<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, 1997
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or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-784
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DETREX CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-0480840
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(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 (248) 358-5800
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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
Capital Stock on March 12, 1998 of Detrex Corporation held by nonaffiliates was
approximately $26,522,185.
The number of shares of Common Capital Stock, $2 Par Value, outstanding on March
12, 1998 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
Shareholders for the year
ended December 31, 1997
2. Detrex Corporation Part III, Items 10, 11, 12
Notice of Annual and 13
Meeting of Shareholders
and Proxy Statement for
the Annual Meeting of
Shareholders to be held
April 23, 1998
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 and is comprised of the following
operations:
Detrex Corporation - a specialty chemicals company
- Solvents and Environmental Services Division - distributes and recycles
parts, cleaning solvents and industrial wastes
- Equipment Division - designs, engineers and sells industrial parts
cleaning equipment
- Automation Division - engineers and sells automation and material
handling equipment
- RTI Laboratories - provides analytical and environmental laboratory
services
Subsidiaries of Detrex Corporation
- Harvel Plastics, Inc. - manufactures PVC and CPVC pipe and custom
extrusions
- The Elco Corporation - produces lubricant additives, pharmaceutical
intermediates, and hydrochloric acid
- Seibert-Oxidermo, Inc. - produces industrial and automotive paint and
other coatings
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:
Product Line
-------------------------------
Chemical
Products Chemical
and Services Equipment Total
------------- ------------ ------------
1997 $ 83,466,537 $ 12,290,264 $ 95,756,801
1996 78,017,582 18,807,854 96,825,436
1995 77,698,771 16,603,228 94,301,999
1994 79,975,998 20,120,445 100,096,443
1993 85,895,760 19,682,709 105,578,469
Of the $83 million included in 1997 Chemical Products and Services sales,
approximately $15.5 million (19%) represent sales by the Company's solvents
division, $13.8 million (17%) represent sales by its paint subsidiary, $22.8
million (27%) represent sales by its lubricants subsidiary, $29.7 million (35%)
represent sales by its plastic pipe subsidiary and $1.8 million (2%) represent
sales of other related chemical products and services.
All of the Company's business units operate in highly competitive markets which
are mainly national in scope, although approximately 12% of the Company's
business in 1996 and 1997 was done internationally,
3
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FORM 10-K
PART I (CONTINUED)
------------------
ITEM 1. BUSINESS (Continued)
principally by its lubricants subsidiary and its plastic pipe subsidiary.
Generally, for 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 Company's business is dependent upon a single customer or a few
customers.
The backlog of orders at any one time is generally not significant to the
Company's business. At December 31, 1997, the Company's backlog of Equipment
orders was approximately $2.3 million and the Company expects to complete all of
these orders in the first half of 1998.
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 continuing to go through a major transition in
the marketplace, primarily because of the phasing out of certain ozone depleting
solvents and other regulatory actions. As a result, the division is increasingly
marketing substitutes for such solvents, including aqueous based cleaners, is
expanding its permits to enable it to handle more waste codes, and is becoming
involved in the parts cleaning business.
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 1997, 1996, and 1995 on research
sponsored by the Company were $1,365,000, $1,114,000 and $1,272,000,
respectively. The number of professional employees engaged in such activities
were 16 for 1997, 15 for 1996, and 17 for 1995.
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 1998. 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, 1997 totaled $9.6 million, of which $1.5 million is
estimated to be spent in 1998. 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 353 persons as of December 31, 1997.
The Company is not engaged in manufacturing operations in foreign countries;
however, 12% of its sales were derived from customers in foreign countries.
4
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FORM 10-K
PART I (CONTINUED)
ITEM 1. BUSINESS (Concluded)
The Company utilized a combination of internally generated funds and the receipt
of a federal income tax refund to finance its activities during 1997. As of
December 31, 1997, working capital was $9.3 million compared to $8.5 million at
December 31, 1996. For a discussion of the Company's credit agreement, see Note
5 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
numerous locations of which ten are owned as follows:
1) A 70,000 square foot inactive plant in Redford Township, Michigan is located
on seven acres of land. The plant was sold as of March 17, 1998.
2) Facilities located on 57 acres in Ashtabula, Ohio are used in connection with
the manufacture of hydrochloric acid, reagent grade chemicals, fine chemicals
including pharmaceutical intermediates, N-methyl pyrrole, and zinc-based
lubricant additives.
3) The Company's lubricants subsidiary, The Elco Corporation, 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 current
lease expires June 30, 1998 and the Company is negotiating an extension.
4) The Company's plastic pipe subsidiary, Harvel Plastics, Inc. ("Harvel"),
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 leased warehouse space has been added in
California.
Harvel is planning to expand its manufacturing capacity in 1998 by leasing a new
facility in California, which will be built to suit Harvel's warehouse and
manufacturing needs. The lease was signed on January 30, 1998, and is scheduled
to commence on July 1, 1998. The lease term is for an initial period of fifteen
years expiring in the year 2013, with provision for three five year extensions.
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 Romulus,
Michigan containing 35,300 square feet of office, research and plant space on 40
acres of land.
5
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FORM 10-K
PART I (CONTINUED)
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ITEM 2. PROPERTIES (Concluded)
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 currently listed for sale.
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 Company and at least seventeen other companies are potentially responsible
for sharing the costs in a proceeding to clean up contaminated sediments in the
Fields Brook watershed in Ashtabula, Ohio. The Environmental Protection Agency
(`EPA') issued a Record of Decision in 1986 concerning the methods it recommends
using to accomplish this task. The Company and the other potentially responsible
parties negotiated with the EPA as to how best to effect the clean up operation.
After negotiation, an agreement was reached with the EPA on clean-up
methodology. The Company's share of clean-up costs is anticipated to be in the
range of approximately $3.0 to $3.5 million.
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 environmental
contamination at several sites, including properties owned by the Company. The
amounts of the reserve at December 31, 1997 and 1996 were $9.6 million and $10.3
million, respectively. The reserve includes a provision for the Company's
anticipated share of remediation in the Fields Brook watershed referred to
above, as well as a provision for costs that are expected to be incurred in
connection with remediation of other sites. Some of these studies have been
completed; others are ongoing. In some cases, the methods of remediation remain
to be agreed upon.
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FORM 10-K
PART I (CONTINUED)
ITEM 3. LEGAL PROCEEDINGS (Concluded)
The Company expects to continue to incur professional fees, expenses and capital
expenditures in connection with its environmental compliance efforts. In
addition, there are several 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 the 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
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FORM 10-K
PART I (CONTINUED)
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the registrant at March 23, 1998
and their positions and offices with the registrant are as follows:
Name and Age Positions and Offices
------------ ---------------------
W. C. King (53) Chairman and Chief Executive Officer (a)
T. E. Mark (45) President and Chief Operating Officer (b)
G. J. Israel (57) Vice President - Finance, Treasurer and
Chief Financial Officer (c)
R. M. Currie (44) Secretary and General Counsel (d)
E. R. Rondeau (63) Controller (e)
(a) Mr. King joined the Company as President and Chief Executive Officer in
April 1995. He was elected Chairman of the Board in January 1996. Prior to
joining the Company, Mr. King was President and Chief Operating Officer of
Masland Industries from 1992 to 1994 and prior to that, Vice President and Group
Executive of Allied Signal.
(b) Mr. Mark joined the Company as President and Chief Operating Officer in
January 1996. Prior to that he was President and General Manager of ABB Paint
Finishing from 1990 to 1996.
(c) Mr. Israel was elected Vice President - Finance and Chief Financial Officer
on February 25, 1993 and Treasurer in 1994. 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.
(d) 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.
(e) Mr. Rondeau served as Assistant Controller of the Company for more than five
years before being elected Controller on March 25, 1993. Mr. Rondeau has
announced his intention to retire on March 31, 1998.
All officers of the Company are elected annually and hold office until their
successors are chosen and qualify in their stead.
8
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FORM 10-K
PART II
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Page (and caption) in 1997
Detrex Corporation
10-K Item Annual Report to Shareholders*
------------------ ------------------------------
<S> <C> <C>
5. Market for Registrant's Common
Stock and Related Shareholder Matters:
(a) Market and market prices
of the common stock 16- Selected Quarterly Data
(b) Approximate number of
holders of common stock - Highlights
(c) Dividend history 16- Selected Quarterly Data
6. Selected Financial Data 15- Selected Financial Data
7. Management's Discussion and 12-14 - Management's
Analysis of Financial Condition Discussion and
and Results of Operations Analysis of Financial
Condition
and Results of Operations
8. Financial Statements and Supplementary
Data:
- Detrex Corporation Consolidated
Balance Sheets, December 31,
1997 and 1996 4,5
- Consolidated Statements of
Operations and Retained Earnings
for the Years Ended December 31,
1997, 1996, and 1995 3
- Consolidated Statements of Cash
Flows for the Years Ended
December 31, 1997, 1996, and 1995 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 Shareholders
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
* Detrex Corporation's Annual Report to Shareholders for the year ended December
31, 1997 is incorporated herein as Exhibit 13 under Item 14(a) 3 of Part IV.
</TABLE>
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 "Election of Directors" in the Detrex
Corporation Proxy Statement (the "Proxy Statement") for the Annual Meeting of
Shareholders to be held April 23, 1998. 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 caption "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 "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 "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
<TABLE>
<S> <C> <C>
(a) 1. All Financial Statements
Detrex Corporation and Subsidiaries (incorporated by
reference to the Company's Annual Report to Shareholders
for the year ended December 31, 1997-see Part II)
(a) 2. Financial Statement Schedules Page
----
Independent Auditors' Report 15
Schedule II - Valuation and Qualifying Accounts for the
Years Ended December 31, 1997, 1996, and 1995. 16
</TABLE>
Financial Statements and Financial Statement Schedules Omitted:
Other financial statement schedules are omitted because of the absence of the
conditions under which they are required.
11
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FORM 10-K
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Continued)
<TABLE>
<S> <C> <C>
(a) 3. Exhibits
3(i) Articles of Incorporation, as amended, are 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(ii) Bylaws, as amended, as of February 26, 1998 Attached as
an Exhibit
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, 1993, 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 2, 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 Exhibit 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)
</TABLE>
12
<PAGE> 13
FORM 10-K
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Continued)
<TABLE>
<S> <C> <C>
(a) 3. Exhibits (Continued)
10(e) Employment Agreement - Robert M. Currie, is hereby --
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1994, as Exhibit 10(g)
10(f) Temporary Employment Agreement - William C. King, is hereby --
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1995, as Exhibit 10(i)
10(g) Employment Agreement - William C. King, is hereby --
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1995, as Exhibit 10(j)
10(h) Employment Agreement - Thomas E. Mark, is hereby --
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1995, as Exhibit 10(k)
--
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 year ended December 31, 1993
10(j) First Amendment to Credit Agreement and Waiver, dated as of --
December 31, 1994, is hereby incorporated by reference to
Commission file #0-784 Annual Report on Form 10-K for the year
ended December 31, 1994 as Exhibit 10(j)
</TABLE>
13
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FORM 10-K
PART IV (CONCLUDED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Concluded)
<TABLE>
<S> <C> <C>
(a) 3. Exhibits (Concluded)
10(k) Credit Agreement with Comerica Bank dated as of --
June 13, 1996 (the "Credit Agreement"), is hereby incorporated by
reference to Commission file #0-784 Quarterly Report on Form
10-Q for the quarter ended June 30, 1996 as Exhibit 10(p)
10(l) First Amendment to the Credit Agreement, dated --
December 5, 1996 is hereby incorporated by reference to
Commission file #0-784 Annual Report on Form 10-K for
the year ended December 31, 1996 as Exhibit 10(o)
10(m) Second Amendment to the Credit Agreement, dated as of --
March 31, 1997 is hereby incorporated by reference to Commission
file #0-784 Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 as Exhibit 10(q)
10(n) Commitment Letter from Comerica Bank to Harvel Plastics, Inc. Attached as
an indirect subsidiary of Detrex Corporation, dated November 24, 1997 an Exhibit
13 Annual Report to Shareholders for the year ended December 31, 1997 Attached as
an Exhibit
21 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 1997
</TABLE>
14
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Detrex Corporation:
We have audited the consolidated financial statements of Detrex Corporation and
its subsidiaries (the "Company") as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997, and have issued our
report thereon dated February 25, 1998; such consolidated financial statements
and report are included in your Annual Report to Shareholders for the year ended
December 31, 1997 and are incorporated herein by reference. Our audits also
included the financial statement schedule of the Company, 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
Detroit, Michigan
February 25, 1998
15
<PAGE> 16
DETREX CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULES
<PAGE> 17
FORM 10-K
SCHEDULE II
DETREX CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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, 1997
Inventory Valuation Reserves $176,909 272,713 185,432 $264,190
Finished Machines Valuation
Reserves $343,307 63,470 159,770 $247,007
Allowance for Uncollectible
Accounts $394,599 145,721 168,751 $371,569
Year Ended December 31, 1996
Inventory Valuation Reserves $330,251 67,446 220,788 $176,909
Finished Machines Valuation
Reserves $398,950 7,927 63,570 $343,307
Allowance for Uncollectible
Accounts $458,693 226,905 290,999 $394,599
Year Ended December 31, 1995
Inventory Valuation Reserves $235,617 221,458 158,441 285,265 $330,251
Finished Machines Valuation
Reserves $899,332 30,000 530,382 $398,950
Allowance for Uncollectible
Accounts $329,634 546,991 417,932 $458,693
</TABLE>
16
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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, 1998 By W. C. King
---------------- ---------------------------
W. C. King
Chairman 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 1998 by the following
persons on behalf of the Registrant and in the capacities indicated.
