AIR FILTRATION MARKET UPDATE

March 2011

McIlvaine Company
www.mcilvainecompany.com



TABLE OF CONTENTS

CONSTRUCTION
U.S. Housing Starts, Permits Down in February

FINANCIALS
Met-Pro Corporation Announces Fourth Quarter and Fiscal Year End Financial Results
Clarcor Reports First Quarter 2011 Results

COMPANY NEWS
H&V Announces Expansion into India with Formation of JV with Nath Group
Johns Manville Announces Additional Capacity for Microfiber by April 2011
Donaldson to Build New Manufacturing Facility in Aguascalientes, Mexico
AAF International Approved for Economic Development Incentives
AAF Netherlands Plant Achieves ISO 14001 Certification
United Components Acquired by Rank Group Ltd.

NEW PRODUCTS/ PROCESS
New Ventilating Room Air Purifier from Air Innovations
Saudi Aramco to Deploy Sonic Cleaning Process for Gas Turbines


Many projects, mergers and acquisitions are detailed in monthly updates in the Market Report’s Chapters under Industry Analysis. Click on the links below to view current updates for each industry.

AEROSPACE
FOOD
DISK DRIVE
FLAT PANEL
METALWORKING
OTHER ELECTRONICS
PHARMACEUTICAL
POWER
PULP MILLS
SEMICONDUCTOR
TRANSPORTATION

CONSTRUCTION

U.S. Housing Starts, Permits Down in February
Privately-owned housing starts in February were at a seasonally adjusted annual rate of 479,000, 22.5 percent below the revised January rate. The housing starts for single-family units in February dropped 11.8 percent from January.

Privately-owned housing units authorized by building permits, an indication of future building, were at a seasonally adjusted annual rate of 517,000 in February. This is 8.2 percent below the revised January rate of 563,000 and is 20.5 percent below the February 2010 estimate of 650,000.

Single-family authorizations in February were 382,000, 9.3 percent below the revised January figure. Authorizations of units in buildings with five units or more were at a rate of 121,000 in February.

FINANCIALS
Met-Pro Corporation Announces Fourth Quarter and Fiscal Year End Financial Results
Met-Pro Corporation (NYSE:MPR) recently announced the Company's financial results for the fourth quarter and fiscal year ended January 31, 2011.

Net sales for the fiscal year ended January 31, 2011 were up 11% to $88.9 million compared with $80.1 million for the same period last year. Net income totaled $6.1 million for the fiscal year ended January 31, 2011 compared with net income of $4.4 million for the same period last year, an increase of 38%.

New order bookings for the fiscal year ended January 31, 2011 were up 10% to $89.9 million compared with $81.8 million for the prior fiscal year.

Sales in the Filtration/Purification Technologies segment were $10.1 million, or $0.1 million lower than the $10.2 million of sales for the fiscal year ended January 31, 2010, a decrease of 1.2%. This decrease in sales was due to decreased demand in our Pristine Water Solutions business unit, as a result of a weakness in the municipal markets served by this business unit, which appear to be recovering more slowly from the economic slowdown.

Net income for the fiscal year ended January 31, 2011 was $6.1 million compared with $4.4 million for the fiscal year ended January 31, 2010, an increase of $1.7 million or 38.3%.

Income from operations in the Filtration/Purification Technologies segment was $0.6 million, or $0.3 million higher than the $0.3 million for the fiscal year ended January 31, 2010, an increase of 100.0%. The increase in income from operations in the Filtration/Purification Technologies segment was related to increased sales and higher gross margins in our Keystone Filter business unit.

Keystone Filter, part of the Filtration/Purification business, manufactures a wide range of air and liquid filtration products for industrial, commercial and residential markets. Keystone Filter is also one of the premier custom pleaters and custom filter cartridge manufacturers in the United States.

Met-Pro Corporation, with headquarters at 160 Cassell Road, Harleysville, Pennsylvania, is a leading niche-oriented global provider of product recovery, pollution control and fluid handling solutions.

Clarcor Reports First Quarter 2011 Results
Clarcor Inc. (NYSE: CLC) reported its financial results for the first quarter of 2011. Diluted earnings per share of $0.43 grew 48% from last year’s first quarter on the strength of a 14% increase in net sales. The Company successively leveraged this sales growth into a 37% increase in operating profit and a 2.1 percentage point improvement in operating margin.

