<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------------------------- --------
Commission file number 0-784
--------------------------------------------------------
DETREX CORPORATION
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-0480840
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24901 Northwestern Hwy., Suite 500, Southfield, Michigan 48075
-------------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 358-5800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Capital Stock, $2 Par Value
----------------------------------
(Title of Class)
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 a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
<PAGE> 2
FORM 10-K
The aggregate market value (based upon the NASDAQ Closing Price) of Common
Stock on March 17, 1995 of Detrex Corporation held by nonaffiliates was
approximately $15,042,433.
The number of shares of Common Capital Stock, $2 Par Value outstanding on March
17, 1995 was 1,583,414.
Documents incorporated by reference:
Part and Item Number
of Form 10-K into
Document which Incorporated
1. Detrex Corporation Part II Items 5 through 8
Annual Report to Part IV, Item 14
Stockholders for the year
ended December 31, 1994
2. Detrex Corporation Part III, Items 10, 11, 12
Notice of Annual and 13
Meeting of Stockholders
and Proxy Statement for
the Annual Meeting of
Stockholders to be held
April 27, 1995
2
<PAGE> 3
FORM 10-K
PART I
ITEM 1. BUSINESS
Detrex Corporation was incorporated in Michigan in 1925. Detrex Corporation
and its subsidiaries (the Company) operate predominantly in a single industry,
chemicals and allied products, services, and supply processes for use by
manufacturing and service industries.
Detrex Corporation and its subsidiaries operate predominantly in a single
industry: chemicals and allied products, services, and processes for use by
manufacturing and service industries. The principal products include specialty
chemicals, industrial cleaners, process equipment, coatings, lubricant
additives, chlorinated solvents, hydrochloric acid, PVC plastic pipe,
industrial finishing materials and paints, industrial furnaces, degreasing
equipment, and environmental and analytical laboratory services. The products
are primarily sold by sales-service engineers and most sales are direct to
industrial users. Net sales by product line for each of the last five years are
set forth below:
<TABLE>
<CAPTION>
Product Line
------------
Chemical
Products Chemical
and Services Equipment Total
--------------- --------- -------
<S> <C> <C> <C>
1994 $79,975,998 $20,120,445 $100,096,443
1993 85,895,760 19,682,709 105,578,469
1992 79,326,021 17,428,137 96,754,158
1991 70,092,135 11,305,378 81,397,513
1990 75,904,572 20,232,975 96,137,547
</TABLE>
Of the $80.0 million included in 1994 Chemical Products and Services sales,
approximately $22 million (27.3%) represent sales by the Company's solvents
division, $14 million (16.9%) represent sales by its paint subsidiary, $13
million (16.6%) represent sales by its lubricants subsidiary and $25 million
(31.6%) represent sales by its plastic pipe subsidiary.
All of the Company's business units operate in highly competitive markets which
are mainly national in scope, although some business is done internationally by
its lubricants subsidiary and its plastic pipe subsidiary. In all products,
there are numerous competitors with no one company or a small number of
companies being dominant. The Company operates in niche markets and its
principal methods of competition in various markets include service, price and
quality, depending on the market serviced. No material part of the business is
dependent upon a single customer or a few customers.
3
<PAGE> 4
FORM 10-K
PART I (CONTINUED)
ITEM 1. BUSINESS (Continued)
The backlog of orders at any one time is generally not significant to the
Company's business. At December 31, 1994, the Company's backlog of Chemical
Equipment orders was $10,174,000 and the Company expects to complete
all of these orders in 1995. At December 31, 1993, the Company's backlog of
Chemical Equipment orders was $9,386,000.
Raw materials essential to the Company's various products are generally
commodity materials and are readily available from competitive sources. The
Company's solvents division is going through a major transition in the
marketplace, primarily because of the rapid phasing out of ozone depleting
solvents. As a result, the division is increasingly marketing substitutes for
such solvents, including aqueous based cleaners, and is involved in the supply
of environmental services.
The Company owns various patents and trademarks which aid in maintaining the
Company's competitive position; these expire at various times within the next
seventeen years. The expiration of such patents and trademarks should not have
a material adverse effect on the Company's operations. No material portion of
the Company's business is seasonal or subject to renegotiation of profits or
termination of contracts or subcontracts at the election of the government.
The approximate dollar amounts spent during 1994, 1993, and 1992 on research
sponsored by the Company were $1,784,000, $2,532,000, and $2,458,000,
respectively. The number of professional employees engaged in such activities
were 28 for 1994, 40 for 1993, and 32 for 1992.
There are no customers to which sales were made in an amount which equals ten
percent or more of consolidated revenues.
The Company does not expect to incur significant capital expenditures for
environmental compliance in 1995. However, the Company does expect to continue
to incur significant professional fees and expenses in connection with its
environmental compliance efforts. The Company maintains an environmental
reserve which at December 31, 1994 totaled $12.6 million, of which $1.5
million is estimated to be spent in 1995. A more detailed discussion of
environmental matters is included under Item 3 - Legal Proceedings and in
Management's Discussion and Analysis in the Annual Report.
The Company employed 367 persons as of December 31, 1994.
The Company is not engaged in manufacturing operations in foreign countries,
nor is a material portion of sales or revenues derived from customers in
foreign countries, although the Company intends to increase its international
business at certain of its business units.
4
<PAGE> 5
FORM 10-K
PART I (CONTINUED)
ITEM 1. BUSINESS (Concluded)
The Company utilized a combination of internally generated funds, a portion of
the proceeds from the sale of its Industrial Chemical Specialties Division,
and net additional borrowings of $1.5 million to finance its activities during
1994. As of December 31, 1994, working capital was $7.0 million, compared to
$10.7 million at December 31, 1993. For a discussion of the Company's credit
agreements, see Footnote 4 to the Consolidated Financial Statements and
Management's Discussion and Analysis in the Annual Report.
ITEM 2. PROPERTIES
The Company's administrative offices are located in approximately 7,500 square
feet of leased space at 24901 Northwestern Hwy., Suite 500, Southfield,
Michigan.
Detrex and its subsidiaries conduct manufacturing and research operations in
eleven principal locations of which ten are owned as follows:
1) A 50,000 square foot plant in Redford Township, Michigan is located on seven
acres of land. This plant includes blending, mixing, drumming, and other
facilities available to toll manufacture. There are above ground storage
facilities for raw materials and finished products. The plant also houses
administrative personnel for two of the Company's divisions.
2) A plant located on 57 acres in Ashtabula, Ohio is used in connection with
the manufacture of hydrochloric acid, reagent grade chemicals and N-methyl
pyrrole.
3) The Company's lubricants subsidiary manufactures gear and oil additives in a
plant located in Cleveland, Ohio on 5 acres of land and 59,000 square feet
of office, research and plant space. This plant is equipped with mixing and
blending equipment and storage facilities. Additional manufacturing of
additives is done in a plant consisting of 12,800 square feet at Hooven
(Cincinnati), Ohio located on 3.6 acres of leased land. The present lease
at Hooven expires in June 1996.
4) The Company's plastic pipe subsidiary manufactures plastic pipe in a plant
located on 20 acres of land and 228,500 square feet of office and plant
space located in Easton, Pennsylvania. Extruders and special dies are used
to manufacture the plastic PVC pipe from resin. Production and warehouse
facilities have been expanded several times since this subsidiary was
acquired in 1968, and during 1994, warehouse space was added in California.
5) Seibert-Oxidermo, Inc. manufactures industrial finishing materials and
automotive paints in a plant located in Detroit, Michigan containing 26,200
square feet of office and plant space on one acre of land. Additional
manufacturing of automotive paints is done in a plant located in
5
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FORM 10-K
PART I (CONTINUED)
ITEM 2. PROPERTIES (Concluded)
Romulus, Michigan containing 35,300 square feet of office, research and
plant space on 40 acres of land.
6) The Company owns a building used as a research laboratory and office in
Bowling Green, Kentucky. The plant formerly used for manufacturing in
Bowling Green is expected to be sold in late 1995 or early 1996 for
approximately book value.
7) The Company owns a warehouse and sales office facility located in Detroit,
Michigan. The building area is approximately 20,000 square feet and is
located on approximately one-half acre of land.
8) The Company owns a warehouse and sales office facility located in Los
Angeles, California. The Building area is approximately 10,000 square feet
and is located on one acre of land in the industrial section of the city.
9) The Company owns a warehouse and sales office facility located in Charlotte,
North Carolina. The Building area is approximately 11,000 square feet and
is located on one acre of land.
10)The Company owns a warehouse and sales office facility located in
Indianapolis, Indiana. The building area is approximately 8,600 square feet
and is located on one acre of land.
ITEM 3. LEGAL PROCEEDINGS
The Environmental Protection Agency ('EPA') has notified the Company and at
least seventeen other companies that they may be potentially responsible for
sharing costs in a proceeding to clean up contaminated sediments in the Fields
Brook watershed in Ashtabula, Ohio. The EPA issued a Record of Decision in
1986 concerning the methods it recommends using to accomplish this task at an
estimated total cost of $48,000,000. The Company and the other potentially
responsible parties have expressed their disagreement with this recommendation
and are continuing to negotiate with the EPA as to how best to effect the clean
up operation. The Company believes that the Fields Brook remedial
investigation and feasibility studies referred to below will be an important
factor in negotiating with the EPA.
The Company maintains a reserve for anticipated expenditures over the next
several years in connection with remedial investigations, feasibility studies,
remedial design, and remediation relating to the clean up of contamination at
several sites, including properties owned by the Company. The Company
conducted a comprehensive review of its reserves during the fourth quarter of
1994 and added $8.5 million to this reserve. The total amount of the reserve
at December 31, 1994 is $12.6 million, which amount was calculated without
taking into consideration any possible insurance recoveries.
6
<PAGE> 7
FORM 10-K
PART I (CONTINUED)
ITEM 3. LEGAL PROCEEDINGS (Concluded)
The reserve includes a provision for the Company's anticipated share of
remedial investigation and feasibility studies to determine sources of
contamination and methods of remediation in the Fields Brook watershed referred
to above, as well as a provision for costs that may be incurred in connection
with remediation of the Fields Brook watershed and other sites. Some of these
studies have been completed; others are ongoing. In many cases, the methods
of remediation remain to be agreed upon.
The Company is a defendant in an action brought by the Carrier Corporation in
Superior Court for Los Angeles County, California. An order granting the
Company Summary Judgment was reversed by an Appellate Court in late 1992.
Carrier has alleged that a product manufactured by the Company malfunctioned,
causing environmental damage to its property. The Court ordered that the trial
be separated into two phases. The first phase proceeded to trial in October of
1994 and was completed in December of 1994. The Company is awaiting the
decision of the trial judge. Depending upon his ruling, the second phase of
the trial is expected to begin in the summer of 1995. The Company believes it
has valid defenses to the claims and is vigorously defending the action. The
Company's product liability insurance carrier is paying the costs of defense
under a reservation of rights. The Company believes that any judgment against
it will be covered by its product liability insurance.
The Company expects to continue to incur professional fees, expenses and
capital expenditures in connection with its environmental compliance efforts.
In addition to the above, there are several other claims and lawsuits pending
against the Company and its subsidiaries.
The amount of liability to the Company with respect to costs of remediation of
contamination of the Fields Brook watershed and of other sites, and the amount
of liability with respect to several other claims and lawsuits against the
Company, was based on available data. The Company has established its reserves
in accordance with its interpretation of the principles outlined in Statement
of Financial Accounting Standards No. 5 and Securities and Exchange Commission
Staff Accounting Bulletin No. 92. In the event that any additional accruals
should be required in the future with respect to such matters, the amounts of
such additional accruals could have a material impact on the results of
operations to be reported for a specific accounting period but should not have
a material impact on the Company's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.