Signature Title
--------- -----
W. C. King Chairman and Chief Executive
---------------------------- Officer
W. C. King
T. E. Mark President and Chief Operating
---------------------------- Officer
T. E. Mark
G. J. Israel Vice President, Treasurer and
---------------------------- Chief Financial Officer
G. J. Israel
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
17
<PAGE> 19
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3(ii) Bylaws, as amended, as of February 26, 1998 Attached as
an Exhibit
10(n) Commitment Letter from Comerica Bank to Harvel Attached as
Plastics, Inc. an indirect subsidiary of Detrex an Exhibit
Corportation, dated November 24, 1997
13 Annual Report to Shareholders for the year ended Attached as
December 31, 1997 an Exhibit
21 Subsidiaries of the Registrant Attached as
an Exhibit
23 Consent of Auditors Attached as
an Exhibit
27 Financial Data Schedule Attached as
an Exhibit
<PAGE> 1
EXHIBIT 3(ii)
BY-LAWS OF DETREX CORPORATION
(As Amended Through February 26, 1998)
ARTICLE I
Offices
The principal and registered offices of the Corporation shall be in the
City of Southfield, County of Oakland, State of Michigan.
ARTICLE II
STOCKHOLDERS AND STOCKHOLDERS' MEETINGS
SECTION 1. The Stockholders of the Corporation shall be those who appear
on the books of the Corporation as holders of one or more shares of the Capital
Stock.
SECTION 2. All meetings of the Stockholders shall be held at the
registered office of the Corporation, 24901 Northwestern Highway, Suite 500,
City of Southfield, Michigan, unless some other place, either within or without
the State, shall be designated in the call therefor.
SECTION 3. An Annual Meeting of Shareholders shall be held on the fourth
Thursday in April of each year, at 11 o'clock A.M., if not a legal holiday, and
if a legal holiday, then on the next secular day following at the same time,
when they shall elect by plurality vote a Board of Directors, and transact such
other business as may properly be brought before the meeting.
SECTION 4. Notices of meetings, written or printed, for every annual or
special meeting of Stockholders, shall be prepared by the Secretary and by him
mailed to the last known post office address of each Stockholder having voting
rights, not less than ten (10) nor more than forty (40) days prior to the date
of such meeting, and if for a special meeting such notice shall state the
object or objects thereof, provided, however, that any annual or special
meeting of the Stockholders may be held without notice upon a waiver of such
notice by all of the Stockholders having voting rights, which waiver may be by
telegram or other writing before or after the holding thereof; or when all of
the Stockholders having voting rights are represented in person or by proxy.
In no case shall a failure to mail the notice required in this paragraph, or
any irregularity in such notice, affect the validity of any annual meeting of
Stockholders, or of any proceedings had at such meeting.
<PAGE> 2
SECTION 5. The holders of a majority of the stock issued and outstanding,
and entitled to vote thereat, present in person, or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the Stockholders
for the transaction of business except as otherwise provided by law or by the
certificate of incorporation. If, however, such a majority shall not be
present or represented at any meeting of the Stockholders, the Stockholders
entitled to vote thereat present in person or by proxy, shall have power to
adjourn the meeting from time to time without notice other than announcement at
the meeting, until the requisite amount of voting stock shall be present. At
such adjourned meeting at which the requisite amount of voting stock shall be
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
SECTION 6. At each meeting of the Stockholders every Stockholder having
the right to vote shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such Stockholder and bearing date not
more than three (3) years prior to said meeting, unless said instrument
provided for a longer period. The vote for Directors, and, upon the demand of
any Stockholder, the vote upon any question before the meeting, shall be by
ballot. All elections shall be had and all questions decided by a plurality
vote, unless otherwise provided by law, by the Articles of Incorporation, as
amended, or by these By-Laws.
SECTION 7. The Secretary shall make and certify a complete list of the
Stockholders entitled to vote at a Stockholders meeting or any adjournment
thereof. The list shall:
(a) Be arranged alphabetically within each class and series, with
the address of, and the number of shares held by, each Stockholder.
(b) Be produced at the time and place of the meeting.
(c) Be subject to inspection by any Stockholder during the whole
time of the meeting.
(d) Be prima facie evidence as to who are the Stockholders
entitled to examine the list or to vote at the meeting.
SECTION 8. Special meetings of the Stockholders for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the Chairman
of the Board or the President, and shall be called by the Chairman of the
Board, the President or Secretary at the request in writing of a majority of
the Board of Directors, or at the request in writing of Stockholders owning a
majority in amount of the entire Capital Stock of the Corporation issued and
outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting
of the Stockholders shall be confined to the purpose or purposes stated in the
notice thereof.
SECTION 9. The Chairman of the Board or the President and Secretary of the
Corporation shall act as Chairman and Secretary, respectively, of all
Stockholders' meetings. In the absence of the Chairman of the Board and
President, the Vice
<PAGE> 3
President present who is first in the order of election shall act
as Chairman and in the absence of the Chairman of the Board, President and Vice
Presidents, the meeting shall elect any Stockholder present to act as the
Chairman.
SECTION 10. The order of business at all Stockholders' meetings shall be
as follows:
1. Roll call.
2. Proof of proper notice of meeting.
3. Reading of minutes of previous meeting or meetings.
4. Report of officers.
5. Reports of committees.
6. Unfinished business.
7. New business.
SECTION 11. Except as otherwise provided by law, at any annual meeting of
Stockholders only such business shall be conducted as shall have been properly
brought before the meeting. In order to be properly brought before the
meeting, such business must have either been (a) specified in the written
notice of the meeting (or any supplement thereto) given to Stockholders of
record on the record date for such meeting by or at the direction of the Board
of Directors, (b) brought before the meeting at the direction of the Board of
Directors or the presiding officer of the meeting, or (c) specified in a
written notice, meeting all of the requirements specified below, given by or on
behalf of a Stockholder of record on the record date for such meeting entitled
to vote thereat or a duly authorized proxy for such Stockholder, provided that
such Stockholder continues to be a Stockholder of record at the time of such
meeting. A notice referred to in clause (c) hereof must be delivered
personally, or mailed to and received at, the principal executive office of the
Corporation, addressed to the attention of the Secretary, not fewer than 90
calendar days nor more than 120 calendar days in advance of the date in the
then current year corresponding to the date the Corporation's Proxy Statement
was released to Stockholders in connection with the previous year's annual
meeting of Stockholders, except that if the date of the annual meeting has been
changed by more than 30 calendar days from any date contemplated at the time of
the previous year's proxy statement, the notice must be received by the time of
the previous year's proxy statement, the notice must be received by the
Corporation a reasonable time before such new date for the annual meeting of
Stockholders. Such notice referred to in clause (c) hereof shall set forth (i)
a full description of each such item of business proposed to be brought before
the meeting, (ii) the name and address of the person proposing to bring
such business before the meeting and, if different, of the Stockholder on whose
behalf such business is to be brought before the meeting, (iii) the class and
number of shares held of record, held beneficially and represented by proxy by
such person as of the record date for the meeting (if such date has then been
made publicly available) and as of the date of such notice, (iv) if any item of
such business involves a nomination for director, all information regarding
each such nominee that would be required to be set forth in a definitive proxy
statement filed with the Securities
<PAGE> 4
and Exchange Commission (the "SEC") pursuant to Section 14 of the
Securities Act of 1934, as amended (the "Exchange Act"), or any successor
thereto, and the written consent of each such nominee to serve if elected, and
(v) if so requested by the Corporation, all other information that would be
required to be filed with the SEC if, with respect to the business proposed to
be brought before the meeting, the person proposing such business was a
participant in a solicitation subject to Section 14 of the Exchange Act or any
successor thereto. No business shall be brought before any annual meeting of
Stockholders of the Corporation otherwise than as provided in this Section.
Notwithstanding the foregoing provision, unless otherwise required by law, the
Board of Directors shall not be obligated to include information as to any
nominee for director in any proxy statement or other communication sent to
Stockholders. The presiding officer of the meeting may, if the facts warrant,
determine and declare to the meeting that any proposed item of business was not
brought before the meeting in accordance with the foregoing procedures, and if
he or she should so determine, he or she shall so declare at the meeting and
the defective item of business shall be disregarded.
ARTICLE III
DIRECTORS
SECTION 1. The business and affairs of the Corporation shall be managed
and controlled by a Board of not less than seven (7) nor more than twelve (12)
Directors, the exact number of which shall be fixed from time to time by
resolution of the Board of Directors, provided that the number of Directors
shall not be reduced so as to shorten the term of any Directors at the time in
office. The Directors to be elected at each Annual Meeting of the Stockholders
shall be elected for a term of three years except as provided in this Section
and in Article IX of the Articles of Incorporation, and each Director elected
shall hold office until his successor is elected and qualified. If at any time
the number of Directors shall be less than twelve (12) the Board of Directors
may, by majority vote at any meeting at which a quorum is present, increase the
number of Directors to any number not exceeding twelve (12). The Board may at
any time fill vacancies in the Board arising from resignation, removal, death
or other incapacity or arising from an increase in the number of Directors by a
vote of a majority of the Directors then in office although less than a quorum
at a meeting called upon due notice. Each Director chosen to fill a vacancy
and each Director chosen to fill a newly created directorship shall hold office
until the next election of Directors by the Stockholders at which time a
director to fill such vacancy or to fill such newly created directorship shall
be elected by the Stockholders for the unexpired term. When the number of
Directors is changed, any newly created directorships or any decrease
in directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as possible. A resignation from the Board
shall be deemed to take effect upon its receipt by the Corporation unless
otherwise specified therein. This section shall be altered, amended or
repealed only by a vote of the Stockholders.
SECTION 2. In addition to the powers and authority by these By-Laws
expressly conferred upon it, the Board may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or
<PAGE> 5
by these By-Laws directed or required to be exercised or done by the
Stockholders. The Directors may elect one of their members to be Chairman of
the Board. The Chairman of the Board shall be the Chief Executive Officer of
the Corporation and shall have such additional duties and powers as may from
time to time be assigned to him by the Board of Directors or these By-Laws.
The Chairman of the Board, or in his absence the President, shall preside at
all meetings of the Board of Directors. In the absence of both, a temporary
chairman may be chosen by the Directors present at any such meeting. The
Secretary of the Corporation shall act as Secretary at all meetings of the
Board of Directors but, in his absence, a temporary Secretary may be appointed
by the Chairman of the meeting.
SECTION 3. At any meeting of the Stockholders called for the purpose, any
Director may, by the vote of the Stockholders entitled to cast a majority of
the votes, be removed from office for cause. Any vacancy in the Board of
Directors created by such removal shall be filled in accordance with the
provisions of Section 1 of this Article III. This Section shall be altered,
amended or repealed only by a vote of the Stockholders.