Norm Johnson, CLARCOR’s Chairman and Chief Executive Officer, said, “We picked up in the first quarter where we left off fiscal year 2010—with another strong quarter…All of our segments contributed to our success as each segment posted double-digit sales growth from last year’s first quarter. Certainly, the improving economic environment compared with the first quarter last year facilitated this growth. However, we were also able to drive incremental growth through the introduction of new products and further penetration of non-U.S. markets.”

Engine/Mobile Filtration Segment Net sales at the Engine/Mobile Filtration segment for the first quarter of 2011 increased $14.9 million, or 15%, compared with the first quarter of 2010. This increase was related primarily to higher volume of heavy-duty engine filter sales, which have been positively influenced by the continued strength in the U.S. trucking industry.

Net sales at their Industrial/Environmental Filtration segment for the first quarter of 2011 increased $10.1 million, or 10%, from the first quarter of 2010 primarily due to an approximate $8.0 million increase in sales domestically across many of our markets including air filtration, aerospace, aviation and sales through Total Filtration Services—the distribution business. This sales increase was the result of improved economic conditions in the U.S. along with new product offerings in air filtration. Sales outside the U.S. increased approximately $2.0 million in the first quarter of 2011 primarily as a result of higher off-shore oil drilling sales off the coast of Singapore. In addition, in the first quarter of 2011 we were able to successfully enter the Brazilian oil and gas market after opening a local sales office there at the end of 2010. These positive sales trends were partially offset by a decline in European sales as some periphery markets—notably Spain—continue to be negatively impacted by economic and financial issues.

Updated projected sales growth and operating margin by segment and on a consolidated basis are as follows:

Segment 2011 Estimated Sales Growth 2011 Estimated Operating Margin
Engine/Mobile Filtration 12.0% to 14.0% 20.5% to 22.5%
Industrial/Environmental Filtration 13.0% to 15.0% 10.0% to 11.0%
Packaging -9.0% to -7.0% 8.0% to 9.0%
CLARCOR 10.5% to 12.5% 14.5% to 16.0%

COMPANY NEWS

H&V Announces Expansion into India with Formation of JV with Nath Group
Hollingsworth & Vose Co. recently announced the formation of a joint venture with Nath Group and plans to establish a manufacturing capability in India. The plan includes construction of a new mill near Aurangabad, Maharashtra. The investment will be financed by both companies, with H&V being the majority owner and managing partner. Warehousing facilities will also be established during the planning and construction period to better serve customers currently importing H&V products. The new mill will be capable of producing the highest standards of water and solvent based engine filter media, as well as selected products for HVAC filtration and battery separator applications.

Commenting on the expansion plans, H&V CEO Val Hollingsworth said "H&V has been active building our relationships and presence in India for many years. We are pleased to be taking this next step forward to better serve our customers in India and the surrounding region. Our vice president of international business development, Juergen Binzer, and I evaluated a number of options for expanding into India and we are delighted to be joining with Nath. Like H&V, Nath is a family owned professionally managed company with a long term view and a commitment to technology. This investment, like our investments in China is part of our strategy to serve our customers globally." Nath Chairman Nandkishor Kagliwal, added "We look forward to close collaboration with H&V as we work together to build this company."

H&V's vice president and general manager of its engine and industrial filtration business, David von Loesecke, commented "The demand in India for high quality engine and industrial filtration products is significant and growing. We have already created a successful base business of imported products with customers in India. We are pleased to be able to soon offer locally produced products incorporating our latest technology for our customers."

Johns Manville Announces Additional Capacity for Microfiber by April 2011
Johns Manville (JM) recently announced they are bringing online previously shutdown capacity in order to better serve the overall market demand for Microfiber.

“For over 150 years, JM has been committed to meeting the needs of our valued customers,” noted J.P. Blanchard, Global Manager of the Filtration and Specialty Nonwovens Business. “We invested in bringing the additional capacity online in order to better serve our customers’ needs as well as the growing demand in the market for our world-class products.”

