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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 12 Months Ended
Jan. 31, 2012
Business Description And Accounting Policies Abstract  
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Text Block]

Nature of operations:

The Company manufactures and sells product recovery and pollution control equipment for purification of air and liquids, fluid handling equipment for corrosive, abrasive and high temperature liquids, and filtration and purification products. The Company has three reporting segments: Product Recovery/Pollution Control Technologies, Fluid Handling Technologies and Mefiag Filtration Technologies, and one other segment (Filtration/Purification Technologies).

Basis of presentation:

The consolidated financial statements include the accounts of Met-Pro Corporation (“Met-Pro” or the “Company”) and its direct and indirect wholly-owned subsidiaries: Mefiag B.V., Met-Pro Product Recovery/Pollution Control Technologies Inc., Strobic Air Corporation, MPC Inc., Pristine Water Solutions Inc., Mefiag (Guangzhou) Filter Systems Ltd., Met-Pro (Hong Kong) Company Limited, Met-Pro Industrial Services Inc., Bio-Reaction Industries Inc., Met-Pro Holdings LLC and Met-Pro Chile Limitada.  Significant intercompany accounts and transactions have been eliminated.

Certain reclassifications have been made to prior year information to conform with the current year presentation.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Foreign currency translation:

Assets and liabilities of the Company’s foreign subsidiaries are translated at current exchange rates, while income and expenses are translated at average rates for the period.  Translation gains and losses are reported as a component of accumulated other comprehensive income in the consolidated statements of shareholders’ equity.

Fair Value of Financial Instruments:

Under the accounting for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
 
 
We use the following valuation techniques to measure fair value for our assets and liabilities:
 
Level 1   
Quoted market prices in active markets for identical assets or liabilities;
   
Level 2
Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs); and
   
Level 3
Unobservable inputs for the asset or liability, which are valued based on management’s estimates of assumptions that market participants would use in pricing the asset or liability.
 
The amounts reported on the consolidated balance sheets for cash and cash equivalents, short-term investments, accounts receivable, other assets and short-term debt approximate fair value due to the short-term nature of these instruments.

Inventories:

Inventories are stated at the lower of cost (principally first-in, first-out) or market, except for the inventory in the Met-Pro Global Pump Solutions business unit (Dean Pump product brand) which is determined on the last-in, first-out basis (see Note 5).

Property, plant and equipment:

Property, plant and equipment are stated at cost, net of accumulated depreciation.  Expenditures for maintenance and repairs are charged to expense as incurred.  Renewals and betterments are capitalized (see Note 6).  For financial reporting purposes, provisions for depreciation are calculated on a straight-line basis over the following estimated useful lives of the assets:
 
Years
Buildings and improvements
10-39
Machinery and equipment
  5-10
Furniture and fixtures
5-7
Automotive equipment
3

The carrying amount of all long-lived assets is evaluated periodically to determine if an adjustment to the depreciation period or the non-depreciated balance is warranted.  Based upon its most recent analysis, the Company believes that no impairment of property, plant and equipment exists as of January 31, 2012.

Goodwill:

In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment”.  The amendments in this update allow the Company the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, based on its qualitative assessment, the Company concludes it is more likely than not that the fair value of a reporting unit is less than its carrying amount, quantitative impairment testing is required.  However, if an entity concludes otherwise, quantitative impairment testing is not required.  Quantitative impairment testing involves significant judgment in estimating projections of fair value generated through future performance of each of the reporting units, which comprise our operating segments.  In calculating the fair value of the reporting units using the present value of estimated future cash flows method, we rely on a number of assumptions including sales and related gross margin projections, operating margins, anticipated working capital requirements and market rate of returns used in discounting projected cash flows.  These assumptions are based upon market and industry forecasts, our business plans and historical data.  Inherent uncertainties exist in determining and applying such factors.  The discount rate used in the projection of fair value represents a weighted average cost of capital available to the Company.  ASU No. 2011-08 is effective for annual and interim reporting periods beginning after December 15, 2011.  The Company will adopt ASU No. 2011-08 during the first quarter of fiscal year 2013. 
 
No impairment was present upon performing this test since the fair value of each reporting unit exceeded its carrying value, including goodwill.  At January 31, 2012, the goodwill associated with the Company’s three reporting segments and one other segment totaled $20,798,913.
 