7
<PAGE> 8
FORM 10-K
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the registrant at March 23,
1995 and their positions and offices with the registrant are as follows:
<TABLE>
<CAPTION>
Name and Age Positions and Offices
------------ ---------------------
<S> <C> <C>
J. L. Wenzler (54) President and Chief Executive Officer (a)
G. J. Israel (54) Vice-President - Finance, Treasurer and Chief Financial Officer (b)
J. F. Schatt (49) Vice-President - Human Resources (c)
A. E. Porter (45) Vice-President - Operations (d )
D. R. Crandell (38) Vice-President - Commercial Development (e )
R. M. Currie (41) Secretary and General Counsel (f)
E. R. Rondeau (60) Controller (g)
</TABLE>
(a) Mr. Wenzler was elected President and Chief Executive Officer on
January 15, 1993. Mr. Wenzler came to the Company from Heartland
Industries where he served as President and Chief Executive Officer
from 1990 to 1992. Prior to that time, Mr. Wenzler was President and
Chief Executive Officer of Akzo Coatings, Inc.
(b) Mr. Israel was elected Vice-President - Finance and Chief Financial
Officer on February 25, 1993. Mr. Israel came to the Company from
Chrysler Corporation where he served for 26 years in numerous
financial positions. His most recent position was Vice President and
Controller-Treasurer of Chrysler Canada Ltd.
(c) Mr. Schatt was elected Vice President - Human Resources on April 22,
1993. Mr. Schatt came to the Company from McLouth Steel where he
served as Vice President - Administration.
(d) Mr. Porter was elected Vice President - Operations on June 1, 1994.
Mr. Porter joined the Company on April 20, 1993, and served in various
executive positions until his current appointment. Prior to that, he
was employed by Akzo Coatings, Inc.
(e) Mr. Crandell was elected Vice President - Commercial Development on
June 1, 1994. Mr. Crandell joined the Company on September 30, 1991,
and served in various executive positions until his current
appointment. Prior to that, he served as Assistant Controller of
Pulte Home Corporation.
(f) Mr. Currie joined the Company as General Counsel on July 16, 1993. He
was named Secretary and General Counsel on November 1, 1994. Prior to
joining the Company, Mr. Currie was engaged in private law practice.
(g) Mr. Rondeau served as Assistant Controller of the Company for more
than the past five years before being elected Controller on March 25,
1993.
All officers of the Company are elected annually and hold office until their
successors are chosen and qualify in their stead.
8
<PAGE> 9
FORM 10-K
PART II
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Page (and caption) in 1994
Detrex Corporation
10-K Item Annual Report to Stockholders*
--------- ------------------------------
<S> <C>
5. Market for Registrant's Common
Stock and Related Stockholder Matters:
(a) Market and market prices
of the common stock 16- Selected Quarterly Data
(b) Approximate number of
holders of common stock - Highlights
6. Selected Financial Data 15- Selected Financial Data
7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 12-14 - Management's Discussion and
Analysis of Financial Condition
and Results of Operations
8. Financial Statements and Supplementary
Data:
- Detrex Corporation Consolidated
Balance Sheets, December 31,
1994 and 1993 4,5
- Consolidated Statements of
Operations and Retained Earnings
for the Years Ended December 31,
1994, 1993, and 1992 3
- Consolidated Statements of Cash
Flows for the Years Ended
December 31, 1994, 1993, and 1992 6
- Notes to Consolidated Financial
Statements 7-11
- Independent Auditors' Report 2
With the exception of the aforementioned
information and the information incorporated
by reference in Items 5, 6 and 7, the
Annual Report to Stockholders is not
to be deemed filed as part of this
Form 10-K Annual Report.
9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure Not Applicable
</TABLE>
* Detrex Corporation's Annual Report to Stockholders for the year ended
December 31, 1994 is incorporated herein as Exhibit 13 under Item 14(a) 1 of
Part IV.
9
<PAGE> 10
FORM 10-K
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from the
information set forth under the caption "Respecting the Election of Directors"
in the Detrex Corporation Proxy Statement (the "Proxy Statement") for the Annual
Meeting of Stockholders to be held April 27, 1995. The information required
for Executive Officers of the Company is included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the
information set forth under the captions "Executive Compensation and Other
Transactions" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated by reference from the
information set forth under the caption "Respecting the Election of Directors"
in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the
information set forth under the captions "Respecting the Election of Directors"
and "Executive Compensation and Other Transactions" in the Proxy Statement.
10
<PAGE> 11
FORM 10-K
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. All Financial Statements
Detrex Corporation and Subsidiaries (incorporated
by reference to the Company's Annual Report to
Stockholders for the year ended December 31,
1994-see Part II)
(a) 2. Financial Statement Schedules PAGE
Independent Auditors' Report 14
Schedule II - Valuation and Qualifying Accounts 15
for the Years Ended December 31, 1994, 1993,
and 1992.
Financial Statement Schedules Omitted:
Other financial statement schedules are omitted because of the
absence of the conditions under which they are required.
11
<PAGE> 12
FORM 10-K
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Continued)
(a) 3. Exhibits
<TABLE>
<S> <C>
3(a) Articles of Incorporation, as amended, is hereby
incorporated by reference to Commission file #0-784,
Annual Report on Form 10-K for the year ended
December 31, 1987, as Exhibit 3(a) --
3(b) Bylaws, as amended, are hereby incorporated by reference
to Commission file #0-784, Annual Report on Form 10-K
for the year ended December 31, 1993, as Exhibit 3(b) --
4 Shareholders Rights Plan is hereby incorporated by
reference to Commission file #0-784 8-K Report dated
May 4, 1990, as Exhibit 4 --
Executive Compensation Plans and Arrangements
10(a) 1993 Stock Option Plan is hereby incorporated by reference to
Commission file # 0-784 1993 proxy statement dated March
26, 1994, as Exhibit 10(a) --
10(b) 1993 Stock Option Plan for outside directors is hereby
incorporated by reference to Commission file #0-784 1993 proxy
statement dated March 26, 1993, as Exhibit 10(b)
10(c) 1994 Stock-Cash Incentive Plan is hereby incorporated by reference
to Commission file #0-784 Annual Report on Form 10-K for the year
ended December 31, 1993, as exibit 10(c) --
10(d) Employment Agreement - Gerald J. Israel, is hereby incorporated
by reference to Commission file #0-784 Annual Report on
Form 10-K for the year ended December 31, 1992, as Exhibit 10(h) --
10(e) Employment Agreement - Joseph L Wenzler, is hereby incorporated by
reference to Commision file #0-784 Annual Report on Form 10-K for the
year ended December 31, 1992 as Exibit 10(k) --
</TABLE>
12
<PAGE> 13
FORM 10-K
PART IV (CONCLUDED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Concluded)
(a) 3 Exhibits (Concluded)
10(f) Employment Agreement - Joseph F. Schatt is
hereby incorporated by reference to
Commission file #0-784 Annual Report on
Form 10-K for the year ended
December 31, 1993 as Exhibit 10(I) --
10(g) Employment Agreement - Robert M. Currie Attached
as an Exhibit
10(h) Employment Agreement - Anthony E. Porter Attached
as an Exhibit
Other Material Contracts
10(i) Revolving Credit Agreement and Amended
Term Loan Agreement dated March 11, 1994
in the aggregate amount of $12 Million
is hereby incorporated by reference to
Commission file #0-784 Annual Report
on Form 10-K for the ended December 31, 1993 --
10(j) First Amendment to Credit Agreement and Attached
Waiver, dated as of December 31, 1994 as an Exhibit
11 Summary of significant accounting policies
is hereby incorporated by reference to
Annual Report to Stockholders, Note 1 of
page 7, as Exhibit 11 --
13 Annual Report to Stockholders for the Attached
year ended December 31, 1994 as an Exhibit
22 Subsidiaries of the Registrant Attached
as an Exhibit
Consents of Experts and Counsel
23 Consent of Auditors Attached
as an Exhibit
27 Financial Data Schedule Attached
as an Exhibit
(b) No Form 8-K was filed in the fourth quarter of 1994.
13
<PAGE> 14
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Detrex Corporation:
We have audited the consolidated financial statements of Detrex Corporation and
its subsidiaries as of December 31, 1994 and 1993 and for each of the three
years in the period ended December 31, 1994, and have issued our report thereon
dated February 22, 1995 (March 9, 1995 as to Note 4); such consolidated
financial statements and report are included in your 1994 Annual Report to
Stockholders and are incorporated herein by reference. Our audits also included
the financial statement schedule of Detrex Corporation and its subsidiaries,
listed in Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
February 22, 1995
-14-
<PAGE> 15
FORM 10-K
SCHEDULE II
DETREX CORPORATION AND SUBSIDIARIES
VALUATION RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Additions
--------------------------
Balance Charged to Charged Balance
Beginning Costs and to Other at End
Description of Year Expenses Accounts Deductions of Year
----------- ------------ ----------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994
Inventory Valuation Reserves $876,783 74,548 715,714 $235,617
Finished Machines Valuation
Reserves $934,169 34,837 $899,332
Year Ended December 31, 1993
Inventory Valuation Reserves $180,684 859,843 163,744 $876,783
Finished Machines Valuation
Reserves $0 934,169 $934,169
Year Ended December 31, 1992
Inventory Valuation Reserves $335,887 21,740 176,943 $180,684
</TABLE>
15
<PAGE> 16
FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Detrex Corporation
(Registrant)
Date March 23, 1995 By J. L. Wenzler
J. L. Wenzler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on this twenty-third day of March 1995 by the
following persons on behalf of the Registrant and in the capacities indicated.
Signature Title
J. L. Wenzler President and Chief Executive Officer
J. L. Wenzler
G. J. Israel Vice President, Treasurer and Chief Financial
G. J. Israel Officer
E. R. Rondeau Controller and Chief Accounting Officer
E. R. Rondeau
B. W. Cox Director
B. W. Cox
R. A. Emmett, III Director
R. A. Emmett, III
J. F. Mangold Director
J. F. Mangold
B. W. McCleary Director
B. W. McCleary
A. R. Thalacker Director
A. R. Thalacker
J. D. Withrow Director
J. D. Withrow
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
10(g) Employment Agreement - Robert M. Currie
10(h) Employment Agreement - Anthony E. Porter
10(j) First Amendment to Credit Agreement and Waiver,
dated as of December 31, 1994
13 Annual Report to Stockholders for the year ended
December 31, 1994
22 Subsidiaries of the Registrant
Consents of Experts and Counsel
23 Consent of Auditors
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10(g)
[DETREX CORPORATION LETTERHEAD]
June 23, 1993
Mr. Robert M. Currie
5149 Cherokee Court
Troy, MI 48098
Dear Bob:
Confirming our conversation on June 22, 1993, I have concluded that you
would make an excellent member of the Detrex management team and hereby tender
the following Offer of Employment on behalf of Detrex:
POSITION: Corporate General Counsel
EFFECTIVE DATE: July 15, 1993
SALARY: $120,000 base per year, payable bi-weekly.
TERM OF EMPLOYMENT: July 15, 1993 and continue until July 14, 1996. The
term of employment will automatically extend for an
additional one (1) year period unless communicated to
you in writing, at least 30 days prior to your
anniversary hiring date, and not to exceed a total
maximum of 10 years from original date of hire.
AUTOMOBILE: In lieu of a company car, your base pay will be
increased by $5,000 as a permanent car allowance.
