<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, 1998
----------------------------------------------
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
Commission file number 0-784
-------------------------------------------------
DETREX CORPORATION
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-0480840
--------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24901 Northwestern Hwy, Suite 500, Southfield, Michigan 48075
- ------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 358-5800
----------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ---------------------------- --------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Capital Stock, $2 Par Value
------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X NO
------------ ------------
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
<PAGE> 2
FORM 10-K
The aggregate market value (based upon the NASDAQ Closing Price) of Common
Capital Stock on March 15, 1999 of Detrex Corporation held by nonaffiliates was
approximately $ 9.9 million.
The number of shares of Common Capital Stock, $2 Par Value, outstanding on March
15, 1999 was 1,583,414.
Documents incorporated by reference:
<TABLE>
<CAPTION>
Part and Item Number
of Form 10-K into
Document which Incorporated
--------- --------------------
<S> <C> <C>
1. Detrex Corporation Part II Items 5 through 8
Annual Report to Part IV, Item 14
Shareholders for the year
ended December 31, 1998
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 22, 1999
</TABLE>
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 Equipment Divisions - provide solutions for production
parts cleaning needs, including equipment, solvents, recycling of
waste, contract parts cleaning
- Automation Division - engineering, selling, and servicing automation
and material handling equipment
- RTI Laboratories - provides full-service analytical and environmental
laboratory services
Subsidiaries of Detrex Corporation
- Harvel Plastics, Inc. - manufacturer of high quality PVC and CPVC
pipe and custom extrusions
- The Elco Corporation - manufacturer of high performance specialty
chemicals including lubricant additives, fine chemicals, and
semi-conductor grade hydrochloric acid
- Seibert-Oxidermo, Inc. - supplier of primers and functional coatings
for the automotive industry
The products are primarily sold by sales-service engineers and most sales are
direct to industrial users. Net sales by product line for each of the last five
years are set forth below:
<TABLE>
<CAPTION>
Product Line
------------------------------
Chemical
Products Chemical
and Services Equipment Total
------------ ------------ -------------
<S> <C> <C> <C> <C>
1998 $77,914,813 $ 8,124,464 $ 86,039,277
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
</TABLE>
Of the $78 million included in 1998 Chemical Products and Services sales,
approximately $14.5 million (19%) represent sales by the Company's solvents
division, $12.2 million (16%) represent sales by its paint subsidiary, $19.9
million (25%) represent sales by its lubricants subsidiary, $29.7 million (38%)
represent sales by its plastic pipe subsidiary and $1.7 million (2%) represent
sales of other related chemical products and services. For additional
information regarding the operating segments of the Company, see Note 16 to the
Consolidated Financial Statements.
3
<PAGE> 4
FORM 10-K
PART I (CONTINUED)
------------------
ITEM 1. BUSINESS (Continued)
The backlog of orders at any one time is generally not significant to the
Company's business. At December 31, 1998, the Company's backlog of Equipment
orders was approximately $500,000 and the Company expects to complete all of
these orders in the first half of 1999.
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 1998, 1997, and 1996 on research
sponsored by the Company were $1,243,000, $1,365,000 and $1,114,000,
respectively. The number of professional employees engaged in such activities
were 14 for 1998, 16 for 1997, and 15 for 1996.
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 1999. 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, 1998 totaled $8.0 million, of which $1.2 million is
estimated to be spent in 1999. 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 366 persons as of December 31, 1998.
The Company is not engaged in manufacturing operations in foreign countries. For
information regarding sales by customer location, see Note 16 to the
Consolidated Financial Statements.
4
<PAGE> 5
FORM 10-K
PART I (CONTINUED)
------------------
ITEM 1. BUSINESS (Concluded)
The Company utilized a combination of internally generated funds, the proceeds
from the sale of a closed plant, an insurance refund, and industrial development
bond proceeds to finance its activities during 1998. As of December 31, 1998,
working capital was $5.9 million compared to $9.3 million at December 31, 1997.
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.
The Company has market risks which could arise from fluctuations in interest
rates under both its Credit Agreement and the Industrial Development Bonds
issued by the California Economic Development Financial Authority. (see Notes 5
and 6 to the Consolidated Financial Statements). A 1% increase in the prime
interest rate could impact the Company's pretax earnings by approximately
$75,000 and a 1/2% increase in tax-exempt bond interest rates could affect
pretax earnings by a maximum of $20,000.
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) 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.
2) 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 Company
has been operating on six month leases for the last two years.
3) 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.
Harvel expanded its manufacturing capacity in 1998 by leasing a new 100,000
square feet facility in California, which was built to suit Harvel's warehouse
and manufacturing needs. The lease term is for an initial period of fifteen
years expiring in the year 2013, with provision for three five-year extensions.
4) Seibert-Oxidermo, Inc. manufactures primers and functional coatings for the
automotive industry in a plant located in Romulus, Michigan containing 45,000
square feet of office, research and plant space on 40 acres of land. In
addition, Seibert maintains a warehouse facility in Detroit, Michigan.
5
<PAGE> 6
FORM 10-K
PART I (CONTINUED)
------------------
ITEM 2. PROPERTIES (Concluded)
5) The Company owns a building used as a research laboratory and office in
Bowling Green, Kentucky. The plant formerly used for manufacturing in Bowling
Green is expected to be sold in the first half of 1999.
6) 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.
7) 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.
8) 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.
9) 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.
10) The company owns a warehouse and sales office facility located in Chicago,
Illinois. The building area is approximately 10,000 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, 1998 and 1997 were $8.0 million and $9.6
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.
6
<PAGE> 7
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
<PAGE> 8
FORM 10-K
PART I (CONTINUED)
------------------
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the registrant at March 25, 1999
and their positions and offices with the registrant are as follows:
<TABLE>
<CAPTION>
Name and Age Positions and Offices
------------ ---------------------
<S> <C> <C>
W. C. King (54) Chairman and Chief Executive Officer (a)
T. E. Mark (46) President and Chief Operating Officer (b)
G. J. Israel (58) Vice President - Finance, Treasurer and Chief
Financial Officer (c)
R. M. Currie (45) Secretary and General Counsel (d)
S. J. Quinlan (35) Controller (e)
</TABLE>
(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. Quinlan served as a Division Controller for the Company for more than
five years before being elected Controller on April 23, 1998.
All officers of the Company are elected annually and hold office until their
successors are chosen and qualify in their stead.
8
<PAGE> 9
FORM 10-K
PART II
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Page (and caption) in 1998 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 14- Management's Discussion and
Analysis of Financial Condition
and Results of Operations
6. Selected Financial Data 16- Selected Financial Data
7. Management's Discussion and 13-15 - Management's Discussion and
Analysis of Financial Condition Analysis of Financial Condition
and Results of Operations and Results of Operations
8. Financial Statements and Supplementary
Data:
- Detrex Corporation Consolidated
Balance Sheets, December 31,
1998 and 1997 4,5
- Consolidated Statements of
Operations and Retained Earnings
for the Years Ended December 31,
1998, 1997, and 1996 3
- Consolidated Statements of Cash
Flows for the Years Ended
December 31, 1998, 1997, and 1996 6
- Notes to Consolidated Financial
Statements 7-12
- 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
</TABLE>
* Detrex Corporation's Annual Report to Shareholders for the year ended
December 31, 1998 is incorporated herein as Exhibit 13 under Item 14(a) 3 of
Part IV.