The changes in the carrying amount of goodwill by the three reporting segments and one other segment for the fiscal year ended January 31, 2012 are as follows:
 
 
  Product Recovery/
Pollution Control
 Technologies
Fluid Handling
Technologies
Mefiag
Filtration Technologies
 Filtration/ Purification Technologies
Total
Balance as of February 1, 2011
 
$15,706,667
  
$11,542
  
$1,732,482
   
$3,348,222
 
$20,798,913
Goodwill acquired during the period
 
-
  
-
  
-
   
-
 
-
Balance as of January 31, 2012
 
$15,706,667
  
$11,542
  
$1,732,482
   
$3,348,222
 
$20,798,913

Other intangible assets:

The Company maintains intangible assets with finite and indefinite lives.  The following is a summary of the Company’s components of other intangible assets, which are reported in other assets on the consolidated balance sheets.

   
January 31, 2012
 
January 31, 2011
 
   
Gross Carrying
 
Accumulated
 
Gross Carrying
 
Accumulated
 
Amortized intangible assets
 
Amount
 
Amortization
 
Amount
 
Amortization
 
 
Patents
 
$761,821
 
($131,665
)
$709,132
 
($70,453
)
 
Customer lists
 
384,000
 
(275,667
)
384,000
 
(261,264
)
 
Intellectual property
 
195,886
 
(195,886
)
195,886
 
(195,886
)
 
Other
 
181,337
 
(110,753
)
181,337
 
(78,517
)
     
$1,523,044
 
($713,971
)
$1,470,355
 
($606,120
)
                     
Unamortized intangible assets
                 
 
Trademarks
 
$11,963
 
$0
 
$10,500
 
$0
 

The following is a summary of the amortization expense related to the Company’s components of other intangible assets:
       
Amortization Expense
   
 
For the year ended January 31, 2010
 
$37,047
 
For the year ended January 31, 2011
 
52,017
 
For the year ended January 31, 2012
 
107,851
       
Estimated Amortization Expense
   
 
For the year ended January 31, 2013
 
$97,315
 
For the year ended January 31, 2014
 
80,648
 
For the year ended January 31, 2015
 
80,201
 
For the year ended January 31, 2016
 
79,256
 
For the year ended January 31, 2017
 
77,589
 
Thereafter
 
394,064
     
$809,073
 
For financial reporting purposes, provisions for amortization are calculated on a straight-line basis over the following estimated useful lives for the identified intangible assets:

 
Years
Patents
6-20
Customer Lists
10
Intellectual Property
10
Other
2-20
 
Asset Available for Sale:

The Company maintains a vacant plot of land available for sale in Heerenveen, The Netherlands amounting to $546,771 and $572,223 as of January 31, 2012 and 2011, respectively.  This asset available for sale is reported in other assets on the consolidated balance sheets.
 
Revenue recognition:

The Company recognizes revenues from product sales or services provided when the following revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable and collectability is reasonably assured.  FASB ASC Topic 605, “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 FASB ASC Topic 605.

Advertising:

Advertising costs are charged to operations in the year incurred and were $1,258,220, $988,217 and $938,046 for the years ended January 31, 2012, 2011, and 2010, respectively.

Research and development:

Research and development costs are charged to operations in the year incurred and were $2,512,923, $2,242,052 and $2,145,716 for the years ended January 31, 2012, 2011, and 2010, respectively.
 
Stock-based compensation:

The Company accounts for stock-based compensation under the provisions of FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires the recognition of the fair value of stock-based compensation.  Under the fair value recognition provisions for FASB ASC Topic 718, stock-based compensation is estimated at the grant date based on the fair value of the awards expected to vest and recognized as expense ratably over the requisite service period of the award.  The Company uses the Black-Scholes valuation model to estimate fair value of stock-based awards, which requires various assumptions including estimating stock price volatility, forfeiture rates and expected life.
Income Taxes:
 
Income taxes are determined using the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes”. Under ASC Topic 740, tax expense includes U.S. and international income taxes plus the provision for U.S. taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested. Tax credits and other incentives reduce tax expense in the year the credits are claimed.  Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported in deferred income taxes.  Deferred tax assets are recognized if it is more likely than not that the assets will be realized in future years.  The Company establishes a valuation allowance for deferred tax assets for which realization is not more likely than not.
 
