ITEM 1. BUSINESS
Detrex Corporation was incorporated in Michigan in 1925. Detrex Corporation and its subsidiaries (the Company) operate predominantly in a single industry, chemicals and allied products, services, and supply processes for use by manufacturing and service industries.
Detrex Corporation and its subsidiaries operate predominantly in a single industry: chemicals and allied products, services, and processes for use by manufacturing and service industries. The principal products include specialty chemicals, industrial cleaners, process equipment, coatings, lubricant additives, chlorinated solvents, hydrochloric acid, PVC plastic pipe, industrial finishing materials and paints, industrial furnaces, degreasing equipment, and environmental and analytical laboratory services. The products are primarily sold by sales-service engineers and most sales are direct to industrial users. Net sales by product line for each of the last five years are set forth below:
Of the $80.0 million included in 1994 Chemical Products and Services sales, approximately $22 million (27.3%) represent sales by the Company's solvents division, $14 million (16.9%) represent sales by its paint subsidiary, $13 million (16.6%) represent sales by its lubricants subsidiary and $25 million (31.6%) represent sales by its plastic pipe subsidiary.
All of the Company's business units operate in highly competitive markets which are mainly national in scope, although some business is done internationally by its lubricants subsidiary and its plastic pipe subsidiary. In all products, there are numerous competitors with no one company or a small number of companies being dominant. The Company operates in niche markets and its principal methods of competition in various markets include service, price and quality, depending on the market serviced. No material part of the business is dependent upon a single customer or a few customers.
FORM 10-K
PART I (CONTINUED)
ITEM 1. BUSINESS (Continued)
The backlog of orders at any one time is generally not significant to the Company's business. At December 31, 1994, the Company's backlog of Chemical Equipment orders was $10,174,000 and the Company expects to complete all of these orders in 1995. At December 31, 1993, the Company's backlog of Chemical Equipment orders was $9,386,000.
Raw materials essential to the Company's various products are generally commodity materials and are readily available from competitive sources. The Company's solvents division is going through a major transition in the marketplace, primarily because of the rapid phasing out of ozone depleting solvents. As a result, the division is increasingly marketing substitutes for such solvents, including aqueous based cleaners, and is involved in the supply of environmental services.
The Company owns various patents and trademarks which aid in maintaining the Company's competitive position; these expire at various times within the next seventeen years. The expiration of such patents and trademarks should not have a material adverse effect on the Company's operations. No material portion of the Company's business is seasonal or subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government.
The approximate dollar amounts spent during 1994, 1993, and 1992 on research sponsored by the Company were $1,784,000, $2,532,000, and $2,458,000, respectively. The number of professional employees engaged in such activities were 28 for 1994, 40 for 1993, and 32 for 1992.
There are no customers to which sales were made in an amount which equals ten percent or more of consolidated revenues.
The Company does not expect to incur significant capital expenditures for environmental compliance in 1995. However, the Company does expect to continue to incur significant professional fees and expenses in connection with its environmental compliance efforts. The Company maintains an environmental reserve which at December 31, 1994 totaled $12.6 million, of which $1.5 million is estimated to be spent in 1995. A more detailed discussion of environmental matters is included under Item 3 - Legal Proceedings and in Management's Discussion and Analysis in the Annual Report.
The Company employed 367 persons as of December 31, 1994.
The Company is not engaged in manufacturing operations in foreign countries, nor is a material portion of sales or revenues derived from customers in foreign countries, although the Company intends to increase its international business at certain of its business units.
FORM 10-K
PART I (CONTINUED)
ITEM 1. BUSINESS (Concluded)
The Company utilized a combination of internally generated funds, a portion of the proceeds from the sale of its Industrial Chemical Specialties Division, and net additional borrowings of $1.5 million to finance its activities during 1994. As of December 31, 1994, working capital was $7.0 million, compared to $10.7 million at December 31, 1993. For a discussion of the Company's credit agreements, see Footnote 4 to the Consolidated Financial Statements and Management's Discussion and Analysis in the Annual Report.
ITEM 2.
ITEM 2. PROPERTIES
The Company's administrative offices are located in approximately 7,500 square feet of leased space at 24901 Northwestern Hwy., Suite 500, Southfield, Michigan.