9
<PAGE> 10
FORM 10-K
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from the
information set forth under the caption "Election of Directors" in the Detrex
Corporation Proxy Statement (the "Proxy Statement") for the Annual Meeting of
Shareholders to be held April 22, 1999. 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>
<CAPTION>
<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, 1998-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, 1998, 1997, and 1996. 16
</TABLE>
11
<PAGE> 12
FORM 10-K
PART IV (CONTINUED)
-------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Continued)
<TABLE>
<CAPTION>
(a) 3. Exhibits
<S> <C> <C>
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, 1997, as Exhibit 3(a)
3(ii) Bylaws, as amended, are hereby incorporated by --
reference to Commission file #0-784, Annual
Report Form 10-K for the year ended
December 31, 1998, as Exhibit 3(ii)
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(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>
<CAPTION>
(a) 3. Exhibits (Continued)
<S> <C> <C>
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) 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(j) First Amendment to 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)
</TABLE>
13
<PAGE> 14
FORM 10-K
PART IV (CONCLUDED)
-------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Concluded)
<TABLE>
<CAPTION>
(a) 3. Exhibits (Concluded)
<S> <C> <C>
10(k) 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(l) Third Amendment to the Credit Agreement, dated --
April 22, 1998 is hereby incorporated by reference to
Commission file #0-784 Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998 as Exhibit 10(o)
10(m) Fourth Amendment to the Credit Agreement, dated Attached as
March 15, 1999 an Exhibit
13 Annual Report to Shareholders for the year ended December 31, 1998 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 1998
</TABLE>
14
<PAGE> 15
[DELOITTE & TOUCHE LLP LETTERHEAD]
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, 1998 and 1997, and for each
of the three years in the period ended December 31, 1998, and have issued our
report thereon dated February 25, 1999; such consolidated financial statements
and report are included in your Annual Report to Shareholders for the year ended
December 31, 1998 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.
/s/ Deloitte & Touch LLP
Detroit, Michigan
February 25, 1999
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, 1998, 1997 AND 1996
- ----------------------------------------------------
<TABLE>
<CAPTION>
Additions
--------------------------
Balance Charged to Charged Balance
Beginning Costs and to Other at End
Description of Year Expenses Accounts Deductions of Year
----------- --------- ---------- -------- ---------- -------
Year Ended December 31, 1998
<S> <C> <C> <C> <C> <C>
Inventory Valuation Reserves $264,190 182,363 225,115 $221,438
Finished Machines Valuation
Reserves $247,007 14,586 10,176 $251,418
Allowance for Uncollectible
Accounts $371,569 158,000 280,201 $249,368
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
</TABLE>
16
<PAGE> 18
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 25, 1999 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-fifth day of March 1999 by the following
persons on behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
W. C. King
---------------------------- Chairman and Chief Executive
W. C. King Officer
T. E. Mark
---------------------------- President and Chief Operating
T. E. Mark Officer
G. J. Israel
---------------------------- Vice President, Treasurer and
G. J. Israel Chief Financial Officer
S. J. Quinlan
---------------------------- Controller and Chief Accounting
S. J. Quinlan Officer
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
</TABLE>
17
<PAGE> 19
DETREX CORPORATION AND SUBSIDIARIES
EXHIBITS
<PAGE> 1
EXHIBIT 10(m)
Execution Copy
FOURTH AMENDMENT TO
CREDIT AGREEMENT
-------------------
THIS FOURTH AMENDMENT ("Amendment") dated as of March 15, 1999, by and
among the borrowers listed on Schedule 1 (collectively "Companies") and Comerica
Bank, a Michigan banking corporation ("Bank").
RECITALS:
A. Companies and Bank entered into a Credit Agreement dated as of
June 13, 1996, which was amended by a First Amendment dated December 5, 1996, a
Second Amendment dated March 31, 1997, and a Third Amendment dated April 22,
1998 (as amended, "Agreement").
B. Companies and Bank desire to amend the Agreement and the
Revolving Credit Note (as defined in the Agreement) as hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
1. The definition of Revolving Credit Maturity Date set forth in
Section 1 of the Agreement is amended to read in its entirety as follows:
"Revolving Credit Maturity Date' shall mean May 1, 2001."
2. Section 2.A is amended to read in its entirety as follows:
"2.A.1 THE INDEBTEDNESS: Equipment Line of Credit"
2.A.1 Bank may lend to Companies at any time and from time to
time from the date hereof until the Equipment Line Maturity Date, sums
not to exceed Two Million Dollars ($2,000,000) in aggregate principal
amount. Each of the borrowings hereunder shall be evidenced by an
Equipment Note. Bank shall not be obligated to make any advance under
this Section 2.A.
2.A.2 The indebtedness represented by each Equipment Note shall
be payable in equal monthly principal installments equal to the amount
necessary to amortize the original amount of the Equipment Note over a
five year term commencing on the first day of the first month after
such loan is made and on the first day of each month thereafter until
the maturity date thereof, when the entire unpaid balance of principal
and interest thereon shall be due and payable. The maturity date for
each Equipment Note shall be the date which is five (5) years after the
date thereof. In addition to the above required payments on principal,
Company
<PAGE> 2
agrees to pay interest on the unpaid principal balance of each
Equipment Note from time to time outstanding at a per annum rate equal
to three quarters of one percent (3/4%) above the Prime Rate, provided,
however, upon the occurrence of any Event of Default hereunder,
interest shall be payable at a per annum rate of three and three
quarters percent (3 3/4%) above the Prime Rate. Interest payments shall
be made monthly, commencing on the first day of the first month
following the advance under the applicable Equipment Note and on the
first day of each month thereafter. Interest shall be computed on a
daily basis using a year of 360 days for the actual number of days
elapsed, and in such computation effect shall be given to any change in
the interest rate resulting from a change in the Prime Rate on the date
of such change in the Prime Rate.
2.A.3 Bank shall not make advances under this Section 2.A unless
Companies shall have first filed with Bank a request for draw in form
acceptable to Bank executed by an authorized officer of Companies. Each
such request for an advance shall be submitted to Bank not less than
ten (10) days prior to the requested date of disbursement of the
advance.
2.A.4 Bank will approve requests for draws upon presentation by
Company of such documents, instruments or opinions, in form and
substance satisfactory to the Bank, as the Bank may require.
2.A.5 Companies may prepay such Equipment Note in whole or in
part without penalty. Any prepayments shall be applied to principal
payments due under an Equipment Note in the inverse order of their
maturities.
2.A.6 Proceeds of each Equipment Note shall be used solely to
finance the acquisition of machinery and equipment which is acceptable
to Bank.
2.A.7 The Companies shall pay to the Bank an equipment facility
commitment fee quarterly in arrears commencing July 1, 1999, and within
three Business Days after the last day of each calendar quarter
thereafter. The fee shall be an amount equal to the average daily
balance of the unborrowed portion of the equipment facility for the
quarterly period then ending, multiplied by one half of one percent
(1/2%). The fee shall be computed on the basis of a year of three
hundred sixty (360) days and assessed for the actual number of days
elapsed. Upon request of Companies, Bank shall provide to Companies the
detail of Bank's computation of the fee. Whenever any payment of the
fee shall be due on a day which is not a Business Day, the date for
payment thereof shall be extended to the next Business Day.
2.A.8 The aggregate amount of advances available under this
Section 2.A shall not exceed $2,000,000. Each advance shall be in an
amount not less than $600,000."
2
<PAGE> 3
3. The first three sentences of Section 4.1 of the Agreement are
amended to read in their entirety as follows:
"The Revolving Credit Notes and the Advances under Section 2
hereof shall bear interest from the date thereof on the unpaid
principal balance thereof from time to time outstanding, at a rate per
annum equal to one quarter of one percent (1/4%) plus the Prime Rate.
Interest shall be payable monthly on the first Business Day of each
calendar month, commencing on the first Business Day of the calendar
month during which such Advance is made, and at maturity.
Notwithstanding the foregoing, from and after the occurrence of any
Event of Default and during the continuation thereof, the Advances
shall bear interest, payable on demand, at a rate per annum equal to
three and one quarter percent (3 1/4%) above the Prime Rate."
4. Sections 9.1, 9.2, 9.3 and 9.4 are amended to read in their
entireties as follows:
"9.1 Leverage Ratio. Beginning December 31, 1998, permit the
Consolidated Leverage Ratio at any time to be more than 2.5 to 1.0."
9.2 Cash Flow Coverage Ratio. Permit the Consolidated Cash Flow
Coverage Ratio at any time to be less than the amounts specified below
for the determination date specified below:
December 31, 1998 .25 to 1.0
March 31, 1999 .30 to 1.0
June 30, 1999 .30 to 1.0
September 30, 1999 .30 to 1.0
December 31, 1999 and as of the last day of each fiscal
quarter thereafter .50 to 1.0
9.3 Current Ratio. Beginning December 31, 1998, permit the ratio
of Consolidated Current Assets to Consolidated Current Liabilities at
any time to be less than 1.1 to 1.0.
