compared to $0.48 in the prior year. And our balance sheet remains strong, with cash on-hand and short-term investments at January 31, 2013 of $34.3 million. And debt levels continue to be reduced, dropping now to $2.6 million.

With that, I will turn the call back to Ray for some closing comments.

Thank you, Neal. Just a few concluding remarks before we open the call to your questions. Quarterly fluctuation is endemic to our business, and fiscal 2013 was no exception, as we earned $0.20 per diluted share in the first half of the year and $0.35 in the second half of the year. However, if you look at the Company on a trailing 12-month basis over the last several years, you'll see a very nice steady upward trend line stable earnings growth.

The global strength of the Met-Pro brands, and more focused strategic sales and marketing efforts, have enabled us to improve our penetration of targeted growth markets. Together with the productivity and efficiency enhancements implemented within our organization, year-over-year, we have steadily improved our financial performance. This year, we are particularly pleased with the turnaround achieved in our Product Recovery/Pollution Control segment over the last six months of the year, and the reduction in our operating expense ratio.

These accomplishments have strengthened our organization and are helping to prepare us for our next stage of growth. As mentioned previously, our quotation activity remains strong, while our pipeline of potential opportunities continues to grow. Gross margin should benefit from better project selectivity and execution. And we should continue to see disciplined cost control increase the leverage in our business model. This is a formula that should lead to continued steady growth and increased shareholder value.

I would like to thank the many loyal, dedicated, talented employees who have contributed to our success, as well as thank our shareholders for their continued support. I would also like to thank all of you for your participation in today's call.

I will now turn the call back to Kevin Bittle.

Thank you, Ray. We'd now like to welcome any questions you may have. I'll ask our operator Kristi to provide instructions for this portion of the call.

(Operator Instructions) Michael Gaugler, Brean Capital.

Congrats on the quarter, and Ray, particularly on the turnaround in product recovery. Very noticeable in the numbers.

Thank you.

Yes.

I guess the only thing that kind of really sticks out to me and continue to watching the cash build on the balance sheet, wondering what your thoughts were there? Perhaps maybe a bump in the dividend, given how much you've got sitting there at the moment.

Well, you know, as far as the plan for the usage of the cash, we're actively looking at some interesting opportunities in different sizes and timing with regards to acquisitions. And there's some nice possibilities that are out there that would complement our business. As far as share repurchases, we constantly look at that. And we have a tool in place, as you well know -- a share purchase plan in place, and -- but we've done very limited share repurchases in the past.

And then when you talk about the dividend, we're constantly looking at the dividend. Last year, we increased the dividend, I think, in December about 2%. And the Board looks at that as far as how the business is going, and we make a decision as a full Board in that area. So, nothing specific right now, Michael, but we are looking at the different options.

A high quality problem to have, right? But it's good to have low debt and a nice cash balance to give us a lot of flexibility going forward.

Yes, no question. Ray, can you give us any color on maybe where you're looking in terms of the acquisition front? Is it towards the pump business? Pollution controls? Maybe just a general overview of what you really -- what you see out there and where you might take the business.

There is good opportunities on both sides, Michael. There's -- on the air side, you've got some that can fill some of the gaps, let's say, in our product offerings and maybe our geographical reach. And the same thing on the pump side. There is a number of companies out there, private companies, of a scale that would fit right in, and that would add to our product offering.

If you look at our pump business right now, they're primarily centrifugal pump businesses -- different materials of construction, but primarily centrifugal. So, we're looking at it, do we add other types of pumps to this product line? So it's both sides, really, Michael, that we're looking to grow not only our air side, but our liquid side. And the pump side would be the ideal place.

Thanks, guys. Again, congrats.

Thank you, Michael.

Gerry Sweeney, Boenning.

I wanted to talk a little bit about Product Recovery/Pollution Control, and then maybe a little bit about SG&A. Nice to see the operating margin starting to pick up there. Can you give a little bit more detail as to what you've done internally? I assume we should expect this to be quote/unquote permanent. I do understand that there is always some variability in revenue and going through that segment in particular. But what have you done internally to get to this level? And maybe a little bit of detail on that front.

Well, we made some structural organizational type changes to improve things from a an execution viewpoint. That's one. We had some issues early in the year in the second quarter, as Neal had mentioned.

