<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, 1999
------------------------------------------------------
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 17, 2000 of Detrex Corporation held by nonaffiliates was
approximately $4,948,169 million.
The number of shares of Common Capital Stock, $2 Par Value, outstanding on March
17, 2000 was 1,583,414.
Documents incorporated by reference:
<TABLE>
<CAPTION>
Part and Item Number
of Form 10-K into
Document which Incorporated
-------- ------------------
<S> <C>
1. Detrex Corporation Part II Items 5 through 8
Annual Report to Part IV, Item 14
Shareholders for the year
ended December 31, 1999
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 27, 2000
</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 chemicals and allied
products, services, and supply processes for use by manufacturing and service
industries and is comprised of the following operations:
Detrex Corporation
- Solvents and Equipment Divisions - provide solutions for production
parts cleaning needs, including equipment, solvents, recycling of
waste, and contract parts cleaning
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
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>
1999 $84,921,659 $ 5,494,176 $ 90,415,835
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
</TABLE>
Of the $85 million included in 1999 Chemical Products and Services sales,
approximately $14.5 million (17%) represent sales by the Company's solvents
division, $13.5 million (16%) represent sales by its paint subsidiary, $19.9
million (23%) represent sales by its lubricants subsidiary, $35.7 million (42%)
represent sales by its plastic pipe subsidiary and $1.4 million (2%) represent
sales of other related chemical products and services. For additional
information regarding the operating segments of the Company, see Note 15 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, 1999, the Company's backlog of equipment
orders was approximately $800,000 and the Company expects to complete all of
these orders in the first half of 2000.
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 1999, 1998, and 1997 on research
sponsored by the Company were $1,286,000, $1,243,000 and $1,365,000,
respectively. The number of professional employees engaged in such activities
were 12 for 1999, 14 for 1998, and 16 for 1997.
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 2000. 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, 1999 totaled $7.3 million, of which $1.5 million is
estimated to be spent in 2000. 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 327 persons as of December 31, 1999.
The Company is not engaged in manufacturing operations in foreign countries. For
information regarding sales by customer location, see Note 15 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 and increased borrowings to finance its
activities during 1999. As of December 31, 1999, working capital was $3.7
million compared to $5.9 million at December 31, 1998. 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
$100,000 and a 1% increase in tax-exempt bond interest rates could affect pretax
earnings by a maximum of $35,000.
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.
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. In addition, the company owns a separate building in
Bowling Green for its parts cleaning operations.
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 $2.5 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, 1999 and 1998 were $7.3 million and $8.0
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 to the above, there are several claims and lawsuits pending against the
Company and its subsidiaries. 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. One
of those lawsuits involves the division of costs between several potentially
responsible companies for reimbursement to the EPA for costs it incurred to
conduct environmental remediation at a drum and barrel recycler, which the
Company had utilized several years ago. The potentially responsible companies
entered into an Agreement to, among other things, jointly defend the cost claims
of the EPA. A dispute arose amongst the potentially responsible companies over
the Agreement which resulted in the filing of a lawsuit. The matter went to
trial before a jury in June of 1999 and a judgment was entered against the
Company in the amount of approximately $750,000, plus interest and attorney
fees. The Company is taking an appeal to the Michigan Court of Appeals and
believes it has reasonable grounds to seek reversal of the judgment.
The amount of liability to the Company with respect to costs of
remediation of contamination of the Fields Brook watershed and of other sites,
and the amount of liability with respect to several other claims and lawsuits
against the Company, was based on available data. The Company has established
its reserves in accordance with its interpretation of the principles outlined in
Statement of Financial Accounting Standards No. 5 and Securities and Exchange
Commission Staff Accounting Bulletin No. 92. In the event that any additional
accruals should be required in the future with respect to such matters, the
amounts of such additional accruals could have a material impact on the results
of operations to be reported for a specific accounting period but should not
have a material impact on the Company's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.
7
<PAGE> 8
FORM 10-K
PART I (CONTINUED)
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the registrant at March 24, 2000
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 (55) Chairman and Chief Executive Officer (a)
T. E. Mark (47) President and Chief Operating Officer (b)
G. J. Israel (59) Vice President - Finance, Treasurer and Chief
Financial Officer (c)
R. M. Currie (46) Secretary and General Counsel (d)
S. J. Quinlan (36) 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 1999 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 15- 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 13-14 - 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,
1999 and 1998 4,5
- Consolidated Statements of
Operations and Retained Earnings
for the Years Ended December 31,
1999, 1998, and 1997 3
- Consolidated Statements of Cash
Flows for the Years Ended
December 31, 1999, 1998, and 1997 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, 1999 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 27, 2000. 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
(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, 1999-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,
1999, 1998, and 1997. 16
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>
3(i) Articles of Incorporation, as amended, are hereby --
incorporated by reference to Commission file #0-784,
Annual Report on Form 10-K for the year ended
December 31, 1987, as Exhibit 3(a)
3(ii) Bylaws, as amended, are hereby incorporated by --
reference to Commission file #0-784, Annual
Report Form 10-K for the year ended
December 31, 1997, 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>
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>
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 --
March 15, 1999 is hereby incorporated by reference to
Commission file #0-784 Annual Report on Form 10-K for the
Year ended December 31, 1998 as Exhibit 10(m)
10(n) Fifth Amendment to the Credit Agreement, dated May 20, 1999 --
is hereby incorporated by reference to Commission file #0-784
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999 as Exhibit 10(n)
10(o) Sixth Amendment to the Credit Agreement, dated Attached as
February 29, 2000 an Exhibit
13 Annual Report to Shareholders for the year ended December 31, 1999 Attached as
an Exhibit
21 Subsidiaries of the Registrant Attached as
an Exhibit
23 Consent of Auditors Attached as
an Exhibit
27 Financial Data Schedule Attached as
an Exhibit
(b) A report was filed on Form 8-K on December 14, 1999 announcing the
closing of a manufacturing plant of The Elco Corporation, a subsidiary
of the Registrant.
</TABLE>
14
<PAGE> 15
DETREX CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULES
<PAGE> 16
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, 1999 and 1998, and for each
of the three years in the period ended December 31, 1999, and have issued our
report thereon dated March 1, 2000; such consolidated financial statements and
report are included in your Annual Report to Shareholders for the year ended
December 31, 1999 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 & Touche LLP
- -------------------------
Deloitte & Touche LLP
Detroit, Michigan
March 1, 2000
<PAGE> 17
FORM 10-K
SCHEDULE II
DETREX CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<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, 1999
<S> <C> <C> <C> <C> <C>
Inventory Valuation Reserves $221,438 187,214 193,649 $227,873
Finished Machines Valuation
Reserves $251,418 34,755 24,945 $241,608
Allowance for Uncollectible
Accounts $249,368 115,000 120,100 $244,268
Year Ended December 31, 1998
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
</TABLE>
<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 27, 2000 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-seventh day of March 2000 by the following
persons on behalf of the Registrant and in the capacities indicated.