SECTION 4. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to a threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal, other than an action by or in the right of the
Corporation, by reason of the fact that he or she is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise whether for profit or not, against expenses,
including attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
the action, suit, or proceeding, if the person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation or its shareholders, and with respect to a
criminal action or proceeding, if the person had no reasonable cause to believe
his or her conduct was unlawful. The termination of an action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of
<PAGE> 6
nolo contendere or its equivalent, does not, of itself, create a presumption
that the person did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation or its shareholders, and, with respect to a criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
(b) The Corporation shall indemnify any person who was or is a party to or
is threatened to be made a party to a threatened, pending, or completed action
or suit by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he or she is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, against expenses, including actual
and reasonable attorneys' fees, and amounts paid in settlement incurred by the
person in connection with the action or suit, if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the Corporation or its shareholders. However,
indemnification shall not be made for a claim, issue, or matter in which the
person has been found liable to the Corporation unless and only to the extent
that the court in which the action or suit was brought has determined upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnification for the expenses which the court considers proper.
(c) (1) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of an
action, suit, or proceeding referred to in subsections (a) or (b) of this
section, or in defense of a claim, issue, or matter in the action, suit, or
proceeding, he or she shall be indemnified against expenses, including actual
and reasonable attorneys' fees, incurred by him or her in connection with the
action, suit, or proceeding and an action, suit, or proceeding brought to
enforce the mandatory indemnification provided in this subsection.
(2) Any indemnification under subsections (a) or (b) of this
section, unless ordered by a court, shall be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in
the circumstances because he or she has met the applicable standard of
conduct set forth in subsections (a) or (b) of this section. This
determination shall be made in any of the following ways:
(i) By a majority vote of a quorum of the board
consisting of directors who were not parties to the action,
suit, or proceeding.
(ii) If the quorum described in subdivision (i) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The committee
shall consist of not less than two (2) disinterested
directors.
(iii) By independent legal counsel in a written opinion.
(iv) By the shareholders.
<PAGE> 7
(3) If any person is entitled to indemnification under subsections
(a) or (b) of this section for a portion of expenses, including
attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement, but not for the total amount thereof, the Corporation shall
indemnify the person for the portion of the expenses, judgments,
penalties, fines, or amounts paid in settlement for which the person is
entitled to be indemnified.
(d) Expenses incurred in defending a civil or criminal action, suit, or
proceeding described in subsections (a) or (b) of this section may be paid by
the Corporation in advance of the final disposition of the action, suit, or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee, or agent to repay the expenses if it is ultimately
determined that the person is not entitled to be indemnified by the
Corporation. The undertaking shall be by unlimited general obligation of the
person on whose behalf advances are made but need not be secured.
(e) (1) The indemnification or advancement or expenses provided under
subsections (a), (b), (c), and (d) of this section is not exclusive of other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under the Articles of Incorporation, By-Laws, or a contractual
agreement. However, the total amount of expenses advanced or indemnified from
all sources combined shall not exceed the amount of actual expenses incurred by
the person seeking indemnification or advancement of expenses.
(2) The indemnification provided for in subsections (a), (b), (c),
and (d) of this section continues as to a person who ceases to be a
director, officer, employee, or agent and shall inure to the benefit of
the heirs, executors, and administrators of the person.
(f) The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have power to indemnify him against such
liability under the provisions of these By-Laws.
(g) For purposes of subsections (a), (b), (c), (d), (e) and (f) of this
section, "Corporation" may include constituent corporations absorbed in a
consolidation or merger and the resulting or surviving corporation, if so
determined by resolution of the Board of Directors, so that a person who is or
was a director, officer, employee, or agent of the constituent corporation or
is or was serving at the request of the constituent corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise whether for
profit or not shall stand in the same position under the provisions
<PAGE> 8
of this section with respect to the resulting or surviving corporation as the
person would if he or she had served the resulting or surviving corporation in
the same capacity.
(h) For purposes of subsections (a), (b), (c), (d), (e) and (f) of this
section, "other enterprises" shall include employee benefit plans; "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and "serving at the request of the Corporation" shall include any
service as a director, officer, employee, or agent of the Corporation which
imposes duties on, or involves services by, the director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interests of the participants and
beneficiaries of an employee benefit plan shall be considered to have acted in
a manner "not opposed to the best interest of the Corporation or its
shareholders" as referred to in subsections (a) and (b) of this section.
(i) This Section 4 providing for the indemnification and advancement of
expenses shall be considered as a contractual agreement between a director,
officer, employee or agent of the Corporation and the Corporation and any
repeal or modification of this section shall not adversely affect the rights
and protections of a person existing hereunder at the time of such repeal or
modification.
ARTICLE IV
MEETINGS OF THE BOARD
SECTION 1. The regular Annual Meeting of the Board of Directors of the
Corporation shall be held, without notice, at the same place at which the
Annual Meeting of Stockholders is held, unless some other place shall be
designated therefor, immediately following the adjournment of the regular
Annual Meeting of Stockholders.
SECTION 2. Regular meetings of the Board may be held without notice at
such time and place (whether in the State or elsewhere) as shall from time to
time be determined by the Board.
SECTION 3. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board or by the President on three (3) days' notice
to each Director either personally or by mail or by telegram; special meetings
shall be called by the Chairman of the Board or by the President or Secretary
in like manner and on like notice on the written request of two (2) Directors.
Special meetings may be held, without notice, upon waiver, which waiver may be
by telegram or other writing, or when all of the members of the Board are
present at such meeting.
SECTION 4. At all meetings of the Board, a majority of the Directors shall
be necessary and sufficient to constitute a quorum for the transaction of
business, and the
<PAGE> 9
act of a majority of the Directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors, except as
otherwise specifically provided by statute or by the certificate of
incorporation or by these By-Laws, and provided that if the number of Directors
shall consist of more than seven (7) members, less than a majority, but in no
event less than one-third (1/3) of the members, may constitute a quorum.
ARTICLE V
COMPENSATION OF DIRECTORS
SECTION 1. Directors shall receive reasonable compensation for their
services as directors in such form and amount as shall be determined by the
Board of Directors from time to time; provided, that nothing herein contained
shall be construed to preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.
SECTION 2. Members of special or standing committees may be paid
reasonable compensation for attending committee meetings as determined by the
Board of Directors.
ARTICLE VI
COMMITTEES
SECTION 1. The Board of Directors may by resolution or resolutions passed
by a majority of the whole Board designate an Executive Committee of three or
more Directors. If provision be made for an Executive Committee, the members
thereof shall be elected by the Board of Directors to serve during the pleasure
of the Board. The Board of Directors shall elect a Chairman of the Executive
Committee from its members, but such Chairman shall not be, as such, an officer
of the Corporation. He shall have such authority and perform such duties as
may be assigned to him by the Board of Directors. Except as herein otherwise
provided, the Executive committee shall, during the intervals between the
meetings of the Board of Directors, possess and may exercise all of the powers
of the Board of Directors in the management of the business and affairs of the
Corporation. The executive Committee shall keep full and fair records and
accounts of its proceedings and transactions. All action by the Executive
Committee shall be reported to the Board of Directors at its meeting next
succeeding such action and shall be subject to revision and alteration by the
Board of Directors; provided that no rights of third persons shall be
affected by any such revision or alteration. Vacancies in the Executive
Committee shall be filled by the Board of Directors, but during the temporary
absence of a member of the Executive Committee, the remaining members of the
Executive Committee may appoint a member of the Board of Directors to act in
the place of such absent member.
<PAGE> 10
SECTION 2. Subject to the provisions of these By-Laws, the Executive
Committee shall fix its own rules of procedure and shall meet as provided by
such rules or by resolution of the Board of Directors and it shall also meet at
the call of the Chairman of the Board or the President of the Corporation or of
any two members of the Committee. Unless otherwise provided by such rules or
by such resolution, the provisions of Section 3 of Article IV relating to the
notice required to be given of meetings of the Board of Directors shall also
apply to meetings of the Executive Committee. A majority of the Executive
Committee shall be necessary to constitute a quorum. The Executive Committee
may act in writing, or by cable or by telegraph or by telephone, without a
meeting, but no such action of the Executive Committee shall be effective
unless concurred in by a majority of the entire Committee.
SECTION 3. The Board of Directors may by resolution provide for such other
standing or special committees as it deems desirable and discontinue the same
at pleasure. Each such committee shall have such powers and perform such
duties, not inconsistent with law, as may be assigned to it by the Board of
Directors. If provision be made for any such committee, the members thereof
shall be appointed by the Board of Directors and shall serve during the
pleasure of the Board of Directors. Vacancies in such committees shall be
filled by the Board of Directors.
ARTICLE VII
OFFICERS
SECTION 1. The officers of the Corporation (who need not be Stockholders)
shall be chosen by the Directors and shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Treasurer. The Board
may also choose Assistant Secretaries and Assistant Treasurers. Any two
offices except those of President and Vice President may be held by the same
person at the same time.
SECTION 2. The Board may appoint such other officers and agents as it
shall deem necessary, who shall hold office for such terms and shall exercise
such powers and duties as shall be determined from time to time by the Board.
SECTION 3. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors and/or such committee or committees as
the Board of Directors may from time to time determine upon.
SECTION 4. The officers of the Corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the office
of any officer or officers becomes vacant for any reason, the vacancy shall be
filled by the affirmative vote of a majority of the whole Board of Directors.
<PAGE> 11
SECTION 5. The Chairman of the Board shall be the Chief Executive Officer
of the Corporation and, under the direction of the Board of Directors, shall
have general and active control of the business, finances and affairs of the
Corporation. He shall preside at all meetings of the Stockholders and of the
Board of Directors at which he shall be present. He may sign and execute, in
the name of the Corporation, all authorized deeds, mortgages, bonds, contracts
or other instruments, except in cases in which the signing and execution
thereof shall have been expressly delegated to some other officer or agent of
the Corporation.
SECTION 6. The President shall be the Chief Operating Officer of the
Corporation and shall perform all of the duties of the Chairman of the Board in
the absence or disqualification of the Chairman of the Board. The Vice
President who shall be first in the order of election shall, in the absence or
disqualification of the Chairman of the Board and the President, perform all
the duties of the Chairman of the Board. In the event of the absence or
disqualification of the Chairman of the Board, the President and the Vice
President first in the order of election, the Vice President second in the
order of election shall perform all the duties of the Chairman of the Board.
In the event of the absence or disqualification of the Chairman of the Board,
the President and the Vice Presidents first and second in the order of
election, the Vice President third in the order of election shall perform all
the duties of the Chairman of the Board.
SECTION 7. The Secretary shall keep the minutes of Stockholders' and
Directors' meetings and shall have the custody of the corporate Seal, all
records, papers, files and books of the Corporation, except the books of
account. He shall issue notices of all meetings required by the By-Laws and
shall affix the corporate seal to all instruments of the Corporation requiring
the same, and attest the same by his signature whenever such attestation shall
be required, and shall generally perform all the duties appertaining to the
office of Secretary of a corporation.
SECTION 8. The Treasurer shall have the custody of and be responsible for
all funds and securities of the Corporation, which may come into his hands, and
shall keep regular, full and accurate accounts of all receipts and
disbursements, and shall render detailed reports of the same to the Board of
Directors at its regular meetings and at all other times when required by the
Board. He shall deposit all moneys of the Corporation in such bank or banks as
shall be designated by the Board of Directors, and shall generally perform all
duties usually appertaining to the office of Treasurer of a corporation.
SECTION 9. The Assistant Secretary shall possess all the powers and
perform all the duties of the Secretary in the absence or disability of
the latter and he shall at all times act as an assistant to the Secretary and
have such powers and perform such duties of the Secretary as shall be assigned
to him by the Stockholders, Board of Directors or the Secretary. In case both
the Secretary and Assistant Secretary are at the same time absent or unable to
perform their duties, the Board of Directors may
<PAGE> 12
appoint a Secretary Pro Tempore with powers and duties to act as
Secretary during the absence and disability of both Secretary and Assistant
Secretary.
SECTION 10. The Assistant Treasurer shall possess all the powers and
perform all the duties of the Treasurer in the absence or disability of the
latter and he shall at all times act as an assistant to the Treasurer and have
such powers and perform such duties of the Treasurer as shall be assigned to
him by the Stockholders, the Board of Directors or the Treasurer.
SECTION 11. The Chairman of the Board or the President and the Secretary
shall sign all deeds, mortgages, bills of sale, leases and other conveyances of
any interest in property and all general contracts, the execution of which has
been duly authorized by the Board of Directors or by the Stockholders;
provided, however, that the foregoing shall not be construed to prevent
ordinary purchases in the conduct of the business, which purchases may be made
by any other officers of the Corporation or by any other person or persons who
may be designated by the Board of Directors.