We've also looked at how we're selling and being more selective to who we are selling to, and picking our spots a little more carefully to where we can generate the higher margins, and based on our history and experience and the quality of our products. So those are two things -- the upfront side, as far as being more selective, focusing on markets where we can get the higher gross margins, and then the execution side. So when we get those, that we can either meet the margin or improve the margin. So, those are the two areas that we really have focused on hard with that group.

Then, looking at SG&A, 20% goal three years out. I mean, that's nice to see. I mean, setting -- putting a line in the sand, something we should expect to, to look forward to. Some details on the plan, how that's going to be achieved, and maybe if available, when -- like, how incremental? Are we -- is this going to be a gradual nipping away at the sides and incremental improvements? Or do you have some larger plans in place that will see a step-down? Just a little bit more detail on that.

Sure, Gerry. Yes, it's -- we think it's the right level for our business. We've made some investments in SG&A kind of ahead of growth, and we see our growth continuing. I think it's more of an incremental thing. Obviously, if an acquisition opportunity comes in, that will have its own profile to it. But we see it as just incrementally spreading our existing infrastructure over more and more sales.

We've taken some actions over the course of the year. And if you even look at our fourth-quarter run rate in SG&A, you can see that we are moving in the right direction. So, that's really, really what it is. We've looked across our business and said, you know, where are the value-added activities and where are the ones that we can be focused more on efficiency?

Okay. Yes, I mean, so I did note -- I mean, you can see the step-down and I guess the -- well, the G&A was about -- well, so I'm looking at my model here in real time here -- so the selling was down, but that was probably commensurate with some of the revenue. Okay. And then tax, just a little housekeeping -- tax, in and around the 32% to 33% going forward. There's a little bit of variability in there.

Yes, I think that's right. I'd say we're going to probably surround the 33%. Might be a little bit lower, but that feels about right.

And then, finally -- actually, I just want to touch base on the pump side. You know, I know you had a great couple of quarters because you had that large pump project. And then the operating margins popped out into the low 20s. And I don't want to focus on a quarter necessarily, because I know there is variability. And like you said, I mean, you look at the top line, year-over-year-over-year, it's growing and there is variability in -- on a quarter-by-quarter basis.

But the operating margins in the low 20s caught my eye a little bit. Is that just a coming off a large project, maybe not as much coming in, in the fourth quarter, like you said, some of -- maybe some people pushing some projects out?

Gerry, it was more product mix, as far as with the product mix and some timing of some expenses as far as the margin. And we've got very good opportunities out there in the pipeline. As you know, it's a business that's a book-ship business. They can book a project and turn it around very quickly, as we did last year with the $6 million job -- we booked that in April. And before the end of the year, we shipped the whole project, which had over 400 pumps in it. And that's in addition to the daily business.

So, there's opportunities out there that we see. I don't think the fourth quarter -- we're not concerned about the fourth quarter. That's something that's going to continue. It's -- we feel confident about that business going forward.

Okay. No, obviously, I mean it's always been -- I mean, you do a great job in that space. So that's it from my end. So, thanks a lot.

William Bremer, Maxim Group.

(multiple speakers) Okay, good. Glad I got you. All right. I want to dig into the operating margins -- EBITDA margins per segment a little bit. And let's go right back to the pump side per the last caller on the [22 spot 4%] for the fourth. On $9.3 million, we haven't had a level that low in quite some time. And I understand the mix issues. But on that type of volume, I was just curious your response there? And then going forward for '14, if it's just a abnormality of that particular quarter, then are we back to at least, say, the 25% level going forward?

Yes, Bill, I guess to answer your questions, I think the annual margin is a good indicator of the future. We are always looking, through throughput and some efficiencies, continue to try to push that margin a bit. But I think for modeling purposes, the annual margin percentage is probably a better indicator than the fourth quarter. And in terms of the $9.3 million of revenue, that's kind of pretty much a fourth of our full-year. We were coming off of some fairly high order volume from a large shipment in the second and third quarter, but we feel good about continuing growth in that business.

All right, same question. Let's take it to Strobic Air here, and pretty much the product recovery arena. Last two quarters, definitely seen a sequential improvement from your cost initiatives and restructuring. '14, are we looking now at sort of that type of range of EBITDA margins going forward?