9.4 Consolidated Tangible Net Worth. Permit Consolidated Tangible
Net Worth at any time to be less than the following amounts during the
periods specified below:
December 31, 1998 $16,500,000
January 1, 1999 through September 30, 1999 $17,000,000
October 1, 1999 through December 30, 2000 $17,500,000
December 31, 2000 and thereafter $18,000,000"
5. The definition of "Measuring Period" is amended to read in its
entirety as follows:
3
<PAGE> 4
"Measuring Period' shall mean for the determination date referred
to below the applicable period shown opposite such determination date:
<TABLE>
<CAPTION>
Determination Date Measuring Period
------------------ ----------------
<S> <C>
March 31, 1999 January 1, 1999 through March 31, 1999
June 30, 1999 January 1, 1999 through June 30, 1999
September 30, 1999 January 1, 1999 through September 30, 1999
December 31, 1999 The four preceding fiscal quarters ending on such
and the last day of each determination date
fiscal quarter thereafter"
</TABLE>
6. Companies hereby represent and warrant that, after giving effect
to the amendments contained herein, (a) execution, delivery and performance of
this Amendment and any other documents and instruments required under this
Amendment or the Agreement are within each Company's corporate powers, have been
duly authorized, are not in contravention of law or the terms of any Company's
Articles of Incorporation or Bylaws, and do not require the consent or approval
of any governmental body, agency, or authority; and this Amendment and any other
documents and instruments required under this Amendment or the Agreement, will
be valid and binding in accordance with their terms; (b) the continuing
representations and warranties of each Company set forth in Sections 7.1 through
7.15 of the Agreement are true and correct on and as of the date hereof with the
same force and effect as made on and as of the date hereof; (c) the continuing
representations and warranties of each Company set forth in Section 7.16 of the
Agreement are true and correct as of the date hereof with respect to the most
recent financial statements furnished to the Bank by Companies in accordance
with Section 10.1 of the Agreement; and (d) no Event of Default (as defined in
the Agreement) or condition or event which, with the giving of notice or the
running of time, or both, would constitute an Event of Default under the
Agreement, has occurred and is continuing as of the date hereof.
7. Except as expressly provided herein, all of the terms and
conditions of the Agreement remain unchanged and in full force and effect.
8. This Amendment shall be effective as of the date first above
written and the payment by Companies to Bank of a non-refundable amendment fee
in the amount of $10,000.
4
<PAGE> 5
IN WITNESS the due execution hereof as of the day and year first above written.
COMERICA BANK DETREX CORPORATION
By: [SIG] By: GERALD J. ISRAEL
------------------------------ ------------------------------
Gerald J. Israel
Its: Assistant Vice President Its: Vice President-Finance and
Chief Financial Officer
THE ELCO CORPORATION
By: GERALD J. ISRAEL
------------------------------
Gerald J. Israel
Its: Treasurer
HARVEL PLASTICS, INC.
By: GERALD J. ISRAEL
------------------------------
Gerald J. Israel
Its: Director
SEIBERT-OXIDERMO, INC.
By: GERALD J. ISRAEL
------------------------------
Gerald J. Israel
Its: Treasurer
5
<PAGE> 6
SCHEDULE 1
----------
Detrex Corporation
The Elco Corporation
Harvel Plastics, Inc.
Seibert-Oxidermo, Inc.
6
<PAGE> 1
EXHIBIT 13
DETREX CORPORATION AND SUBSIDIARIES
1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE> 2
EXHIBIT 13
------------------------------------------
DETREX
CORPORATION
1998 ANNUAL REPORT
------------------------------------------
<PAGE> 3
HIGHLIGHTS(1)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales..................................... $86,039,000 $95,757,000 $96,825,000
Net income (loss)............................. (797,000) 1,513,000 415,000
Income (loss) per common share -- basic....... (.50) .96 .26
Stockholders' equity per common share......... 11.38 11.89 10.93
Additions to land, buildings and equipment
(including capital leases).................. 7,500,000 5,360,000 2,770,000
Current ratio................................. 1.3 to 1 1.4 to 1 1.4 to 1
Number of stockholders........................ 443 441 387
Number of employees........................... 366 353 345
</TABLE>
(1) This information should be considered in conjunction with
the Consolidated Financial Statements and Management's
Discussion and Analysis.
- --------------------------------------------------------------------------------
DETREX GROUP OF COMPANIES
-- Detrex Corporation -- a specialty chemicals company
- Solvents and Equipment Divisions -- provide solutions for production
parts cleaning needs, including equipment, solvents, recycling of
waste, and contract parts cleaning
- Automation Division -- engineering, selling, and servicing automation
and material handling equipment
- RTI Laboratories -- provides full-service analytical and environmental
laboratory services
-- Subsidiaries of Detrex Corporation
- Harvel Plastics, Inc. -- manufacturer of high quality PVC and CPVC pipe
and custom extrusions
- The Elco Corporation -- manufacturer of high performance specialty
chemicals including lubricant additives, fine chemicals, and
semi-conductor grade hydrochloric acid
- Seibert-Oxidermo, Inc. -- supplier of primers and functional coatings
for the automotive industry
<PAGE> 4
TO OUR SHAREHOLDERS:
After two profitable years, Detrex incurred a loss of $797,000 in 1998. Our
turnaround stalled on several fronts as we and the chemical industry were
buffeted by the turbulent economic situation in Asia, the slow-down in computer
chip manufacturing and the strong U. S. dollar. These conditions contributed to
a $9.7 million reduction in sales for Detrex. The largest declines were in
cleaning equipment sales and export sales of lubricant additives. This volume
reduction had a big impact on the profitability of our business units and action
was taken to reduce costs by approximately $2.5 million on an annualized basis.
At the same time, we focused the organization on improving sales performance and
generating growth opportunities. As we enter 1999, we have lower costs and are
executing several initiatives to grow the revenue base.
All of the business units responded to the economic conditions by improving
their operations. Harvel Plastics, Inc. succeeded in maintaining year-ago sales
levels in spite of very difficult market conditions; however earnings were down
due to pricing pressure and start-up costs associated with the new California
manufacturing facility. The Elco Corporation was hard hit by the economic
conditions referred to above which resulted in volume and profit declines; the
cost structure was realigned in light of lower volumes. Seibert-Oxidermo, Inc.
struggled with low volume through the first three quarters; sales of new and
existing products improved in the fourth quarter, and this, combined with the
consolidation of manufacturing facilities, should allow it to be profitable in
1999. The Solvents and Environmental Services Division improved year-over-year
earnings in spite of shrinking markets and highly competitive conditions. The
two capital equipment divisions, Automation and Equipment, were hard hit by the
slow-down in industrial spending on plant equipment resulting in losses for the
year. The operations of the Equipment Division have been revised to improve
profitability and the resulting termination pay adversely affected the fourth
quarter. RTI Laboratories has weathered the shake-out in the analytical testing
field and enjoyed improved sales and earnings for the year.
A number of initiatives are underway which will benefit us in the years to
come. We are making progress in controlling environmental liabilities as well as
disposing of non-utilized assets. Numerous growth opportunities are being
pursued in the operating units, including:
- Harvel's new California manufacturing facility is operating and producing
plastic pipe.
- The Solvents Division has successfully started a contract parts cleaning
business; we will build on this success by opening additional parts
cleaning centers in 1999.
- Seibert has developed a paint formulation which helps our customers solve
difficult quality problems on SMC parts.
- We are expanding production capacity for pyrroles in Elco to meet growing
demand for these chemicals.
In spite of the disappointing earnings, cash flow from operations was
positive by $1.4 million. These internally generated funds and $4.0 million in
industrial revenue bonds were used to help fund capital expenditures of $7.1
million. These investments were for the expansion of Harvel's operations in
California, various growth initiatives and continuing improvements in plant and
equipment.
