-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gr4E2RYDlfvr/bjhX1RPjJvtfPm2K5+9rlStizKun/eYkJ//Wvz5dJSZM3mVRNUu Qtlg4LXoa9FKPE1YgAl79w== /in/edgar/work/20000804/0000950124-00-004536/0000950124-00-004536.txt : 20000921 0000950124-00-004536.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950124-00-004536 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DETREX CORPORATION CENTRAL INDEX KEY: 0000028372 STANDARD INDUSTRIAL CLASSIFICATION: [2800 ] IRS NUMBER: 380480840 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00784 FILM NUMBER: 685855 BUSINESS ADDRESS: STREET 1: 24901 NORTHWEST HWY STREET 2: STE 500 CITY: SOUTHFIELD STATE: MI ZIP: 48075 BUSINESS PHONE: 2483585800 MAIL ADDRESS: STREET 1: P O BOX 5111 CITY: SOUTHFIELD STATE: MI ZIP: 48075 FORMER COMPANY: FORMER CONFORMED NAME: DETREX CHEMICAL INDUSTRIES INC DATE OF NAME CHANGE: 19860805 10-Q 1 e10-q.txt FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 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., Ste. 500, Southfield, MI 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 (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 ----- ----- As of July 27, 2000 1,583,414 shares of the registrant's stock were outstanding. ------------- 2 DETREX CORPORATION
INDEX PART I FINANCIAL INFORMATION PAGE - ------ --------------------- ---- Item 1 Condensed Consolidated Balance Sheets- June 30, 2000 and December 31, 1999 3 Condensed Consolidated Unaudited Statements of Operations For the Three and Six Months Ended June 30, 2000 and 1999 4 Consolidated Unaudited Statements of Cash Flows- Six Months Ended June 30, 2000 and 1999 5 Notes to Condensed Consolidated Unaudited Financial Statements 6-7 Item 2 Management's Discussion and Analysis of Interim Financial Information 8-9 PART II OTHER INFORMATION - ------- ----------------- Item 4 Submission of Matters to Vote of Security Holders 10 Item 6 Exhibits and Reports on Form 8-K 10 SIGNATURES 11
2 3 DETREX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED AUDITED June 30, 2000 December 31, 1999 ------------- ----------------- ASSETS Current Assets: Cash and cash equivalents $ 433,424 $ 381,269 Accounts receivable (less allowance for uncollectible accounts of $281,000 in 2000 and $259,000 in 1999) 14,424,081 13,363,021 Inventories: Raw materials 4,519,371 4,981,780 Work in process 387,209 332,187 Finished goods 7,571,210 7,109,459 ----------- ----------- Total Inventories 12,477,790 12,423,426 Prepaid expenses and other 685,010 991,888 Deferred income taxes 1,419,370 1,419,370 ----------- ----------- Total Current Assets 29,439,675 28,578,974 Land, buildings, and equipment-net 25,389,575 26,687,145 Prepaid pensions 2,001,319 1,760,243 Deferred income taxes 1,227,782 1,454,663 Other assets 1,032,769 1,136,948 ----------- ----------- $59,091,120 $59,617,973 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Loans payable $ 9,038,945 $ 8,313,749 Current portion of long-term debt 1,000,800 866,000 Current maturities of capital leases 191,568 214,349 Accounts payable 10,023,134 11,403,039 Environmental reserve 1,500,000 1,500,000 Accrued compensation 508,995 300,362 Other accruals 2,364,397 2,258,978 ----------- ----------- Total Current Liabilities 24,627,839 24,856,477 Long term portion of capital lease obligations 178,874 267,942 Long-term debt 4,154,975 4,802,775 Accrued postretirement benefits 4,852,822 4,702,822 Environmental reserve 5,380,132 5,834,555 Accrued pensions and other 100,696 100,696 Minority interest 2,350,869 2,160,379 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 14,256,065 13,703,479 ----------- ----------- Total Stockholders' Equity 17,444,913 16,892,327 ----------- ----------- $59,091,120 $59,617,973 =========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS 3 4 DETREX CORPORATION CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended June 30 June 30 2000 1999 2000 1999 ---- ---- ---- ---- Net sales $25,960,161 $22,205,658 $52,866,246 $44,199,672 Cost of sales 19,563,423 17,042,859 39,699,359 33,553,777 Selling, general and administrative expenses 4,562,208 4,465,617 9,429,981 8,870,625 Provision for depreciation and amortization 959,701 942,293 1,919,271 1,870,272 Net loss (gain) from property transactions 84,955 -- 98,859 (380,206) Other income and deductions (144,057) (53,628) (182,745) (94,083) Minority interest 105,914 47,678 220,489 108,832 Interest expense 387,370 213,002 744,455 399,279 ----------- ----------- ---------- ----------- Income (loss) before income taxes 440,647 (452,163) 936,577 (128,824) Provision (credit) for income taxes 179,619 (124,838) 383,992 (5,203) ----------- ----------- ---------- ----------- Net income (loss) $ 261,028 $ (327,325) $ 552,585 $ (123,621) =========== =========== ========= =========== Net income (loss) per common share: Basic $ 0.16 $ (.21) $ 0.35 $ (.08) Diluted $ 0.16 $ (.21) $ 0.35 $ (.08) Weighted average shares outstanding: Basic 1,583,414 1,583,414 1,583,414 1,583,414 Effects of dilutive stock options -- -- -- -- ----------- ----------- ---------- ----------- Diluted 1,583,414 1,583,414 1,583,414 1,583,414 =========== =========== ========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS 4 5
DETREX CORPORATION CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS Six Months Ended June 30 ------- 2000 1999 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 552,585 $ (123,621) Adjustments to reconcile net income(loss) to net cash provided by(used in) Operating activities: Depreciation and amortization 1,919,271 1,870,272 Loss (gain) on disposal of property 98,859 (380,206) Deferred income taxes 226,881 (77,191) Minority interest 190,490 78,833 Changes to operating assets and liabilities that provided (used) cash: Accounts receivable (1,061,060) (1,075,484) Inventories (54,365) (915,947) Prepaid expenses and other 65,802 (652) Other assets 97,184 41,340 Accounts payable (1,379,905) 333,835 Environmental reserve (454,423) (433,884) Accrued compensation 208,633 274,946 Other accruals 105,588 (206,802) Postretirement benefits 150,000 150,000 ----------- ----------- Total adjustments 112,955 (340,940) ----------- ----------- Net cash provided by (used in) operating activities 665,540 (464,561) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (798,359) (2,825,546) Sale/disposal of fixed assets 84,626 380,000 Change in proceeds from bond issue -- 1,182,366 ----------- ----------- Net cash used in investing activities (713,733) (1,263,180) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under revolving credit facility 725,196 1,236,033 Borrowing under equipment loan facility 170,000 1,200,000 Repayment of long term debt (683,000) (10,000) Principal payments under capital lease obligations (111,848) (135,192) ----------- ---------- Net cash provided by financing activities 100,348 2,290,841 ----------- ---------- Net increase in cash and cash equivalents 52,155 563,100 Cash and cash equivalents at beginning of period 381,269 192,689 ----------- ---------- Cash and cash equivalents at end of period $ 433,424 $ 755,789 =========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 696,264 $ 340,925 Income taxes $ 8,000 $ 130,412 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Capital lease obligations incurred with the acquisition of equipment $ -0- $ 26,500 Capital lease terminations $ -0- $ 24,963
SEE NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS 5 6 DETREX CORPORATION NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying condensed consolidated unaudited financial statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the results of operations for the periods presented. Certain amounts for 1999 have been reclassified to conform with 2000 classifications. The information furnished for the six months may not be indicative of results to be expected for the full year. 2. 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 June 30, 2000 was $6.9 million. 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. 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. 6 7 DETREX CORPORATION 3. The Company has four operating segments that meet the quantitative thresholds of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information": - Harvel Plastics - manufactures PVC and CVPC 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 - Parts Cleaning Technologies - designs, engineers and sells industrial cleaning equipment, distributes virgin or reclaimed solvents and aqueous or semi-aqueous cleaning chemistries and provides parts cleaning services. Other includes consulting, businesses sold in 1999, property transactions, minority interest and provisions for certain employee benefit items. Data for the three months ended June 30, 2000 and 1999 and the six months ended June 30, 2000 and 1999 is as follows:
Three Months Ended June 30 Six Months Ended June 30 2000 1999 2000 1999 ---- ---- ---- ---- Net sales: Harvel Plastics $12,273,046 8,611,848 $24,668,677 $17,309,703 Elco Corporation 5,144,526 4,610,565 10,859,804 9,874,093 Seibert-Oxidermo 3,749,022 3,497,969 7,707,604 6,879,095 Parts Cleaning Technologies 4,683,517 5,060,712 9,349,359 9,250,787 Other 110,050 424,564 280,802 885,994 ----------- ---------- ----------- ----------- Total $25,960,161 $22,205,658 $52,866,246 $44,199,672 =========== =========== =========== =========== Earnings (loss) before income taxes: Harvel Plastics 1,165,168 523,942 2,425,620 1,197,237 Elco Corporation 391,196 140,455 875,574 692,488 Seibert-Oxidermo 115,170 119,764 275,192 199,008 Parts Cleaning Technologies (105,226) (84,143) (330,025) (437,279) Other 141,892 72,196 285,083 211,225 --------- ------- --------- ----------- Sub-total 1,708,200 772,214 3,531,444 1,862,679 Corporate administrative expense (765,474) (956,296) (1,680,958) (1,871,554) Corporate interest expense (309,873) (177,476) (589,203) (334,329) Other (192,206) (90,605) (324,706) 214,380 --------- -------- ---------- ----------- Total $ (440,647) $ (452,163) $ 936,577 $ (128,824) ========== ============ =========== ===========
7 8 DETREX CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL INFORMATION Results of Operations Detrex Corporation and its consolidated subsidiaries ("the Company") reported net income of $261,028 for the second quarter of 2000, compared with a net loss of $327,325 for the second quarter of 1999. For the first six months of 2000, the Company reported net income of $552,585, compared with a net loss of 123,621 for the first half of 1999. Summarized below is selected operating data for the current fiscal period and the comparable data for the same period last year (in thousands):
Three Months Ended Six Months Ended June 30 June 30 ------- ------- 2000 1999 2000 1999 ---- ---- ---- ---- $ % $ % $ % $ % --- --- --- --- --- --- --- --- Sales 25,960 100.00 22,206 100.0 52,866 100.00 44,200 100.0 Gross margin 6,397 24.6 5,163 23.2 13,167 24.9 10,646 24.1 Selling, general and administrative expenses 4,562 17.6 4,466 20.6 9,430 17.8 8,871 20.1 Depreciation and amortization 960 3.7 942 4.2 1,919 3.6 1,871 4.2 Net income (loss) 261 1.0 (327) (1.5) 553 1.0 (124) (0.3)
Sales for the six month period were up $8.7 million, or 19.6%, driven primarily by continued strong demand for plastic pipe manufactured by Harvel Plastics ("Harvel"). Harvel's sales increased by $7.4 million. Smaller increases were registered by the additives subsidiary, The Elco Corporation ("Elco"), and the paint subsidiary, Seibert -Oxidermo ("Seibert"), which saw revenues increase by $.9 million and $.8 million, respectively. Gross margins improved to 24.6% during the second quarter from 23.2%, and for the year to date period to 24.9% from 24.1%, as manufacturing efficiencies more than offset the adverse effects of higher raw material costs. The exception was Parts Cleaning Technologies Division ("Parts Cleaning") where margins declined during the second quarter as a result of lower shipments. Selling and administrative expenses, expressed as a percentage of sales, improved 2.3% over a year ago. Overall expenses rose, as volume increases at Harvel, Elco and Seibert necessitated additional sales and technical support. The provision for depreciation and amortization is slightly higher than in 1999, primarily as a result of higher depreciation of equipment at Harvel. Interest expense is higher due to an increase in borrowing levels and higher interest rates from a year ago. The effective income tax rate in 2000 is higher than in 1999 due to higher state and local income tax expense. 