Yes, I think that's right. I think if you maybe focus more on the operating margin -- I don't have the EBIT margin right in front of me, but I think the operating margins in the mid to high-single digits are what we see in the near-term to medium-term.

Okay. Mefiag -- we have these quarters that we have double-digit margins, and then a few hundred thousand of sales back before then we're down to low single digits. Help me grasp how do I forecast this particular arena? I mean definitely you guys are getting some projects that have very high margins, and then there are some quarters that that just doesn't translate.

Well, it's just like Mefiag or Met-Pro overall, where the variability from quarter to quarter. But the Mefiag business, one of the things that we're seeing now, Bill, is the housing market last year was up what, 12.5%, 13%? Automobiles, outside of Europe -- okay, the automobile industries have been pretty strong. These are two markets that drive the metal finishing and plating industry.

So we see some -- we believe there will be an uptick globally in the metal finishing business, even with things being brought back to the US, they're being repatriated as far as companies doing the metal finishing here. And when you look at Mefiag also as part of where they may go, and it's the printed circuit board industry. They develop, they filter for that industry and they're working with one of the key chemical suppliers of that industry. And we are seeing some traction here. So you've got the comeback of the housing, the sustainability of the automobile industry, and then the moving into a new market that I think are a good sign for Mefiag.

Yes and I think just to add to that, is that you know, it is hard. It's quarter over quarter. I know we like to look at things more on an annual basis, events and order patterns, and our completed contract method of accounting can cause fluctuation quarter to quarter. And Mefiag's business, the -- you're absolutely right, that the margins can float a little bit depending on mix amongst regions, depending upon products. But when you come to the end and you say Mefiag's operating margins there 6.2% this year versus 6% last year. So it just -- it kind of works -- it seems to work its way out. But it is a challenge from quarter to quarter.

Okay. One final question for me. Let's go to the balance sheet a little bit. DSOs increased quite substantially year-over-year. Is that due to the fact that we have 28% of net sales from international markets? And Neal, what's the game plan to start to curtail that and bring that back?

So, I think in the fourth quarter, you'll see our operating cash flow picked up quite a bit. You know we had some of it is timing of order patterns when you make a sale. So it's a point in time. But in general, our kind of our days outstanding are really pretty consistent on a year-over-year basis. But to give you a sense of that, I don't have the number right in front of me, but I believe our -- through the third quarter, our operating cash flow is at about $1.7 million through nine months, and is now up over $5 million for the full year, as you had a lot of shipments late in the third quarter that were sitting in receivables that got converted into cash in the fourth quarter.

Okay, gentlemen. Thank you.

Steve Shaw, Sidoti & Co.

Hey, Neal, I missed the product recovery number. What did you say? That was down 14% to $11.8 million?

I'm sorry. Were you looking at the revenue line or --?

Yes, revenue.

Yes, so, for the year, product recovery is up about just a little over 13%.

(multiple speakers) 12%? 13%.

For the quarter, it was down about 14% -- 13.7% down to 11.8%.

What was the cause of that? There was a large contract coming off the books?

No, I think, again, some of it is just the end timing. Some of it is that, as we've indicated in the past, that you know you can't eat revenue. And so we're focused on selectivity, getting the right sales, sales that are going to translate to the bottom line. And you'll see that the profitability of our Product Recovery business has really improved pretty dramatically on the lower sales piece.

Right. Okay. And everything was pretty much covered already. I know you guys can't get too specific, but any color on any trends or anything that you've been seeing in the first quarter so far?

Oh, we are seeing -- we've had some good bookings. If you look at from February through today, last year, we were about -- on the larger projects, we were about $1.2 million, $1.3 million in bookings. We've already announced in a month-and-a-half over $4 million worth of large project bookings in the air side of our business alone.

The good news there is also some of those have been the municipal market, which it has pretty much been dead the last few years for the Product Recovery/Pollution Control group, because they just weren't buying it. And what we're seeing now is an uptick there on the odor control side of the business, where we have a very firm position. So there's some good news there. And as I said, we are three times, almost 4 times the amount of bookings that we were a year ago the same time.

Okay. All right, thanks, Ray. Thanks, Neal.

JinMing Liu, Ardour Capital.