We are committed to supporting growth opportunities in all of the operating
units and will focus on achieving improved sales performance in 1999. While we
expect that business conditions in the chemical industry will remain at the
current level for several months, we should be well positioned for improvement
when economic conditions in the industry improve. We thank you and the entire
Detrex family for your continued backing and support.
Thomas E. Mark William C. King
President and Chief Operating Officer Chairman and Chief Executive Officer
1
<PAGE> 5
--------------- INDEPENDENT AUDITORS' REPORT ---------------
[DELOITTE & TOUCHE LLP LETTERHEAD]
To the Board of Directors and Stockholders of
Detrex Corporation
We have audited the accompanying consolidated balance sheets of Detrex
Corporation and its subsidiaries (the Company) as of December 31, 1998 and 1997
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, 1998.
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, 1998 and 1997 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 25, 1999
2
<PAGE> 6
DETREX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES................................................... $86,039,277 $95,756,801 $96,825,436
Cost of sales (exclusive of depreciation)................... 64,754,272 71,356,262 74,147,179
Selling, general and administrative expenses................ 18,062,684 17,816,042 18,923,660
Provision for depreciation and amortization................. 3,311,984 3,242,789 3,188,758
Net environmental (income).................................. -- -- (100,000)
Other (income) expense -- net............................... (149,210) 293,961 (571,118)
Minority interest........................................... 246,352 314,912 280,014
Interest expense............................................ 781,002 723,893 919,947
Gain on sale of Pacific Industrial Furnace Division......... -- -- (368,985)
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES........................... (967,807) 2,008,942 405,981
Provision (Credit) for income taxes......................... (171,280) 495,839 (9,387)
----------- ----------- -----------
NET INCOME (LOSS)........................................... (796,527) 1,513,103 415,368
RETAINED EARNINGS AT BEGINNING OF YEAR...................... 15,632,925 14,119,822 13,704,454
----------- ----------- -----------
RETAINED EARNINGS AT END OF YEAR............................ $14,836,398 $15,632,925 $14,119,822
=========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE:
Basic....................................................... $(.50) $.96 $.26
=========== =========== ===========
Diluted..................................................... $(.50) $.94 $.26
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic....................................................... 1,583,414 1,583,414 1,583,414
Effects of Dilutive Stock Options........................... -- 28,056 11,222
----------- ----------- -----------
Diluted..................................................... 1,583,414 1,611,470 1,594,636
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 7
DETREX CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
<TABLE>
<CAPTION>
ASSETS
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................... $ 192,689 $ 398,093
Accounts receivable (net of allowance for uncollectible
accounts of $249,000 in 1998 and $372,000 in 1997)........ 12,222,210 16,296,172
Inventories................................................. 10,925,801 9,742,109
Land and building held for sale............................. -- 1,425,000
Prepaid expenses and other.................................. 966,651 692,543
Deferred income taxes....................................... 1,924,027 1,349,842
----------- -----------
TOTAL CURRENT ASSETS................................. 26,231,378 29,903,759
LAND, BUILDINGS AND EQUIPMENT:
Land........................................................ 993,602 993,602
Buildings and improvements.................................. 17,051,589 16,555,248
Machinery and equipment..................................... 37,259,191 31,298,526
Construction in progress.................................... 2,702,657 2,541,084
----------- -----------
58,007,039 51,388,460
Less allowance for depreciation and amortization............ 32,743,694 30,040,031
----------- -----------
LAND, BUILDINGS AND EQUIPMENT -- NET................. 25,263,345 21,348,429
LAND, BUILDING AND EQUIPMENT HELD FOR SALE.................. 21,232 1,350,239
INDUSTRIAL DEVELOPMENT BOND PROCEEDS -- RESTRICTED FOR
CAPITAL EXPENDITURES...................................... 1,247,902 --
PREPAID PENSIONS............................................ 1,383,246 1,338,951
DEFERRED INCOME TAXES....................................... 689,504 693,406
OTHER ASSETS................................................ 1,154,148 935,978
----------- -----------
$55,990,755 $55,570,762
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 8
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Loans payable............................................... $ 6,289,774 $ 5,699,836
Current portion of long-term debt........................... 500,000 --
Current maturities of capital lease obligations............. 256,724 303,464
Accounts payable............................................ 9,682,835 9,843,411
Environmental reserve....................................... 1,235,000 1,485,000
Accrued compensation........................................ 263,872 1,184,740
Other accruals.............................................. 2,078,391 2,113,776
----------- -----------
TOTAL CURRENT LIABILITIES............................ 20,306,596 20,630,227
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS.............. 468,142 569,396
INDUSTRIAL DEVELOPMENT BONDS................................ 3,500,000 --
ACCRUED POSTRETIREMENT BENEFITS............................. 4,671,375 4,488,982
ENVIRONMENTAL RESERVE....................................... 6,803,817 8,090,952
ACCRUED PENSION AND OTHER................................... 148,079 1,028,285
MINORITY INTEREST........................................... 2,067,500 1,941,147
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........................................... 14,836,398 15,632,925
----------- -----------
TOTAL STOCKHOLDERS' EQUITY........................... 18,025,246 18,821,773
----------- -----------
$55,990,755 $55,570,762
=========== ===========
</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>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ (796,527) $ 1,513,103 $ 415,368
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization...................... 3,311,984 3,242,789 3,188,758
Loss on disposal of assets......................... 92,857 42,255 107,488
Deferred income taxes.............................. (570,283) 83,080 1,277,731
Minority interest.................................. 126,353 194,111 160,015
Changes to operating assets and liabilities that
provided (used) cash:
Accounts receivable.............................. 4,073,962 (1,092,988) (1,247,167)
Note receivable.................................. -- 1,562,665 (1,562,665)
Refundable U.S. income taxes..................... -- 1,003,827 2,036,945
Inventories...................................... (1,183,692) (683,942) (620,662)
Prepaid expenses and other....................... (318,403) 185,720 46,018
Other assets..................................... 52,597 (34,177) 20,761
Accounts payable................................. (160,576) (1,279,930) 2,115,738
Environmental reserve............................ (1,537,135) (695,345) 63,098
Accrued compensation............................. (920,868) 485,220 56,431
Accrued postretirement benefits.................. 182,393 195,398 307,699
Other accruals................................... (919,380) (600,271) (1,966,249)
----------- ----------- -----------
TOTAL ADJUSTMENTS.............................. 2,229,809 2,608,412 3,983,939
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 1,433,282 4,121,515 4,399,307
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (7,073,049) (4,710,327) (2,324,663)
Proceeds from disposal of property...................... 1,395,549 2,125 1,615
Unused proceeds from bond issue-restricted for capital
expenditures......................................... (1,247,902) -- --
Proceeds from insurance settlement...................... 1,250,000 -- --
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (5,675,402) (4,708,202) (2,323,048)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issued............................... 4,000,000 -- --
Debt issuance costs..................................... (222,985) -- --
Borrowing (repayment) under revolving credit facility... 589,938 72,383 (2,872,547)
Principal payments under capital lease obligations...... (330,237) (398,648) (657,027)
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES................................ 4,036,716 (326,265) (3,529,574)
----------- ----------- -----------
Net decrease in cash and cash equivalents................... (205,404) (912,952) (1,453,315)
Cash and cash equivalents at beginning of year.............. 398,093 1,311,045 2,764,360
----------- ----------- -----------
Cash and cash equivalents at end of year.................... $ 192,689 $ 398,093 $ 1,311,045
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest........................................... $ 809,809 $ 797,756 $ 1,023,564
Income taxes....................................... $ 282,413 $ 205,472 $ 223,044
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations incurred in connection with
the acquisition of equipment........................... $ 425,322 $ 649,665 $ 445,649
Capital lease terminations.............................. $ 243,080 $ 440,149 $ 152,931
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 (the Company) 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, fine chemicals, 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 11% of the Company's
business in 1997 and 14% in 1998 was done outside the United States, 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. 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
petro-chemical companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statements
The consolidated financial statements comprise those of the Company and its
subsidiaries. All intercompany balances and transactions have been eliminated.