Signature Title
W. C. King Chairman and Chief Executive
- ------------------------------- Officer
W. C. King
T. E. Mark President and Chief Operating
- ------------------------------- Officer
T. E. Mark
G. J. Israel Vice President, Treasurer and
- ------------------------------- Chief Financial Officer
G. J. Israel
S. J. Quinlan Controller and Chief Accounting
- ------------------------------- Officer
S. J. Quinlan
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
D. R. Zimmer Director
- -------------------------------
D. R. Zimmer
<PAGE> 19
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10(o) Sixth Amendment to the Credit Agreement,
dated February 29, 2000
13 Annual Report to Shareholders for the year ended
December 31, 1999
21 Subsidiaries of the Registrant
23 Consent of Auditors
27 Financial Data Schedule
</TABLE>
<PAGE> 20
DETREX CORPORATION AND SUBSIDIARIES
EXHIBITS
<PAGE> 1
EXHIBIT 10(o)
SIXTH AMENDMENT TO
CREDIT AGREEMENT
THIS SIXTH AMENDMENT ("Amendment") dated as of February 29, 2000, 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 five amendments (as amended, "Agreement").
B. Companies and Bank desire to amend the Agreement and the Equipment
Notes (as defined in the Agreement) as hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
1. The definitions of Revolving Credit Commitment, Revolving Credit
Maturity Date, Equipment Line Maturity Date, Lending Availability and Equipment
Reliance set forth in Section 1 of the Agreement are amended to read in their
entireties as follows:
"Equipment Line Maturity Date' shall mean May 1, 2001.
"Equipment Reliance' shall initially mean $750,000. On the
first day of each month, beginning March 1, 2000, Equipment Reliance
shall decrease by $50,000 until such time as the Equipment Reliance is
zero.
"Lending Availability' shall mean as of any date of
determination thereof, the sum of (a) eighty five percent (85%) of
Eligible Accounts plus (b) thirty five percent (35%) of Eligible
Inventory; provided, however, in no event shall the amount of Lending
Availability determined under this clause (b) exceed Four Million
Dollars ($4,000,000), plus (c) the amount of the Equipment Reliance as
of such date.
'Revolving Credit Commitment' shall mean Thirteen Million
Dollars ($13,000,000), subject to reduction or termination pursuant to
Section 2.6 hereof.
'Revolving Credit Maturity Date' shall mean May 1, 2001."
2. Section 2.A.2 is amended to read in its entirety as follows:
<PAGE> 2
"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 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 one percent (1%) 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 four percent (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."
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 three quarters of one percent (3/4%) 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 three quarters percent (3-3/4%) 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, 1999, permit the
Consolidated Leverage Ratio at any time to be more than 2.75 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, 1999 .30 to 1.0
March 31, 2000 .30 to 1.0
2
<PAGE> 3
June 30, 2000 .30 to 1.0
September 30, 2000 .30 to 1.0
December 31, 2000 and as of the last day of each fiscal
quarter thereafter .50 to 1.0
9.3 Current Ratio. Beginning December 31, 1999, permit the ratio
of Consolidated Current Assets to Consolidated Current Liabilities at
any time to be less than 1.0 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, 1999 through December 30, 2000 $16,000,000
December 31, 2000 and thereafter $16,500,000"
5. The definition of "Measuring Period" is amended to read in its
entirety as follows:
""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, 2000 January 1, 2000 through March 31, 2000
June 30, 2000 January 1, 2000 through June 30, 2000
September 30, 2000 January 1, 2000 through September 30, 2000
December 31, 2000 The four preceding fiscal quarters ending on such
and the last day of each determination date
fiscal quarter thereafter"
</TABLE>
6. Exhibit "E" to the Agreement is deleted and attached Exhibit "E"
is substituted therefor.
7. Each of the existing Equipment Notes is amended to increase the
non-default interest rate to the rate set forth in Section 2.A.2 of the
Agreement (as amended by this Amendment).
8. The Companies did not comply with the provisions of Sections 9.1,
9.2, 9.3 and 9.4 of the Agreement for the period ended December 31, 1999 (as
such provisions were in effect prior to this Amendment). The Bank hereby waives
any default under the Agreement arising as a result of such non-compliance with
the prior provisions for the period ended December 31, 1999. This is not a
waiver of any non-compliance for any period for such covenants as amended by
this Amendment.
3
<PAGE> 4
9. 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.
10. Except as expressly provided herein, all of the terms and
conditions of the Agreement remain unchanged and in full force and effect.
11. This Amendment shall be effective upon (a) the payment by
Companies to Bank of a non-refundable amendment fee in the amount of $37,500 and
(b) execution and delivery by Companies to Bank of a replacement Revolving
Credit Note in the form attached hereto as Exhibit "E".
IN WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK DETREX CORPORATION
By: By:
-------------------------------- ------------------------------
Jeffrey S. Pitts Gerald J. Israel
Its: Assistant Vice President Its: Vice President-Finance and
Chief Financial Officer
4
<PAGE> 5
THE ELCO CORPORATION
By:
---------------------------------
Gerald J. Israel
Its: Treasurer
HARVEL PLASTICS, INC.
By:
---------------------------------
Gerald J. Israel
Its: Director
SEIBERT-OXIDERMO, INC.
By:
---------------------------------
Gerald J. Israel
Its: Treasurer
5
<PAGE> 6
SCHEDULE 1
Detrex Corporation
The Elco Corporation
Harvel Plastics, Inc.
Seibert-Oxidermo, Inc.
6
<PAGE> 7
EXHIBIT "E"
REVOLVING CREDIT NOTE
Detroit, Michigan
$13,000,000 February 29, 2000
On or before May 1, 2001, FOR VALUE RECEIVED, the undersigned
(collectively "Companies") jointly and severally promise to pay to the order of
Comerica Bank, a Michigan banking corporation ("Bank") at 500 Woodward Avenue,
Detroit, Michigan, in lawful money of the United States of America the
Indebtedness to Bank or so much of the sum of Thirteen Million Dollars
($13,000,000) as may from time to time have been advanced and then be
outstanding hereunder pursuant to the Credit Agreement ("Agreement") dated as of
June 13, 1996, made by and between Companies and Bank, as amended, together with
interest thereon as hereinafter set forth. Capitalized terms used herein, unless
defined to the contrary, have the meanings given them in the Agreement.