8 9 DETREX CORPORATION Results of Operations - Segment Disclosure Harvel sales for the second quarter and year to date increased 42.5% over the prior year periods, and earnings before taxes increased over 120% in the second quarter and 102% year to date. This performance resulted from the continued strong demand in the construction industry, and the ability to better service the western region of the country from the new California production and warehouse facility. Elco's sales improved over 1999 by approximately 10%. Earnings improved over 1999, primarily as a result of improved margins due to manufacturing efficiencies, which offset higher selling expenses, primarily in the international area, where the company continues to invest to improve its presence. Seibert's sales and earnings improved on a year to date basis due to continued high automotive demand, new applications and the growing acceptance of its PopFree(TM) primer. Manufacturing efficiencies resulting from a 1999 plant consolidation also contributed to the earnings improvement. In the second quarter of 2000, results were adversely impacted by the bankruptcy of one customer. In April 2000 the Company's Solvent and Equipment Divisions were consolidated to form the Parts Cleaning Technologies Division. In conjunction with this consolidation, termination costs of approximately $.1 million before taxes were recorded. Excluding the termination costs, results improved in the second quarter in spite of lower volumes. Liquidity, Financial Condition, and Capital Resources The Company utilized internally generated funds and increased borrowings under both the equipment term loan and the revolving credit facility to finance operating activities and $.8 million in capital expenditures during the first half of 2000. The Company borrowed $.2 million under its equipment facility in May 2000, and borrowings under its revolving credit facility increased by $.7 million during the first half the year; paydowns on the revolver totaled $2.5 million in the second quarter, as receivables were converted to cash. The Company will continue to finance its activities with its existing credit facilities for calendar year 2000. Working capital at June 30, 2000 was $4.8 million, as compared to $3.7 million at December 31, 1999. The company has paid no dividends since the second quarter of 1991 and cannot forecast when the dividend will be restored. 9 10 DETREX CORPORATION
PART II - OTHER INFORMATION Item 4 SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS (a) The 75th Annual Meeting of the Stockholders of Detrex Corporation was held in Southfield, Michigan on the 27th day of April 2000. (b) Election of Mr. Zimmer as Director of the First Class to hold office for a two year term or until his successor has been elected and has qualified: For 1,327,655 Against -- Abstain 86,383 Election of Mssrs. Emmett, McCleary and Thalacker as Directors of the Second Class to hold office for three year terms or until their successors have been elected and qualify: Mr. Emmett Mr. McCleary Mr. Thalacker ---------- ------------ ------------ For 1,308,764 1,309,155 1,308,764 Against -- -- -- Abstain 105,274 104,883 105,274 Messrs. King, Mangold, Mark, and Withrow continue as directors. Item 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - None (b) (1) A report on Form 8-K was filed on April 27, 2000 announcing the extension of the Company's Shareholder Rights Plan for ten years. (2) A report on Form 8-K was filed on May 16, 2000 announcing that the Registrant's common stock will be traded the Nasdaq SmallCap Market as opposed to the Nasdaq National Market effective May 17, 2000.
10 11 DETREX CORPORATION SIGNATURES Pursuant to the requirements 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 Date 8/4/00 S.J. Quinlan ---------- ---------------------------------------------- S.J. Quinlan Controller and Chief Accounting Officer Date 8/4/00 G. J. Israel ---------- ---------------------------------------------- G.J. Israel Vice President - Finance and Chief Financial Officer 11 12 Exhibit Index ------------- Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 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. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 433 0 14,424 281 12,478 29,440 59,701 34,311 59,091 24,628 3,079 0 0 3,167 14,278 59,091 52,866 52,866 39,699 39,699 0 0 744 937 384 553 0 0 0 553 .35 .35
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