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

 

March 8, 2010

PRESS RELEASE

Detrex Corporation Reports Results for 2009

Southfield, Michigan – March 8, 2010 - Detrex Corporation (DTRX.PK), a diversified manufacturer of PVC and CPVC pipe, duct and shapes and specialty chemicals including additives for industrial petroleum products and high purity hydrochloric acid, today announced results for 2009.

The combined sales of the company’s two business units – The Elco Corporation and Harvel Plastics, Inc. – totaled $74.5 million in 2009 compared to $98.6 million in 2008. The decline in sales was the result of the sharp fall-off in demand that began in the fourth quarter of 2008 and continued into 2009. While market conditions began to stabilize late in the first quarter of 2009, business activity remained at a low level throughout the year at Harvel while showing some improvement at Elco. In response to the economic conditions, actions were taken across the company to reduce costs and expense. In addition to general cost reduction measures, these actions included freezing of the pension plans, elimination of the 401-k match, officer salary reductions, headcount reductions and pay freezes at all operating locations. The effects of these actions phased in as the year progressed and in combination with measures to improve market penetration resulted in steady improvements in operating performance in the third and fourth quarters. In the fourth quarter, profits from operations were positive prior to non-operating adjustments.

The company had a net loss of $2,963,752 or ($1.85) per fully diluted share, for the full year of 2009 compared to net income of $887,915, or $0.56 per fully diluted share, in 2008. Earnings in both years were impacted significantly by several non-operating adjustments. The 2008 results include pre-tax environmental charges of $1,250,000, of which $300,000 was in continuing operations and $950,000 was in discontinued operations. In 2009, total pre-tax charges of $3,758,467 were made including the following: 1) a $3,900,000 environmental charge, of which $1,600,000 was in continuing operations and $2,300,000 was in discontinued operations; 2) a $1,618,818 charge to write down property held for sale in order to recognize the impact of severely depressed real estate values in the Detroit market; and 3) an offsetting gain of $1,760,351 recognized due to a post-retirement benefit plan termination. The approximate total after-tax effect of these non-operating adjustments for 2009 was to reduce earnings by $2,470,000.

During 2009 the company spent $4.1 million on environmental remediation projects. Several of these projects are complete or nearing completion while others are in the early phases of corrective action. The previously mentioned charge of $3.9 million was made at the end of 2009 to increase the environmental reserve to $5.3 million. As the result of the Chrysler LLC bankruptcy, two sites have become liabilities again after having been settled nearly twenty years ago. The additional environmental charges are related to new developments at existing sites and the formerly closed projects and cost increases for changed conditions. The company expects to spend $2.1 million in 2010 on environmental matters.

The unfunded status of the company’s pension plan decreased to $10.6 million in 2009 from $15.7 million in 2008. This reduction was the result of gains in the investment portfolios, freezing of the plans so that active employees no longer accrue additional benefits and contributions to the plans. The company also terminated its post retirement benefit plan which resulted in a reduction of this liability to $0.2 million from $1.6 million. Partially offsetting these balance sheet improvements was a $1.6 million reduction in the value of the piece of property that has been held for sale since 2001.

The company utilized cash flow from working capital management and an increase in net borrowings of $1.2 million in 2009 to fund $4.1 million in environmental expenditures, $1.0 million in pension and retiree health funding, $1.2 million in capital expenditures and other business needs. In June of 2009 the company’s bank, JP Morgan Chase NA, waived the company’s default with certain of its debt covenants; the agreement was subsequently amended in November. At this time the facility provides for a term loan and revolving credit facility totaling approximately $20 million. This facility has a term that expires in January of 2011.

Commenting on the Company’s results for 2009, President and CEO Tom Mark said, “Our objective for 2009 was to minimize the impact of the economic downturn and to generate earnings and free cash flow to be used for funding the operations and the legacy liabilities. We achieved this objective with a modest increase in bank borrowing and will continue to focus on this objective while striving for improved operational performance. We are cautiously optimistic about the economic outlook and our ability to capitalize on the markets as they improve.”

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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