Each of the Advances made hereunder shall bear interest at the interest
rate from time to time applicable thereto under the Agreement or as otherwise
determined thereunder, and interest shall be computed, assessed and payable as
set forth in the Agreement.
This Note is a note under which advances, repayments and readvances may
be made from time to time, but only in accordance with the terms and conditions
of the Agreement. This Note evidences borrowing under, is subject to, and may be
accelerated or matured under, the terms of the Agreement, to which reference is
hereby made.
Companies agree that in the event of a default hereunder or any default
or Event of Default under the Agreement, Bank shall be entitled to liquidate and
collect all property or assets (including deposits and other credits) whether
presently owned or hereafter acquired, of Companies in possession or control of
(or owing by) the Bank for any purpose, and to apply the proceeds of such
liquidations and collections, and offset any amounts owing by Bank, against
Companies' obligations hereunder and under the Agreement.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Companies hereby waive presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agree that no obligation
hereunder shall be discharged by reason of any extension, indulgence, release,
or forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note. Any transferees of,
or endorser, guarantor or surety paying this Note in full shall succeed to all
rights of Bank, and Bank shall be under no further responsibility for the
exercise thereof or the loan evidenced hereby.
7
<PAGE> 8
This Note is a renewal and increase of a Revolving Credit Note dated
June 13, 1996 in the original principal amount of $12,000,000 by Companies
payable to Bank.
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
DETREX CORPORATION
By:
------------------------------------
Gerald J. Israel
Its: Vice President-Finance
and Chief Financial Officer
THE ELCO CORPORATION
By:
------------------------------------
Gerald J. Israel
Its: Treasurer
HARVEL PLASTICS, INC.
By:
------------------------------------
Gerald J. Israel
Its: Director
8
<PAGE> 9
SEIBERT-OXIDERMO, INC.
By:
------------------------------------
Gerald J. Israel
Its: Treasurer
9
<PAGE> 1
EXHIBIT 13
DETREX CORPORATION AND SUBSIDIARIES
1999 ANNUAL REPORT TO SHAREHOLDERS
<PAGE> 2
------------------------------------------
DETREX
CORPORATION
1999 ANNUAL REPORT
------------------------------------------
<PAGE> 3
HIGHLIGHTS(1)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales..................................... $90,416,000 $86,039,000 $95,757,000
Net income (loss)............................. (1,133,000) (797,000) 1,513,000
Income (loss) per common share -- basic....... (.72) (.50) .96
Stockholders' equity per common share......... 10.67 11.38 11.89
Additions to land, buildings and equipment
(including capital leases).................. 5,300,000 7,500,000 5,360,000
Current ratio................................. 1.1 to 1 1.3 to 1 1.4 to 1
Number of round-lot stockholders.............. 567 443 441
Number of employees........................... 327 366 353
</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
-- 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:
While this past year was a very difficult one in many of our markets and
our financial results were not satisfactory, we made substantial progress in
positioning our businesses for improved revenue growth and higher profitability.
Despite realizing stronger year over year revenue gains in each successive
quarter, we incurred a loss of $1.1 million in 1999. Disappointing operating
results in several of the operations were aggravated by significant costs
incurred to improve profitability, manage environmental liabilities and dispose
of non-utilized assets as well as by a large operating loss in the Automation
business which has been sold. Manufacturing facilities were consolidated at both
Elco and Seibert-Oxidermo during the year, at a cost in excess of $700,000. This
action will improve productivity beginning this year. Costs were also incurred
for launching manufacturing operations at Harvel's California plant; currently
the plant is operating efficiently and providing additional capacity for both
PVC and CPVC pipe. In addition to these actions, we sold an idle plant and
continue to resolve environmental matters.
While much effort was focused on improving our cost position for the
future, we continue to make significant investments in product development.
During the year we commercialized such diverse products as Harvel LXT pipe for
ultra-pure water systems, aqueous parts cleaning chemistry and equipment,
Seibert's PopFree primer for improving the quality of SMC parts, and introduced
an environmentally friendly hydraulic additive by Elco.
We are encouraged by the sales outlook for the first quarter as the
strengthening trend experienced quarter by quarter during 1999 has continued in
January and February. We anticipate revenue for the first quarter being higher
than in any quarter of 1998 and 1999. This development is the result of actions
taken in the business units to improve volume. Significant capital expenditures
have been made at both Harvel and Elco to facilitate volume growth in existing
products. At Seibert, technical resources have been devoted to strengthening our
position in coatings for plastic automotive components. The Solvents division
has been working to offset shrinking traditional markets with introduction of
alternative chemistries and parts cleaning services. The market for cleaning
equipment continues to be down and we are beginning to use manufacturers
representatives to improve coverage.
We expect improved performance from the business units in the coming year
based on the combination of higher sales and cost reductions. Strategic and
operational actions are ongoing to drive continued improvement in the businesses
and the company as a whole. Our objective is to grow shareholder value. The
initial step is to operate all our businesses on a profitable basis and to
generate positive cash flow from operations. In 1999 we sold two divisions that
were non-core and we now have five business units:
- Harvel Plastics
- Elco Corporation
- Seibert-Oxidermo
- Solvents and Environmental Services division
- Equipment division
Three of these had operating income in 1999. The challenge is to realize
improved profitability in these three units while addressing strategic issues in
the other two.
We realize the impact of our operating results on the value of your
investment over the last two years and thank you for your patience. We are
committed to improving results and increasing the value of your investment.
Thomas E. Mark
President and Chief Operating Officer
William C. King
Chairman and Chief Executive Officer
1
<PAGE> 5
--------------- INDEPENDENT AUDITORS' REPORT ---------------
------------------------------------
Suite 900
600 Renaissance Center
Deloitte & Touche LLP Letterhead Detroit, Michigan 48243-1704
To the Board of Directors and Stockholders of
Detrex Corporation
We have audited the accompanying consolidated balance sheets of Detrex
Corporation and its subsidiaries (the Company) as of December 31, 1999 and 1998
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, 1999.