SECTION 12. In case of the absence of any officer of the Corporation, or
for any other reason that the Board may deem sufficient, the Board may delegate
for the time being, the powers or duties, or any of them of such officer to any
other officer, or to any Director, provided a majority of the entire Board
concur therein.
SECTION 13. The several officers of the Corporation are hereby empowered
and authorized to do and perform such other and further duties as from time to
time may be assigned to their respective offices by resolution of the Board of
Directors, including authority to sign certificates of stock, checks, drafts
and notes of the Corporation.
SECTION 14. The Directors may by resolution require any and all officers
of the Corporation and any and all employees of the Corporation to give bond to
the Corporation with sufficient sureties conditioned upon the faithful
performance of the duties of their respective offices or employment.
ARTICLE VIII
CAPITAL STOCK
SECTION 1. The certificates of stock of the Corporation shall be numbered
and shall be entered in the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by the
Chairman of the Board, the President or a Vice President, and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
and sealed with the seal of the Corporation; provided, that where such
certificate is signed (1) by a transfer agent or an assistant transfer agent,
or (2) by a transfer clerk acting on behalf of such corporation, and a
registrar, the signature of any such Chairman of the Board, President, Vice
President,
<PAGE> 13
Treasurer, Assistant Treasurer, Secretary or Assistant Secretary
and/or the seal of the Corporation may be a facsimile. In case any officer or
officers, who shall have signed, or whose facsimile signature or signatures
shall have been used on any such certificate or certificates, shall cease to be
such officer or officers of the Corporation, whether because of death,
resignation, or otherwise before such certificate or certificates shall have
been delivered by such corporation, such certificate or certificates may
nevertheless be adopted by such corporation and delivered as though the person
or persons who signed such certificate or certificates or whose facsimile
signature or signatures shall have been used thereon had not ceased to be such
officer or officers of this Corporation. Such certificates shall be in such
form as shall not be inconsistent with the Articles of Incorporation of this
Corporation or the laws of the State of Michigan, and shall be prepared and
approved by the Board of Directors.
SECTION 2. Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by an attorney,
lawfully constituted in writing, and upon surrender of the certificate
therefor.
SECTION 3. The Board of Directors shall have power to fix in advance a
date, not exceeding sixty (60) and not less than ten (10) days preceding the
date of any meeting of Stockholders or the date for the payment of any
dividend, or the date for the allotment of rights or the date when any change
or conversion or exchange of capital stock shall go in to effect, as a record
date for the determination of the Stockholders entitled to receive payment of
any such dividend, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of capital stock,
and in such case only such Stockholders as shall be Stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend, or to receive such allotment
of rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
SECTION 4. The Corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the laws of
Michigan.
SECTION 5. Any person claiming a certificate of stock to be lost or
destroyed, shall make an affidavit or affirmation of that fact and advertise
the same in such manner as the Board of Directors may require, and the
Board of Directors may, in its discretion, require the owner of the lost or
destroyed certificate, or his legal representative, to give the Corporation a
bond, in such sum as it may direct, to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss of any such
certificate; a new certificate of the same tenor and for the same number of
shares as the one alleged to be lost or destroyed may be issued without
requiring any bond when, in the judgment of the Directors, it is proper so to
do.
<PAGE> 14
ARTICLE IX
VOTING STOCK IN OTHER CORPORATIONS
Unless otherwise ordered by the Board of Directors, the Chairman of the
Board, the President or a Vice President shall have full power and authority,
in behalf of this Corporation, to attend and to act and to vote at any meetings
of Stockholders of any corporation in which this Corporation may hold stock and
at any such meeting shall possess and may exercise any and all the rights and
powers incident to the ownership of such stock and which, as the owner thereof,
the Corporation might have possessed and exercised if present. The Board of
Directors, by resolution, from time to time, may confer like powers upon any
other person or persons. The Chairman of the Board, the President or a Vice
President of the Corporation may authorize from time to time the signature and
issuance of proxies to vote upon shares of stock of other corporations standing
in the name of the Corporation. All such proxies shall be signed in the name
of the Corporation by the Chairman of the Board, the President or Vice
President or such other officer authorized by the Board of Directors or the
Executive Committee.
ARTICLE X
CHECKS
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers, or such other person or persons, as the
Board of Directors or the Executive Committee may from time to time designate.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Corporation shall end on the thirty-first day of
December in each year.
ARTICLE XII
DIVIDENDS
<PAGE> 15
Dividends upon the capital stock of the Corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of capital stock as
authorized by law.
ARTICLE XIII
NOTICE OF INTENT TO FORECLOSE LIEN ON STOCK
Whenever a debt is due to this Corporation from a Stockholder thereof, the
Secretary, upon being instructed so to do by the Board of Directors, shall give
written notice to such Stockholder that, unless said Stockholder shall pay his
indebtedness to said Corporation within thirty (30) days from the time of
giving such notice, then said Corporation will proceed to sell and transfer the
stock of such Stockholder in said Corporation in the same manner, and by the
same procedure as is provided by law for the sale of the stock of a subscriber
to capital stock who has not paid up his subscription. Such notice shall be
served in the manner hereinafter provided for service of notices.
ARTICLE XIV
CALLS
Notice of calls for payment of subscriptions to the capital stock of this
Corporation shall be in writing, and may be served in the same manner
hereinafter provided for service of notices.
ARTICLE XV
NOTICES
SECTION 1. Whenever under the provisions of these By-Laws notice is
required to be given to any Director, Officer or Stockholder, it shall
not be construed to mean personal notice, but such notice, unless otherwise
provided by these By-Laws or by the General Corporation Code, may be given in
writing, by mail, by depositing the same in the post office or letter box in a
postpaid sealed wrapper, addressed to such Stockholder, Officer or Director at
his address as it appears on the records of the Corporation.
<PAGE> 16
SECTION 2. Any stockholders, Director or Officer may waive any notice
required to be given under these By-Laws.
ARTICLE XVI
SEAL
The Board of Directors shall provide a suitable seal, containing the name
of the Corporation. The seal shall be in charge of the Secretary. If deemed
advisable by the Board of Directors, duplicate seals may be provided and kept
for the necessary purposes of the Corporation.
ARTICLE XVII
AMENDMENTS
Except as otherwise provided in the Articles of Incorporation, these
By-Laws may be altered, amended or repealed by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, at
any regular or at any special meeting of the Stockholders if notice of the
proposed alteration, amendment or repeal be contained in the notice of such
special meeting, or by the affirmative vote of a majority of the Board of
Directors at any regular or special meeting; provided, however, that such of
the respective sections of the By-Laws, if any, or amendments thereto, as are
adopted by the Stockholders, may be altered, amended or repealed by the
Stockholders, only if any such section respectively by its express terms so
provided. This section shall be altered, amended or repealed only by a vote of
the Stockholders.
ARTICLE XVIII
CONTROL SHARE ACQUISITIONS
SECTION 1. This Article is adopted under Section 799 of the Michigan
Business Corporation Act, and the terms used in this Article shall have the
meanings specified in Section 799.
<PAGE> 17
SECTION 2. Control shares acquired in a control share acquisition, with
respect to which no acquiring person statement has been filed with the
Corporation, may, at any time during the period ending 60 days after the last
acquisition of control shares or the power to direct the exercise of voting
power of control shares by the acquiring person, be redeemed by the Corporation
at the fair value of the shares.
SECTION 3. After an acquiring person statement has been filed and after
the meeting at which the voting rights of the control shares acquired in a
control share acquisition are submitted to the Stockholders, the shares may be
redeemed by the Corporation at the fair value of the shares unless the shares
are accorded full voting rights by the Stockholders as provided in Section 798
of the Michigan Business Corporation Act.
SECTION 4. An election to redeem shares by the Corporation under Section 2
or 3 of this Article shall be made only by vote of the Board of Directors.
Written notice of the election shall be sent to the acquiring person within
seven days after the election is made. The determination of the Board of
Directors as to fair value shall be conclusive. Payment shall be made for the
control shares subject to redemption within 30 days after the election is made
at a date and place selected by the Board of Directors. The Board of Directors
may adopt additional procedures to accomplish a redemption.
<PAGE> 1
EXHIBIT 10(n)
[COMERICA BANK LETTERHEAD]
November 24, 1997
Mr. Gerald J. Israel
Vice President-Finance
Detrex Corporation
24901 Northwestern Hwy., Suite 500
Southfield, MI 48075-2203
Dear Jerry:
I am pleased to inform you that Comerica Bank ("Comerica") has agreed to provide
a Standby Letter of Credit to Harvel Plastics, Inc. for those purposes and on
those terms and conditions set forth on the attached Term Sheet and General
Conditions (collectively the "Commitment").
Please indicate your acceptance of this Commitment by signing below where
indicated, and return your signed copy of this letter to me within 30 days from
the date of this letter. If your written acceptance is not received by me within
said period of time, this Commitment shall automatically become null and void.
This Commitment may only be accepted as drawn, and may not be accepted in part,
conditionally or subject to modification. The letter of credit must be fully
closed, if at all, on or before February 28, 1998.
Please call me at (313) 222-9278 if you have any questions regarding the terms
of this Commitment or the closing of this transaction.
Sincerely,
COMERICA BANK
By /S/ Daniel T. Ruzylo
----------------------------
Daniel T. Ruzylo
Its: Vice President
----------------------------
<PAGE> 2
COMERICA
ACCEPTANCE
The undersigned hereby accept(s) this Commitment and agree(s) to be fully bound
by the terms and conditions set forth therein.
Dated: December 1 , 1997
-----------------------------
HARVEL PLASTICS, INC.
- -----------------------------------
By: G. J. Israel
--------------------------------
Its: DIRECTOR
-------------------------------
2
<PAGE> 3
COMERICA
TERM SHEET
I. Letter of Credit
Obligor: Harvel Plastics, Inc., a Pennsylvania corporation.
Amount: Up to a $4,100,000 Standby Letter of Credit to support
the issuance of up to $4,000,000 of bonds to finance the
purchase of equipment for Harvel's expansion to
California.
Term: Up to an eight year letter of credit. No
amortization under the credit will be
required through the year ending 12-31-98.
Beginning on 4-1-99 the Bank will apply a
formula availability reserve/holdback
against the Detrex revolving credit in the
amount of $145,000. The reserve will
increase by $145,000 on 7-1 and 10-1 and
reduce to zero on 1-1.
Collateral: First security interest and/or lien in all
of Obligor's accounts receivable, inventory,
machinery, equipment and a first mortgage on
real estate located at 300 Kuebler Road,
Easton, Pennsylvania. This letter of credit
will be cross collateralized and cross
defaulted with all Comerica debt outstanding
to guarantors.
Borrowing Formula: Advance limited to 100% of the cost of equipment to be
purchased including up to $553,000 of tooling and
$370,000 of installation costs.
Letter of Credit
Fee: 1-1/2% per annum on the outstanding balance of the Letter
of Credit payable annually in advance. A processing fee
of $150 per draw on the credit will also be charged.
Fees: A) A 1/2% one-time closing fee, plus
B) All out-of-pocket costs of Comerica, plus
C) All legal fees and charges of inside and/or outside
counsel for Comerica, plus
D) Any fees associated with services provided
by W.Y. Campbell & company will be quoted
separately.
3
<PAGE> 4
COMERICA
Your good faith deposit will be applied against the above
fees and costs.
Corporate Guaranty: Detrex Corporation, Elco Corporation and Seibert
Oxidermo, Inc., unlimited and secured by a first lien on
Corporate Guarantor's accounts receivable, inventory,
machinery and equipment, and real estate located at 401
Emmet Ave., Bowling Green, Kentucky, 325 Emmet Ave.,
Bowling Green, Kentucky and 26000 Capitol Ave., Redford,
Michigan.
Purpose: To support the acquisition of equipment.
Loan Documentation: The loan shall be evidenced by a loan agreement,
promissory note, guaranties, security agreements,
financing statements, and such other
documents as shall be required by Comerica.
The form and substance of the loan
documentation must be satisfactory to
Comerica.
Other Documents and
Information: A condition to making the loan is receipt by
Comerica of such other information and
documentation as shall be required by
Comerica, including without limit insurance
and opinions of counsel. The form and
substance of such information and
documentation must be satisfactory to
Comerica.
