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

 

March 6, 2009

PRESS RELEASE

Detrex Corporation Reports Profit for 2008

Southfield, Michigan – March 6, 2009 - Detrex Corporation (OTCQX: DTRX), a diversified manufacturer of PVC and CPVC pipe, duct and shapes and specialty chemicals including lubricant additives and high purity hydrochloric acid, today announced 2008 full year pre-tax income from continuing operations of $2,830,716, compared to $4,067,107 in 2007.

The combined sales of the company’s two business units – The Elco Corporation and Harvel Plastics, Inc. – totaled $98.6 million in 2008 compared to $91.2 million in 2007. The revenue increase was almost entirely due to higher selling prices at both units that reflected significant increases in raw material costs during the first part of the year. Gross margins came under pressure as sales price adjustments did not fully recoup the raw material cost increases. In the fourth quarter margins at Harvel came under further pressure as raw material costs reversed course and pipe prices declined sharply. Therefore, both margins and earnings declined in 2008 compared to 2007.

The 2008 net income including discontinued operations was $887,915 or $0.56 per fully diluted share, compared to $1,980,627, or $1.22 per fully diluted share, in the prior year. The 2008 results included pre-tax environmental charges of $1,250,000, of which $300,000 were in continuing operations and $950,000 in discontinued operations; no such charges were incurred in 2007. Additional provisions of $86,000 were made in discontinued operations for ongoing holding costs and workers’ compensation expenses, resulting in a total net of tax charge of $682,600 compared to $89,900 in 2007. Net income in 2008 reflects income tax expense of $907,801 which is significantly greater than the actual payments of $346,000; the Company is not required to pay Federal income tax due to utilization of significant tax loss carryforwards.

The environmental charges that were made in 2008 were required to address anticipated costs for three matters. The charge to continuing operations was for additional remediation and construction at the Fields Brook Superfund project. A pre-tax charge of $750,000 was made to discontinued operations in the third quarter for a new environmental claim that is related to a business venture that was discontinued in the 1950’s. Discontinued operations also includes a $200,000 pre-tax charge resulting from expanded sampling and consulting costs at the site of one of the company’s former operations. In spite of these setbacks, the company made significant progress at several sites including completion of the dredging of the Ashtabula River during 2008.

The unfunded status of the company’s pension plan increased in 2008 due to losses in the pension plan investment portfolios. While the company made contributions of $1.5 million to the plan, the combination of investment losses, benefit payments and adjustments in the liability increased the combined underfunded position of the pension plans from $8.1 million in 2007 to $15.7 million at the end of 2008.

The company utilized internally generated funds from its business units and increased net borrowings of $2.3 million in 2008 to finance its overall operations, working capital requirements, pension funding, environmental expenditures, and capital expenditures. In 2009, the combined outlay for these matters is expected to be at approximately the same level. The company entered into a new credit agreement with a new principal lender in March, 2008, and believes it has sufficient additional availability under the new agreement to fund its cash requirements in 2009. Nonetheless, continued operating performance is important to the company’s ability to meet these obligations.

Commenting on the Company’s results for 2008, President and CEO Tom Mark said, “We performed well during most of 2008 in spite of a very difficult market environment in which costs and prices rose then fell sharply and demand was weak. While we made significant progress with several environmental projects, it became necessary to make additional provisions for new environmental costs. We are also disappointed that the underfunded position of the company’s pension plans increased substantially. Going forward, we are keenly aware of the challenges that the economy poses and are implementing contingency plans as the situation unfolds. Our objective is to generate free cash flow to be used for funding the operations and continuing to address the legacy liabilities.”

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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