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, 1999 and 1998 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
March 1, 2000
[Deloitte & Touche LOGO]
2
<PAGE> 6
DETREX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES................................................... $90,415,835 $86,039,277 $95,756,801
Cost of sales (exclusive of depreciation)................... 69,730,585 64,754,272 71,356,262
Selling, general and administrative expenses................ 18,146,524 18,062,684 17,816,042
Provision for depreciation and amortization................. 3,654,842 3,311,984 3,242,789
Other (income) expense -- net............................... (179,734) (242,067) 251,706
Minority interest........................................... 212,879 246,352 314,912
Interest expense............................................ 1,074,629 781,002 723,893
Net (gain) loss from property transactions.................. (285,039) 92,857 42,255
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES........................... (1,938,851) (967,807) 2,008,942
Provision (credit) for income taxes......................... (805,932) (171,280) 495,839
----------- ----------- -----------
NET INCOME (LOSS)........................................... (1,132,919) (796,527) 1,513,103
RETAINED EARNINGS AT BEGINNING OF YEAR...................... 14,836,398 15,632,925 14,119,822
----------- ----------- -----------
RETAINED EARNINGS AT END OF YEAR............................ $13,703,479 $14,836,398 $15,632,925
=========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE:
Basic....................................................... $(.72) $(.50) $.96
=========== =========== ===========
Diluted..................................................... $(.72) $(.50) $.94
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic....................................................... 1,583,414 1,583,414 1,583,414
Effects of Dilutive Stock Options........................... -- -- 28,056
----------- ----------- -----------
Diluted..................................................... 1,583,414 1,583,414 1,611,470
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 7
DETREX CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................... $ 381,269 $ 192,689
Accounts receivable (net of allowance for uncollectible
accounts of $244,000 in 1999 and $249,000 in 1998)........ 13,363,021 12,222,210
Inventories................................................. 12,423,426 10,925,801
Prepaid expenses and other.................................. 991,888 966,651
Deferred income taxes....................................... 1,419,370 1,924,027
----------- -----------
TOTAL CURRENT ASSETS................................. 28,578,974 26,231,378
LAND, BUILDINGS AND EQUIPMENT:
Land........................................................ 914,602 993,602
Buildings and improvements.................................. 19,589,641 17,051,589
Machinery and equipment..................................... 38,795,472 37,259,191
Construction in progress.................................... 2,134,039 2,702,657
----------- -----------
61,433,754 58,007,039
Less allowance for depreciation and amortization............ 34,746,609 32,743,694
----------- -----------
LAND, BUILDINGS AND EQUIPMENT -- NET................. 26,687,145 25,263,345
INDUSTRIAL DEVELOPMENT BOND PROCEEDS -- RESTRICTED FOR
CAPITAL EXPENDITURES...................................... -- 1,247,902
PREPAID PENSIONS............................................ 1,760,243 1,383,246
DEFERRED INCOME TAXES....................................... 1,454,663 689,504
OTHER ASSETS................................................ 1,136,948 1,175,380
----------- -----------
$59,617,973 $55,990,755
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 8
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Loans payable............................................... $ 8,313,749 $ 6,289,774
Current portion of long-term debt........................... 866,000 500,000
Current maturities of capital lease obligations............. 214,349 256,724
Accounts payable............................................ 11,403,039 9,682,835
Environmental reserve....................................... 1,500,000 1,235,000
Accrued compensation........................................ 300,362 263,872
Other accruals.............................................. 2,258,978 2,078,391
----------- -----------
TOTAL CURRENT LIABILITIES............................ 24,856,477 20,306,596
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS.............. 267,942 468,142
LONG-TERM DEBT.............................................. 4,802,775 3,500,000
ACCRUED POSTRETIREMENT BENEFITS............................. 4,702,822 4,671,375
ENVIRONMENTAL RESERVE....................................... 5,834,555 6,803,817
ACCRUED PENSION AND OTHER................................... 100,696 148,079
MINORITY INTEREST........................................... 2,160,379 2,067,500
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........................................... 13,703,479 14,836,398
----------- -----------
TOTAL STOCKHOLDERS' EQUITY........................... 16,892,327 18,025,246
----------- -----------
$59,617,973 $55,990,755
=========== ===========
</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>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $(1,132,919) $ (796,527) $ 1,513,103
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization...................... 3,654,842 3,311,984 3,242,789
(Gain)/Loss on disposal of assets.................. (285,039) 92,857 42,255
Deferred income taxes.............................. (260,502) (570,283) 83,080
Minority interest.................................. 92,879 126,353 194,111
Changes to operating assets and liabilities that
provided (used) cash:
Accounts receivable.............................. (1,140,811) 4,073,962 (1,092,988)
Note receivable.................................. -- -- 1,562,665
Refundable U.S. income taxes..................... -- -- 1,003,827
Inventories...................................... (1,497,625) (1,183,692) (683,942)
Prepaid expenses and other....................... (402,234) (318,403) 185,720
Other assets..................................... 24,438 52,597 (34,177)
Accounts payable................................. 1,720,204 (160,576) (1,279,930)
Environmental reserve............................ (704,262) (1,537,135) (695,345)
Accrued compensation............................. 36,490 (920,868) 485,220
Accrued postretirement benefits.................. 31,447 182,393 195,398
Other accruals................................... 123,796 (919,380) (600,271)
----------- ----------- -----------
TOTAL ADJUSTMENTS.............................. 1,393,623 2,229,809 2,608,412
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 260,704 1,433,282 4,121,515
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (5,281,687) (7,073,049) (4,710,327)
Proceeds from disposal of property...................... 504,414 1,395,549 2,125
Used (Unused) proceeds from bond issue-restricted for
capital expenditures................................. 1,247,902 (1,247,902) --
Proceeds from insurance settlement...................... -- 1,250,000 --
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (3,529,371) (5,675,402) (4,708,202)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank Borrowings......................................... 1,830,000 -- --
Repayment of long term debt............................. (161,225) -- --
Proceeds from debt issued............................... -- 4,000,000 --
Debt issuance costs..................................... -- (222,985) --
Borrowing under revolving credit facility............... 2,023,975 589,938 72,383
Principal payments under capital lease obligations...... (235,503) (330,237) (398,648)
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES................................ 3,457,247 4,036,716 (326,265)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 188,580 (205,404) (912,952)
Cash and cash equivalents at beginning of year.............. 192,689 398,093 1,311,045
----------- ----------- -----------
Cash and cash equivalents at end of year.................... $ 381,269 $ 192,689 $ 398,093
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest........................................... $ 1,073,896 $ 809,809 $ 797,756
Income taxes....................................... $ 208,283 $ 282,413 $ 205,472
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations incurred in connection with
the acquisition of equipment........................... $ 26,500 $ 425,322 $ 649,665
Capital lease terminations.............................. $ 33,472 $ 243,080 $ 440,149
</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 chemicals and allied products, services, and processes for use by
manufacturing and service industries. The principal products and services
include specialty chemicals, lubricant additives, parts cleaning, cleaning
solvents, hydrochloric acid, PVC and CPVC plastic pipe, automotive and
industrial paints, and degreasing equipment.
All of the Company's business units operate in highly competitive markets
which are mainly national in scope, although approximately 12% of the Company's
business in 1998 and 1999 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 1997 and 1998 have been reclassified to conform with 1999
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, 1999 totals $370,371 and costs incurred on these contracts amounts
to $247,080. Included in accounts receivable is $161,464 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.