4
<PAGE> 5
COMERICA
GENERAL CONDITIONS
The following General Conditions are specifically incorporated within
and form a part of the Commitment to which they are attached. Fulfillment and
discharge of the following General Conditions are essential preconditions to
Comerica's obligation to consummate the proposed loan transaction.
1. Co-Ordination with Comerica's Counsel. ____________________________
will act as our counsel in connection with the Closing of this transaction.
After your acceptance of this Commitment, you are requested to promptly contact
the attorney assigned to your account for the purpose of arranging the ordering
of Uniform Commercial Code searches, the preparation of closing documents and
the coordination of the respective obligations. Please obtain the name of that
attorney from your loan officer. Early contact by your counsel is also
encouraged.
2. Closing Date. Comerica shall set a date and place for Closing.
You should contact your loan officer immediately to advise of your scheduling
preferences and/or potential problems.
3. Delivery of Obligor's Documents. All documentation to be provided
to Comerica by you (other than that to be drafted by Comerica's counsel) shall
be provided as soon as possible after the acceptance of this Commitment. It
would be appreciated if your documentation is delivered to Comerica and its
counsel at least five business days prior to the date established by Comerica
for Closing.
4. Reliance Upon Representations. Comerica's Commitment is given in
reliance upon the truth of all representations and statements made orally or in
writing by or on behalf of the Obligor to Comerica, and those representations
and statements are deemed to be a part of the Commitment. Comerica, at its
discretion, may require the updating (immediately prior to Closing) of any
financial information to be provided with respect to Obligor, any guarantor or
any other party for whom such information is required by the Commitment.
5. Adverse Information. In the event that adverse information comes to
your attention at any time prior to consummation of the loan transaction
proposed by the Commitment, you are required to bring it to Comerica's attention
immediately.
6, Disclaimer by Comerica. By issuance of the Commitment and Closing
of the Loan, Comerica makes no
5
<PAGE> 6
COMERICA
representation, warranty or assurance to the Obligor or any guarantor of the
financial viability of the Obligor, the advisability of entering into the
proposed transaction or that Comerica assumes any responsibility whatsoever to
see to the application of any portion of the loan proceeds. By acceptance of the
Commitment (with respect to parties whose acceptance is required) and
consummation of the transaction (with respect to all borrowers and guarantors),
all such parties shall be deemed to have expressly acknowledged the absence of
any such representations, warranties or assurances.
7. Prohibition on Assignment by Obligor. Neither the Commitment nor
any rights under the Commitment are assignable by the Obligor, in whole or in
part, voluntarily, by operation of law or otherwise (including by way of the
sale or assignment of interests in Obligor).
8. Assignment by Comerica. While the Commitment cannot be assigned by
the Obligor without Comerica's prior written consent, the Commitment may be
assigned (including by way of participations) by Comerica, without discharging
Comerica's liability hereunder.
9. Termination of Commitment. The Commitment may be terminated at
Comerica's option, without further liability by Comerica, and in such manner as
Comerica may determine, upon the occurrence of any of the following events:
A. The failure by the Obligor, any guarantor or any other
necessary party to comply with any of the terms and
conditions of the Commitment, or if any representation or
warranty made by or on behalf of Obligor should be or become
untrue or misleading in any material respect;
B. Upon the filing by or against the Obligor, any guarantor or
any affiliated or related party required to deliver or
execute any document or enter into any arrangement on behalf
of the Obligor in connection with fulfillment of the
Obligor's preconditions to Closing, of a petition in
bankruptcy or insolvency or for reorganization or
appointment of a receiver or trustee, or the making by the
Obligor or any such party of any assignment for the benefit
of creditors or the filing of a petition for arrangement by
the Obligor or any such party, which in each case is not
withdrawn, dismissed, cancelled and/or terminated upon the
earlier of 60 days after the filing or entry of the same or
6
<PAGE> 7
COMERICA
the date for expiration of the Commitment after its
acceptance by the Obligor; or
C. The occurrence, prior to full closing, of any material and
adverse event or circumstance (measured in Comerica's sole
judgment) affecting the Obligor's business or the security
to be granted to Comerica.
Upon such termination, any otherwise refundable fees paid or to be paid to
Comerica by the Obligor shall constitute liquidated damages. In addition, at
Comerica's election, Obligor shall pay to Comerica, upon demand, the full amount
of all costs and expenses (including without limit in-house or outside attorney
charges) incurred by the Bank in connection with the Commitment and the proposed
transactions.
10. Cancellation for Failure to Close. The Commitment may, in all
events, be cancelled at Comerica's option, communicated to the Obligor in
writing, in the event that the loan proposed to be made pursuant to the
Commitment is not closed within 60 days after the date of the Commitment (unless
an earlier or later Closing date is specifically stated in the body of the
Commitment).
11. Fees Earned Upon Acceptance. Any commitment fees designated as
non-refundable and payable upon acceptance of the Commitment shall be deemed
earned upon acceptance of the Commitment unless otherwise stated in the
Commitment. Obligor shall not be entitled to a refund or credit with respect to
non-refundable commitment fees under any circumstances, unless specifically so
stated in the Commitment.
12.Title, Priority of Liens and Condition of Property. The Obligor
shall own all property in which Comerica is to be granted a lien, security
interest or encumbrance, absolutely and free and clear of all liens,
encumbrances, security interests and claims of other parties. Unless otherwise
stipulated in the Commitment, any lien, security interest or encumbrance to be
created in favor of Comerica shall be a first and prior lien upon the specified
property and all proceeds and products thereof, superior to the lien, right and
interest of any other party except to the extent expressly permitted by the
Commitment. All tangible personal property in which Comerica is to be granted a
security interest shall be and be maintained in good operating condition and
repair.
13. Damage or Destruction to Property. If any real or personal
property to be pledged, assigned, mortgaged or otherwise encumbered in favor of
Comerica in connection with the loan to be made pursuant to the Commitment, is
substantially damaged or destroyed by fire or other casualty
7
<PAGE> 8
COMERICA
and is not entirely repaired, restored or replaced (without further encumbrance
of the Obligor's property or assets) prior to Closing, Comerica may cancel the
Commitment by sending written notice to the Obligor.
14. Payment Dates. With respect to loans requiring regular periodic
payments of principal and interest, the first full payment of principal and
interest shall be made on the first day of the first month following Closing,
unless Comerica shall agree otherwise. To the extent that any loan or loans are
to be made pursuant to the Commitment which do not require regular payments of
principal, but interest only, this statement shall apply with respect to the
interest portion to be paid.
15. Waiver or Modification. The provisions of the Commitment
(including without limit these General Conditions) cannot be waived or modified
except in a further written instrument signed by the Obligor and Comerica (with
respect to a modification) or by Comerica (with respect to a waiver).
16. Survival of Closing. The provisions of the Commitment shall
survive the closing of the loan transaction.
17. Captions. Captions to paragraphs in the Commitment and these
General conditions have been inserted solely for the sake of convenient
references, and are entirely without substance or effect.
8
<PAGE> 1
EXHIBIT 13
DETREX CORPORATION AND SUBSIDIARIES
1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE> 2
------------------------------------------
DETREX
CORPORATION
1997 ANNUAL REPORT
------------------------------------------
<PAGE> 3
HIGHLIGHTS(1)
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales..................................... $95,757,000 $96,825,000 $94,302,000
Net income (loss)............................. 1,513,000 415,000 (1,869,000)
Income (loss) per common share -- basic....... .96 .26 (1.18)
Stockholders' equity per common share......... 11.89 10.93 10.67
Additions to land, buildings and equipment
(including capital leases).................. 5,360,000 2,770,000 2,662,000
Current ratio................................. 1.4 to 1 1.4 to 1 1.3 to 1
Number of stockholders........................ 441 387 425
Number of employees........................... 353 345 347
</TABLE>
(1) This information should be considered in conjunction with
the Consolidated Financial Statements and Management's
Discussion and Analysis.
- --------------------------------------------------------------------------------
DETREX GROUP OF COMPANIES(1)
-- Detrex Corporation -- a specialty chemicals company
- Solvents and Environmental Services Division -- distributes and
recycles parts cleaning solvents and disposes of industrial wastes
- Equipment Division -- designs, engineers and sells industrial parts
cleaning equipment
- Automation Division -- engineers and sells automation and material
handling equipment
- RTI Laboratories -- provides analytical and environmental laboratory
services
-- Subsidiaries of Detrex Corporation
- Harvel Plastics, Inc. -- manufactures PVC and CPVC pipe and custom
extrusions
- The Elco Corporation -- produces petroleum additives, pharmaceutical
intermediates, and hydrochloric acid
- Seibert-Oxidermo, Inc. -- produces industrial and automotive paint and
other coatings
(1) For more information about the products of Detrex and its subsidiaries, see
page 16 of this Annual Report or visit our Web Site at http://www.detrex.com
<PAGE> 4
TO OUR SHAREHOLDERS:
We are pleased to report that your company achieved earnings of $1.5
million in 1997. This marks Detrex's second consecutive year of earnings
improvement and represents a significant increase over last year's earnings of
$415,000. The dedication and enthusiasm of the Detrex team generated profitable
results in all business units and a strong 1997 fourth quarter performance has
brought our consecutive string of profitable quarters to eight. As we enter
1998, the turnaround continues with our focus shifting to creating and
sustaining long-term profitable growth for your company.
Net sales in 1997 reflect a $3.5 million revenue increase which replaced
nearly all of the $4.6 million sales revenue associated with the industrial
furnace division which was sold in 1996. Our plastic pipe subsidiary, Harvel
Plastics, Inc., was the main contributor to the revenue growth.
Harvel generated solid bottom-line performance by capitalizing on the
demand for high quality PVC and CPVC products. The Elco Corporation also made an
important contribution to our profitability and responded effectively to
customer demand and changing market conditions. Cost reductions in the Solvents
and Environmental Services Division yielded much needed improvements, with the
business returning to profitability after two years of losses. Its sister
division, the Equipment Division, improved upon last year's profitable
performance with enhanced business processes and controls. Seibert-Oxidermo,
Inc., our paint subsidiary, achieved QS-9000 certification, introduced several
new custom products, and generated a profit in a highly competitive market. The
Automation Division successfully executed six major orders in its first year as
a stand-alone unit, and RTI Laboratories effectively accommodated on-going
changes in the analytical testing field.
Cash flow from operations enabled Detrex to fund $4.7 million in capital
expenditures internally in 1997. In addition, working capital has improved to
$9.3 million as of December 31, 1997. We are projecting capital expenditures of
nearly $8.5 million for 1998, including almost $4.0 million for the expansion of
Harvel's operations on the West Coast, as well as several other investments for
growth. Our capital expenditures will be financed primarily through internally
generated funds and industrial development bonds.
The Harvel expansion, slated for 1998, should provide your company an
outstanding platform to expand its geographical presence and distribution in the
western region of the United States. By reducing transportation costs and
improving order turnaround time, a new manufacturing and distribution facility
will enhance Harvel's ability to ship product to Pacific Rim countries, as well
as to customers on the West Coast. We believe this new facility should provide
an outstanding growth opportunity for both Harvel and Detrex.
Our Elco subsidiary is working on products and market opportunities with
strong potential for growth as well. The new plant in Ashtabula has been
launched and will provide much needed additional capacity in 1998. We are
currently developing new products, including an extremely high-purity
hydrochloric acid. In addition, we are enhancing our facilities and capabilities
for manufacturing of fine chemicals including pharmaceutical intermediates for
use in a broad range of products.
During 1997, we accelerated the recovery that began in 1996 and further
stabilized Detrex. Our goal for the new year is to continue building shareholder
value through growth and continuing improvements in plant, equipment, people and
processes. We thank our shareholders and the entire Detrex family for their
continued backing and support and look forward to continued progress.