The company will reimburse you for use of your
personal vehicle on company business at 28 cents per
mile.
BONUS: You will be a participant in the Executive Performance
Bonus Plan -- that program has not yet been finalized.
STOCK OPTIONS: You will be provided with 5,000 shares of Detrex
Corporation stock on option, over a five year period
of time. The price of said shares will be based on the
mean market price on the day that you begin your
employment with Detrex Corporation.
MEDICAL BENEFITS: Company and employee paid medical and hospitalization
coverage is effective 30 days after you begin
employment. You have a choice of two health care
organizations. Blue Care Network is offered with a
payroll deduction of $41.59 per pay period. CIGNA is
also offered with a payroll deduction of $23.08 per
pay period.
<PAGE> 2
DETREX CORPORATION
Mr. Robert M. Currie -2- June 23, 1993
LIFE INSURANCE: $5,000 term life insurance is company paid. Voluntary
$10,000 term life insurance is offered at a payroll
deduction of $6.00 per month. We also offer $100,000
Travelers life insurance at a payroll deduction of $60.00
per month.
PENSION PLAN: Full vesting occurs after five (5) full years of
employment.
STOCK PLAN: Employees are offered the opportunity to purchase company
stock through payroll deductions. By purchasing stock
through payroll deductions all commission and brokerage
fees are waived.
EXPENSES: All company/business expenses will be reimbursed by the
company upon submission of approved company expense forms.
DOCUMENTS: You will be expected to complete an employment application
form.
REPORTING: You will report to the President and CEO of Detrex
Corporation.
RESPONSIBILITIES: You will be an employee of Detrex Corporation and will be
based in Southfield, Michigan, with major efforts directed
towards Company legal matters. Appropriate in-house or
outside personnel resources will be assigned as necessary.
OTHER EMPLOYMENT: You will be allowed sufficient time to wind up your private
practice of law which includes the handling of three (3)
particular matters to their conclusions. Other than winding
up your private practice, you shall not directly or
indirectly render services to any other person or
organization for which you receive compensation or
otherwise engage in activities which would interfere
significantly with the performance of your duties at
Detrex.
SEVERANCE: Eighteen months of severance will be provided to you in the
event Detrex terminates your employment for any reason
other than "cause". "Cause" shall mean terminates because
of (a) refusal (other than by reason of incapacity due to
physical or mental illness) to perform the duties incident
to the office of general counsel; (b) the commission of a
felony, or the perpetration of a dishonest act or fraud
against the Company, or any affiliate or subsidiary
thereof, or (c) any act or omission by you which, in the
good faith opinion of the President and Chief Executive
Officer, and board, is injurious in any
<PAGE> 3
DETREX CORPORATION
Mr. Robert M. Currie -3- June 23, 1993
material respect to the financial condition, business or
reputation of the Company or any of its affiliates or
subsidiaries and which is the result of wilful misconduct
and gross negligence.
If you wish to accept this offer, please sign below and return with the
other documents requested.
Sincerely yours,
/s/ Joseph L. Wenzler
Joseph L. Wenzler
President
Accepted By: /s/ Robert M. Currie
--------------------
Dated: 6-23-93
--------------------------
<PAGE> 1
EXHIBIT 10(h)
[DETREX CORPORATION LETTERHEAD]
March 23, 1993
Mr. Anthony Porter
9750 Allen Road
Allen Park, MI 48101
Dear Tony:
Enclosed please find a revised Offer of Employment. I certainly hope
you join us in rebuilding this company. I know that you will make a fine
addition to the Detrex Team. Detrex Corporation hereby tenders the following
Offer of Employment to you:
POSITION: Division General Manager
SALARY: $90,000 base per year, payable every other week.
SIGNING BONUS: Payment of $5,000.00 signing bonus on day of start.
AUTOMOBILE: In lieu of a company car, your base pay will be
increased by $6,000 as a permanent car allowance. The
Company will reimburse you for use of your personal vehicle
on company business at 28 cents per mile.
BONUS: You will be a participant in the Executive Performance
Bonus Plan - that program has not yet been finalized.
Minimum Guarantee for part year 1993 = $10,000.00.
MEDICAL BENEFITS: Company and employee paid medical and hospitalization
coverage is effective the first day of employment. You have
a choice of two health care organizations. Blue Care
Network is offered with a payroll deduction of $41.59 per
pay day. CIGNA is also offered with a payroll deduction of
$23.08 per pay day.
LIFE INSURANCE: $5,000 term life insurance is company paid. Voluntary
$10,000 term life insurance is offered at a payroll
deduction of $6.00 per month. We also offer $100,000
Travelers life insurance at a payroll deduction of $60.00
per month.
PENSION PLAN: Full vesting occurs after five (5) full years of
employment.
<PAGE> 2
DETREX CORPORATION
Anthony Porter -2- March 23, 1993
EXPENSES: All company/business expenses are reimbursed by the
company upon submission of appropriate documentation.
DOCUMENTS: You will be expected to complete an employment application
form.
REPORTING: Initially, you will report directly to the President and
CEO of Detrex Corporation. No later than June 1993, you
will report to the "To Be Named" Chemical Group Vice
President.
TIMING: Employment will begin as soon as you are available.
RESPONSIBILITIES: You will be an employee of Detrex Corporation and will be
based in Southeastern Michigan. You may have an interim
2-3 month (maximum) assignment out-of-state to assist in
getting a troubled division "on line".
SEVERANCE: Three months of severance will be provided during your
first year of service with the Company. This will be
increased by one month per year thereafter to a maximum
of 12 months.
If you wish to accept this offer, please sign below and return with the
other documents requested.
Sincerely yours,
/s/ Joseph L. Wenzler
Joseph L. Wenzler
President
Accepted By: /s/ Anthony E. Porter
---------------------
Dated: 4/20/93
---------------------------
<PAGE> 1
EXHIBIT 10(j)
FIRST AMENDMENT TO
CREDIT AGREEMENT AND WAIVER
THIS FIRST AMENDMENT ("Amendment") dated as of December 31, 1994, by
and among the borrowers listed on Schedule 1 (collectively "Companies") and
Comerica Bank, a Michigan banking corporation and NBD Bank (formerly known as
NBD Bank, N.A.), a Michigan banking corporation (individually "Bank" and
collectively "Banks") and Comerica Bank, as agent for the Banks (in such
capacity "Agent").
RECITALS:
A. Companies, Agent and Banks entered into a Credit Agreement
("Agreement") dated as of March 11, 1994.
B. Companies and Banks desire to amend the Agreement as hereinafter
set forth.
NOW, THEREFORE, the parties agree as follows:
1. The definition of "Applicable Additional Margin" set forth in
Section 1.8 of the Agreement is amended to read in its entirety as follows:
"1.8 'Applicable Additional Margin' shall mean as of any date
of determination thereof, (a) one quarter of one percent (1/4%) if as
of such date of determination, the Revolving Credit Aggregate
Commitment is equal to or less than Eight Million Dollars ($8,000,000)
or if the aggregate outstanding principal amount of the Advances plus
the outstanding amount of Letters of Credit is equal to or greater than
Eight Million Dollars ($8,000,000) and less than Nine Million Dollars
($9,000,000), (b) three eighths of one percent (3/8%) if as of such date
of determination, the aggregate outstanding principal amount of the
Advances plus the outstanding amount of Letters of Credit is equal to
or greater than Nine Million Dollars ($9,000,000), and (c) shall mean
zero percent (0%) at all other times."
2. The definition of "Applicable Increase" set forth in Section 1.11
of the Agreement is amended to read in its entirety as follows:
"1.11 'Applicable Increase' shall for purposes of the
provisions of Section 11.4 mean for any given fiscal quarter an amount
(rounded to the nearest $1,000) equal to one hundred percent (100%) of
Consolidated Net Income for the fiscal quarter ending on such date (but
in any event not less than zero)."
<PAGE> 2
3. The definition of "Consolidated Adjusted Net Income" set forth in
Section 1.25 of the Agreement is amended to read in its entirety as follows:
"1.25 'Consolidated Adjusted Net Income' shall mean as of any date of
determination thereof net income from continuing operations of Detrex and
its consolidated Subsidiaries for the applicable Measuring Period,
determined in accordance with GAAP, as consolidated in accordance with
GAAP, less to the extent added in calculating such net income, the amount
of any recoveries in environmental reserves (net of applicable taxes) and
plus to the extent deducted in calculating such net income, the amount of
any deductions related to increases in environmental reserves (net of
applicable taxes)."
4. The definition of "Consolidated Cash Flow Coverage Ratio" set forth in
Section 1.26 of the Agreement is amended to read in its entirety as follows:
"1.26 'Consolidated Cash Flow Coverage Ratio' shall mean as of any
date of determination thereof, a ratio, the numerator of which is
Consolidated Adjusted Net Income for the applicable Measuring Period, plus
depreciation and amortization expenses for such period, of Detrex and its
consolidated Subsidiaries and the denominator of which is the sum of
Capital Expenditures, payments on capital leases and dividends paid or
payable during such period, of Detrex and its consolidated Subsidiaries,
plus and amount of payments of principal due during such period with
respect to long-term indebtedness of Detrex and its consolidated
Subsidiaries (excluding balloon payments), plus, to the extent not
reflected in the calculation of Consolidated Adjusted Net Income, the
amount of any cash expenditures during such period by Detrex and its
consolidated Subsidiaries which are deductions from long term or short term
environmental reserves, all as determined in accordance with GAAP, as
consolidated in accordance with GAAP."
5. The definition of "Lending Availability" set forth in Section 1.60 of
the Agreement is amended to read in its entirety as follows:
"1.60 'Lending Availability' shall mean as of any date of
determination thereof, an amount equal to eighty percent (80%) of Eligible
Accounts."
6. The definition of "Measuring Period" set forth in Section 1.71 of the
Agreement is amended to read in its entirety as follows:
2
<PAGE> 3
"1.71 'Measuring Period' shall mean (a) with respect to the
calculation of the Consolidated Cash Flow Coverage Ratio for the fiscal
quarter (i) ending March 31, 1995, the period beginning January 1, 1995 and
ending March 31, 1995, (ii) ending June 30, 1995, the period beginning
January 1, 1995 and ending June 30, 1995, (iii) ending September 30, 1995,
the period beginning January 1, 1995 and ending September 30, 1995, (iv)
ending December 31, 1995 and each fiscal quarter thereafter the four
immediately preceding fiscal quarters ending on such date, and
(b) with respect to the calculation of the Consolidated Interest Coverage
Ratio the four immediately preceding fiscal quarters ending on the
applicable date of determination."
7. The definition of "Minimum Amount" set forth in Section 1.72 of
the Agreement is amended to read in its entirety as follows:
"1.72 'Minimum Amount' shall mean $17,000,000 plus an amount equal to
the Applicable Increase for each fiscal quarter of Detrex ending on or after
March 31, 1995."
8. Section 4.4 of the Agreement is amended to change the words "one and
one half percent (1 1/2%)" in the fifth line thereof to "one and five eighths
percent (1 5/8%)."