Research and Development
Research and development costs are charged to operations as incurred.
Research and development costs for 1999, 1998 and 1997 were approximately
$1,286,000, $1,243,000, and $1,365,000, 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 approximated fair values.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the balance sheet date and
the reported amounts of revenues and expenses during the
7
<PAGE> 11
reporting period. Actual results could differ from those estimates.
3. INVENTORIES
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Raw materials................. $ 4,981,780 $ 3,435,271
Work in progress.............. 343,427 358,079
Finished goods................ 7,109,459 7,157,247
Less: Progress billings on
work in progress............ (11,240) (24,796)
----------- -----------
$12,423,426 $10,925,801
=========== ===========
</TABLE>
The excess of current cost over the stated last-in, first-out value is
approximately $572,000 and $450,000 at December 31, 1999 and 1998.
4. CAPITAL AND OPERATING LEASES
Capitalized lease assets included in machinery and equipment at December 31
are as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Machinery and equipment......... $1,204,201 $1,367,961
Accumulated amortization........ 778,903 700,201
---------- ----------
Leased assets -- net............ $ 425,298 $ 667,760
========== ==========
</TABLE>
Rent expense applicable to operating leases for 1999, 1998 and 1997 was
$975,000, $598,000 and $591,000, respectively.
Minimum annual lease payments for leases in effect at December 31, 1999 are
as follows:
<TABLE>
<S> <C> <C>
Minimum Lease Payments: Capital Operating
-------- ----------
2000......................... $259,021 $ 782,589
2001......................... 169,562 750,652
2002......................... 101,596 688,433
2003......................... 25,226 639,603
2004......................... 1,725 574,359
2005 and thereafter.......... -- 4,038,640
-------- ----------
Total minimum lease payments..... $557,130 $7,474,276
==========
Less amount representing
interest....................... 74,839
--------
Present value of net minimum
lease payments................. 482,291
Less current portion............. 214,349
--------
Non-current portion.............. $267,942
========
</TABLE>
5. REVOLVING CREDIT AGREEMENT AND TERM LOAN
The Company has a Credit Agreement (the Agreement) with Comerica Bank with
a current expiration date of May 1, 2001. As of December 31, 1999 the Agreement
provided 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 was prime interest rate plus 1/4%. The
Agreement also provided for a $2.0 million term loan facility at an interest
rate of prime plus 3/4%. At December 31, 1999, the outstanding balance under the
term loan was $1,668,775, of which $1,302,775 is included in long-term debt and
$366,000 is included in current portion of long-term debt.
The weighted average interest rate for short term borrowings under the
Agreement for the year ended December 31, 1999 was 8.35%, compared to 8.77% for
the year ended December 31, 1998 and 9.92% for the year ended December 31, 1997.
At December 31, 1999, 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, 1999, and the Company is in
compliance with the amended covenants. The Company expects to be in compliance
with the amended Agreement throughout 2000. The amendment to the Agreement
increased the facility to $13.0 million and increased the interest rate on the
revolving credit facility to prime plus 3/4% and the interest on the term loan
facility to prime plus 1%.
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 1999 was 4.9%. 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>
Due to December 31 being a holiday, the actual redemption will take place
on the first business day of the following year.
As of December 31, 1998 bond proceeds of $1,247,902 were unused. That
amount was utilized for capital expenditures during 1999.
7. OTHER INCOME -- NET
Other income includes interest income of approximately $700, $2,100, and
$7,000, for 1999, 1998 and 1997, respectively.
8
<PAGE> 12
8. INCOME TAXES
Income taxes include the following components:
<TABLE>
<CAPTION>
1999 1998 1997
----------- --------- ---------
<S> <C> <C> <C>
Current for tax purposes:
Federal...................... -- $ 56,951 $ 42,032
State and local.............. 70,805 178,306 194,559
----------- --------- ---------
Total current.............. 70,805 235,257 236,591
----------- --------- ---------
Deferred income taxes:
Federal...................... (876,737) (406,537) 723,261
Valuation allowance.......... -- -- (467,000)
State and local.............. -- -- 2,987
----------- --------- ---------
Total deferred............. (876,737) (406,537) 259,248
----------- --------- ---------
Provision (credit) for income
taxes........................ $ (805,932) $(171,280) $ 495,839
=========== ========= =========
</TABLE>
Deferred tax assets (liabilities) at December 31, 1999 and 1998 relate to
the following temporary differences and carryforwards:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net operating loss carryforward.......... $ 1,274,800 $ 613,747
Alternative minimum tax credit
carryforward........................... 432,027 482,027
Accruals for:
Postretirement benefits................ 1,800,711 1,788,669
Environmental.......................... 2,808,400 3,078,063
Self insurance reserve................. 125,334 121,738
Inventory related........................ 544,888 599,510
Insurance refund......................... -- 478,625
Other.................................... 298,033 277,060
----------- -----------
Gross deferred tax assets............ 7,284,193 7,439,439
----------- -----------
Depreciation............................. (2,440,044) (2,998,988)
Undistributed earnings of the Company's
DISC................................... (1,178,644) (1,334,812)
Other.................................... (791,472) (492,108)
----------- -----------
Gross deferred tax liabilities....... (4,410,160) (4,825,908)
----------- -----------
Net deferred tax assets.............. $ 2,874,033 $ 2,613,531
=========== ===========
</TABLE>
The Company has net operating loss carryforwards of approximately $3.7
million that expire in 2010, 2018, and 2019.
The reasons for the difference between the income tax provision and income
taxes computed at the statuatory rate of 34% for 1999, 1998 and 1997 are
summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax
provision....................... $(659,209) $(329,065) $ 683,040
State and local income taxes, net
of federal tax benefit.......... 46,731 117,682 130,380
Nondeductible meal and
entertainment expense........... 80,488 69,509 68,655
Deferred tax asset valuation
allowance; reserve adjustment... (169,739) -- (467,000)
Other -- net...................... (104,203) (29,406) 80,764
--------- --------- ---------
$(805,932) $(171,280) $ 495,839
========= ========= =========
</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. PROPERTY TRANSACTIONS
In March 1999, the Company sold its idle plant in Bowling Green, Kentucky.
Also in March, another plant facility was converted to a warehouse and written
down to net realizable value and is now included with Other Assets on the
Balance Sheet. The net result of all property transactions for the year was a
before tax gain of $285,039.
In December 1999, the Company announced the closing of its lubricant
additives plant located on leased property outside of Cincinnati, Ohio. The
manufacturing operations previously conducted there were transferred to the
Company's new facility in Ashtabula, Ohio. As a result of the consolidation, The
Elco Corporation accrued a one-time before tax charge of $637,000 in the fourth
quarter.