<TABLE>
<S> <C>
Thomas E. Mark William C. King
President and Chief Operating Officer Chairman and Chief Executive Officer
</TABLE>
1
<PAGE> 5
--------------- INDEPENDENT AUDITORS' REPORT---------------
------------------------------------
Suite 900
600 Renaissance Center
Deloitte & Touche LLP Letterhead Detroit, Michigan 48243-1704
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, 1997 and 1996 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, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial 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, 1997 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 25, 1998
Deloitte & Touche Logo
2
<PAGE> 6
DETREX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES................................................... $95,756,801 $96,825,436 $94,301,999
Cost of sales............................................... 71,356,262 74,147,179 73,062,297
Selling, general and administrative expenses................ 17,816,042 18,923,660 20,027,863
Provision for depreciation and amortization................. 3,242,789 3,188,758 3,393,721
Net environmental (income) expense.......................... -- (100,000) 100,039
Other (income) expense -- net............................... 293,961 (571,118) (689,350)
Minority interest........................................... 314,912 280,014 242,110
Interest expense............................................ 723,893 919,947 886,106
Gain on sale of Pacific Industrial Furnace Division......... -- (368,985) --
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES........................... 2,008,942 405,981 (2,720,787)
Provision (Credit) for income taxes......................... 495,839 (9,387) (851,484)
----------- ----------- -----------
NET INCOME (LOSS)........................................... 1,513,103 415,368 (1,869,303)
RETAINED EARNINGS AT BEGINNING OF YEAR...................... 14,119,822 13,704,454 15,573,757
----------- ----------- -----------
RETAINED EARNINGS AT END OF YEAR............................ $15,632,925 $14,119,822 $13,704,454
=========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE:
Basic....................................................... $.96 $.26 $(1.18)
=========== =========== ===========
Diluted..................................................... $.94 $.26 $(1.18)
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic....................................................... 1,583,414 1,583,414 1,583,414
Effects of Dilutive Stock Options........................... 28,056 11,222 --
----------- ----------- -----------
Diluted..................................................... 1,611,470 1,594,636 1,583,414
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 7
DETREX CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
<TABLE>
<CAPTION>
ASSETS
1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................... $ 398,093 $ 1,311,045
Accounts receivable (less allowance for uncollectible
accounts of $372,000 in 1997 and $395,000 in 1996)........ 16,296,172 15,203,184
Note receivable............................................. -- 1,562,665
Refundable U.S. income taxes................................ -- 1,003,827
Inventories................................................. 9,742,109 9,058,167
Land and building held for sale............................. 1,425,000 --
Prepaid expenses and other.................................. 692,543 878,263
Deferred income taxes....................................... 1,349,842 759,063
----------- -----------
TOTAL CURRENT ASSETS................................. 29,903,759 29,776,214
LAND, BUILDINGS AND EQUIPMENT:
Land........................................................ 993,602 993,602
Buildings and improvements.................................. 16,555,248 15,938,390
Machinery and equipment..................................... 31,298,526 29,539,130
Construction in progress.................................... 2,541,084 819,122
----------- -----------
51,388,460 47,290,244
Less allowance for depreciation and amortization............ 30,040,031 27,916,193
----------- -----------
LAND, BUILDINGS AND EQUIPMENT -- NET................. 21,348,429 19,374,051
LAND, BUILDING AND EQUIPMENT HELD FOR SALE.................. 1,350,239 2,820,125
PREPAID PENSIONS............................................ 1,338,951 1,280,886
DEFERRED INCOME TAXES....................................... 693,406 1,367,265
OTHER ASSETS................................................ 935,978 973,858
----------- -----------
$55,570,762 $55,592,399
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 8
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Loans payable............................................... $ 5,699,836 $ 5,627,453
Current maturities of capital lease obligations............. 303,464 385,366
Accounts payable............................................ 9,843,411 11,123,341
Environmental reserve....................................... 1,485,000 1,027,000
Accrued compensation........................................ 1,184,740 699,520
Other accruals.............................................. 2,113,776 2,398,802
----------- -----------
TOTAL CURRENT LIABILITIES............................ 20,630,227 21,261,482
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS.............. 569,396 393,800
ACCRUED POSTRETIREMENT BENEFITS............................. 4,488,982 4,293,584
ENVIRONMENTAL RESERVE....................................... 8,090,952 9,244,297
ACCRUED PENSION AND OTHER................................... 1,028,285 1,344,330
MINORITY INTEREST........................................... 1,941,147 1,746,236
STOCKHOLDERS' EQUITY:
Common capital stock, $2 par value, authorized 4,000,000
shares,
outstanding 1,583,414 shares.............................. 3,166,828 3,166,828
Additional paid-in capital.................................. 22,020 22,020
Retained earnings........................................... 15,632,925 14,119,822
----------- -----------
TOTAL STOCKHOLDERS' EQUITY........................... 18,821,773 17,308,670
----------- -----------
$55,570,762 $55,592,399
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 9
DETREX CORPORATION
CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)....................................... $ 1,513,103 $ 415,368 $(1,869,303)
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization...................... 3,242,789 3,188,758 3,393,721
(Gain) Loss on sale or write-off of buildings,
machinery and equipment........................ 42,255 107,488 (189,066)
Deferred income taxes.............................. 83,080 1,277,731 2,721,155
Changes to operating assets and liabilities that
provided (used) cash:
Accounts receivable.............................. (1,092,988) (1,247,167) 4,103,160
Note receivable.................................. 1,562,665 (1,562,665) --
Refundable U.S. income taxes..................... 1,003,827 2,036,945 (3,040,772)
Inventories...................................... (683,942) (620,662) 509,579
Prepaid expenses and other....................... 185,720 46,018 (248,742)
Other assets..................................... (34,177) 20,761 (133,535)
Accounts payable................................. (1,279,930) 2,115,738 (2,757,588)
Environmental reserve............................ (695,345) 63,098 (2,382,738)
Accrued compensation............................. 485,220 56,431 (179,561)
Postretirement benefits.......................... 195,398 307,699 349,569
Other accruals................................... (406,160) (1,806,234) 1,148,045
----------- ----------- -----------
TOTAL ADJUSTMENTS.............................. 2,608,412 3,983,939 3,293,227
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 4,121,515 4,399,307 1,423,924
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (4,710,327) (2,324,663) (2,095,379)
Proceeds from disposal of machinery and equipment....... 2,125 1,615 235,321
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (4,708,202) (2,323,048) (1,860,058)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings......................................... -- -- 3,000,000
Repayment of long-term debt............................. -- -- (1,000,000)
Borrowing (repayment) of short-term debt -- net......... 72,383 (2,872,547) --
Principal payments under capital lease obligations...... (398,648) (657,027) (815,468)
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES................................ (326,265) (3,529,574) 1,184,532
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ (912,952) (1,453,315) 748,398
Cash and cash equivalents at beginning of year.............. 1,311,045 2,764,360 2,015,962
----------- ----------- -----------
Cash and cash equivalents at end of year.................... $ 398,093 $ 1,311,045 $ 2,764,360
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest........................................... $ 797,756 $ 1,023,564 $ 771,564
Income taxes....................................... $ 205,472 $ 223,044 $ 284,579
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations incurred in connection with
the acquisition of equipment........................... $ 649,665 $ 445,649 $ 566,628
Capital lease terminations.............................. $ 440,149 $ 152,931 $ 175,708
Sale of PIFCO........................................... $ -- $ 1,562,665 --
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 10
DETREX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND CUSTOMER CONCENTRATION
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, lubricant additives, pharmaceutical intermediates, cleaning solvents,
hydrochloric acid, PVC and CPVC plastic pipe, industrial finishing materials and
paints, automation equipment, 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.
All of the Company's business units operate in highly competitive markets
which are mainly national in scope, although approximately 12% of the Company's
business in 1996 and 1997 is done internationally, principally by its lubricants
subsidiary and its plastic pipe subsidiary. Generally, for 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 and therefore vulnerability from this aspect
is not a factor. However, certain of the Company's business units sell primarily
to automotive or automotive related companies.
2. 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 1995 and 1996 have been reclassified to conform
with 1997 classifications.
Inventories and Accounts Receivable
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 equipment contracts are stated at the accumulated cost of material,
labor and burden less related progress billings.
Revenue from the Company's equipment contracts is recognized using the
percentage-of-completion method except when use of the completed contract method
does not have a material impact on the results of operations.
For sales reported under the percentage of completion method, the percent
of revenues is recognized based on the ratio of costs incurred to date to total
costs expected for each project. Revenue recognized for jobs in process at
December 31, 1997 totals $1,454,000 and costs incurred on these contracts
amounts to $1,071,000. Included in accounts receivable is $947,310 that has not
been billed to customers.
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 1997, 1996 and 1995 were approximately
$1,365,000, $1,114,000, and $1,272,000, respectively.
Earnings (Loss) Per Common Share
Basic earnings (loss) per common share is based upon the average number of
common shares outstanding during the year. Shares subject to in-the-money stock
options are the only items impacting diluted earnings per share.
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.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable,
notes receivable, accounts payable, and debt under the Revolving Credit
Agreement approximated fair values.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the balance sheet date
7
<PAGE> 11
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. INVENTORIES
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Raw materials............... $3,390,407 $ 3,005,399
Work in progress............ 359,819 1,785,310
Finished goods.............. 5,996,243 5,768,376
Less: Progress billings on
work in progress.......... (4,360) (1,500,918)
---------- -----------
$9,742,109 $ 9,058,167
========== ===========
</TABLE>
The excess of current cost over the stated last-in, first-out value is
approximately $1,345,000 and $1,635,000 at December 31, 1997 and 1996.
4. CAPITAL AND OPERATING LEASES
Capitalized lease assets included in machinery and equipment at December 31
are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Machinery and equipment...... $1,420,319 $2,140,025
Accumulated amortization..... 611,394 1,151,240
---------- ----------
Leased assets -- net......... $ 808,925 $ 988,785
========== ==========
</TABLE>
Rent expense applicable to operating leases for 1997, 1996 and 1995 was
$591,000, $565,000 and $569,000, respectively.
Minimum annual lease payments for leases in effect at December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
Minimum Lease Payments: Capital Operating
---------- ----------
<S> <C> <C>
1998.................... $ 413,017 $ 463,565
1999.................... 314,188 306,028
2000.................... 212,537 128,181
2001.................... 127,614 64,186
2002.................... 56,654 60,607
2003 and thereafter..... -- 75,000
---------- ----------
Total minimum lease
payments................... 1,124,010 $1,097,567
==========
Less amount representing
interest................... 251,150
----------
Present value of net minimum
lease payments............. 872,860
Less current portion......... 303,464
----------
Non-current portion.......... $ 569,396
==========
</TABLE>
5. REVOLVING CREDIT AGREEMENT AND TERM LOAN
The Company finalized a new Credit Agreement (the Agreement) with Comerica
Bank on June 13, 1996. The Agreement provides for a credit facility of up to
$12.0 million, collateralized by the Company's inventory, accounts receivable,
certain fixed assets, and stock of subsidiaries. The Agreement contains, among
other provisions, requirements for maintaining defined levels of tangible net
worth and various financial statement ratios. Interest under the Agreement is
based on the prime interest rate. The Company has received a commitment from
Comerica Bank to extend the current facility to at least one year beyond the
current May 1, 1998 expiration date. The current Agreement also provides for a
$2.0 million Term Loan facility.
The weighted average interest rate for short term borrowings under the
Agreement for the year ended December 31, 1997 was 9.92%, compared to 10.07% for
the year ended December 31, 1996 and 8.10% for the year ended December 31, 1995.
6. INCOME TAXES
The income taxes, calculated in accordance with SFAS No. 109 for 1997, 1996
and 1995, included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ----------- -----------
<S> <C> <C> <C>
Current for tax purposes:
Federal.................... $ 42,032 $(1,146,060) $(4,318,066)
State and local............ 194,559 74,381 278,427
--------- ----------- -----------
Total Current............ 236,591 (1,071,679) (4,039,639)
--------- ----------- -----------
Deferred income taxes:
Federal.................... 723,261 948,152 2,609,310
Valuation allowance........ (467,000) -- 467,000
State and local............ 2,987 114,140 111,845
--------- ----------- -----------
Total Deferred........... 259,248 1,062,292 3,188,155
--------- ----------- -----------
Provision (Credit) for income
taxes...................... $ 495,839 $ (9,387) $ (851,484)
========= =========== ===========
</TABLE>
Deferred tax assets (liabilities) at December 31, 1997 and 1996 relate to
the following temporary differences and carryforwards:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net operating loss carryforward.......... $ 244,815 $ 1,049,617
Alternative minimum tax credit
carryforward........................... 425,176 383,144
Accruals for:
Postretirement benefits................ 1,718,831 1,644,013
Environmental.......................... 3,666,633 3,932,879
Restructuring.......................... 41,463 43,268
Self insurance reserve................. 150,097 187,621
Inventory related........................ 429,790 460,635
Other.................................... 184,367 225,875
----------- -----------
Gross deferred tax assets............ 6,861,172 7,927,052
----------- -----------
Valuation allowance...................... -- (467,000)
----------- -----------
Depreciation............................. (3,021,329) (2,919,663)
Undistributed earnings of the Company's
DISC................................... (1,484,017) (1,484,017)
Insurance Refund......................... -- (344,610)
Other.................................... (312,578) (585,434)
----------- -----------
Gross deferred tax liabilities....... (4,817,924) (5,333,724)
----------- -----------
Net deferred tax assets.............. $ 2,043,248 $ 2,126,328
=========== ===========
</TABLE>
The Company has a net operating loss carryforward of $720,044 that expires
in 2010.