Certain amounts for 1996 and 1997 have been reclassified to conform with 1998
classifications.
Inventories and Accounts Receivable
Inventories are stated at lower of cost or market. Approximately 95% of raw
materials, including raw materials in work in process and finished goods
inventories, is valued 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, 1998 totals $786,453 and costs incurred on these contracts amounts
to $652,211. Included in accounts receivable is $400,089 that has not been
billed to customers due to contractual arrangements.
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>
Interest incurred during construction periods is capitalized. $18,955 was
capitalized in 1998 and $86,540 was capitalized in 1997.
Research and Development
Research and development costs are charged to operations as incurred.
Research and development costs for 1998, 1997 and 1996 were approximately
$1,243,000, $1,365,000, and $1,114,000, 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, debt under the Revolving Credit Agreement,
and the Industrial Development Bonds issue approximated fair values.
7
<PAGE> 11
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 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>
1998 1997
----------- ----------
<S> <C> <C>
Raw materials.................. $ 3,435,271 $3,390,407
Work in progress............... 358,079 359,819
Finished goods................. 7,157,247 5,996,243
Less: Progress billings on work
in progress.................. (24,796) (4,360)
----------- ----------
$10,925,801 $9,742,109
=========== ==========
</TABLE>
The excess of current cost over the stated last-in, first-out value is
approximately $450,000 and $1,345,000 at December 31, 1998 and 1997.
4. CAPITAL AND OPERATING LEASES
Capitalized lease assets included in machinery and equipment at December 31
are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Machinery and equipment......... $1,367,961 $1,420,319
Accumulated amortization........ 700,201 611,394
---------- ----------
Leased assets -- net............ $ 667,760 $ 808,925
========== ==========
</TABLE>
Rent expense applicable to operating leases for 1998, 1997 and 1996 was
$598,000, $591,000 and $565,000, respectively.
Minimum annual lease payments for leases in effect at December 31, 1998 are
as follows:
<TABLE>
<S> <C> <C>
Minimum Lease Payments: Capital Operating
-------- ----------
1999......................... $328,685 $ 699,215
2000......................... 261,834 540,284
2001......................... 162,661 484,662
2002......................... 94,695 497,319
2003......................... 18,325 490,520
2004 and thereafter.......... -- 4,431,024
-------- ----------
Total minimum lease payments..... $866,200 $7,143,024
==========
Less amount representing
interest....................... 141,334
--------
Present value of net minimum
lease payments................. 724,866
Less current portion............. 256,724
--------
Non-current portion.............. $468,142
========
</TABLE>
5. REVOLVING CREDIT AGREEMENT AND TERM LOAN
During 1998 the Company amended its Credit Agreement (the Agreement) with
Comerica Bank including an extension of the expiration date to May 1, 2000. 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 equaled the prime interest rate.
The 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, 1998 was 8.77%, compared to 9.92% for
the year ended December 31, 1997 and 10.07% for the year ended December 31,
1996.
At December 31, 1998, the Company was not in compliance with certain
financial covenants contained in the Agreement. The terms of the facility were
subsequently amended retroactive to December 31, 1998, and the Company is in
compliance with the amended covenants. The Company expects to be in compliance
with the amended Agreement throughout 1999. Additional changes to the Agreement
include extending the credit facility to May 1, 2001 and changing the interest
rate to prime plus 1/4%.
6. INDUSTRIAL DEVELOPMENT BONDS
In connection with the expansion of Harvel Plastics, Inc.'s manufacturing
capacity, $4.0 million of industrial development bonds were issued by the
California Economic Development Financial Authority on March 24, 1998. Interest
rates for these bonds are established weekly based on tax-exempt bond interest
rates. The rate at the end of 1998 was 4.0%. The obligation is backed by a
Letter of Credit issued by Comerica Bank for the total amount of the bonds. The
Letter of Credit is in effect until January 2006 and affords protection against
failed remarketing efforts if any were to occur. The amount and timing of
redemption of the bonds is as follows:
<TABLE>
<CAPTION>
December 31 Amount
- ------------------------------ --------
<S> <C>
1999.......................... $500,000
2000.......................... 600,000
2001.......................... 500,000
2002.......................... 600,000
2003.......................... 500,000
2004.......................... 600,000
2005.......................... 700,000
</TABLE>
At December 31, 1998, $1,247,902 of the proceeds of the bonds were held in
a restricted trust for remaining capital expenditures in connection with the
expansion project.
7. OTHER INCOME -- NET
Other income includes interest income of approximately $2,100, $7,000, and
$182,000 for 1998, 1997 and 1996, respectively.
8
<PAGE> 12
8. INCOME TAXES
Income taxes include the following components:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- -----------
<S> <C> <C> <C>
Current for tax purposes:
Federal...................... $ 56,951 $ 42,032 $(1,146,060)
State and local.............. 178,306 194,559 74,381
--------- --------- -----------
Total current.............. 235,257 236,591 (1,071,679)
--------- --------- -----------
Deferred income taxes:
Federal...................... (406,537) 723,261 948,152
Valuation allowance.......... -- (467,000) --
State and local.............. -- 2,987 114,140
--------- --------- -----------
Total deferred............. (406,537) 259,248 1,062,292
--------- --------- -----------
Provision (credit) for income
taxes........................ $(171,280) $ 495,839 $ (9,387)
========= ========= ===========
</TABLE>
Deferred tax assets (liabilities) at December 31, 1998 and 1997 relate to
the following temporary differences and carryforwards:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net operating loss carryforward.......... $ 613,747 $ 244,815
Alternative minimum tax credit
carryforward........................... 482,027 425,176
Accruals for:
Postretirement benefits................ 1,788,669 1,718,831
Environmental.......................... 3,078,063 3,666,633
Restructuring.......................... 8,421 41,463
Self insurance reserve................. 121,738 150,097
Inventory related........................ 599,510 429,790
Insurance refund......................... 478,625 --
Other.................................... 268,639 184,367
----------- -----------
Gross deferred tax assets............ 7,439,439 6,861,172
----------- -----------
Depreciation............................. (2,998,988) (3,021,329)
Undistributed earnings of the Company's
DISC................................... (1,334,812) (1,484,017)
Other.................................... (492,108) (312,578)
----------- -----------
Gross deferred tax liabilities....... (4,825,908) (4,817,924)
----------- -----------
Net deferred tax assets.............. $ 2,613,531 $ 2,043,248
=========== ===========
</TABLE>
The Company has net operating loss carryforwards of $1,805,139 that expire
in 2010 and 2018.
The reasons for the difference between the income tax provision and income
taxes computed at the statuatory rate of 34% for 1998, 1997 and 1996 are
summarized below:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax
provision....................... $(329,065) $ 683,040 $ 138,034
State and local income taxes, net
of federal tax benefit.......... 117,682 130,380 124,424
Nondeductible meal and
entertainment expense........... 69,509 68,655 63,504
Tax refund carryback tax rate
differential.................... -- -- (364,319)
Deferred tax asset valuation
allowance....................... -- (467,000) --
Other -- net...................... (29,406) 80,764 28,970
--------- --------- ---------
$(171,280) $ 495,839 $ (9,387)
========= ========= =========
</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.
9. 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 had two facilities available for
sale. One facility was sold in 1998 and the second is under contract to sell and
it is anticipated that the transaction will be finalized during the first half
of 1999. Insurance proceeds of $1,250,000 were received as a result of storm
damage to the second facility and the book value of the property was adjusted
accordingly.