Thanks for taking my question. (multiple speakers) First question, I don't know whether you have this number or not, how much of your revenue for the whole year is related to aftermarket sales and service?

It's about I'd say somewhere in the 35% range this past year (multiple speakers) -- that's aftermarket and consumables.

Okay. Oh, plus consumables. Okay.

Yes.

Okay, good. Just I've noticed in your last two order announcements, there was not a timing for the delivery of those two orders. Is there anything you can share with us?

I think one of the things is that just as from the quarter-to-quarter variability in our results, there is variability in customers, when -- especially on the larger projects, when you get the project, timing as far as getting things returned and so forth, it can move around quite a bit. And we just felt that we didn't want to lead anybody in the wrong direction, as far as saying something is going to ship in a quarter, and then the customer either delays or something from a change in scope. So we felt it was better to just leave it blank.

But whether those two orders can be delivered within this fiscal year?

I think out of the orders that we announced, I think only one of them -- one of them may go into next year. It's scheduled for either late this fiscal year or into the first quarter of next year, out of the four orders.

Okay, good to know. Lastly, I just want to ask (multiple speakers) --

(multiple speakers) I think as a general rule (multiple speakers) -- I'm sorry, go ahead.

Yes, well, just lastly, I want to get into the selling expense for the fourth quarter. This came down dramatically is if I look at the past three quarters, it has been relatively steady. Is there anything we should know, whether it's due to some structural changes you made or just simply just timing?

I think it's a combination of things as far as where the sales were down in the fourth quarter versus last year. And then what happens is on some of our jobs, we pay commissions to reps, distributors -- to reps, basically. On other ones where we take them directly, there is no commission. So that can be a variable that comes into play also. But it's -- I don't think it's anything that was structurally that we did differently. It was just the timing of different things, whether it be rep commissions or the amount of sales that we actually had.

Okay, got that. Thanks a lot.

Leonard Cooper, private investor.

I was wondering what kind of policy Met-Pro has with regard to intellectual property? Do you protect your innovations and enforce them?

We do -- it's on a case-by-case basis, Leonard, as far as -- in some cases, you may not want to patent a certain product because what you're doing is you're disclosing a lot of information, where, in certain countries, it can be used to where they can actually copy it and you're not protected. So we will choose on a case-by-case basis where we believe it's best to actually apply for a patent and get a patent; and in other cases, we'll keep it close to the vest and not go for the patent, because of the disclosure that we would have to do.

You're welcome.

Okay. Thank you.

William Bremer, Maxim Group.

Yes, gentlemen, just a follow-up. You mentioned the bookings $7.5 million January and February. How does that compare year-over-year to '12 at this time?

Well, I can give you -- I don't know exactly from that point, but Bill, what I can say is from February to mid-March, last year, we did about $1.2 million in large projects, roughly $1.2 million. This year, we are at $4.3 million, $4.4 million in large projects. So that's a comparison there. I'm not sure about January to January.

Okay. All right. And then, when you look out, and you mentioned the types of acquisitions that you're planning or considering, very big difference in the two segments in terms of operating margin. Which one do you feel is more in terms of the shorter-term nature of potentially doing a bolt-on acquisition?

Boy, that's -- it's tough to answer, Bill, because it's not just us that we've got to be concerned about. It's the other side as far as the timing and when they are willing to close and so forth. But they're of a size that both -- either side could wind up accelerating and closing at a period of time that's either short -- one's shorter than the other. It's very tough to gauge that.

Okay. And then very little in terms of stock buyback the last few years really has been concentrated in the fourth quarter, really, for I guess, comp expense. But can you remind us, what is left in terms of the authorization on the stock buyback at this time?

About -- just a little under 150,000 shares.

And will that be active within your '14?

Really not going to provide any forward guidance on that, but you're right to say that for the most part over the last year, and even really the last two years, it's been substantially related to option redemption and executive compensation.

Okay, gentlemen. Thank you.

There are no further questions at this time. I hand the program back over to Mr. De Hont for any further comments or closing remarks.

Thank you, Christy. Once again, thank you for joining us this morning. We hope we've been able to provide you with a useful update on Met-Pro's progress and performance. If you had any further questions, feel free to contact either Neal or me at any time. Thanks, everybody.

And this does conclude today's conference call. You may now disconnect.