The capacity will be out of the company’s Waterville, Ohio facility and the new assets will immediately increase the supply of some products by as much as 35 percent. Furthermore, additional capacity is available that will be activated in a second phase as demand dictates. The primary markets for Microfiber are High Efficiency Air Filtration and Absorptive Glass Mat Battery Separators.

“JM is committed to serving our customers and has dedicated substantial resources to underscore our commitment to the Microfiber’s business as the markets return,” noted Bob Wamboldt, Vice President and General Manager of Engineered Products North America. “This is the right time to make investments in additional capacity and fulfill the needs of the market and our customers.”

“The current schedule is for capacity to be running in April with supply available to our customers soon thereafter,” noted Blanchard. “We are committed to growing with our customers and to supporting their global operations now and for the long-term.”

Donaldson to Build New Manufacturing Facility in Aguascalientes, Mexico
Donaldson Company, Inc. (NYSE: DCI), announced recently that construction will begin on another manufacturing facility in Aguascalientes, Mexico. This new 140,000 square foot facility will manufacture air filters for the Company's growing markets in the Americas. Donaldson's existing plant in Aguascalientes, which currently manufactures both air and liquid filters, will specialize in liquid filters upon the completion of this new air filter plant.

"We are very pleased to add this new facility to our existing manufacturing and distribution base in Aguascalientes and have appreciated the ongoing wonderful support of the local Aguascalientes officials and our employees," said Joe Lehman, Vice President of Global Operations. "The ongoing economic recovery, plus our market share gains, has driven our replacement filter sales to record levels over the past year. Based on our Strategic Growth Plan, this new plant will allow us to expand both our air and liquid filter manufacturing capacity to meet our projected OEM and Aftermarket Customer demand throughout the Americas."

AAF International Approved for Economic Development Incentives
AAF-McQuay Inc. dba AAF International was approved for economic development incentives at a March 15th special meeting of the Kentucky Economic Development Finance Authority meeting in Frankfort, Ky.

AAF International, headquartered in Louisville, is a global manufacturer of comprehensive air filtration products and systems. It has operations in 22 countries with more than 2,600 employees worldwide, including 200 locally. The company is considering an expansion project that would be an investment of $3.8 million and add 50 new jobs and new annual payroll of $3.1 million.

AAF International was approved for up to $3 million in KBI incentives for up to 10 years. "AAF International received word today that the Kentucky Economic Development Finance Authority (KEDFA) reached preliminary approval to provide incentives for AAF International to support the growth of our company," said Kevin Lynch, COO of AAF International. "The KEDFA incentives are a very important part of the criteria we will examine as we continue our business evaluation process."

AAF Netherlands Plant Achieves ISO 14001 Certification
AAF International recently announced that in additional to the ISO 9001 certificate, their Netherlands manufacturing facility in Emmen achieved ISO 14001 Certification in December 2010. The Emmen plant is the second plant beside the Nove Mesto plant who achieved ISO 14001 in the year 2010.

United Components Acquired by Rank Group Ltd.
United Components International (UCI), the parent company of Airtex Products in Fairfield, Ill., and Champion Laboratories in Albion, Ill., has been sold to the Rank Group Limited, a New Zealand based holding company with the view to developing its worldwide activity within the automotive market sector. Champion Laboratories is a global manufacturer of components sold to the automotive specialist OEM & aftermarket channels. Champion Laboratories (Europe) Ltd (formerly Eurofilter) manufactures and manages automotive filter sales throughout Europe as well as Gas Turbine & Industrial filters globally.

The Rank Group acquired all of the outstanding shares of capital stock and other equity interests in UCI for a payment of $375 million. In addition, Rank assumed the net indebtedness of UCI and its subsidiaries, estimated to be $605 million.

UCI operates Champion Laboratories in Albion and West Salem. Champ is a major manufacturer of automotive and heavy truck filters. Airtex Products in Fairfield is a major manufacturer of fuel pumps for new and aftermarket applications.

UCI also operates Wells Manufacturing in Fond Du Lac, Wisconsin and ASC Industries in N. Canton, Ohio, both manufacturers of automotive parts.

“We believe the Rank Group has a great reputation in owning and operating successful businesses,” said Keith Zar, Vice President of UCI, International. “We expect all of UCI’s businesses will remain intact and will continue to operate in place.”