10. 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 6.75% and 4.0%, at December 31, 1998, 7.0% and 4.0% at December 31, 1997
and 7.5% and 4.0% at December 31, 1996. The expected long-term rate of return on
assets was 8.5% in 1996 and 1997 and 9.25% in 1998. The following tables set
forth the information required under Statement of Financial Accounting Standards
No. 132:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
A. CHANGE IN PROJECTED BENEFIT OBLIGATION
Benefit Obligation at
January 1............. $29,056,309 $26,515,238
Service Cost............ 684,709 570,823
Interest Cost........... 1,992,556 1,942,248
Actuarial (Gain)/Loss... 1,224,166 1,826,456
Benefits Paid in
Measurement Year...... (1,849,575) (1,798,456)
----------- -----------
Benefit Obligation at
December 31........... $31,108,165 $29,056,309
=========== ===========
B. CHANGE IN PLAN ASSETS
Market Value of Assets
at January 1.......... $32,834,181 $29,678,283
Actual Return on
Assets................ 2,722,420 4,872,550
Contributions Made in
Measurement Year...... 5,899 81,804
Benefits Paid in
Measurement Year...... (1,849,575) (1,798,456)
----------- -----------
Market Value of Assets
at December 31........ $33,712,925 $32,834,181
=========== ===========
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
1998 1997
----------- -----------
C. RECONCILIATION OF FUNDED STATUS
<S> <C> <C>
Funded Status as of
December 31........... $ 2,604,760 $ 3,777,872
Unrecognized Transition
(Asset)/Obligation.... (554,975) (752,700)
Unrecognized Prior
Service Cost.......... 437,617 480,252
Unrecognized Net
(Gain)/Loss........... (1,221,563) (2,844,684)
----------- -----------
Net Pension Asset....... $ 1,265,839 $ 660,740
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
D. NET PERIODIC PENSION CREDIT
Service Cost............ $ 684,709 $ 570,823 $ 584,825
Interest Cost........... 1,992,556 1,942,248 1,869,757
Expected Return on
Assets................ (2,952,562) (2,451,343) (2,304,433)
Net Amortization........ (323,903) (316,716) (222,304)
----------- ----------- -----------
Net Periodic Pension
Cost.................. $ (599,200) $ (254,988) $ (72,155)
=========== =========== ===========
</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>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits attributed
to service during the period... $107,647 $100,341 $171,286
Interest cost on accumulated
postretirement benefit
obligation..................... 249,066 246,921 284,266
Net amortization................. (42,301) (48,580) --
-------- -------- --------
Net periodic postretirement
benefit cost................... $314,412 $298,682 $455,552
======== ======== ========
</TABLE>
The Company's postretirement benefit plans are not funded. The status of
the plans at December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees.................................. $2,242,022 $2,121,546
Fully eligible active plan participants... 304,208 248,040
Other active plan participants............ 1,275,976 1,113,065
---------- ----------
Subtotal................................ 3,822,206 3,482,651
Unrecognized net gain and prior service
cost...................................... 849,169 1,006,331
---------- ----------
Total accrued postretirement benefits... $4,671,375 $4,488,982
========== ==========
</TABLE>
The change in accumulated benefit obligation is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Accumulated Postretirement Benefit
Obligation - January 1.................... 3,482,651 $4,086,412
Service Cost................................ 107,647 100,341
Interest Cost............................... 249,066 246,921
Amendments.................................. -- (213,491)
Actuarial (Gain)/Loss....................... 114,861 (634,248)
Benefits Paid in Measurement Year........... (132,019) (103,284)
---------- ----------
Accumulated Postretirement Benefit
Obligation - December 31.................. $3,822,206 $3,482,651
========== ==========
</TABLE>
For measurement purposes, a 8% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1998. The rate is assumed
to decrease gradually over the next 4 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, 1998 by approximately 14.8%
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by approximately 16.2%.
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 6.75% at December 31, 1998, 7.0% at
December 31, 1997 and 7.5% at December 31, 1996.
11. 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.
12. 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
10
<PAGE> 14
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, 1998 and 1997 were $8.0 million and $9.6 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.
13. 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, 1998, 1997 and 1996.
14. STOCK PURCHASE RIGHTS
The Company has in place a Shareholder Rights Plan, under which preferred
stock purchase rights were distributed to shareholders as a dividend of one
Right for each outstanding share of Common Stock. Each Right will entitle
shareholders to buy one one-hundredth of a newly issued share of Series A
Preferred Stock of the Company at an exercise price of $80, subject to
adjustment. The Rights will be exercisable only if a person or group acquires
beneficial ownership of 15% or more of the Company's outstanding Common Stock or
commences a tender or exchange offer upon consummation of which a person or
group would beneficially own 30% or more of the Company's outstanding Common
Stock. Until they become exercisable, the Rights will be evidenced by the Common
Stock certificates and will be transferred only with such certificates.
If any person or group 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 after a person or group becomes the
beneficial owner of 15% or more of the Company's outstanding Common Stock 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.
15. 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, 1998, 1997 and 1996, 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, 7,000 remain available for
future grants under the Management Plan; the time for granting options under the
Directors Plan has expired.
<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>
1996
Outstanding at beginning
of year................ 23,000 $8.90 30,000 $9.89
Granted.................. 101,000 6.27 6,000 7.31
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
Outstanding at end of
year................... 121,000 6.72 42,000 9.27
1998
Granted.................. 22,000 13.38 -- --
Outstanding at end of
year................... 143,000 7.74 42,000 9.27
</TABLE>
11
<PAGE> 15
Of the 185,000 options outstanding at December 31, 1998, the weighted
average remaining life is 6.25 years; 131,316 of such options are exercisable at
December 31, 1998. Also, of the 185,000 options outstanding, 83,000 are in-the-
money and 102,000 are out-of-the-money. The range of exercise prices is from
$5.00 to $13.38. The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------ ---------------------
Weighted Weighted Weighted
Range of Shares Average Average Shares Average
Exercise Under Remaining Exercise Under Exercise
Price Option Life Price Option Price
-------- ------- --------- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
$ 5.00-$ 8.00 92,000 7.00 $ 5.86 71,250 $ 5.91
$ 8.01-$11.00 62,000 5.67 8.97 51,066 8.96
$11.01-$13.38 31,000 5.18 12.95 9,000 11.90
------------- ------- ---- ------ ------- ------
$ 5.00-$13.38 185,000 6.25 $ 8.09 131,316 $ 7.51
</TABLE>
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 1996, 1997 and
1998 as well as the underlying weighted average Black-Scholes assumptions are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ---------- --------
<S> <C> <C> <C>
Net income (loss) as reported (in
thousands)......................... $ (797) $1,513 $415
Pro-forma net income (loss) (in
thousands)......................... (888) 1,434 347
Earnings (loss) per share as
reported -- basic.................. (0.50) 0.96 0.26
Pro-forma earnings (loss) per
share.............................. (.56) 0.91 0.22
Expected Volatility.................. 0.50 0.37 0.36
Risk-Free Rate of Return............. 5.62 6.54 5.99
6 6-10 10
Expected Life........................ Years Years Years
</TABLE>
Using the assumptions underlying the Black-Scholes model, the per share
weighted average fair value of options granted in 1998, 1997 and 1996 is $7.31,
$4.60 and $3.51.
16. SEGMENT REPORTING
Effective December 31, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The Company has five operating segments that meet the
quantitative thresholds of Statement No. 131:
- Harvel Plastics -- manufactures PVC and CPVC pipe and custom extrusions
- Elco Corporation -- produces lubricant additives, hydrochloric acid and
fine chemicals
- Seibert-Oxidermo -- supplies paint, primers and specialty coatings for
the automotive industry
- Equipment Division -- designs, engineers and sells industrial cleaning
equipment
- Solvents Division -- distributes virgin or reclaimed solvents and aqueous
or semi-aqueous cleaning chemistries.