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 7.75% and 4.0%, at December 31, 1999, 6.75% and 4.0% at December 31, 1998
and 7.0% and 4.0% at December 31, 1997. The expected long-term rate of return on
assets was 8.5% in 1997 and 9.25% in 1998 and 1999. The following tables set
forth the information required under Statement of Financial Accounting Standards
No. 132:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
A. CHANGE IN PROJECTED BENEFIT OBLIGATION
Benefit obligation at January 1....... $31,108,165 $29,056,309
Service cost.......................... 740,960 684,709
Interest cost......................... 2,050,569 1,992,556
Actuarial (gain)/loss................. (3,568,490) 1,224,166
Benefits paid in measurement year..... (1,678,189) (1,849,575)
----------- -----------
Benefit obligation at December 31..... $28,653,015 $31,108,165
=========== ===========
B. CHANGE IN PLAN ASSETS
Market value of assets at January 1... $33,712,925 $32,834,181
Actual return on assets............... 2,772,542 2,722,420
Contributions made in measurement
Year................................ -- 5,899
Benefits paid in measurement Year..... (1,678,189) (1,849,575)
----------- -----------
Market value of assets at December
31.................................. $34,807,278 $33,712,925
=========== ===========
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
C. RECONCILIATION OF FUNDED STATUS
Funded status as of December 31....... $ 6,154,263 $ 2,604,760
Unrecognized transition asset......... (357,237) (554,975)
Unrecognized prior service cost....... 388,775 437,617
Unrecognized net gain................. (4,524,252) (1,221,563)
----------- -----------
Net pension asset..................... $ 1,661,549 $ 1,265,839
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
D. NET PERIODIC PENSION CREDIT
Service cost............ $ 740,960 $ 684,709 $ 570,823
Interest cost........... 2,050,569 1,992,556 1,942,248
Expected return on
assets................ (3,028,580) (2,952,562) (2,451,343)
Net amortization........ (158,659) (323,903) (316,716)
----------- ----------- -----------
Net periodic pension
credit................ $ (395,710) $ (599,200) $ (254,988)
=========== =========== ===========
</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>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost attributed to
service during the period...... $149,240 $107,647 $100,341
Interest cost on accumulated
postretirement benefit
obligation..................... 294,711 249,066 246,921
Net amortization................. (13,058) (42,301) (48,580)
-------- -------- --------
Net periodic postretirement
benefit cost................... $430,893 $314,412 $298,682
======== ======== ========
</TABLE>
The Company's postretirement benefit plans are not funded. The status of
the plans at December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees.................................. $2,444,287 $2,242,022
Fully eligible active plan participants... 257,106 304,208
Other active plan participants............ 1,313,300 1,275,976
---------- ----------
Subtotal................................ 4,014,693 3,822,206
Unrecognized net gain and prior service
cost...................................... 688,129 849,169
---------- ----------
Total accrued postretirement benefits... $4,702,822 $4,671,375
========== ==========
</TABLE>
The change in accumulated benefit obligation is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit
obligation - January 1.................... 3,822,206 3,482,651
Service cost................................ 149,240 107,647
Interest cost............................... 294,711 249,066
Actuarial loss.............................. 147,982 114,861
Benefits paid in measurement year(1)........ (399,446) (132,019)
---------- ----------
Accumulated postretirement benefit
obligation - December 31.................. $4,014,693 $3,822,206
========== ==========
</TABLE>
(1) Includes prescription drugs in 1999
For measurement purposes, a 6.25% annual rate of increase in the per capita
cost of covered health care benefits (other than prescription drugs where the
rate was 7.04%) was assumed for 1999. The rate is assumed to decrease gradually
over the next 3 years to 4.75% 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, 1999 by approximately 14.1%
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by approximately 19.7%.
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.75% at December 31, 1999, 6.75% at
December 31, 1998 and 7.0% at December 31, 1997.
11. CONTINGENCIES
The Company and at least seventeen other companies are potentially
responsible for sharing the costs in a proceeding to clean up contaminated
sediments in the Fields Brook watershed in Ashtabula, Ohio. The Environmental
Protection Agency ('EPA") issued a Record of Decision in 1986 concerning the
methods it recommends using to accomplish this task. The Company and the other
potentially responsible parties negotiated with the EPA as to how best to effect
the clean up operation. After negotiation, an agreement was reached with EPA on
clean-up methodology. The Company's share of future costs is anticipated to be
approximately $2.5 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, 1999 and 1998 were $7.3 million and $8.0
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.
10
<PAGE> 14
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. One of those lawsuits involves the
division of costs between several potentially responsible companies for
reimbursement to the EPA for costs it incurred to conduct environmental
remediation at a drum and barrel recycler, which the Company had utilized in the
late 1980's. The potentially responsible companies entered into an Agreement to,
among other things, jointly defend the cost claims of the EPA. A dispute arose
amongst the potentially responsible companies over the Agreement which resulted
in the filing of a lawsuit. The matter went to trial before a jury in June of
1999 and a judgment was entered against the Company in the amount of
approximately $750,000, plus interest and attorney fees. The Company is taking
an appeal to the Michigan Court of Appeals and believes it has reasonable
grounds to seek reversal of the judgment.
The amount of liability to the Company with respect to costs of remediation
of contamination of the Fields Brook watershed and of other sites, and the
amount of liability with respect to several other claims and lawsuits against
the Company, was based on available data. The Company has established its
reserves in accordance with its interpretation of the principles outlined in
Statement of Financial Accounting Standards No. 5 and Securities and Exchange
Commission Staff Accounting Bulletin No. 92. In the event that any additional
accruals should be required in the future with respect to such matters, the
amounts of such additional accruals could have a material impact on the results
of operations to be reported for a specific accounting period but should not
have a material impact on the Company's consolidated financial position.
12. PREFERRED STOCK
The Company has authorized 1,000,000 shares of $2 par value preferred
stock, issuable in series. No shares were issued or outstanding as of December
31, 1999, 1998 and 1997.
13. STOCK PURCHASE RIGHTS
The Company has in place a Shareholder Rights Plan, under which preferred
stock purchase rights were distributed to shareholders as a dividend of one
Right for each outstanding 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.