8
<PAGE> 12
The reasons for the difference between the income tax provision and income
taxes computed at 34% for 1997, 1996 and 1995 are summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Computed 'expected' tax
provision..................... $ 683,040 $ 138,034 $(925,068)
State and local income taxes,
net of federal tax benefit.... 130,380 124,424 257,580
Nondeductible meal and
entertainment expense......... 68,655 63,504 57,324
Tax refund carryback tax rate
differential.................. -- (364,319) (791,805)
Deferred tax asset valuation
allowance..................... (467,000) -- 467,000
Other -- net.................... 80,764 28,970 83,485
--------- --------- ---------
$ 495,839 $ (9,387) $(851,484)
========= ========= =========
</TABLE>
In 1995, the Company established a valuation allowance of $467,000 against
its deferred tax assets. The Company returned this reserve to income in 1997.
7. LAND, BUILDINGS AND EQUIPMENT HELD FOR SALE
In 1993, the Company sold one division and outsourced manufacturing at
another location. As a result, the Company has two facilities available for
sale. Neither facility is currently utilized and the Company is actively
pursuing the sale of both. One facility is under contract to sell and it is
anticipated that the transaction will be finalized during the first half of
1998.
8. 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 7.0% and 4.0%, at December 31, 1997, 7.5% and 4.0% at December 31, 1996 and
7.25% and 4.0% at December 31, 1995. The expected long-term rate of return on
assets was 8.5% in all years. The following table sets forth the plans' funded
status and amounts recognized in the Company's balance sheet at December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligations:
Vested benefits.................... $25,430,985 $23,253,400
Non-vested benefits................ 1,121,041 1,065,066
----------- -----------
Total............................ $26,552,026 $24,318,466
=========== ===========
Projected benefit obligations for
service
rendered to date..................... $29,056,309 $26,515,239
Plan assets at fair value -- primarily
equity and fixed income bond funds... 32,834,181 29,678,284
----------- -----------
Excess of plan assets over projected
benefit obligations.................. 3,777,872 3,163,045
Unrecognized net asset at January 1,
1986 being recognized principally
over 15 years........................ (752,700) (950,426)
Unrecognized net gain from past
experience different from that
assumed.............................. (2,364,432) (1,888,671)
Additional minimum liability........... (180,335) (156,892)
----------- -----------
Net pension asset...................... $ 480,405 $ 167,056
=========== ===========
</TABLE>
For plans included above where projected benefits exceed plan assets the
following data is set forth:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Accumulated benefit obligations.............. $918,272 $844,844
Projected benefit obligations................ 946,925 881,981
Plan assets at fair value.................... 737,182 639,326
</TABLE>
Net pension credit included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost-benefits
earned during the year... $ 570,823 $ 584,825 $ 467,594
Interest cost on projected
benefit obligations...... 1,942,248 1,869,757 1,755,902
Actual return on plan
assets................... (4,872,550) (3,506,258) (4,310,407)
Net amortization and
deferral................. 2,104,491 979,521 1,956,305
----------- ----------- -----------
Net pension credit......... $ (254,988) $ (72,155) $ (130,606)
=========== =========== ===========
</TABLE>
The Company has a 401(k) plan covering its salaried employees. Employees
can contribute up to 15% of their salaries. The Company makes no contribution to
this plan.
Certain divisions and subsidiaries of the Company provide contributory
defined benefit health care plans for retirees, subject to various conditions
and limitations.
Net periodic postretirement benefit costs included the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits attributed
to service during the period... $100,341 $171,286 $161,389
Interest cost on accumulated
postretirement benefit
obligation..................... 246,921 284,266 290,573
Net amortization................. (48,580) -- --
-------- -------- --------
Net periodic postretirement
benefit cost................... $298,682 $455,552 $451,962
======== ======== ========
</TABLE>
9
<PAGE> 13
The Company's postretirement benefit plans are not funded. The status of
the plans at December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees.................................. $2,121,546 $2,149,113
Fully eligible active plan participants... 248,040 283,839
Other active plan participants............ 1,113,065 1,653,460
Unrecognized net gain and prior service
cost...................................... 1,006,331 207,172
---------- ----------
Total accrued postretirement benefits... $4,488,982 $4,293,584
========== ==========
</TABLE>
For measurement purposes, a 8.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1997. The rate is assumed
to decrease gradually over the next 8 years to 5.0% 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, 1997 by approximately
$640,129 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by approximately
$54,659.
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% at December 31, 1997, 7.5% at
December 31, 1996 and 7.25% at December 31, 1995.
9. SALE OF PACIFIC INDUSTRIAL FURNACE DIVISION
On October 21, 1996, the Company completed the sale of the net assets of
its Pacific Industrial Furnace Company (PIFCO) division. A portion of the
consideration was received as a $1,562,665 note which was paid in 1997. Also,
the Company entered into a consulting agreement which provides that it will
receive compensation for providing certain services to the buyer over a four
year period. The 1996 pre-tax gain on the sale of this division was $369,000.
Included in 1996 results are sales of $4.6 million and a before tax loss of
$573,000 applicable to PIFCO.
10. OTHER INCOME -- NET
Other income includes interest income of approximately $7,000, $182,000 and
$272,000 for 1997, 1996 and 1995, respectively.
11. CONTINGENCIES
The Company and at least seventeen other companies are potentially
responsible for sharing the costs in a proceeding to clean up contaminated
sediments in the Fields Brook watershed in Ashtabula, Ohio. The Environmental
Protection Agency ('EPA') issued a Record of Decision in 1986 concerning the
methods it recommends using to accomplish this task. The Company and the other
potentially responsible parties negotiated with the EPA as to how best to effect
the clean up operation. After negotiation, an agreement was reached with EPA on
clean-up methodology. The Company's share of clean-up costs is anticipated to be
in the range of approximately $3.0 to $3.5 million.
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 environmental
contamination at several sites, including properties owned by the Company. The
amounts of the reserve at December 31, 1997 and 1996 were $9.6 million and $10.3
million respectively. The reserve includes a provision for the Company's
anticipated share of remediation in the Fields Brook watershed referred to
above, as well as a provision for costs that are expected to be incurred in
connection with remediation of other sites. Some of these studies have been
completed; others are ongoing. In some 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.
12. 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, 1997, 1996 and 1995.
13. 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
10
<PAGE> 14
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.
14. 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). A summary of
the fixed stock option grants under Detrex's Management Plan and Directors Plan
as of December 31, 1997, 1996, and 1995, and changes during the years is
presented below.
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. Of the 200,000 options reserved, 34,000 remain available for
future grants.
<TABLE>
<CAPTION>
Management Plan Directors Plan
------------------------ -----------------------
Shares Shares
Under Weighted Ave. Under Weighted Ave.
Option Exercise Price Option Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
1995
Outstanding at beginning
of year................ 95,000 $9.01 24,000 $10.30
Granted.................. 3,000 8.00 6,000 8.25
Exercised................ -- -- -- --
Forfeited................ 75,000 9.00 -- --
Outstanding at end of
year................... 23,000 8.90 30,000 9.89
1996
Granted.................. 101,000 6.27 6,000 7.31
Exercised................ -- -- -- --
Forfeited................ 5,000 8.625 -- --
Outstanding at end of
year................... 119,000 6.68 36,000 9.46
1997
Granted.................. 2,000 9.00 6,000 8.13
Exercised................ -- -- -- --
Forfeited................ -- -- -- --
Outstanding at end of
year................... 121,000 6.72 42,000 9.27
</TABLE>
Of the 163,000 options outstanding at December 31, 1997, the weighted
average remaining life is 7.5 years, and 97,700 of such options are exercisable
at December 31, 1997. Also, of the 163,000 options outstanding, 104,000 are
in-the-money and 59,000 are out-of-the-money. The range of exercise prices is
from $5.00 to $13.20.
In accordance with the Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation, the Company has elected to continue to
report compensation by applying the requirements of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees and therefore has
recorded no charge to income for stock options. The pro-forma effect of applying
the Black-Scholes option valuation model to options granted in 1995, 1996 and
1997 as well as the underlying weighted average Black-Scholes assumptions are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income (loss) as reported (in
thousands)........................ $1,513 $415 $(1,869)
Pro-forma net income (loss) (in
thousands)........................ 1,434 347 (1,890)
Earnings (loss) per share as
reported.......................... 0.96 0.26 (1.18)
Pro-forma earnings (loss) per
share............................. 0.91 0.22 (1.19)
Expected Volatility................. 0.37 0.36 0.42
Risk-Free Rate of Return............ 6.54 5.99 7.23
Expected Life....................... 6-10 Years 10 Years 10 Years
</TABLE>
Using the assumptions underlying the Black-Scholes model, the per share
weighted average fair value of options granted in 1997, 1996 and 1995 is $4.60,
$3.51 and $5.56, respectively.
11
<PAGE> 15
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Detrex Corporation and its consolidated subsidiaries (the Company) earned
$1,513,000 for the year ended December 31, 1997, compared to a net profit of
$415,000 for the year ended December 31, 1996 and a net loss of $1,869,000 for
the year ended December 31, 1995. All of the Company's business units were
profitable in 1997 and the Company has achieved eight consecutive quarters of
profitability. In 1997 the Company earned $868,000, or approximately 57% of its
annual net income, in the fourth quarter, compared with 1996 where the Company
earned $256,000, or approximately 62% of its annual net income in the fourth
quarter. The fourth quarter of 1997 was favorably impacted by high earnings from
the Company's Equipment Division, favorable inventory adjustments, and the
return to income of a portion of the Company's tax valuation reserve.
The year-to-year improvement was achieved through a combination of actions
in the business units and the corporate office. The Elco Corporation ("Elco")
improved its operations by rationalizing its product lines and introducing new
products. Harvel Plastics, Inc. ("Harvel") took advantage of new production
equipment and tooling to maintain its edge in quality and to introduce new
products to the market, resulting in substantial volume growth.
Seibert-Oxidermo, Inc. ("Seibert") achieved QS-9000 certification, introduced
several new custom products, and generated a profit in a highly competitive
market. The Equipment Division returned to profitability in 1996 and continued
the improvement in 1997 as it reestablished its position in the marketplace; in
addition, process improvements in engineering and project management contributed
to improved results. Cost cutting at the corporate office and the Solvents and
Environmental Division provided significant bottom line savings. The Solvents
Division also succeeded in increasing market share in a shrinking market through
intense customer focus. In general, the Company has benefited from an emphasis
on sales, service and support to its customer base.
COMPARATIVE OPERATING DATA (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ----------------
$ % $ % $ %
------ ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales................................................ 95,757 100.0 96,825 100.0 94,302 100.0
Gross margin............................................. 24,401 25.5 22,678 23.4 21,240 22.5
Selling, general and administrative expenses............. 17,816 18.6 18,924 19.5 20,028 21.2
Depreciation and amortization............................ 3,243 3.4 3,189 3.3 3,394 3.6
Gain on sale of PIFCO.................................... -- -- 369 .4 -- --
Net income (loss)........................................ 1,513 1.6 415 .4 (1,869) (2.0)
</TABLE>
1997 COMPARED TO 1996 -- Net sales in 1997 reflect a $3.5 million revenue
increase which replaced nearly all of the $4.6 million sales revenue associated
with the industrial furnace division (PIFCO) which was sold in 1996. Our plastic
pipe subsidiary, Harvel was the main contributor to the revenue growth.
Gross margin in 1997 was 25.5%, compared to 23.4% in 1996. Improved cost
control at the Company's Equipment Division and its Solvents and Environmental
Services Division accounted for most of the margin improvement.
The $1.1 million decrease in selling, general and administrative expenses
is primarily attributable to a division being sold in the fourth quarter of
1996, the cost cutting activities that took place at the Company's Solvents and
Environmental Services Division and reduction in outside commissions at Elco.