Information regarding the Company's Automation Division and its RTI
Laboratories Division are combined with Corporate data since they do not meet
the quantitative thresholds. In addition, Corporate data includes interest
expense, corporate administrative expense, discontinued operations and
provisions for certain employee benefit items. Data (in thousands) for 1998,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net sales:
Harvel Plastics..................... $29,656 $29,638 $26,323
Elco Corporation.................... 19,873 22,759 22,278
Seibert-Oxidermo.................... 12,237 13,783 13,486
Equipment Division.................. 7,291 10,594 13,383
Solvents Division................... 14,502 15,782 15,181
Other............................... 2,480 3,201 6,174
------- ------- -------
Total............................. $86,039 $95,757 $96,825
======= ======= =======
Earnings (loss) before income taxes:
Harvel Plastics..................... $ 2,710 $ 3,267 $ 2,661
Elco Corporation.................... 1,237 2,811 2,751
Seibert-Oxidermo.................... (366) 296 672
Equipment Division.................. (823) 756 679
Solvents Division................... 361 291 (818)
------- ------- -------
Sub-total......................... $ 3,119 $ 7,421 $ 5,945
Corporate administrative expense.... (3,912) (3,790) (3,627)
Corporate interest expense.......... (655) (576) (808)
Other............................... 480 (1,046) (1,104)
------- ------- -------
Total............................. $ (968) $ 2,009 $ 406
======= ======= =======
Depreciation and amortization:
Harvel Plastics..................... $ 1,204 $ 1,148 $ 1,012
Elco Corporation.................... 924 835 787
Seibert-Oxidermo.................... 330 360 316
Equipment Division.................. 78 87 88
Solvents Division................... 288 289 332
Other............................... 488 524 654
------- ------- -------
Total............................. $ 3,312 $ 3,243 $ 3,189
======= ======= =======
Total assets:
Harvel Plastics..................... $21,630 $15,904 $13,908
Elco Corporation.................... 15,139 13,284 11,754
Seibert-Oxidermo.................... 6,949 7,626 7,739
Equipment Division.................. 3,618 5,900 5,626
Solvents Division................... 5,473 5,869 5,446
Other............................... 3,245 6,988 11,119
------- ------- -------
Total............................. $56,054 $55,571 $55,592
======= ======= =======
Sales by customer location:
United States....................... $75,730 $85,063 $84,744
Outside United States............... 10,309 10,694 12,081
------- ------- -------
Total............................. $86,039 $95,757 $96,825
======= ======= =======
</TABLE>
12
<PAGE> 16
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
After two profitable years, Detrex Corporation and its consolidated
subsidiaries (the "Company") incurred a loss of $797,000 in 1998. With the
exception of the company's Solvents Division, each of the Company's reporting
segments incurred a decline in earnings in 1998.
Harvel Plastics, Inc. ("Harvel") maintained the same revenue as in 1997 but
earnings were adversely affected by start-up costs associated with its new
California manufacturing facility and margin pressure resulting from world-wide
overcapacity of PVC and CPVC pipe. The Elco Corporation ("Elco") reported
declines in revenue in both its lubricant additives and its hydrochloric acid
product lines. The majority of the decline in lubricant additives was in the
international markets where the strong U.S. dollar had a negative impact; the
decline in hydrochloric acid was attributable to the slowdown in computer chip
manufacturing, an industry which is normally a major purchaser of high-grade
hydrochloric acid. Seibert-Oxidermo, Inc. ("Seibert") recorded a loss in 1998,
compared to profits in both 1996 and 1997. Seibert suffered a loss in volume
which was partially caused by the effects of the General Motors strike in the
second and third quarters. Seibert's business is almost entirely dependent on
the automotive industry, and pricing pressures for suppliers in that industry
continue. The Company's Equipment Division also incurred a loss in 1998 after
two years of earnings. The Equipment Division had a $3.3 million reduction in
revenue as capital spending was reduced in the markets served by this Division.
The Division's 1998 revenues and earnings were negatively impacted by a very
strong 1997 fourth quarter as customers accelerated purchases of new or upgraded
cleaning equipment to meet new government standards required as of December 31,
1997. The Company's Solvents Division reported an increase in earnings even
though revenue declined on a year-to-year basis. The increase in earnings was
primarily attributable to the Division successfully implementing a new contract
parts cleaning business during 1998.
As a result of the losses incurred during the last three quarters of the
year, action was taken to reduce costs both at the Corporate level and at three
of the Company's business units. Manpower, insurance costs and legal expenses
were reduced at the Corporate level. Manpower reductions also took place at the
Equipment Division, Elco and Seibert. Manufacturing expenses were reduced at
both Elco and Seibert. The effect of these actions was to reduce costs by
approximately $2.5 million on an annualized basis.
COMPARATIVE OPERATING DATA (IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ----------------
$ % $ % $ %
------ ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales................................................ 86,039 100.0 95,757 100.0 96,825 100.0
Gross margin............................................. 21,285 24.7 24,401 25.5 22,678 23.4
Selling, general and administrative expenses............. 18,063 21.0 17,816 18.6 18,924 19.5
Depreciation and amortization............................ 3,312 3.8 3,243 3.4 3,189 3.3
Gain on sale of PIFCO.................................... -- -- -- -- 369 .4
Net income (loss)........................................ (797) (.9) 1,513 1.6 415 .4
</TABLE>
1998 COMPARED TO 1997 -- Net sales in 1998 reflect a $9.7 million decrease
from the previous year. The largest decrease was in the Company's Equipment
Division as a result of reduced capital spending by customers in the markets we
serve. Decreases also occurred at Elco, Seibert, and the Company's Solvents
Division. During 1998, these business units were adversely affected by the
economic situation in Asia, the slowdown in computer chip manufacturing, and the
General Motors strike. Sales at Harvel were approximately the same as the
previous year.
Gross margin in 1998 was 24.7%, compared to 25.5% in 1997. Margins were
adversely affected by the drop in volume and pricing pressure. Margins at Harvel
were also affected by launch costs at its new California manufacturing facility.
As a result of launching the California operations, Harvel's inventory and
manpower were both higher than December 31, 1997 levels.
The year-to-year increase in selling, general and administrative expenses
is due to economic increases in all of the Company's operating units,
termination and severance costs, and additional marketing and technical support
personnel in some of the Company's business units. These increases more than
offset the increase in pension credits.
The provision for depreciation and amortization is higher than a year ago
as a result of depreciation of plant additions in Ashtabula, Ohio and partial
year depreciation of equipment at Harvel's new facility in California.
13
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
Interest expense on bank borrowings is approximately $31,000 lower than
last year due to lower rates being negotiated at the time the Company's Credit
Agreement was extended. However, interest expense in 1998 also includes interest
attributable to the tax deferral of income from certain export sales and two
months of interest on Harvel's industrial development bonds. Also, more interest
was capitalized in 1997 than in 1998. The total year-to-year change in interest
expense is an increase of $57,000.
The income tax credit in 1998 reflects a credit for federal income tax,
partially offset by state and local income tax expense. 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.
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. 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 and Solvents Divisions 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
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 by a credit to reflect the recognition of a rate
differential resulting from the carryback of certain components of prior year
net operating losses to tax years in which the statutory rate was 46%.
LIQUIDITY, FINANCIAL CONDITION, AND CAPITAL RESOURCES
The Company utilized internally generated funds, and the proceeds from the
sale of a closed plant to finance its operations during 1998. In addition, in
late September, insurance proceeds were received in conjunction with storm
damage to a plant being held for sale. It is anticipated that the plant will be
sold in the first half of 1999. Also, financing for Harvel's expansion in
California was accomplished by obtaining $4.0 million of industrial development
bonds.
The Company's capital expenditures in 1999 are estimated to be $5.5
million. It is anticipated that these expenditures will principally be financed
through internally generated funds and borrowings under existing financing
arrangements.
On February 23, 1999, the Company received reaffirmation of its $12.0
million credit facility. The financial covenants were amended and the interest
rate was increased by 1/4%. The term of the credit facility was extended to May
1, 2001. (See Note 5 to the Consolidated Financial Statements).
Working capital was $5.9 million at December 31, 1998 compared to $9.3
million at December 31, 1997. The Company believes the 1998 working capital
level is adequate. The Company has paid no dividends since the second quarter of
1991 and cannot forecast when the dividend will be restored.
YEAR 2000 COMPLIANCE
The Company currently is working to resolve the potential impact of the
Year 2000 on the processing of information by its computerized information
systems. Year 2000 ("Y2K") issues may arise if computer programs have been
written using two digits,
14
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
instead of four, to define the applicable year. In such case, a program that
utilizes time-sensitive logic may recognize a date using "00" as the Year 1900
rather than the Year 2000, which could result in miscalculations or system
failures.