9. Section 11.1 of the Agreement is amended to read in its entirety as
follows:
"11.1 Leverage Ratio. Permit the Consolidated Leverage Ratio at any
time to exceed the following amounts during the periods specified below:
December 31, 1994 through December 30, 1995 2.5 to 1.0
December 31, 1995 through December 30, 1996 2.25 to 1.0
December 31, 1996 and thereafter 2.20 to 1.0"
10. Section 11.2 of the Agreement is amended to read in its entirety as
follows:
"11.2 Cash Flow Coverage Ratio. Permit the Consolidated Cash Flow
Coverage Ratio at any time to be less than the amounts specified below
during the periods specified below:
January 1, 1995 through December 31, 1995 .50 to 1.0
January 1, 1996 through December 31, 1996 .65 to 1.0
January 1, 1997 and thereafter .85 to 1.0"
3
<PAGE> 4
11. Section 11.3 is amended to read in its entirety as follows:
"11.3 Current Ratio. Permit the ratio of Consolidated
Current Assets to Consolidated Current Liabilities at any time to be
less than 1.25 to 1.0 through December 31, 1995 and thereafter, to be
less than 1.35 to 1.0. For purposes of calculation of this ratio, all
Indebtedness of Companies to Bank outstanding under the Revolving
Credit Notes shall be treated as a part of Consolidated Current
Liabilities."
12. The following subsection (1) is hereby added to Section 12.1 of
the Agreement and the period at the end of subsection (k) of Section 12.1 is
deleted and a semi-colon substituted therefor:
"(1) If Lending Availability is less than $10,000,000 as of
December 31, 1994 (as determined on the basis of the results of the
Agent's collateral audit of Companies as of December 31, 1994 and
without regard to any Eligible Inventory)."
13. The Banks hereby waive any default under the Agreement arising
from the failure of Companies to comply with the provisions of Sections 11.1,
11.2, 11.3 and 11.4 of the Agreement for the period ended December 31, 1994 to
the extent resulting solely from the addition by the Companies as of December
31, 1994 of $8,500,000 to their environmental reserves. This waiver shall not
act as a consent or waiver of any other transaction, act or omission, whether
related or unrelated thereto. This waiver shall not extend to or affect any
obligation, covenant, agreement or default not expressly waived hereby.
14. Upon execution of this Amendment, Companies shall pay to
the Agent, for pro-rata distribution to the Banks, an amendment fee in the
amount of $12,000. The amendment fee is non-refundable. Following receipt
thereof, the Agent shall promptly remit to each Bank its pro-rata share of the
amendment fee. The Agent shall use diligent good faith efforts to complete the
collateral audit before March 10, 1995.
15. Companies hereby represent and warrant that, after giving
effect to the amendments and waivers contained herein, (a) execution, delivery
and performance of this Amendment and any other documents and instruments
required under this Amendment or the Agreement are within each Company's
corporate powers, have been duly authorized, are not in contravention of law
or the terms of any Company's Articles of Incorporation or Bylaws, and do not
require the consent or approval of any governmental body, agency, or authority;
and this Amendment and any other documents and instruments required under this
Amendment or the Agreement, will be valid and binding in accordance with their
terms; (b) the
4
<PAGE> 5
continuing representations and warranties of each Company set forth in Sections
9.1 through 9.15 of the Agreement are true and correct on and as of the date
hereof with the same force and effect as made on and as of the date hereof; (c)
the continuing representations and warranties of each Company set forth in
Section 9.16 of the Agreement are true and correct as of the date hereof with
respect to the most recent financial statements furnished to the Bank by
Companies in accordance with Section 10.1 of the Agreement; and (d) no Event of
Default (as defined in the Agreement) or condition or event which, with the
giving of notice or the running of time, or both, would constitute an Event of
Default under the Agreement, has occurred and is continuing as of the date
hereof.
16. Except as expressly provided herein, all of the terms and conditions
of the Agreement remain unchanged and in full force and effect.
17. This Amendment shall be effective as of the date first above written.
IN WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK, as Agent DETREX CORPORATION
By: /s/ Michael Banks By: /s/ Gerald J. Israel
--------------------- -----------------------
Michael Banks Gerald J. Israel
Its: Vice President Its: Vice President-Finance and
Chief Financial Officer
THE ELCO CORPORATION
By: /s/ Gerald J. Israel
-----------------------
Gerald J. Israel
Its: Treasurer
5
<PAGE> 6
HARVEL PLASTICS, INC.
By: /s/ Gerald J. Israel
-------------------------
Gerald J. Israel
Its: Director
SEIBERT-OXIDERMO, INC.
By: /s/ Gerald J. Israel
--------------------------
Gerald J. Israel
Its: Treasurer
COMERICA BANK
By: /s/ Michael Banks
--------------------------
Michael Banks
Its: Vice President
NBD BANK
By: /s/ Teresa Kalil Schuster
---------------------------
Teresa Kalil Schuster
Its: Second Vice President
6
<PAGE> 7
SCHEDULE 1
Detrex Corporation
The Elco Corporation
Harvel Plastics, Inc.
Seibert-Oxidermo, Inc.
7
<PAGE> 8
[Comerica Letterhead]
March 9, 1995
Gerald J. Israel
Vice President of Finance
Detrex Corporation
24901 Northwestern Hwy. #500
Southfield, MI 48075
Dear Jerry:
Comerica Bank, as Agent, has completed its collateral audit of the Companies as
of December 31, 1994. We have concluded that the Lending Availability
requirement of $10,000,000 as of December 31, 1994 was adequately satisfied.
Our determination that an account is an eligible account for purposes of this
collateral audit shall not limit Comerica Bank's right to deem the same or
similar types of accounts as ineligible for the purposes of subsequent
Borrowing Base Reports.
Sincerely,
/s/ Michael Banks
Vice President
Comerica Bank, As Agent
P.O. Box 75000
Detroit, MI 48275-3268
slc:MJB
<PAGE> 1
EXHIBIT 13
------------------------------------------
DETREX
CORPORATION
1994 ANNUAL REPORT
------------------------------------------
<PAGE> 2
HIGHLIGHTS(1)
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
Net sales................................... $100,096,000 $105,578,000 $96,754,000
Net loss.................................... (5,639,000) (1,570,000) (4,794,000)(2)
Loss per common share....................... (3.56) (.99) (3.03)(2)
Cash dividends per common share............. -- -- --
Stockholders' equity per common share....... 11.85 15.42 16.42
Additions to land, buildings and equipment
(including capital leases)................ 2,860,000 2,434,000 3,897,000
Current ratio............................... 1.3 to 1 1.5 to 1 1.4 to 1
Percent long-term debt to stockholders'
equity.................................... 3.7 12.4 17.7
Number of stockholders...................... 477 544 593
Number of employees......................... 367 388(3) 495
</TABLE>
(1) This information should be considered in conjunction with
the Consolidated Financial Statements and Management's
Discussion and Analysis.
(2) Includes a one-time charge of $1,812,600, net of income
taxes, reflecting the adoption of Statement of Financial
Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, effective
January 1, 1992, and electing immediate recognition of the
obligation. This represents $1.15 per common share.
(3) Represents number of employees at January 1, 1994.
DETREX CORPORATE
MISSION STATEMENT
Detrex Corporation is a producer and supplier of industrial and specialty
chemicals, services and supply processes to the industrial market place,
including lubricant additives, coatings, process equipment, high quality plastic
pipe, and environmental and analytical laboratory services.
Our core business is in the specialty chemical field, providing process
design and equipment, plus chemical products and services. Our services and
products are designed to fulfill our customers' requirements in lubricating,
cleaning and surface finishing, and the handling of waste generated in the
production process.
Our mission is to meet or exceed our customers' needs by providing cost
effective and technically superior products, systems, and services in an
environmentally sound manner.
We will continue to be responsible to our customers, employees, suppliers,
communities and the environment while providing long term growth and a superior
return to our shareholders.
<PAGE> 3
TO OUR SHAREHOLDERS:
Detrex incurred a net loss of $5,639,000 for the year ended December 31,
1994, compared to a net loss of $1,570,000 for the year ended December 31, 1993.
1994 was adversely impacted by an $8.5 million addition to the Environmental
Reserve which increased the net loss by approximately $5.6 million. The net loss
for 1994, excluding the effect of this adjustment, was $39,000.
In my letter to you last year, I informed you that the Company added $4.0
million to its Environmental Reserve during the second half of 1993. We also
indicated that certain remediation studies were to become available in 1994 and
at that time, the Company would have a more complete basis for estimating
anticipated remediation costs. As a result of these studies and other recent
developments, during the fourth quarter of 1994, the Company made adjustments to
the Environmental Reserve that resulted in an $8.5 million charge to income.
This brings the total amount of the reserve to $12.6 million at December 31,
1994. We anticipate annual cash expenditures of $1.0 to $2.0 million from this
reserve over the next several years. The Company will continue to analyze this
reserve and make adjustments to reflect changes from updated or new studies and
any other significant developments.
While our 1994 results are a disappointment, they do not fully reflect the
achievements of the year or the steps we have taken to improve the Company's
future profitability. The obvious short-term mission of Detrex is to generate
sufficient operating income to overcome the burden placed on the Company as a
result of the environmental problems incurred over the last several decades.
Selling, General and Administrative expense has been reduced from 21.4% of sales
to 18.4%, a $4.2 million reduction. Six of eight business units had significant
improvement in 1994 operating income, and the results before income taxes and
the addition to the Environmental Reserve was an improvement from a loss of $2.8
million to a profit of $200,000 (see Management's Discussion and Analysis).
Solvents & Environmental Services division did not enjoy this progress partially
due to changing environmental laws reducing the market for our solvent based
products.
In addition, the Board of Directors has approved the establishment of a
Commercial Development department whose objective is to pursue new business
opportunities that will generate additional sales and above average profit
margins with minimal capital expenditures. While we anticipate continued
operating expense cuts across the Company, the key focus at this time is higher
volume and higher margin sales.
During 1995, our primary objective is to become a more cost competitive
performer in the markets we serve. I am confident that this can be achieved.
With the steps that we have already taken, and additional steps planned in 1995,
we will be better able to sell our products and service our customers more
effectively than a year ago.
It is important that all of our employees focus on the challenges ahead. We
need to continue the efforts to improve our profitability in each business unit
in order to generate positive cash flow. We need the patience and support of
you, our shareholders, as we continue our efforts to return Detrex to
profitability.
Joseph L. Wenzler
President and Chief Executive Officer
1
<PAGE> 4
--------------- INDEPENDENT AUDITORS' REPORT ---------------
[DELOITTE & TOUCHE LLP LETTERHEAD]
To the Board of Directors and Stockholders of
Detrex Corporation
We have audited the accompanying consolidated balance sheets of Detrex
Corporation and its subsidiaries as of December 31, 1994 and 1993 and the
related consolidated statements of operations and retained earnings and of cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Detrex Corporation and its
subsidiaries at December 31, 1994 and 1993 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
As discussed in Notes 5 and 6 to the financial statements, effective January 1,
1992 the Company changed its methods of accounting for income taxes and for
postretirement health care benefits.
