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

 

August 5, 2009

PRESS RELEASE

Detrex Corporation Reports Results for the Second Quarter of 2009

Southfield, Michigan – August 5, 2009 - Detrex Corporation (DTRX.PK), a diversified manufacturer of PVC and CPVC pipe, duct and shapes and specialty chemicals including lubricant additives and high purity hydrochloric acid, today announced results for the second quarter of 2009.

Second quarter net sales decreased to $18.8 million from $27.5 million in the comparable period last year. On a year-to-date basis, 2009 sales were $36.8 million, compared to $52.2 million in the first half of 2008. The Company incurred a net loss of $299,985, or $0.19 per fully diluted share in the second quarter of 2009 compared to net income in the same period last year of $568,930, or $0.35 per fully diluted share. The net loss for the first six months of 2009 was $621,270, or $0.39 per fully diluted share, compared to net income of $1,071,857, or $0.68 per fully diluted share, in the same period of 2008.

Recessionary market conditions continued into the second quarter for both of the Company’s business units, The Elco Corporation and Harvel Plastics, Inc. Both businesses experienced weak underlying demand which was compounded by inventory destocking throughout the customer base. Elco’s sales in the second quarter were 22% below the strong second quarter of 2008. Sales increased by 12% in the second quarter 2009 from the first quarter which reflects increased activity from repeat customers as their inventories were worked down. Harvel’s second quarter sales were 36% below the strong second quarter of 2008 where high pricing helped to boost sales. Harvel is experiencing weak demand in all segments, especially CPVC industrial pipe, due to the significant downturn in the industrial and commercial construction markets.

The low volume and sales led to a net loss for the quarter, and year-to-date. The Company pursued aggressive reductions in both costs and expenses in order to offset the sales decline to the extent possible. These actions include freezing of the pension plans, suspension of the 401-K match, headcount reductions, selected salary reductions, reduction in the manufacturing workweek and elimination of overtime. Nonetheless, gross margins fell well short of the contribution required to achieve profitability.

The Company generated positive cash flow during the first six months of the year in spite of the net loss. Careful cash management enabled the Company to fund over $3 million for legacy liabilities including environmental and pension, as well as for capital expenditures and reduction of long term debt. The Company was not in compliance with one of its loan covenants at June 30th; the bank (JP Morgan Chase) waived the default and we executed an amendment to the loan agreement on July 31st. The amended loan agreement includes revised covenants, an increase in the interest rate from LIBOR plus 150 basis points to LIBOR plus 300 basis points and shortens the term to November 30th, at which time the intent of both parties is to execute a new one year loan agreement based on management’s 2010 operating plan.

During the quarter the Company settled for $1.0 million an environmental claim made by the EPA for its costs related to a business venture that the Company participated in during the 1950’s. This matter was previously disclosed and will not require additional reserves.

Commenting on the Company’s results for the first half of 2009, President and CEO Tom Mark said, “The protracted economic downturn is continuing to prove very challenging. In response, we have taken action to cut costs and maximize cash flow in order to conserve resources while striving to maintain or improve our market position. It is important to note that we have been able to meet our obligations with regard to funding of legacy liabilities while continuing to support the businesses. While we see some bright spots in the market environment for both companies, we expect this to be a very difficult year overall.”

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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