14. STOCK OPTIONS
On April 22, 1993, the shareholders of the Company approved the
Corporation's 1993 Stock Option Plan (the Management Plan) and the Corporation's
1993 Stock Option Plan for Outside Directors (the Directors Plan). A summary of
the fixed stock option grants under Detrex's Management Plan and Directors Plan
as of December 31, 1999, 1998 and 1997, 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, 6,000 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>
1997
Outstanding at beginning
of year................ 119,000 6.68 36,000 9.46
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
1999
Granted.................. 3,000 9.00 -- --
Forfeited................ 2,000 11.19
Outstanding at end of
year................... 144,000 7.72 42,000 9.27
</TABLE>
11
<PAGE> 15
Of the 186,000 options outstanding at December 31, 1999, the weighted
average remaining life is 5.25 years; 162,332 of the options are exercisable at
December 31, 1999. All of the options 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, 1999:
<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 6.00 $ 5.86 92,000 $ 5.86
$ 8.01-$11.00 64,000 4.68 8.97 54,332 8.96
$11.01-$13.38 30,000 4.18 12.94 16,000 12.55
------------- ------- ---- ------ ------- ------
$ 5.00-$13.38 186,000 5.25 $ 8.07 162,332 $ 7.56
</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 as well as the underlying weighted
average Black-Scholes assumptions are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ----- ------
<S> <C> <C> <C>
Net income (loss) as reported (in
thousands)............................... $(1,133) $(797) $1,513
Pro-forma net income (loss) (in
thousands)............................... (1,227) (888) 1,434
Earnings (loss) per share as
reported -- basic........................ (0.72) (0.50) 0.96
Pro-forma earnings (loss) per share........ (0.78) (.56) 0.91
Expected Volatility........................ 0.57 0.50 0.37
Risk-Free Rate of Return................... 5.23 5.62 6.54
5 6 6-10
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 1999, 1998 and 1997 is $5.31,
$7.31 and $4.60.
15. 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." As of December 31, 1999, 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 and provides parts cleaning
services.
The other category includes certain property transactions, consulting fees,
discontinued operations and certain employee benefit items. Data (in thousands)
for 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net sales:
Harvel Plastics..................... $35,710 $29,656 $29,638
Elco Corporation.................... 19,910 19,873 22,759
Seibert-Oxidermo.................... 13,519 12,237 13,783
Equipment Division.................. 5,295 7,291 10,594
Solvents Division................... 14,541 14,502 15,782
Other............................... 1,441 2,480 3,201
------- ------- -------
Total............................. $90,416 $86,039 $95,757
======= ======= =======
Earnings (loss) before income taxes:
Harvel Plastics..................... $ 2,106 $ 2,710 $ 3,267
Elco Corporation(1)................. 814 1,237 2,811
Seibert-Oxidermo.................... 170 (366) 296
Equipment Division.................. (535) (823) 756
Solvents Division................... (253) 361 291
------- ------- -------
Sub-total......................... $ 2,302 $ 3,119 $ 7,421
Corporate administrative expense.... (3,747) (3,912) (3,790)
Corporate interest expense.......... (858) (655) (576)
Other(2)............................ 364 480 (1,046)
------- ------- -------
Total............................. $(1,939) $ (968) $ 2,009
======= ======= =======
Depreciation and amortization:
Harvel Plastics..................... $ 1,506 $ 1,204 $ 1,148
Elco Corporation.................... 1,022 924 835
Seibert-Oxidermo.................... 293 330 360
Equipment Division.................. 47 78 87
Solvents Division................... 335 288 289
Other............................... 452 488 524
------- ------- -------
Total............................. $ 3,655 $ 3,312 $ 3,243
======= ======= =======
Total assets:
Harvel Plastics..................... $21,983 $21,630 $15,904
Elco Corporation.................... 19,143 15,139 13,284
Seibert-Oxidermo.................... 8,616 6,949 7,626
Equipment Division.................. 3,588 3,618 5,900
Solvents Division................... 7,313 5,473 5,869
Other (includes intercompany
eliminations)..................... (1,025) 3,245 6,988
------- ------- -------
Total............................. $59,618 $56,054 $55,571
======= ======= =======
Sales by customer location:
United States....................... $79,617 $75,730 $85,063
Outside United States............... 10,799 10,309 10,694
------- ------- -------
Total............................. $90,416 $86,039 $95,757
======= ======= =======
</TABLE>
(1) 1999 includes the effect of a one-time charge of $637,000 -- See Note 9.
(2) 1999 includes $1.0 million of losses applicable to a sold business, which
was more than offset by pension credits, consulting fees and gain on sale of
property.
12
<PAGE> 16
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Detrex Corporation and its consolidated subsidiaries (the "Company")
incurred a loss of $1.1 million in 1999. Three of the Company's business units
had operating income in 1999 while the other two had operating losses. A
business sold in 1999 incurred a loss of $1.0 million before tax.
Harvel Plastics, Inc. ("Harvel") had significantly higher revenue than in
1998 as a result of strong demand in the building industry and the ability to
service new markets from its new California manufacturing facility. However,
earnings were down in the first half of the year due to higher raw material
costs that were not completely recovered in price and costs incurred in
launching its new plant. The Elco Corporation ("Elco") had approximately the
same revenue as in 1998. Elco's earnings were adversely affected by a $637,000
charge resulting from the closing of its lubricant additives plant located
outside of Cincinnati, Ohio and costs incurred prior to transferring
manufacturing operations to its new facility in Ashtabula, Ohio.
Seibert-Oxidermo, Inc. ("Seibert") reported a profit in 1999 compared to a loss
in 1998. This improvement occurred from strong automotive demand and volume
increases from new accounts, combined with efficiencies achieved by
consolidating manufacturing operations. The Equipment Division continued to lose
money as the weakness in the cleaning equipment market stretched into 1999. The
loss was smaller than in 1998 as cost reduction measures were taken. Sales in
the Solvents Division were approximately the same as in 1998, but sales in low
margin product lines resulted in a loss for 1999.
COMPARATIVE OPERATING DATA (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
$ % $ % $ %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net sales................................................... 90,416 100.0 86,039 100.0 95,757 100.0
Gross margin................................................ 20,685 22.9 21,285 24.7 24,401 25.5
Selling, general and administrative expenses................ 18,147 20.1 18,063 21.0 17,816 18.6
Depreciation and amortization............................... 3,655 4.0 3,312 3.8 3,243 3.4
Net income (loss)........................................... (1,133) (1.3) (797) (.9) 1,513 1.6
</TABLE>
1999 Compared to 1998 -- Net sales in 1999 for the Company reflect a $4.4
million increase from the previous year. As indicated above, Harvel benefitted
from strong demand in the building industry and having a new manufacturing
operation in California to meet the increased demand. Harvel's sales increase on
a year-to-year basis was $6.0 million. Seibert had a $1.3 million increase in
sales as a result of new business coming on stream. Sales for Elco and the
Solvents Division were approximately the same as last year while Equipment
Division sales decreased by $2.0 million.