[SIG]
February 22, 1995
(March 9, 1995 as to Note 4)
2
<PAGE> 5
DETREX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
NET SALES.................................... $100,096,443 $105,578,469 $96,754,158
Cost of sales................................ 77,640,002 80,461,988 73,813,265
Selling, general and administrative
expenses................................... 18,404,812 22,625,345 20,928,445
Provision for depreciation and
amortization............................... 3,405,273 4,241,314 4,125,131
Provision for plant closing and
restructuring.............................. -- 4,158,794 685,000
Provision for environmental reserve.......... 8,500,000 4,230,007 --
Other (income) expense -- net................ (494,384) (46,079) (198,215)
Minority interest............................ 262,488 164,456 167,059
Interest expense............................. 681,920 979,938 1,284,561
Gain on sale of Industrial Chemical
Specialties Division....................... -- (9,123,114) --
------------ ------------ -----------
Loss before income taxes..................... (8,303,668) (2,114,180) (4,051,088)
Credit for income taxes...................... (2,664,788) (544,501) (1,069,840)
------------ ------------ -----------
LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE..................................... (5,638,880) (1,569,679) (2,981,248)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR
POSTRETIREMENT BENEFITS.................... -- -- (1,812,564)
------------ ------------ -----------
NET LOSS..................................... (5,638,880) (1,569,679) (4,793,812)
RETAINED EARNINGS AT BEGINNING OF YEAR....... 21,212,637 22,782,316 27,576,128
------------ ------------ -----------
RETAINED EARNINGS AT END OF YEAR............. $ 15,573,757 $ 21,212,637 $22,782,316
=========== =========== ==========
PER COMMON SHARE:
LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE..................................... $(3.56) $(0.99) $(1.88)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR
POSTRETIREMENT BENEFITS.................... -- -- $(1.15)
------------ ------------ -----------
NET LOSS..................................... $(3.56) $(0.99) $(3.03)
=========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 6
DETREX CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 2,015,962 $ 2,852,104
Accounts receivable (less allowance for uncollectible accounts
of $330,000 in 1994 and $240,000 in 1993)................... 18,059,177 16,729,976
Accounts receivable -- other.................................. -- 1,650,000
Inventories................................................... 8,977,084 7,468,513
Prepaid expenses, deferred income taxes and other............. 2,780,657 2,701,520
----------- -----------
TOTAL CURRENT ASSETS................................... 31,832,880 31,402,113
LAND, BUILDINGS AND EQUIPMENT:
Land.......................................................... 1,032,102 1,004,402
Buildings and improvements.................................... 18,668,472 18,315,083
Machinery and equipment....................................... 31,768,126 30,295,612
Construction in progress...................................... 242,708 346,532
----------- -----------
51,711,408 49,961,629
Less allowance for depreciation and amortization.............. 29,258,155 27,008,272
----------- -----------
LAND, BUILDINGS AND EQUIPMENT -- NET................... 22,453,253 22,953,357
LAND, BUILDINGS AND EQUIPMENT HELD FOR SALE................... 1,187,889 1,339,570
PREPAID PENSIONS.............................................. 1,121,169 1,088,089
DEFERRED INCOME TAXES AND OTHER............................... 5,179,655 2,268,572
----------- -----------
$61,774,846 $59,051,701
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 7
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Loans payable -- short-term................................... $ 5,500,000 $ 2,000,000
Current maturities of long-term debt and capital leases....... 1,848,080 1,823,711
Accounts payable.............................................. 11,765,191 10,213,033
Environmental reserve......................................... 1,548,000 1,207,000
Accrued compensation.......................................... 822,650 984,915
Accrued expenses -- non active locations...................... 736,446 2,630,143
Other accruals................................................ 2,644,769 1,822,788
----------- -----------
TOTAL CURRENT LIABILITIES.............................. 24,865,136 20,681,590
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS.................. 701,505 3,030,499
ACCRUED POSTRETIREMENT BENEFITS............................... 3,636,316 3,314,282
ENVIRONMENTAL RESERVE......................................... 11,042,937 3,793,000
MINORITY INTEREST............................................. 1,554,112 2,476,623
OTHER ACCRUALS................................................ 1,212,235 1,382,242
STOCKHOLDERS' EQUITY:
Common capital stock, $2 par value, authorized 4,000,000
shares, outstanding 1,583,414 shares in 1994 and 1,580,414
in 1993..................................................... 3,166,828 3,160,828
Additional paid-in capital.................................... 22,020 --
Retained earnings............................................. 15,573,757 21,212,637
----------- -----------
TOTAL STOCKHOLDERS' EQUITY............................. 18,762,605 24,373,465
----------- -----------
$61,774,846 $59,051,701
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 8
DETREX CORPORATION
CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss before cumulative effect of accounting
change......................................... $(5,638,880) $(1,569,679) $(2,981,248)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Gain on sale of Industrial Chemical Specialties
Division................................... -- (9,123,114) --
Depreciation and amortization.................. 3,405,273 4,241,314 4,125,131
(Gain) Loss on sale or write-off of buildings,
machinery and equipment.................... (209,102) 1,487,718 30,799
Deferred income taxes.......................... (3,067,559) (908,595) (1,203,063)
Changes to operating assets and liabilities
that provided (used) cash:
Accounts receivable.......................... (1,329,201) (2,653,599) (2,758,421)
Tax refund receivable........................ -- -- 2,545,281
Inventories.................................. (1,508,571) 1,961,297 1,142,226
Prepaid expenses and other................... 12,685 165,504 (269,306)
Other assets................................. (52,426) 99,137 472,728
Accounts payable............................. 1,552,158 2,194,204 719,879
Environmental reserve........................ 7,590,937 2,813,484 203,443
Accrued compensation......................... (162,265) (13,296) 27,911
Postretirement benefits...................... 322,034 293,447 83,605
Accrued expenses -- non active locations..... (1,893,697) 2,230,143 --
Net assets and liabilities of Industrial
Chemical Specialties Division............ -- (876,886) --
Other accruals............................... (270,543) 571,071 184,499
----------- ----------- -----------
TOTAL ADJUSTMENTS.......................... 4,389,723 2,481,829 5,304,712
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................ (1,249,157) 912,150 2,323,464
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................ (2,200,669) (1,463,843) (2,166,282)
Proceeds from disposal of machinery and
equipment...................................... 309,036 -- --
Proceeds from sale of Industrial Chemical
Specialties Division........................... 1,650,000 10,000,000 --
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES............................ (241,633) 8,536,157 (2,166,282)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings..................................... 3,500,000 -- 3,500,000
Repayment of long-term debt......................... (2,001,361) (1,008,128) (1,008,057)
Repayment of short-term debt........................ -- (6,400,000) (600,000)
Principal payments under capital lease
obligations.................................... (872,011) (905,053) (1,041,479)
Common stock issued................................. 28,020 -- --
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES............................ 654,648 (8,313,181) 850,464
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents.... (836,142) 1,135,126 1,007,646
Cash and cash equivalents at beginning of year.......... 2,852,104 1,716,978 709,332
----------- ----------- -----------
Cash and cash equivalents at end of year................ $ 2,015,962 $ 2,852,104 $ 1,716,978
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest....................................... $ 633,767 $ 1,031,948 $ 1,292,510
Income taxes................................... $ 261,825 $ 228,298 $ 61,691
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations incurred in connection
with the acquisition of equipment................. $ 658,967 $ 970,265 $ 1,730,390
Capital lease terminations.......................... $ 90,220 $ 808,587 $ 241,205
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 9
DETREX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statements
The consolidated financial statements comprise those of the Company and its
subsidiaries. All balances and transactions between the companies have been
eliminated. Certain amounts for 1992 and 1993 have been reclassified to conform
with 1994 classifications.
Inventories
Inventories are stated at lower of cost or market. Cost of raw materials,
including raw materials in work in process and finished goods inventories,
generally is determined by using the last-in, first-out method. Labor and burden
in inventory are determined by using the average cost method. Inventories
relating to fixed-price contracts are stated at the accumulated cost of
material, labor and burden less related progress billings. The completed
contract method is used to recognize revenue. Contract retentions are included
in accounts receivable.
Land, Buildings and Equipment
Land, buildings and equipment are stated at cost. Depreciation and
amortization are provided over the estimated useful lives of the assets using
the straight-line method for financial reporting purposes. Leased equipment is
amortized over the lease term or estimated useful life of the asset.
Annual depreciation rates are as follows:
<TABLE>
<S> <C>
Buildings................................ 2.5-20%
Leasehold improvements................... 2.5-20%
Yard facilities.......................... 5-6 2/3%
Machinery and equipment.................. 6 2/3-33 1/3%
Office furniture and fixtures............ 10-25%
</TABLE>
Research and Development
Research and development costs are charged to operations as incurred.
Research and development costs for 1994, 1993 and 1992 were approximately
$1,784,000, $2,532,000, and $2,458,000, respectively.
Earnings (Loss) Per Common Share
Earnings (loss) per common share are based upon the average number of
common shares outstanding during the year. Shares subject to stock options are
not considered in per share calculations since the Company is in a loss position
and the effect would be antidilutive.
Industry Segment
The Company and its subsidiaries operate predominantly in a single
industry: chemicals and allied products, services, and supply processes for use
by manufacturing and service industries.
Cash Flows
For purposes of the consolidated statements of cash flows, cash equivalents
are defined as short-term highly-liquid investments with a maturity of three
months or less at date of purchase.
2. INVENTORIES
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Raw materials................ $2,279,750 $2,420,764
Work in progress............. 1,971,608 846,587
Finished goods............... 4,914,802 4,591,277
Less: Progress billings on
work in progress........... (189,076) (390,115)
---------- ----------
$8,977,084 $7,468,513
========== ==========
</TABLE>
The excess of current cost over the stated last-in, first-out value is
approximately $2,280,000 and $1,873,000 at December 31, 1994 and 1993.
3. CAPITAL AND OPERATING LEASES
Capitalized lease assets (primarily automobiles, trucks and lab equipment)
included in machinery and equipment at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Machinery and equipment...... $3,930,407 $3,543,814
Accumulated amortization..... 2,067,052 1,513,933
---------- ----------
Leased assets -- net......... $1,863,355 $2,029,881
========== ==========
</TABLE>
Rent expense applicable to operating leases for 1994, 1993 and 1992 was
$925,000, $974,000 and $912,000, respectively.
7
<PAGE> 10
Minimum annual lease payments for leases in effect at December 31, 1994 are as
follows:
<TABLE>
<S> <C> <C>
Minimum Lease Payments: Capital Operating
---------- ----------
1995.................... $1,016,228 $ 492,300
1996.................... 543,251 442,200
1997.................... 202,107 366,400
1998.................... 55,118 339,000
1999.................... 18,218 243,800
2000 and thereafter..... -- 281,200
---------- ----------
Total minimum lease
payments................... 1,834,922 $2,164,900
==========
Less amount representing
estimated executory costs
(such as taxes, maintenance
and insurance) and profit
thereon included in total
minimum lease payments..... 150,524
----------
Net minimum lease payments... 1,684,398
Less amount representing
interest................... 134,813
----------
Present value of net minimum
lease payments............. 1,549,585
Less current portion......... 848,080
----------
Non-current portion.......... $ 701,505
==========
</TABLE>
4. LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT
The composition of long-term debt, exclusive of current maturities, as of
December 31 is as follows:
<TABLE>
<CAPTION>
1994 1993
-------- ----------
<S> <C> <C>
Term note at interest rate of
9.04%, due through 1995...... $ -- $2,000,000
Capitalized lease obligations
at interest rates from 5.7%
to 14.9%, due through 1999
(see Note 3)................. 701,505 1,030,499
-------- ----------
$701,505 $3,030,499
======== ==========
</TABLE>
On March 11, 1994, the Company entered into a three year Revolving Credit
Agreement (the Agreement) with Comerica Bank and NBD Bank, N.A. The Agreement
provides for a credit facility of up to $12.0 million collateralized by the
Company's inventory and accounts receivable. The terms of the Agreement contain,
among other provisions, requirements for maintaining defined levels of tangible
net worth and various financial statement ratios, including working capital and
debt to equity ratios, and a cash flow ratio.
At December 31, 1994, the Company was not in compliance with certain
requirements of the Agreement. The Agreement was subsequently amended
retroactively to December 31, 1994. The Company is in compliance with the
modified Agreement and expects to be in compliance with the terms of such
Agreement throughout 1995.
The weighted average interest rate for short term borrowings for the year
ended December 31, 1994 was 7.94% compared to 5.66% for the year ended December
31, 1993 and 5.59% for the year ended December 31, 1992.
5. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "ACCOUNTING FOR INCOME TAXES", effective as of January 1, 1992. The
Statement requires the use of the liability method of accounting for income
taxes. There was no cumulative effect on net earnings resulting from this
change. For years prior to 1992, the Company accounted for income taxes in
accordance with Statement of Financial Standards (SFAS) No. 96, "ACCOUNTING FOR
INCOME TAXES".
The net credit for income taxes, calculated in accordance with SFAS No. 109
for 1994, 1993 and 1992, included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
----------- --------- -----------
<S> <C> <C> <C>
Current for tax
purposes:
Federal............ $ -- $ 41,658 $ (105,372)
State and local.... 336,199 322,871 238,595
----------- --------- -----------
Total Current.... 336,199 364,529 133,223
----------- --------- -----------
Deferred income
taxes:
Federal............ (2,647,688) (732,912) (1,273,108)
State and local.... (353,299) (176,118) 70,045
----------- --------- -----------
Total Deferred... (3,000,987) (909,030) (1,203,063)
----------- --------- -----------
Credit for income
taxes.............. $(2,664,788) $(544,501) $(1,069,840)
============ ========== ============
</TABLE>
8
<PAGE> 11
Deferred tax assets (liabilities) at December 31, 1994 and 1993 relate to
the following temporary differences and carryforwards:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Net operating loss carryforward........ $ 2,119,710 $ 1,754,943
Alternative minimum tax credit
carryforward......................... 383,144 383,144
Accruals for:
Postretirement benefits.............. 1,392,345 1,269,039
Environmental........................ 4,821,070 1,914,500
Restructuring........................ 281,985 629,105
Self insurance reserve............... 171,539 173,454
Inventory related...................... 671,402 931,960
Other.................................. 253,156 204,746
----------- -----------
Gross deferred tax assets.......... 10,094,351 7,260,891
----------- -----------
Depreciation........................... (2,749,520) (2,643,783)
Undistributed earnings of the Company's
DISC................................. (1,050,586) (923,728)
Gain on sale of ICSD................... -- (479,726)
Other.................................. (169,029) (155,999)
----------- -----------
Gross deferred tax liabilities..... (3,969,135) (4,203,236)
----------- -----------
Net deferred tax assets............ $ 6,125,216 $ 3,057,655
========== ==========
Net current deferred tax assets........ $ 1,945,401 $ 1,820,499
Net noncurrent deferred tax assets..... 4,179,815 1,237,156
----------- -----------
Net deferred tax assets.............. $ 6,125,216 $ 3,057,655
========== ==========
</TABLE>
The Company has net operating loss carryforwards of $511,131, $4,524,423
and $1,198,888 that expire in 2006, 2007 and 2009, respectively.
The reasons for the difference between the income tax provision and income
taxes computed at 34% for 1994, 1993 and 1992 are summarized below:
<TABLE>
<CAPTION>
1994 1993 1992
----------- --------- -----------
<S> <C> <C> <C>
Computed 'expected' tax
provision.................. $(2,823,247) $(718,821) $(1,377,370)
State and local income taxes,
net of federal tax
benefit.................... (14,193) 96,857 203,524
Nondeductible meal and
entertainment expense...... 48,098 34,058 39,895
Other -- net................. 124,554 43,405 64,111
----------- --------- -----------
$(2,664,788) $(544,501) $(1,069,840)
========== ========= ==========
</TABLE>
6. PENSION AND POSTRETIREMENT COSTS
The Company and its subsidiaries have several non-contributory, defined
benefit pension plans which cover substantially all employees. Benefits for
salaried employees are based on years of service and the employee's average
monthly compensation using the highest five consecutive years preceding
retirement. Benefits for hourly employees are generally based on a specified
payment per month for each year of service. The Company's funding policy is to
contribute amounts sufficient to provide for benefits earned to date and those
expected to be earned in the future.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligations
were 8.5% and 4.0%, respectively, at December 31, 1994 and 7.5% and 4.0%,
respectively, at December 31, 1993. The expected long-term rate of return on
assets was 8.5% in both years. The following table sets forth the plans' funded
status and amounts recognized in the Company's balance sheet at December 31:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligations:
Vested benefits.................... $18,836,805 $20,118,169
Non-vested benefits................ 659,032 746,552
----------- -----------
Total............................ $19,495,837 $20,864,721
========== ==========
Projected benefit obligations for
service rendered to date............. $21,464,248 $23,174,426
Plan assets at fair value -- primarily
equity and fixed income bond funds... 25,204,658 27,586,718
----------- -----------
Excess of plan assets over projected
benefit obligations.................. 3,740,410 4,412,292
Unrecognized net asset at January 1,
1986 being recognized principally
over 15 years........................ (1,405,334) (1,657,581)
Unrecognized net gain from past
experience different from that
assumed.............................. (2,316,447) (3,057,321)
Additional minimum liability........... (109,695) --
----------- -----------
Pension liability...................... $ (91,066) $ (302,610)
========== ==========
As recorded in the balance sheet:
Prepaid pensions..................... $ 1,121,169 $ 1,088,089
Other accruals (non-current)......... (1,212,235) (1,390,699)
----------- -----------
Net................................ $ (91,066) $ (302,610)
========== ==========
</TABLE>
Net pension cost (credit) included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Service cost-benefits
earned during the year... $ 556,058 $ 650,412 $ 688,700
Interest cost on projected
benefit obligations...... 1,671,239 1,864,318 1,856,200
Actual return on plan
assets................... 885,828 (2,962,981) (1,457,296)
Net amortization and
deferral................. (3,366,137) 379,464 (1,121,977)
----------- ----------- -----------
Net pension cost
(credit)................. $ (253,012) $ (68,787) $ (34,373)
========== ========== ==========
</TABLE>
Certain divisions and subsidiaries of the Company provide contributory
defined benefit health care plans for retirees, subject to various conditions
and limitations.
The Company adopted SFAS No. 106, "EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS," effective as of January 1, 1992. The Statement
requires accounting for postretirement benefits on an accrual basis which
necessitates measurement of the obligation to provide future benefits and
accrual of the cost during the years that employees provide service. The Company
elected to record a one-time charge to recognize its accumulated postretirement
benefit obligation as of January 1, 1992. The cumulative effect of this
accounting change was to increase the 1992
9
<PAGE> 12
net loss by $1,813,000 which is net of a tax benefit of $1,125,000.
Net periodic postretirement benefit costs included the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits attributed
to service during the period... $156,144 $115,576 $ 74,079
Interest cost on accumulated
postretirement benefit
obligation..................... 264,224 292,903 255,961
Amortization..................... -- 2,840 --
-------- -------- --------
Net periodic postretirement
benefit cost................... $420,368 $411,319 $330,040
======== ======== ========
</TABLE>
The Company's postretirement plans are not funded. The status of the plans
at December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees................................. $1,874,226 $1,983,349
Fully eligible active plan
participants........................... 231,079 239,684
Other active plan participants........... 1,545,580 1,301,389
Unrecognized net loss.................... (14,569) (210,140)
---------- ----------
Total accrued postretirement
benefits............................. $3,636,316 $3,314,282
========= =========
</TABLE>
For measurement purposes, a 10.1% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1995. The rate is assumed
to decrease gradually over the next 8 years to 6.5% in 2002 and thereafter. The
assumption for the health care cost trend rate has a significant effect on the
amount of the obligation and periodic cost reported. An increase in the assumed
health care cost trend rates by 1.0% in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by approximately
$567,300 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by approximately
$88,300.
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 8.5% at December 31, 1994, 7.5% at
December 31, 1993 and 8.5% at December 31, 1992.
Prior to 1992, the cost of providing health care and life insurance
benefits to retired employees was recognized as expense primarily as claims and
premiums were paid. These costs were not significant.
7. SALE OF INDUSTRIAL CHEMICAL SPECIALTIES DIVISION
Effective September 30, 1993, the Company sold its Industrial Chemical
Specialties Division to Novamax Technologies Corporation for $11,650,000 of
which $10.0 million was received on October 1, 1993 and $1,650,000 was received
on June 30, 1994. The Company reported a pre-tax gain of $9,123,000, including
the gain on curtailment of pensions of $279,000, on the sale of this Division.
For the nine months of 1993 prior to the sale, this Division reported Sales of
$10,340,000 and Income Before Tax of $460,000.
8. PROVISION FOR PLANT CLOSINGS AND RESTRUCTURING
In 1993, the Company phased out manufacturing of chemical equipment at its
Bowling Green, Kentucky plant. This operation had a total before tax loss of
approximately $6.1 million for the year. The provision for plant closing and
restructuring of $4.2 million reflects the amounts attributable to asset
write-downs, termination pay, and the costs associated with the winding down of
production.
In 1992, $685,000 was charged to income to complete restructuring of
certain operations.
9. OTHER INCOME -- NET
Other income includes interest income of approximately $46,000, $42,000 and
$70,000 for 1994, 1993 and 1992, respectively.
10. CONTINGENCIES
The Environmental Protection Agency ('EPA') has notified the Company and at
least seventeen other companies that they may be potentially responsible for
sharing the costs in a proceeding to clean up contaminated sediments in the
Fields Brook watershed in Ashtabula, Ohio. The EPA issued a Record of Decision
in 1986 concerning the methods it recommends using to accomplish this task at an
estimated total cost of $48,000,000. The Company and the other potentially
responsible parties have expressed their disagreement with this recommendation
and are continuing to negotiate with the EPA as to how best to effect the clean
up operation. The Company believes that the Fields Brook remedial investigation
and feasibility studies referred to below will be an important factor in the
negotiation with the EPA.
The Company maintains a reserve for anticipated expenditures over the next
several years in connection with remedial investigations, feasibility studies,
remedial design, and remediation relating to the clean up of contamination at
several sites, including properties owned by the Company. The Company conducted
a comprehensive review of its reserves during the fourth quarter of 1994 and
added $8.5 million to this reserve. The total amount of the reserve at December
31, 1994 is $12.6 million, which amount was calculated without taking into
consideration any possible insurance recoveries.
The reserve includes a provision for the Company's anticipated share of
remedial investigation and feasibility studies to determine sources of
contamination and methods of remediation in the Fields Brook watershed referred
to above, as well as a provision for costs that may be incurred in connection
with remediation of the Fields Brook watershed and other sites. Some of these
studies have been completed;
10
<PAGE> 13
others are ongoing. In many cases, the methods of remediation remain to be
agreed upon.
The Company expects to continue to incur professional fees, expenses and
capital expenditures in connection with its environmental compliance efforts.
In addition to the above, there are several other claims and lawsuits
pending against the Company and its subsidiaries.
The amount of liability to the Company with respect to costs of remediation
of contamination of the Fields Brook watershed and of other sites, and the
amount of liability with respect to several other claims and lawsuits against
the Company, was based on available data. The Company has established its
reserves in accordance with its interpretation of the principles outlined in
Statement of Financial Accounting Standards No. 5 and Securities and Exchange
Commission Staff Accounting Bulletin No. 92. In the event that any additional
accruals should be required in the future with respect to such matters, the
amounts of such additional accruals could have a material impact on the results
of operations to be reported for a specific accounting period but should not
have a material impact on the Company's consolidated financial position.
11. PREFERRED STOCK
The Company has authorized 1,000,000 shares of $2 par value preferred
stock, issuable in series. No shares were issued or outstanding as of December
31, 1994, 1993 and 1992.
