June

DETREX CORPORATION - (DTRX:PK) Contact: Thomas E. Mark
Phone: (248) 358-5800 FAX: (248) 799-7192

 

February 28, 2014

PRESS RELEASE

Detrex Corporation Announces Earnings for Full Year 2013 and Announces a First Quarter Dividend

Southfield, Michigan – February 28, 2014 - Detrex Corporation (OTCQX:DTRX), today announced 2013 full year net income of $2.6 million, or $1.51 per fully diluted share, on sales of $41.0 million. In 2012 net sales were $43.4 million and the Company generated a net loss from continuing operations of $7 million inclusive of pre-tax environmental charges of $15.7 million. The total net income in 2012, including the gain on the sale of Harvel Plastics, Inc., was $7.7 million, or $4.49 per fully diluted share. The Company also announced that it will pay a $0.25 quarterly dividend on March 27, 2014 to shareholders of record as of March 13, 2014.

2013 was a transformative year for the Company. Most significantly, the Company completed the transfer of the majority of its legacy environmental liabilities to a third party. This has removed a major source of uncertainty while providing improved predictability and sustainability of earnings and cash flow. The legacy pension obligation was also much improved and the Company’s retirement plans are now in an overfunded position. The Company’s subsidiary, The Elco Corporation, continued to perform well and generated solid earnings that facilitated payment of $1.00 per share in shareholder dividends.

Elco’s 2013 sales of $41.0 million were $2.4 million, or 5.5% below 2012 sales. Most of the decline came in the fourth quarter where sales were $1.4 million below 2012 fourth quarter revenues. Weaker demand was the primary cause for this shortfall. Elco’s lower 2013 revenues resulted in pre-tax earnings of $7.3 million compared to $8.7 million in 2012. This decline is the result of lower sales in combination with the cost for significant investments in Elco’s future that were made in 2013. Improvements were made in manufacturing including more robust processes and investment in equipment. Additional technical, sales, and administrative personnel have been hired as the Company has embarked on improving its capabilities in all of those areas in anticipation of stronger sales in North America, Europe, Asia and elsewhere. In addition, a sales representative office was opened in Shanghai, China.

The Company ended the year with an environmental reserve of $1.9 million which covers the estimated costs for remediation of the Company’s remaining environmental liabilities. These sites are well characterized and represent a well-defined and quantified exposure. During 2013 we spent approximately $0.8 million on remediation, both for the above liabilities, as well as activity on the transferred liabilities prior to the June transfer transaction. We expect spending in 2014 to be approximately $0.7 million. In subsequent years we expect payments to be minimal.

The Company’s pension plans moved from a $4.0 million underfunded position at the beginning of 2013 to an overfunded position of $1.4 million at the end of the year. This was the result of the combined effects of $1.7 million in cash contributions, performance of the pension investment portfolio and an increase in the discount rate from 4.25% to 5.0%. The Company is not required to, and does not plan to, make a contribution to the plan in 2014.

The major cash outlays for 2013 were the liability transfer transaction of $13.5 million, environmental spending of $0.7 million, pension contributions of $1.7 million, capital expenditures of $1.5 million and dividends of $1.7 million. The Company borrowed approximately $9 million to fund the environmental liability transfer transaction. At year-end the loan balance net of cash on hand was $6.5 million which reflects favorable cash generation by Elco and a combination of federal, state and local tax refunds. Given the outlook for much reduced legacy liability payments, additional tax refunds and Elco’s strong cash flow, we expect the loan balance to be significantly reduced or eliminated by the end of 2014.

“In 2013 we continued to deliver shareholder value and believe that significant progress was made. While Elco’s results declined somewhat compared to prior years, we believe that the investments we made to enhance capacity, capability, market position and products will lead to continued strong performance” said President and CEO Tom Mark. “In the year to come we will continue to evaluate and embrace strategic opportunities to generate shareholder value and we look forward to keeping you informed of our progress.”


About Detrex Corporation
Founded in 1925, Detrex Corporation through its subsidiary The Elco Corporation is a leading manufacturer of high performance specialty chemicals including additives for industrial petroleum products and high purity hydrochloric acid.

Forward Looking Statements
Statements included in this press release that are not historical in nature are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Act”). The words “believe,” “expect,” “anticipate,” “estimate,” “guidance,” “target” and similar expressions identify forward-looking statements. The Company cautions readers that forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected in the forward-looking statements. Certain risks and uncertainties are identified from time to time in the Company’s reports. Some factors that could cause results to differ materially from those projected in the forward-looking statements include: market conditions, environmental remediation costs, pension expense and funding requirements, liquidation value of assets, and marketability of real estate and the market value and future liquidity of Detrex stock. The Company claims the protection of the safe harbor for forward-looking statements contained in the 1995 Act.

 

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