Income tax contingencies are accounted for in accordance with FASB ASC Topic 740-10-20, “Income Taxes”. Significant judgment is required in determining the Company’s worldwide provision for income taxes and recording the related assets and liabilities.  In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is less than certain.  The Company is examined by various Federal, State, and foreign tax authorities.  The Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes.  The Company continually assesses the likelihood and amount of potential adjustments and records any necessary adjustments in the period in which the facts that give rise to a revision become known.
 
The Company recognizes interest accrued related to unrecognized tax liabilities in interest expense and penalties in general and administrative expenses.  No such interest and penalties were recognized during the years ended January 31, 2012, 2011 and 2010.

Earnings per share:

Basic earnings per share are computed based on the weighted average number of common shares outstanding during each year.

Diluted earnings per share are computed based on the weighted average number of shares outstanding plus all potential dilutive common shares outstanding (stock options) and awards of restricted stock units during each year.
 
Dividends payable:

On December 16, 2011, the Board of Directors declared a $0.071 per share quarterly cash dividend payable on March 16, 2012 to shareholders of record at the close of business on March 2, 2012, amounting to an aggregate of $1,042,297.

Concentrations of credit risk:

Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents (see Note 3) and trade accounts receivable.  The Company believes concentrations of accounts receivable credit risk are limited due to the number of customers and dispersion among the operating segments and geographic areas.  It is the policy of management to review the outstanding accounts receivable balance at the end of each reporting period, as well as the bad debt write-offs experienced in the past, and establish an allowance for doubtful accounts for uncollectible amounts.
 
Supplemental cash flow information:

 
2012
 
2011
 
2010
Cash paid during the year for:
       
Interest
$192,971
 
$210,497
 
$220,919
Income taxes
2,394,238
 
2,096,789
 
1,608,485
 
Subsequent events:

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
 
Recent accounting pronouncements:

In October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements, a consensus of the FASB Emerging Issues Task Force”, an amendment of ASC Topic 605, “Revenue Recognition”.  ASU No. 2009-13 provides amendments to the criteria for separating consideration in multiple-deliverable arrangements.  As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. Generally Accepted Accounting Principles (“GAAP”).  The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable.  The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available.  A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.  This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price.  Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU.  The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions.  ASU No. 2009-13 was effective for the Company in this fiscal year beginning February 1, 2011.  The adoption of this update to ASC Topic 605 did not have a material impact on our financial position, results of operations or cash flows.

In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”. This update provides amendments to Subtopic 820-10 that requires new disclosures on 1) the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and reasons for the transfers and 2) in the reconciliation for Level 3 fair value measurements, the separate presentation of information about purchases, sales, issuances and settlements. The new disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of this update to ASC Topic 820 did not have a material impact on our financial position, results of operations or cash flows.

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”.  The amendments in this update are the result of the work of the FASB and the International Accounting Standards Board (“IASB”) to develop common requirements for measuring fair value and for disclosing information about fair value measurements.  The amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  The amendments clarify that a reporting entity should disclose quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy in order to increase the comparability of disclosures between reporting entities applying U.S. GAAP and those applying IFRSs.  Additionally, the amendments expand the disclosures for fair value measurements categorized within Level 3 where a reporting entity will need to include the valuation processes used and the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any.  For many of the requirements, the FASB does not intend for the amendments to result in a change in the application of the requirements in ASC Topic 820.  The amendments in this update are to be applied prospectively and are effective during interim and annual periods beginning after December 15, 2011.  The adoption of this update will not have a material impact on our financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.”  The amendments in this update eliminate the current option to report other comprehensive income and its components in the statements of shareholders’ equity.  Instead, an entity will be required to present either a single continuous statement of net income and other comprehensive income or in two separate, but consecutive statements.  The amendments in this update are to be applied retrospectively and are effective for interim and annual periods beginning after December 15, 2011.  The new guidance will be effective for the Company beginning February 1, 2012 and will have presentation changes only.
 
In September 2011, the FASB issued ASU No. 2011-08, “Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment”.  The amendments in this update allow an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, based on its qualitative assessment, an entity concludes it is more likely than not that the fair value of a reporting unit is less than its carrying amount, quantitative impairment testing is required.  However, if an entity concludes otherwise, quantitative impairment testing is not required.  ASU No. 2011-08 is effective for annual and interim reporting periods beginning after December 15, 2011, with early adoption permitted. The adoption of this update is not expected to have a material impact on our financial position, results of operations or cash flows.