12. STOCK PURCHASE RIGHTS
The Company has in place a Shareholder Rights Plan, under which preferred
stock purchase rights were distributed to shareholders as a dividend of one
Right for each outstanding share of Common Stock. Each Right will entitle
shareholders to buy one one-hundredth of a newly issued share of Series A
Preferred Stock of the Company at an exercise price of $80, subject to
adjustment. The Rights will be exercisable only if a person or group acquires
beneficial ownership of 15% or more of the Company's outstanding Common Stock or
commences a tender or exchange offer upon consummation of which a person or
group would beneficially own 30% or more of the Company's outstanding Common
Stock. Until they become exercisable, the Rights will be evidenced by the Common
Stock certificates and will be transferred only with such certificates.
If any person becomes the beneficial owner of 15% or more of the Company's
outstanding Common Stock, or if a holder of 15% or more of the Company's Common
Stock engages in certain self-dealing transactions or a merger transaction in
which the Company is the surviving corporation and its Common Stock remains
outstanding, then each Right not owned by such person or certain related parties
will entitle its holder to purchase, at the Right's then-current exercise price,
shares of the Company's Common Stock (or, in certain circumstances, units of the
Company's Series A Preferred Stock, cash, property or other securities of the
Company) having a market value equal to twice the then-current exercise price.
In addition, if the Company is involved in a merger or other business
combination transaction with another person after which its Common Stock does
not remain outstanding, or sells 50% or more of its assets or earning power to
another person, each Right will entitle its holder to purchase, at the Right's
then-current exercise price, shares of common stock of such other person having
a market value equal to twice the then-current exercise price. The Company will
generally be entitled to redeem the Rights at $.01 per Right at any time until
the tenth business day following public announcement that a person or group has
acquired 15% or more of the Company's Common Stock. The Plan will expire on May
4, 2000 unless the Rights are earlier redeemed by the Company.
13. STOCK OPTIONS
On April 22, 1993, the shareholders of the Company approved the
Corporation's 1993 Stock Option Plan (the Management Plan) and the Corporation's
1993 Stock Option Plan for Outside Directors (the Directors' Plan). Pursuant to
the Management Plan and employment agreements, four key executives have been
granted options totaling 95,000 shares, at exercise prices ranging from $8.625
to $9.50. Pursuant to the Directors' Plan, options for 21,000 shares in 1993 and
6,000 shares in 1994 have been granted at exercise prices ranging from $9.34 to
$13.20. Options for 3,000 of these shares were exercised in 1994 at $9.34 a
share.
The total number of shares reserved for issuance upon exercise of options
under the Management Plan is 150,000 shares and under the Directors' Plan is
50,000 shares. No options have expired under either plan.
11
<PAGE> 14
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Detrex Corporation and its consolidated subsidiaries (the Company) incurred
a net loss of $5,639,000 for the year ended December 31, 1994, compared to a net
loss of $1,570,000 for the year ended December 31, 1993. 1994 was adversely
impacted by a $8.5 million addition to the Company's environmental reserve which
increased the net loss by approximately $5.6 million. The net loss for 1994,
excluding the effect of this adjustment, was $39,000. A tabular breakdown of
results for the last two years reflects the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
------------------ ------------------
Income Income
(Loss) (Loss)
before Net Before Net
Income Income Income Income
Taxes (Loss) Taxes (Loss)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Gain on sale of ICSD............................................... $ -- $ -- $ 9,123 $ 6,021
Provision for plant closing and restructuring...................... -- -- (4,159) (2,745)
Additions to environmental reserve................................. (8,500) (5,600) (4,230) (2,790)
Operations (excluding the above)................................... 196 (39) (2,848) (2,056)
------- ------- ------- -------
Total............................................................ $(8,304) $(5,639) $(2,114) $(1,570)
======= ======= ======= =======
</TABLE>
Footnotes 7 and 8 to the Consolidated Financial Statements explain the
actions in 1993 to sell the Industrial Chemical Specialties Division (ICSD) and
to phase out manufacturing of chemical equipment at the Company's Bowling Green,
Kentucky plant.
The $196,000 profit before tax is attributable to significant increases in
income from the Company's Industrial Furnace division and from three
subsidiaries: Harvel Plastics, Inc.; The Elco Corporation; and Seibert-Oxidermo,
Inc. The Company also reduced the loss at its Equipment division and had a small
increase in profits from its analytical laboratory. In addition, the Company had
a reduction in profits at its Solvents & Environmental Services division and
incurred a small loss at its Chemicals division.
In 1993, the Company conducted a review of its liabilities for
environmental matters. Based on that review, the Company added $4.2 million to
its environmental reserve. The Company indicated in last year's annual report
that certain remediation studies would become available in 1994 and as they
became available, the Company would have a more complete basis for estimating
anticipated remediation costs. Some of this information became available in the
latter part of the year and served as a basis for a comprehensive review of
environmental matters, including its own properties, in the fourth quarter of
1994. The result of that review was the $8.5 million addition to the
environmental reserve referred to above. The Company will continue to analyze
this reserve and make adjustments to reflect changes from updated or new studies
and any other significant developments. For a more detailed explanation of the
Company's liabilities for environmental matters, refer to Footnote 10 of the
Consolidated Financial Statements.
COMPARATIVE OPERATING DATA (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
---------------- ---------------- ---------------
$ % $ % $ %
------- ----- ------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net sales............................................... 100,096 100.0 105,578 100.0 96,754 100.0
Gross margin............................................ 22,456 22.4 25,116 23.8 22,941 23.7
Selling, general and administrative expenses............ 18,405 18.4 22,625 21.4 20,928 21.6
Depreciation and amortization........................... 3,405 3.4 4,241 4.0 4,125 4.3
Provision for plant closing and restructuring........... -- -- 4,159 3.9 685 0.7
Gain on sale of ICSD.................................... -- -- 9,123 8.6 -- --
Income (loss) before effect of accounting change........ (5,639) (5.6) (1,570) (1.5) (2,981) (3.1)
Cumulative effect of accounting change for
postretirement benefits............................... -- -- -- -- (1,813) 1.9
Net income (loss)....................................... (5,639) (5.6) (1,570) (1.5) (4,794) (5.0)
</TABLE>
12
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
1994 COMPARED TO 1993 -- In 1994, Net sales decreased to $100 million, a
5.2% decrease from 1993. However, when 1993 sales were adjusted for the sale of
ICSD, the Company realized a 5.1% increase in sales from its ongoing operations.
The Company had significant sales increases in its industrial furnace division
and in its subsidiary producing plastic pipe and more modest increases in the
sales of its paint subsidiary and its lubricants subsidiary. The increase more
than offset lower sales in the Company's equipment and solvents divisions.
Gross margin in 1994 equaled 22.4% of sales, compared to 23.8% in 1993. The
decline in gross margin is primarily attributable to lower margins within the
Company's solvents division, its general chemicals division and its subsidiary
producing plastic pipe.
The reduction in selling, general and administrative expenses reflects the
inclusion of ICSD for the first nine months of 1993, and reductions in this
category of expenses for 1994 in the Company's equipment division and its
solvents division.
The reduction in depreciation and amortization in 1994 is a result of the
ICSD sale and the discontinuance of manufacturing at the Company's plant in
Bowling Green, Kentucky.
Interest expense in 1994 is lower than in 1993 due to decreased average
borrowings in 1994. The reduction due to lower borrowings was partially offset
by increases in interest rates during the second half of the year.
The Company recorded income tax benefits in both years due to the
significant before tax losses. The Company has net operating loss carryforwards
of $6,234,442 at December 31, 1994, representing a federal income tax benefit of
$2,119,710. The net operating loss carryforwards expire as follows:
2006 $ 511,131
2007 4,524,423
2009 1,198,888
----------
Total $6,234,442
==========
The Company reported taxable income before the benefit of net operating
loss carryforwards of approximately $1.8 million on its 1993 tax return. The
Company has evaluated its forward plans, including the efforts of its recently
organized Commercial Development department, and has concluded that realization
of the net operating loss carryforwards is more likely than not. A major
consideration in reaching that conclusion is that none of the carryforwards
expires for 12 years and a portion does not expire for 15 years.
1993 COMPARED TO 1992 -- During 1993, major operating decisions were made
that had a significant impact on financial results for the year. First, the
Company sold its Industrial Chemical Specialties Division to Novamax
Technologies Corporation for $11,650,000 of which $10,000,000 was received on
October 1, 1993 and $1,650,000 was received on June 30, 1994. The Company
reported a pre-tax gain of $9,123,000 on the sale of this division. Prior to the
sale, this division reported sales of $10,340,000 and Income before Tax of
$460,000 for the Nine Months Ended September 30, 1993.
Second, the Company phased out manufacturing of chemical equipment at its
Bowling Green, Kentucky plant on December 31, 1993. This operation had a total
before tax loss of $6.1 million for the year, including a $4.2 million charge
attributable to asset write downs, termination pay, and the costs associated
with the winding down of production. Of the $4.2 million charge, $1.5 million
remained as a reserve in accrued expenses as of December 31, 1993 and
approximately $500,000 remained as of December 31, 1994. The Company retained
its design engineers, service, and sales personnel to continue the development
and sales of chemical equipment that is now manufactured by outside
sub-contractors.
During 1993, the Company also conducted a review of its liabilities for
environmental matters. As more fully explained in Footnote 10 to the
Consolidated Financial Statements, the Company maintains a reserve for
anticipated expenditures over the next several years in connection with remedial
investigations, feasibility studies, remedial design, and remediation relating
to the clean up of contamination at several sites. The Company added $4.2
million to this reserve in 1993.
In 1993, Net sales increased to $106 million, a 9.1% increase from 1992,
reflecting a modest expansion in the economy. All operating units other than
ICSD, which was sold as of September 30th, showed an increase in sales. The
largest increase in sales
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
took place in the Company's solvents division and in its subsidiary producing
plastic pipe. This subsidiary continues to have favorable operating results and
positive cash flow.
Gross margin in 1993 equaled 23.8% of sales, compared with a gross margin
of 23.7% in 1992. The Company's chemical products operations, which in total
account for approximately 81% of the Company's revenue, reported gross margin of
25.9% in 1993 and 26.4% in 1992.
Selling, general and administrative expenses (which also include Research
and Development costs) increased from $20,928,000 in 1992 to $22,625,000 in
1993. Research and Development costs amounted to $2,532,000 in 1993 compared to
$2,458,000 in 1992 and represents amounts expended to develop new products and
services.
The $116,000 increase in depreciation and amortization is a result of the
additions to machinery and equipment and capital leases over the last few years
and faster amortization of machines used for promotional purposes.
Interest expense decreased as the amount of short-term debt dropped from
$8.4 million on December 31, 1992 to $2.0 million on December 31, 1993. Also,
long-term bank debt decreased by $1.0 million during 1993.
Income taxes for both 1993 and 1992 reflect a credit for federal income
taxes, partially offset by state and local income tax expense.
LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES
During 1994, the Company financed its operations by utilizing a combination
of internally generated funds, which included the collection in June of a
$1,650,000 receivable from the sale of ICSD, and net additional bank borrowings
of $1.5 million. The Company reduced borrowings under its 9.04% Term Loan by
$2.0 million but increased borrowings under its Revolving Credit Agreement by
$3.5 million. During the first quarter of 1995, the Company further increased
its borrowings under its Revolving Credit Agreement by $1.0 million to partially
alleviate some delays in making payments to vendors. The Company has utilized
approximately $431,000 of its Revolving Credit Agreement to satisfy letter of
credit obligations.