UCI had worldwide sales of $900 million last year. The company has a current employment of 3,900.


NEW PRODUCTS/ PROCESS

New Ventilating Room Air Purifier from Air Innovations
The first and only patented indoor air quality product in America that is dedicated to improving the health of occupants by using fresh, outside air is now available. Designed and manufactured by Air Innovations, the HEPAiRx® ventilating room air purifier quickly and effectively dilutes, filters and reduces the indoor pollutants that are often cited as causes of asthma, respiratory irritations and allergic reactions.

HEPAiRx is a uniquely packaged combination of an energy recovery ventilator, high-efficiency particulate air (HEPA) filtration, heater and air conditioner that is conveniently window-mounted.

“These features are important because they allow the room to be treated separately from the rest of the house,” said Air Innovations chairman Larry Wetzel, a licensed professional engineer and inventor of the HEPAiRx. “This prevents the home’s heating and cooling system from continuously re-contaminating the air with pollutants. Also, by isolating the room and providing a slight positive pressure, good air quality can be maintained by mixing and re-circulating room and outside air continuously through the HEPA filter.”

The window-mounted HEPAiRx is most effective in single-room settings, such as bedrooms where people spend large amounts of time. HEPAiRx has undergone several years of testing in the bedrooms of children who have physician-diagnosed asthma. The unit’s soothing “white noise” often blocks sounds outside or inside the house, which may help occupants sleep better.

HEPAiRx research results have been published in two peer-reviewed journals and have been presented at several international indoor air quality technical conferences. The studies show that, within minutes, the unit removes and reduces the kinds of pollutants that trigger respiratory irritations and can exacerbate the symptoms of asthma. These include ultra-fine airborne particulates from cooking, sneezing and animal dander that drift around in the air for hours and are easily stirred up with a minimum amount of activity. A second category of contaminants that HEPAiRx addresses are gaseous compounds like carbon dioxide, carbon monoxide as well as volatile organic compounds (VOCs) like formaldehyde.

More than $2 million dollars in competitive grants and matching monies have been invested to further refine the product and expand clinical research in the area of asthma symptom mitigation. Sponsors include New York State Energy Research and Development Authority (NYSERDA), New York State Foundation for Science and Technology, Syracuse Center of Excellence, and CenterState CEO. Research partners to date include Tufts Medical University, University of Buffalo and Clarkson University.

The product retails for $3,595 and may be purchased direct from Air Innovations.

Saudi Aramco to Deploy Sonic Cleaning Process for Gas Turbines
Saudi Aramco's Research and Development Center (R&DC) is at the forefront of developing and introducing new technologies to support the huge networks of crude oil and gas processing facilities, massive facilities with equipment running round the clock.

Not long ago, Abqaiq Plants engineer Samer Al-Hakami approached R&DC to propose procedures in which it could maximize the service life of air filters used in gas turbine filtration systems. Filters that are used to remove dust and other impurities were failing far faster than the manufacturer's specifications.

Gas turbines play a vital role in supplying energy to facilities within the company. They need complex air filtration systems to prevent turbine components from erosion, fouling and hot corrosion.

The air-filter replacement program at Abqaiq Plants, for example, had become so expensive, it attracted the attention of plant management.

R&DC carried out an extensive study to design and examine ultrasonic (sound waves) technology as a practical, easy-to-apply and cost-effective way to clean the filters and extend their life.

Using sonic cleaning, the researchers found, filters are not only cleaned of dust and dirt but also of organic materials without affecting the physical integrity of the filter.

Environmental scanning electron microscopy, which can produce high-resolution images, reveals details at nanometer level with a magnification of more than 300,000 (about 250 times the magnification limit of the best light microscopes). It was used to examine different cleaning methods throughout the study.

Adopting this cleaning technology for these filters, the company can now reuse more than 10,000 air filters per year that before had been discarded. Not only will that save money but also will contribute to protecting the environment.

According to Mansour A. Al-Shafei and Gasan Alabedi of R&DC, the sonic cleaning process was tested late last year and will be fully operational this year.





McIlvaine Company
Northfield, IL 60093-2743
Tel: 847-784-0012 Fax: 847-784-0061
E-mail: editor@mcilvainecompany.com
Web site: www.mcilvainecompany.com