Detrex Corporation Reports Improved Revenues and an Operating Loss Due to Special Factors for the Third Quarter of 2014; Announces a Fourth Quarter Dividend of $0.25 per Share; and a $3 million Stock Repurchase Program

SOUTHFIELD, Mich.--()--Detrex Corporation (OTCQX:DTRX), today announced improved 2014 third quarter revenues of $11.1 million, an increase over the previous two quarters and the third quarter 2013. Due to various factors the Company reported a third quarter 2014 net loss from continuing operations of $31,381, or $0.02 per fully diluted share, compared to net income of $796,768 or $0.46 per fully diluted share, in the third quarter of 2013. Year-to-date 2014 net income from continuing operations was $1,031,703 or $0.60 per fully diluted share. This compares to 2013 year-to-date net income of $2,749,920, or $1.59 per fully diluted share. In the second quarter of 2014 the Company settled a dispute with the buyer of Harvel Plastics, Inc. in order to collect the escrow related to the transaction. The net income charge related to the settlement and associated legal costs was $304,139 and is reflected in discontinued operations. Year-to-date net income including this charge is $727,564, or $0.42 per fully diluted share, compared to $2,749,920 in the same period of 2013. The Company also announced that it will pay a $0.25 quarterly dividend on December 16, 2014 to shareholders of record as of December 3, 2014.

The Company also announced today that its Board of Directors has authorized a stock repurchase program of up to $3 million of the Company’s outstanding shares through December 1, 2016. The Company intends to finance the repurchase program with available cash, or debt, if the Company deems it advisable. The Company intends to repurchase shares in the open market or through privately negotiated transactions over the next two years, subject to market conditions and other factors. The plan does not obligate the Company to acquire any particular amount of common stock, and the Company maintains sole discretion to suspend or discontinue the program at any time.

Third quarter 2014 revenues of $11.1 million is an improvement to the run rate in the first two quarters and represents a ten percent year-over-year revenue increase. On a year-to-date basis, 2014 sales were $31.1 million compared to $32.5 million for the year-to-date period in 2013. This represents a 4.5% year-over-year reduction. The improved rate of growth in the third quarter is the result of $0.8 million tolling work, along with increased demand in several market segments. The reduction in revenue on a year-to-date basis was largely the result of reduced sales of a product line dependent on fluctuating customer needs. Sales to new and other existing customers have partially offset this reduction in sales and the baseline sales of the other products in the portfolio is growing year-over-year. The Company is pleased with the growth prospects for the recently established China sales office.

President and CEO Tom Mark said, “Sales in the third quarter improved compared to the prior quarters in the year and compared to the year-ago third quarter. We expect that the positive impact of the investments in Elco’s products and capabilities will be reflected in a continued improvement in the sales rate compared to the prior year.”

Earnings declined in the third quarter compared to the comparable period last year primarily due to the environmental charge that is discussed below. In addition, margins were reduced due to unfavorable sales product mix and temporary manufacturing disruptions. The year-to-date decline includes these effects as well as the impact of reduced sales volume. The Company has also increased operating expenses to strengthen Elco’s capabilities in sales, distribution, product development and infrastructure. A reduction in Corporate expenses has partially offset the reduced margins and higher operating expenses at Elco.

The Company recently reviewed its environmental position, including the status of the significant environmental transfer transaction that took place in 2013. The results of the 2013 environmental obligation sale have been positive since the close of the transaction seventeen months ago. During the review, the Company re-evaluated the steps and costs required to clean up the few remaining environmental obligations, including Company-owned property in Ashtabula, Ohio. As a result of the analysis, the Company concluded that it would be prudent to reserve an additional $1.0 million pre-tax to account for estimated future costs related to the few remaining sites. The year-end environmental reserve, net of spending during the year, and including this addition, is estimated to be $1.9 million.

Mark concluded, “We are disappointed to report the recording of an additional environmental charge, which represents a re-evaluation of earlier estimates as we advance the efforts to clean up the sites that we have retained. We continue to be confident in the prospects for the Company, as evidenced by today’s announced stock repurchase program authorization. We continue to be focused on strategic opportunities to generate shareholder value, and we will keep 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.

Detrex Corporation and Subsidiaries
Condensed Consolidated Statement of Operations
(unaudited, in thousands)
 
  Three Months Ended   Year to date
September 30 September 30
2014   2013 2014   2013
 
Net sales $ 11,136 $ 10,127 $ 31,054 $ 32,518
 
Cost of sales 8,024 6,616 21,790 21,354
Selling, general and administrative expense 1,785 2,210 5,519 6,245
Provision for depreciation and amortization 331 304 1,007 902
Provision for corporate environmental reserves 1,000 - 1,000 -
Interest Expense 32 67 140 85
Other Expense   11     14   35     57
Income from continuing operations
before income taxes (47 ) 916 1,563 3,875
 
Provision for income taxes   (16 )   119   531     1,125
Net Income from continuing operations (31 ) 797 1,032 2,750
 
Discontinued operations:
Settlement (loss) on sale of Subsidiary, net of tax 0 0 (304 ) 0
       
Net income $ (31 ) $ 797 $ 728   $ 2,750
 
Basic earnings (loss) per common share:
From continuing operations $ (0.02 ) $ 0.48 $ 0.62 $ 1.64
From discontinued operations   -     -   (0.18 )   -
Net earnings per share $ (0.02 ) $ 0.48 $ 0.44   $ 1.64
 
Fully diluted earnings (loss) per common share:
From continuing operations $ (0.02 ) $ 0.46 $ 0.60 $ 1.59
From discontinued operations   -     -   (0.18 )   -
Net earnings per share $ (0.02 ) $ 0.46 $ 0.42   $ 1.59
 

Shares outstanding, basic

1,676 1,676 1,676 1,676

Shares outstanding, fully diluted

1,730 1,726 1,730 1,726
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
 
  Sept 30   Dec 31
2014 2013
Assets
 
Current Assets $ 13,579 $ 16,777
 
Property and equipment, net 9,453 10,009
 
Other Assets 3,436 3,377
   
Total assets $ 26,468 $ 30,163
 
Liabilities and stockholders' equity
 
Current liabilities $ 6,335 $ 8,202
 
Non-current liabilities 6,311 7,610
 
Stockholders' equity 13,822 14,351
   
Total liabilities and stockholders' equity $ 26,468 $ 30,163

Contacts

Detrex Corporation
Thomas E. Mark
(248) 358-5800
Fax: (248) 799-7192

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