During 1995, the Company expects to again utilize a combination of
internally generated funds and bank borrowings to finance its activities. In
addition, the Company expects to realize in late 1995 or early 1996,
approximately $1.2 million from the pending sale of its former manufacturing
plant in Bowling Green, Kentucky. The Company will spend approximately $500,000
(accrued on the December 31 balance sheet) in 1995 to remediate the property.
As of December 31, 1994, the Company was not in compliance with certain of
the financial covenants contained in its Revolving Credit Agreement. The
financial covenants were subsequently amended with retroactive effect to
December 31, 1994 and the Company is in full compliance with the new covenants.
Working capital was $6,968,000 at December 31, 1994, compared to
$10,721,000 at December 31, 1993.
The Company's capital expenditures (including capital leases) totaled
$2,860,000 in 1994. This compares to $2,434,000 in 1993 and $3,897,000 in 1992.
In order to expand certain portions of its business, the Company anticipates
that 1995 capital expenditures will be in the $4.0 million range.
The Company made cash payments of $1.3 million that were charged to its
Environmental Reserve in 1994. It is anticipated that cash expenditures of
approximately $1.5 million will be charged to this reserve in 1995.
The Company has paid no dividends since the second quarter of 1991 and
cannot forecast when the dividend will be restored.
14
<PAGE> 17
DESCRIPTION OF BUSINESS
Detrex Corporation and its subsidiaries operate predominantly in a single
industry: chemicals and allied products, services, and processes for use by
manufacturing and service industries. The principal products include specialty
chemicals, industrial cleaners, process equipment, coatings, lubricant
additives, chlorinated solvents, hydrochloric acid, PVC plastic pipe, industrial
finishing materials and paints, industrial furnaces, degreasing equipment, and
environmental and analytical laboratory services. The products are primarily
sold by sales-service engineers and most sales are direct to industrial users.
Net sales by product line for each of the last five years are set forth below:
<TABLE>
<CAPTION>
Product Line
----------------------------
Chemical
Products
and Chemical
Services Equipment Total
----------- ----------- ------------
<S> <C> <C> <C>
1994..................................... $79,975,998 $20,120,445 $100,096,443
1993..................................... 85,895,760 19,682,709 105,578,469
1992..................................... 79,326,021 17,428,137 96,754,158
1991..................................... 70,092,135 11,305,378 81,397,513
1990..................................... 75,904,572 20,232,975 96,137,547
</TABLE>
SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales................................................ $100,096 $105,578 $96,754 $81,398 $96,138
Income (loss) before accounting change................... (5,639) (1,570) (2,981) (7,018) 346
Cumulative effect of accounting change................... -- -- (1,813) -- --
Net income (loss)........................................ (5,639) (1,570) (4,794)(1) (7,018) 346
Earnings (loss) per common share before accounting
change................................................. (3.56) (.99) (1.88) (4.44) .22
Cumulative effect of accounting change per common
share.................................................. -- -- (1.15) -- --
Earnings (loss) per common share......................... (3.56) (.99) (3.03)(1) (4.44) .22
Dividends per common share............................... -- -- -- .30 1.20
Total assets............................................. 61,775 59,052 59,662 58,113 61,966
Net working capital...................................... 6,968 10,721 8,164 11,260 16,607
Capital expenditures..................................... 2,201 1,464 2,166 3,956 6,843
Long-term debt........................................... 702 3,030 4,602 5,360 6,010
Stockholders' equity..................................... 18,763 24,373 25,943 30,737 38,229
Stockholders' equity per common share.................... 11.85 15.42 16.42 19.45 24.19
Number of employees...................................... 367 388(2) 495 447 505
Percentages to net sales:
Gross margin........................................ 22.4 23.8 23.7 23.3 25.3
Net income (loss)................................... (5.6) (1.5) (5.0)(1) (8.6) 0.4
Net income (loss) as a percent of:
Average total assets................................ (9.3) (2.6) (8.1)(1) (11.7) 0.6
First of year stockholders' equity.................. (23.1) (6.1) (15.6)(1) (18.4) 0.9
Current ratio............................................ 1.3 1.5 1.4 1.7 2.0
Percent long-term debt to equity......................... 3.7 12.4 17.7 17.4 15.7
</TABLE>
NOTES FOR SELECTED FINANCIAL DATA
(1) Includes a one time charge of $1,812,600 reflecting the adoption of
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, effective January 1, 1992.
(2) At January 1, 1994.
15
<PAGE> 18
PRODUCTS OF DETREX AND DETREX SUBSIDIARIES
<TABLE>
<S> <C> <C>
CHEMICALS DIVISION EQUIPMENT DIVISION HARVEL PLASTICS, INC.
P.O. BOX 1398, 325 EMMETT AVENUE, P.O. BOX 757,
ASHTABULA, OHIO 44004 BOWLING GREEN, EASTON, PENNSYLVANIA 18042
C.U. GUY, General Manager KENTUCKY 42101 E. E. WISMER, President
N-Methyl Pyrrole and Pyrrole B. B. RUSSELL, Business Rigid PVC Plastic Pipe
Semi-conductor Grade Manager (Normal Impact)
Hydrochloric Acid Aqueous and Semi-Aqueous (High Impact)
Equipment Solid Bar, Heavy Wall Tubular Stock,
SOLVENTS AND Electronic Component Cleaning Angle Stock, Custom Extrusions
ENVIRONMENTAL SERVICES and Defluxing Machines
DIVISION SEIBERT-OXIDERMO, INC.
26000 CAPITOL AVENUE, PACIFIC INDUSTRIAL 16255 WAHRMAN,
REDFORD TWP., MICHIGAN FURNACE DIVISION ROMULUS, MICHIGAN
48239 26000 CAPITOL AVENUE, 48174
A.E. PORTER, Acting General Manager REDFORD TWP., D.A. CHURCH,
Virgin or Recycled Solvents MICHIGAN 48239 General Manager
Solvent Reclamation and J.T. O'NEAL, General Manager Industrial and Automotive Coatings
Waste Management Industrial Furnaces Conductive Primers for Rigid and
Automation Equipment Flexible Plastics
RTI LABORATORIES DIVISION Adhesion Promoters for Plastics
31628 GLENDALE, Automotive Parts Enamels
LIVONIA, MICHIGAN Solvent and Water-Borne Coatings
48050
J. G. SINGH, General Manager THE ELCO CORPORATION
Analytical Laboratory Services 1000 BELT LINE ST.,
CLEVELAND, OHIO 44109
R.D. WYVILL, General Manager
Petroleum Additives for
Hydraulic Fluids, Industrial
Gear Oils, Greases and
Metalworking Fluids
</TABLE>
SUPPLEMENTARY INFORMATION (Unaudited)
Selected Quarterly Data (Thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
1994 Quarters 1993 Quarters
------------------------------------------ ------------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $25,566 $25,017 $26,142 $23,371 $23,553 $27,168 $29,084 $25,773
Gross margin on sales....... 5,510 5,533 6,181 5,232 5,673 5,652 6,922 6,869
Net income (loss)........... (5,894) 46 323 (114) (1,259) 258 (260) (309)
Common share................ (3.72) .03 .20 (.07) (.79) .16 (.16) (.20)
Stock price range(1)
High...................... 13 13 3/8 11 7/8 12 1/4 13 7/8 15 9 3/4 9 3/4
Low....................... 10 1/4 11 1/8 11 10 1/4 11 3/8 8 1/4 8 1/4 7 1/2
</TABLE>
(1) Stock price range was obtained from NASDAQ quotations.
16
<PAGE> 19
DIRECTORS OFFICERS
ARBIE R. THALACKER J. L. WENZLER
Chairman of the Board of Detrex President and Chief Executive Officer
Corporation (Non-Executive) and
Partner, Shearman & Sterling, D. R. CRANDELL
Attorneys, New York City Vice President-Commercial Development
BRUCE W. COX G. J. ISRAEL
President, B. W. Cox Company, Vice President-Finance, Treasurer and
Manufacturers Representative Chief Financial Officer
A. E. PORTER
ROBERT A. EMMETT, III Vice President-Operations
Partner, Reed Smith Shaw & McClay,
Attorneys, Washington, D.C.
J. F. SCHATT
Vice President-Human Resources
JOHN F. MANGOLD
Manufacturing Consultant R. M. CURRIE
Secretary and General Counsel
BENJAMIN W. McCLEARY
Partner, McFarland Dewey & Co., E. R. RONDEAU
Investment Bankers, New York City Controller
JOSEPH L. WENZLER
President and Chief
Executive Officer
JOHN D. WITHROW
Retired President and Chief
Operating Officer,
Lectron Products Inc.
AUDIT COMMITTEE
JOHN F. MANGOLD, Chairman
ARBIE R. THALACKER
JOHN D. WITHROW
TRANSFER AGENT AND
REGISTRAR
STATE STREET BANK AND TRUST COMPANY
AUDITORS
DELOITTE & TOUCHE LLP
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE YEAR 1994 WILL BE FURNISHED WITHOUT CHARGE TO
SHAREHOLDERS UPON WRITTEN REQUEST. REQUESTS ARE TO BE SENT TO VICE
PRESIDENT-FINANCE, DETREX CORPORATION, 24901 NORTHWESTERN HWY., SUITE 500,
SOUTHFIELD, MICHIGAN 48075.
<PAGE> 20
DETREX CORPORATION
GENERAL OFFICES -- 24901 NORTHWESTERN HWY., SUITE 500, SOUTHFIELD, MICHIGAN
48075
--------------------------------------------------------------------------------
MAILING ADDRESS -- P.O. BOX 5111, SOUTHFIELD, MI 48086-5111
Telephone: (810) 358-5800
<PAGE> 1
EXHIBIT 22.
FORM 10-K
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation
Name of Subsidiary or Organization
------------------- ----------------
<S> <C>
The Elco Corporation Ohio (1)
Seibert-Oxidermo Michigan (1)
Detrex Industrial Water Treatment Michigan (1)
Wayne Chemical Products Company Michigan (1)
Subsidiaries of The Elco Corporation:
ELDISC Export Co. (100% owned) Delaware (1)
Harvel Plastics, Inc. (85% owned) Pennsylvania (1)
</TABLE>
(1) Financial statements of subsidiary company included in the Consolidated
financial statements.
<PAGE> 1
EXHIBIT 23
[Deloitte & Touche LLP Letterhead]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Number
33-80818 and 33-80820 of Detrex Corporation on Form S-8 of our report dated
February 22, 1995 (March 9, 1995 as to Note 4), incorporated by reference in
and our report dated February 22, 1995 appearing in this Annual Report on Form
10-K of Detrex Corporation for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Detroit, Michigan
March 23, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,016
<SECURITIES> 0
<RECEIVABLES> 18,389
<ALLOWANCES> 330
<INVENTORY> 8,977
<CURRENT-ASSETS> 31,833
<PP&E> 51,711
<DEPRECIATION> 29,258
<TOTAL-ASSETS> 61,775
<CURRENT-LIABILITIES> 24,865
<BONDS> 702
<COMMON> 3,167
0
0
<OTHER-SE> 15,596
<TOTAL-LIABILITY-AND-EQUITY> 61,775
<SALES> 100,096
<TOTAL-REVENUES> 100,096
<CGS> 77,640
<TOTAL-COSTS> 77,640
<OTHER-EXPENSES> 8,500<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 682
<INCOME-PRETAX> (8,304)
<INCOME-TAX> (2,665)
<INCOME-CONTINUING> (5,639)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,639)
<EPS-PRIMARY> (3.56)
<EPS-DILUTED> (3.56)
<FN>
<F1>PROVISION FOR ENVIRONMENTAL RESERVE
</FN>
</TABLE>