In 1997, the Company undertook a study to determine its future computer
hardware and software requirements for its management information systems,
including Y2K compliance considerations. Since then the Company has implemented
a program, consisting of two phases, for achieving upgraded systems and Y2K
compliance. The first phase of the program consisted of replacing the Company's
computerized information systems and programs with new systems and programs that
are Y2K compliant. As of November, 1998, the Company has completed the first
phase. As a result, the Company's accounts payable, accounts receivable and
general ledger were upgraded to new, Y2K compliant systems and programs. The
Company expects to convert its fixed asset records to new, Y2K compliant
programs in the second quarter of 1999.
The second phase of becoming Y2K compliant in its management information
systems is the replacement of computerized information systems and programs that
perform job costing for the Company's Equipment Division and sales invoicing for
the Company's Solvents and Equipment Divisions with Y2K compliant systems and
programs. The Company has started this phase and expects to complete it by
mid-year 1999.
All of the parent Company's operations systems have been reviewed and work
plans have been established to develop Y2K compliance by mid-year 1999. Two of
the Company's subsidiaries, Harvel and Seibert, are substantially compliant at
the present time. Elco has developed a work plan and has an approved capital
expenditure of approximately $75,000 for its Y2K compliance program which is
scheduled to be completed by mid-year 1999.
Since the Company relies on electronic data from certain of its vendors,
financial institutions and customers, the Company has conducted surveys to
determine if these entities are Y2K compliant or are on schedule to become Y2K
compliant before the end of 1999. The Company has sent detailed questionnaires
to approximately 500 vendors, financial institutions and customers to determine
if they are on schedule to become Y2K compliant. Approximately 335 entities have
responded to the questionnaires in varying degrees of detail. All of these
entities have indicated that they are or will become Y2K compliant. However, the
Company has not yet conducted any testing with third parties and therefore has
no assurance that these entities, or others that have not responded, will become
Y2K compliant on a timely basis. If the Company's most significant vendors,
financial institutions and customers fail to become Y2K compliant on a timely
basis, such failure could have a material adverse effect on the Company's
business and operations.
To become Y2K compliant, the Company has appointed an officer as project
coordinator for its Y2K program and has engaged the services of information
systems consultants. As of December 31, 1998, the Company had spent
approximately $500,000 to upgrade its information systems and programs, most for
which were capital expenditures. Although the Company cannot predict with
certainty the remaining expenditures that it will make during 1999 for such
upgrades, the Company's current estimates are in the range of $400,000, most of
which will also be capital expenditures. The Company cannot accurately allocate
the portion of such expenditures for information systems and programs that
relate solely to Y2K compliance.
In the last two years, the Company has dedicated significant management
attention to the Y2K issue. Management updates the Board of Directors on a
regular basis concerning the Company's progress in achieving Y2K compliance.
Because it expects to become Y2K compliant, the Company has not developed a
contingency plan in the event that it should fail to become Y2K compliant. The
Company will continue to monitor its progress in becoming Y2K compliant and will
develop contingency plans as needed if it determines that there will be a
shortfall in its Y2K efforts or those of its vendors, financial institutions and
customers. The Company currently cannot determine the cost of contingency plans,
should they be necessary.
The cost of the Company's Y2K program and the dates by which the Company
believes it will become Y2K compliant are based upon management's best
estimates. The Company cannot assure that it will achieve Y2K compliance
according to this program and actual results could differ from those outlined.
Various factors, including numerous assumptions as to future events, the timely
availability of experienced personnel, the complexity of the transition from its
old systems to the new systems and the compliance efforts of third parties,
which the Company does not control, may adversely affect its Y2K compliance
progress. Any failure to become Y2K compliant on a timely basis could have a
material adverse affect on the Company, including the inability to properly bill
and collect payments from customers, as well as errors and omissions in
accounting and financial data.
15
<PAGE> 19
SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales................................................... $86,039 $95,757 $96,825 $94,302 $100,096
Net income (loss)........................................... (797) 1,513 415 (1,869) (5,639)
Earnings (loss) per common share -- basic................... (.50) .96 .26 (1.18) (3.56)
Earnings (loss) per common share -- diluted................. (.50) .94 .26 (1.18) (3.56)
Total assets................................................ 55,991 55,571 55,592 57,659 61,775
Net working capital......................................... 5,925 9,274 8,515 6,317 6,968
Capital expenditures........................................ 7,073 4,710 2,325 2,095 2,201
Long term portion of capital lease obligations.............. 468 569 394 518 702
Total bank debt............................................. 6,290 5,700 5,627 8,500 5,500
Industrial development bonds................................ 4,000 -- -- -- --
Stockholders' equity........................................ 18,025 18,822 17,309 16,893 18,763
Stockholders' equity per common share....................... 11.38 11.89 10.93 10.67 11.85
Number of employees......................................... 366 353 345 347 367
Percentages to net sales:
Gross margin........................................... 24.7 25.5 23.4 22.5 22.9
Net income (loss)...................................... (.9) 1.6 .4 (2.0) (5.6)
Net income (loss) as a percent of:
Average total assets................................... (1.4) 2.7 .7 (3.1) (9.3)
January 1st stockholders' equity....................... (4.2) 8.7 2.5 (10.0) (23.1)
Current ratio............................................... 1.3 1.4 1.4 1.3 1.3
</TABLE>
SUPPLEMENTARY INFORMATION (Unaudited)
Selected Quarterly Data (Thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
1998 Quarters 1997 Quarters
---------------------------------------- ----------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $21,198 $22,113 $21,292 $21,436 $25,972 $22,908 $23,716 $23,161
Gross margin on sales........... 5,385 5,573 4,905 5,422 7,224 5,791 5,793 5,586
Net income...................... (428) (266) (248) 146 868 173 336 136
Per common share -- basic....... (.27) (.17) (.15) .09 .55 .11 .21 .09
Per common share -- diluted..... (.27) (.17) (.15) .09 .53 .11 .21 .09
Stock price range(1)
High.......................... 7 1/4 13 1/2 17 3/4 18 11 1/4 9 7/8 9 1/4 8 1/4
Low........................... 5 13/16 6 1/4 12 9 3/8 8 3/4 7 1/4 7 1/4 5 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
Member, McFarland Dewey & Co., LLC
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
S. J. QUINLAN
Controller
BUSINESS UNIT EXECUTIVES
D. A. CHURCH
President, Seibert-Oxidermo, Inc.
D. R. CRANDELL
President, Solvents and
Equipment Divisions
J. G. SINGH
General Manager, RTI Laboratories
C. K. UTZ
General Manager, Automation Division
E. E. WISMER
President, Harvel Plastics, Inc.
R. D. WYVILL
President, The Elco Corporation and
General Manager, Chemicals Division
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE YEAR 1998 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
- --------------------------------------------------------------------------------
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)
</TABLE>
(1) Financial statements of subsidiary companies are included in the
Consolidated financial statements.
<PAGE> 1
EXHIBIT 23
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-80818 and No. 33-80820 of Detrex Corporation on Form S-8 of our reports
dated February 25, 1999 appearing in and incorporated by reference in this
Annual Report on Form 10-K of Detrex Corporation for the year ended December
31, 1998.
Deloitte & Touche LLP
Detroit, Michigan
March 25, 1999
<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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 193
<SECURITIES> 0
<RECEIVABLES> 12,471
<ALLOWANCES> 249
<INVENTORY> 10,926
<CURRENT-ASSETS> 26,231
<PP&E> 58,007
<DEPRECIATION> 32,744
<TOTAL-ASSETS> 55,991
<CURRENT-LIABILITIES> 20,307
<BONDS> 468
0
0
<COMMON> 3,167
<OTHER-SE> 14,858
<TOTAL-LIABILITY-AND-EQUITY> 55,991
<SALES> 86,039
<TOTAL-REVENUES> 86,039
<CGS> 64,754
<TOTAL-COSTS> 64,754
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 781
<INCOME-PRETAX> (968)
<INCOME-TAX> (171)
<INCOME-CONTINUING> (797)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (797)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
</TABLE>