The provision for depreciation and amortization is approximately the same
as the prior year for all of the Company's business units.
In 1996, the "Other income" category reflects royalty income received by
Seibert that ended in early 1997, whereas in 1997 the expense is primarily a
write-down of a plant facility in anticipation of its sale.
During 1997, the Company kept its borrowings under its Credit Agreement at
a lower level than during 1996; consequently interest expense was lower in 1997
than in 1996.
Income tax expense in 1997 reflects state, local and federal income taxes,
partially offset by returning to income the deferred tax valuation allowance
that was established in 1995. Income tax expense in 1996 reflects the normal
provisions, completely offset
12
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
by a credit to reflect the recognition of a rate differential resulting from the
carry-back of certain components of prior year net operating losses to tax years
in which the statutory rate was 46%.
1996 COMPARED TO 1995 -- Net sales in 1996 increased $2.5 million over 1995
amounts. Revenue increases occurred at the Company's Equipment Division,
Seibert, Harvel, and Elco. Revenue decreases occurred at the Solvents and
Environmental Services Division and at PIFCO which was sold in October.
Gross margin in 1996 was 23.4%, compared to 22.5% in 1995. The increase is
attributable to improved margins at the Company's Equipment Division and Elco.
These two business units had the largest increase in sales, were able to control
costs, and therefore benefitted from economies of scale. In addition, Elco
entered the pharmaceutical intermediate market where margins are better than
Elco's traditional product lines.
The $1.1 million decrease in selling, general and administrative expenses
is attributable to cost cutting and control activities that took place, and a
reduction in termination and severance pay. Cost cutting was most prevalent in
the Company's Solvents and Environmental Services Division. This cost cutting
action contributed to a smaller loss for this division in 1996 than the one that
occurred in 1995.
The 1996 provision for depreciation and amortization is approximately the
same as in 1995 for all of the Company's current business units. The overall
reduction in depreciation expense is primarily attributable to no depreciation
in 1996 on a former production facility currently held for sale.
Interest expense increased in 1996 as a result of higher interest rates
being incurred on the short-term borrowings under the Company's credit facility.
This rate increase was partially offset by lower borrowings.
The income tax credit in 1996 reflects the normal federal income tax
provision, state and local income taxes, and a credit reflecting the recognition
of a rate differential resulting from the carry-back of certain components of
this year's taxable loss to a tax year in which the statutory rate was 46%.
LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES
The Company utilized a combination of internally generated funds and the
receipt of a federal income tax refund to finance its activities during 1997.
The Company funded $4.7 million in capital expenditures without utilizing any of
its $2.0 million term loan commitment.
Working capital was $9.3 million at December 31, 1997, compared to $8.5
million at December 31, 1996.
The Company is projecting capital expenditures of approximately $8.5
million for 1998, including almost $4.0 million for the expansion of Harvel's
operations and $400,000 for replacing and upgrading the Company's computer
systems. These capital expenditures will be financed through internally
generated funds and industrial development bonds.
The Company has paid no dividends since the second quarter of 1991 and
cannot forecast when dividend payments will be restored.
13
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
OTHER
The Company implemented AICPA Statement of Position 96-1, Environmental
Remediation Liabilities, and Statement of Financial Accounting Standards No.
128, Earning per Share. Implementation had no material impact on the results of
operations, the Company's consolidated financial position, or earnings per
share. The Company will be implementing Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information, in 1998 but at the current time cannot determine how many segments
it will be reporting.
During the last half of 1997, the Company undertook a study to determine
its future computer and software requirements. Included in this study were the
Year 2000 (Y2K) compliance considerations. The Company will be upgrading its
systems over the next two years and, by the second half of 1999, will only be
utilizing programs that are Y2K compliant. Also, since the Company relies on
electronic data from its vendors, financial institutions, customers, and other
constituents, the Company will conduct surveys to determine if these entities
are on schedule to become Y2K compliant. The outcome of these surveys cannot be
predicted.
In order to place a high priority on Y2K compliance, the Company has
designated a project manager and a supporting team to assume responsibility for
implementation. A software vendor has been selected and a consultant has been
engaged to assist in the process. All internal costs associated with the project
have not been identified; however, total capital expenditures for the project
could approximate $800,000.
14
<PAGE> 18
SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales.............................................. $95,757 $96,825 $94,302 $100,096 $105,578
Net income (loss)...................................... 1,513 415 (1,869) (5,639) (1,570)
Earnings (loss) per common share -- basic.............. .96 .26 (1.18) (3.56) (.99)
Earnings (loss) per common share -- diluted............ .94 .26 (1.18) (3.56) (.99)
Total assets........................................... 55,571 55,592 57,659 61,775 59,052
Net working capital.................................... 9,274 8,515 6,317 6,968 10,721
Capital expenditures................................... 4,710 2,325 2,095 2,201 1,464
Long term portion of capital lease obligations......... 569 394 518 702 1,030
Total bank debt........................................ 5,700 5,627 8,500 5,500 4,000
Stockholders' equity................................... 18,822 17,309 16,893 18,763 24,373
Stockholders' equity per common share.................. 11.89 10.93 10.67 11.85 15.42
Number of employees.................................... 353 345 347 367 388(1)
Percentages to net sales:
Gross margin...................................... 25.5 23.4 22.5 22.9 23.8
Net income (loss)................................. 1.6 .4 (2.0) (5.6) (1.5)
Net income (loss) as a percent of:
Average total assets.............................. 2.7 .7 (3.1) (9.3) (2.6)
January 1st stockholders' equity.................. 8.7 2.5 (10.0) (23.1) (6.1)
Current ratio.......................................... 1.4 1.4 1.3 1.3 1.5
</TABLE>
(1) At January 1, 1994.
15
<PAGE> 19
PRODUCTS OF THE DETREX GROUP OF COMPANIES
CHEMICALS DIVISION(1) EQUIPMENT DIVISION
P.O. BOX 1398, 325 EMMETT AVENUE,
ASHTABULA, OHIO 44004 BOWLING GREEN,
R. D. WYVILL, General Manager KENTUCKY 42101
N-Methyl Pyrrole and Pyrrole D. R. CRANDELL,
Semi-conductor Grade Division President
Hydrochloric Acid Aqueous and Semi-Aqueous
Pharmaceutical Intermediates Cleaning Equipment
(1) Operated by The Elco Corporation Electronic Component Cleaning
and Defluxing Machines
SOLVENTS AND Vapor Degreasers
ENVIRONMENTAL SERVICES
DIVISION AUTOMATION DIVISION
24901 NORTHWESTERN HWY, 24901 NORTHWESTERN HWY,
SUITE 512 SOUTHFIELD, MICHIGAN
SOUTHFIELD, MICHIGAN 48075
48075 C. K. UTZ, General Manager
D. R. CRANDELL, Division President Automation and Material
Virgin or Recycled Solvents Handling Equipment
Solvent Reclamation and
Waste Management
RTI LABORATORIES DIVISION
31628 GLENDALE,
LIVONIA, MICHIGAN
48150
J. G. SINGH, General Manager
Analytical Laboratory Services
HARVEL PLASTICS, INC.
P.O. BOX 757,
EASTON, PENNSYLVANIA 18042
E. E. WISMER, President
PVC and CPVC Plastic Pipe
Solid Bar, Heavy Wall Tubular Stock,
Angle Stock, Custom Extrusions
SEIBERT-OXIDERMO, INC.
16255 WAHRMAN,
ROMULUS, MICHIGAN
48174
D. A. CHURCH, President
Industrial and Automotive Coatings
Conductive Primers for Rigid and
Flexible Plastics
Adhesion Promoters for Plastics
Automotive Parts Enamels
Solvent and Water-Borne Coatings
THE ELCO CORPORATION
1000 BELT LINE ST.,
CLEVELAND, OHIO 44109
R. D. WYVILL, President
Petroleum Additives for
Hydraulic Fluids, Industrial
Gear Oils, Greases and
Metalworking Fluids
SUPPLEMENTARY INFORMATION (Unaudited)
Selected Quarterly Data (Thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
1997 Quarters 1996 Quarters
---------------------------------------- ----------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $25,972 $22,908 $23,716 $23,161 $23,453 $25,060 $24,312 $24,000
Gross margin on sales........... 7,221 5,798 5,786 5,596 5,617 5,639 5,847 5,575
Net income...................... 868 173 336 136 256 35 113 11
Per common share -- basic....... .55 .11 .21 .09 .16 .02 .07 .01
Per common share -- diluted..... .53 .11 .21 .09 .16 .02 .07 .01
Stock price range(1)
High.......................... 11 1/4 9 7/8 9 1/4 8 1/4 7 7 1/4 8 1/2 8 3/4
Low........................... 8 3/4 7 1/4 7 1/4 5 3/4 5 3/4 5 1/4 5 4 3/4
</TABLE>
(1) Stock price range was obtained from NASDAQ quotations.
16
<PAGE> 20
DIRECTORS
BRUCE W. COX
President, B. W. Cox Company,
Manufacturers Representative
ROBERT A. EMMETT, III
Partner, Reed Smith Shaw & McClay,
Attorneys, Washington, D.C.
WILLIAM C. KING
Chairman and Chief Executive Officer
JOHN F. MANGOLD
Manufacturing Consultant
THOMAS E. MARK
President and Chief Operating Officer
BENJAMIN W. McCLEARY
Partner, McFarland Dewey & Co.,
Investment Bankers, New York City
ARBIE R. THALACKER
Partner, Shearman & Sterling,
Attorneys, New York City
JOHN D. WITHROW
Retired President and Chief Operating Officer,
Lectron Products Inc.
AUDIT COMMITTEE
JOHN F. MANGOLD, Chairman
ARBIE R. THALACKER
ROBERT A. EMMETT, III
TRANSFER AGENT AND
REGISTRAR
STATE STREET BANK AND TRUST COMPANY
AUDITORS
DELOITTE & TOUCHE LLP
OFFICERS
W. C. KING
Chairman and Chief Executive Officer
T. E. MARK
President and Chief Operating Officer
G. J. ISRAEL
Vice President-Finance, Treasurer and
Chief Financial Officer
R. M. CURRIE
Secretary and General Counsel
E. R. RONDEAU
Controller
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE YEAR 1997 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> 21
DETREX CORPORATION
GENERAL OFFICES -- 24901 NORTHWESTERN HWY., SUITE 500, SOUTHFIELD, MICHIGAN
48075
- --------------------------------------------------------------------------------
MAILING ADDRESS -- P.O. BOX 5111, SOUTHFIELD, MI 48086-5111
Telephone: (248) 358-5800
INTERNET ADDRESS -- http://www.detrex.com
<PAGE> 1
FORM 10-K
EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation
Name of Subsidiary or Organization
------------------ ---------------
<S> <C> <C>
The Elco Corporation Ohio (1)
ELDISC Export Co. (100% owned by The Elco Corporation) Delaware (1)
Harvel Plastics, Inc. (85% owned by The Elco Corporation) Pennsylvania (1)
Seibert-Oxidermo, Inc. Michigan (1)
Wayne Chemical Products Company Michigan (2)
</TABLE>
(1) Financial statements of subsidiary company included in the Consolidated
financial statements.
(2) Inactive Corporation
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-80818 and No. 33-80820 of Detrex Corporation on Form S-8 of our reports
dated February 25, 1998 appearing in and incorporated by reference in this
Annual Report on Form 10-K of Detrex Corporation for the year ended December
31, 1997.
Deloitte & Touche LLP
Detroit, Michigan
March 20, 1998
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 398
<SECURITIES> 0
<RECEIVABLES> 16,668
<ALLOWANCES> 372
<INVENTORY> 9,742
<CURRENT-ASSETS> 29,904
<PP&E> 51,388
<DEPRECIATION> 30,040
<TOTAL-ASSETS> 55,571
<CURRENT-LIABILITIES> 20,630
<BONDS> 569
0
0
<COMMON> 3,167
<OTHER-SE> 15,655
<TOTAL-LIABILITY-AND-EQUITY> 55,571
<SALES> 95,757
<TOTAL-REVENUES> 95,757
<CGS> 71,356
<TOTAL-COSTS> 71,356
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 724
<INCOME-PRETAX> 2,009
<INCOME-TAX> 496
<INCOME-CONTINUING> 1,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,513
<EPS-PRIMARY> .96
<EPS-DILUTED> .94
</TABLE>