Gross margin in 1999 was 22.9% compared to 24.7% in 1998. The major reasons
for the decline were costs involved in closing a plant of Elco's and costs
associated with a business that was sold. In addition Harvel incurred a
reduction in margins as the price of raw materials increased. Solvents Division
incurred a reduction in margin as a result of unfavorable product mix and
offshore competition while Seibert's margins increased due to mix.
Selling, general and administrative expenses were approximately the same in
1999 and 1998. Economic increases averaging 4% occurred in all of the Company's
operating units but productivity improvements offset most of the economics.
Expenses were 20.1% of sales in 1999, compared to 21.0% of sales in 1998.
The provision for depreciation and amortization is higher than 1998 as a
result of depreciation of new plants in Ashtabula, Ohio and Bakersfield,
California, and the new management information system at the Corporate
headquarters.
Interest expense is higher in 1999 due to increased borrowings and higher
interest rates from a year ago.
The income tax credit in both 1999 and 1998 reflects credits for federal
income tax, partially offset by state and local income tax expense.
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
13
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
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.
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.
LIQUIDITY, FINANCIAL CONDITION, AND CAPITAL RESOURCES
The Company utilized internally generated funds, the proceeds from the sale
of a closed plant and increased borrowings to finance operating activities and
$5.3 million in capital expenditures during 1999. The Company's borrowings under
its revolving credit facility increased by $2.0 million during the year bringing
the loan balance at December 31st to $8.3 million. The loan balance under the
Company's equipment facility was $1.7 million.
The Company's capital expenditures for 2000 are estimated to be $3.5
million. It is anticipated that these expenditures will principally be financed
through internally generated funds and borrowings under existing financing
arrangements.
On February 29, 2000, the Company amended its Agreement with Comerica Bank
increasing the revolving credit facility to $13.0 million. The financial
covenants were amended retroactive to December 31, 1999 and the interest rate on
the revolving credit facility was increased by 1/2% and the interest rate on the
term loan facility was increased by 1/4%.
Working capital was $3.7 million at December 31, 1999 compared to $5.9
million at December 31, 1998. The Company has paid no dividends since the second
quarter of 1991 and cannot forecast when the dividend will be restored.
OTHER
The Company has not completed the process of evaluating the impact that
will result from adopting Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities. The Company is
therefore unable to disclose the impact that adopting Statement of Financial
Accounting Standards No. 133 will have on its financial position and results of
operations when such statement is adopted.
The Company completed its work to ensure compliance with Y2K issues on a
timely basis and has not encountered any difficulties in this area.
14
<PAGE> 18
SUPPLEMENTARY INFORMATION (Unaudited)
Selected Quarterly Data (Thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
1999 Quarters
----------------------------------------------------
4th 3rd 2nd 1st
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales....................... $22,939 $23,277 $22,206 $21,994
Gross margin on sales........... 4,528 5,511 5,163 5,483
Net income...................... (742) (268) (327) 204
Per common share -- basic....... (.47) (.17) (.21) .13
Per common share -- diluted..... (.47) (.17) (.21) .13
Stock price range(1)
High.......................... 6 1/4 7 1/4 7 7/16 7
Low........................... 3 5/8 4 1/2 5 1/2 5 1/2
<CAPTION>
1998 Quarters
----------------------------------------------------
4th 3rd 2nd 1st
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales....................... $21,198 $22,113 $21,292 $21,436
Gross margin on sales........... 5,385 5,573 4,905 5,422
Net income...................... (428) (266) (248) 146
Per common share -- basic....... (.27) (.17) (.15) .09
Per common share -- diluted..... (.27) (.17) (.15) .09
Stock price range(1)
High.......................... 7 1/4 13 1/2 17 3/4 18
Low........................... 5 13/16 6 1/4 12 9 3/8
</TABLE>
(1) Stock price range was obtained from NASDAQ quotations.
15
<PAGE> 19
SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales................................................... $90,416 $86,039 $95,757 $96,825 $94,302
Net income (loss)........................................... (1,133) (797) 1,513 415 (1,869)
Earnings (loss) per common share -- basic................... (.72) (.50) .96 .26 (1.18)
Earnings (loss) per common share -- diluted................. (.72) (.50) .94 .26 (1.18)
Total assets................................................ 59,618 55,991 55,571 55,592 57,659
Net working capital......................................... 3,723 5,925 9,274 8,515 6,317
Capital expenditures........................................ 5,282 7,073 4,710 2,325 2,095
Long term portion of capital lease obligations.............. 268 468 569 394 518
Total bank debt............................................. 9,983 6,290 5,700 5,627 8,500
Industrial development bonds................................ 4,000 4,000 -- -- --
Stockholders' equity........................................ 16,892 18,025 18,822 17,309 16,893
Stockholders' equity per common share....................... 10.67 11.38 11.89 10.93 10.67
Number of employees......................................... 327 366 353 345 347
Percentages to net sales:
Gross margin........................................... 22.9 24.7 25.5 23.4 22.5
Net income (loss)...................................... (1.3) (.9) 1.6 .4 (2.0)
Net income (loss) as a percent of:
Average total assets................................... (2.0) (1.4) 2.7 .7 (3.1)
January 1st stockholders' equity....................... (6.7) (4.2) 8.7 2.5 (10.0)
Current ratio............................................... 1.1 1.3 1.4 1.4 1.3
</TABLE>
16
<PAGE> 20
DIRECTORS
BRUCE W. COX
President, B. W. Cox Company,
Manufacturers Representative
ROBERT A. EMMETT, III
Deputy General Counsel for Environment
and Nuclear Programs, U.S. Department of Energy
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.
DAVID R. ZIMMER
Business Consultant;
Former Executive Vice President of
United Dominion Industries, 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
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 1999 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
DETCM-AR-99
<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>
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
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
March 1, 2000 appearing in and incorporated by reference in this Annual Report
on Form 10-K of Detrex Corporation for the year ended December 31, 1999.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Detroit, Michigan
March 24, 2000
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 381
<SECURITIES> 0
<RECEIVABLES> 13,607
<ALLOWANCES> 244
<INVENTORY> 12,423
<CURRENT-ASSETS> 28,579
<PP&E> 61,434
<DEPRECIATION> 34,747
<TOTAL-ASSETS> 59,618
<CURRENT-LIABILITIES> 24,856
<BONDS> 3,168
0
0
<COMMON> 3,167
<OTHER-SE> 13,725
<TOTAL-LIABILITY-AND-EQUITY> 13,703
<SALES> 90,416
<TOTAL-REVENUES> 90,416
<CGS> 69,731
<TOTAL-COSTS> 69,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,075
<INCOME-PRETAX> (1,939)
<INCOME-TAX> (806)
<INCOME-CONTINUING> (1,133)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,133)
<EPS-BASIC> (.72)
<EPS-DILUTED> (.72)
</TABLE>