Detrex and its subsidiaries conduct manufacturing and research operations in eleven principal locations of which ten are owned as follows:
1) A 50,000 square foot plant in Redford Township, Michigan is located on seven acres of land. This plant includes blending, mixing, drumming, and other facilities available to toll manufacture. There are above ground storage facilities for raw materials and finished products. The plant also houses administrative personnel for two of the Company's divisions.
2) A plant located on 57 acres in Ashtabula, Ohio is used in connection with the manufacture of hydrochloric acid, reagent grade chemicals and N-methyl pyrrole.
3) The Company's lubricants subsidiary manufactures gear and oil additives in a plant located in Cleveland, Ohio on 5 acres of land and 59,000 square feet of office, research and plant space. This plant is equipped with mixing and blending equipment and storage facilities. Additional manufacturing of additives is done in a plant consisting of 12,800 square feet at Hooven (Cincinnati), Ohio located on 3.6 acres of leased land. The present lease at Hooven expires in June 1996.
4) The Company's plastic pipe subsidiary manufactures plastic pipe in a plant located on 20 acres of land and 228,500 square feet of office and plant space located in Easton, Pennsylvania. Extruders and special dies are used to manufacture the plastic PVC pipe from resin. Production and warehouse facilities have been expanded several times since this subsidiary was acquired in 1968, and during 1994, warehouse space was added in California.
5) Seibert-Oxidermo, Inc. manufactures industrial finishing materials and automotive paints in a plant located in Detroit, Michigan containing 26,200 square feet of office and plant space on one acre of land. Additional manufacturing of automotive paints is done in a plant located in
FORM 10-K
PART I (CONTINUED)
ITEM 2. PROPERTIES (Concluded)
Romulus, Michigan containing 35,300 square feet of office, research and plant space on 40 acres of land.
6) The Company owns a building used as a research laboratory and office in Bowling Green, Kentucky. The plant formerly used for manufacturing in Bowling Green is expected to be sold in late 1995 or early 1996 for approximately book value.
7) The Company owns a warehouse and sales office facility located in Detroit, Michigan. The building area is approximately 20,000 square feet and is located on approximately one-half acre of land.
8) The Company owns a warehouse and sales office facility located in Los Angeles, California. The Building area is approximately 10,000 square feet and is located on one acre of land in the industrial section of the city.
9) The Company owns a warehouse and sales office facility located in Charlotte, North Carolina. The Building area is approximately 11,000 square feet and is located on one acre of land.
10)The Company owns a warehouse and sales office facility located in Indianapolis, Indiana. The building area is approximately 8,600 square feet and is located on one acre of land.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Environmental Protection Agency ('EPA') has notified the Company and at least seventeen other companies that they may be potentially responsible for sharing costs in a proceeding to clean up contaminated sediments in the Fields Brook watershed in Ashtabula, Ohio. The EPA issued a Record of Decision in 1986 concerning the methods it recommends using to accomplish this task at an estimated total cost of $48,000,000. The Company and the other potentially responsible parties have expressed their disagreement with this recommendation and are continuing to negotiate with the EPA as to how best to effect the clean up operation. The Company believes that the Fields Brook remedial investigation and feasibility studies referred to below will be an important factor in negotiating with the EPA.
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 contamination at several sites, including properties owned by the Company. The Company conducted a comprehensive review of its reserves during the fourth quarter of 1994 and added $8.5 million to this reserve. The total amount of the reserve at December 31, 1994 is $12.6 million, which amount was calculated without taking into consideration any possible insurance recoveries.
FORM 10-K
PART I (CONTINUED)
ITEM 3. LEGAL PROCEEDINGS (Concluded)
The reserve includes a provision for the Company's anticipated share of remedial investigation and feasibility studies to determine sources of contamination and methods of remediation in the Fields Brook watershed referred to above, as well as a provision for costs that may be incurred in connection with remediation of the Fields Brook watershed and other sites. Some of these studies have been completed; others are ongoing. In many cases, the methods of remediation remain to be agreed upon.
The Company is a defendant in an action brought by the Carrier Corporation in Superior Court for Los Angeles County, California. An order granting the Company Summary Judgment was reversed by an Appellate Court in late 1992. Carrier has alleged that a product manufactured by the Company malfunctioned, causing environmental damage to its property. The Court ordered that the trial be separated into two phases. The first phase proceeded to trial in October of 1994 and was completed in December of 1994. The Company is awaiting the decision of the trial judge. Depending upon his ruling, the second phase of the trial is expected to begin in the summer of 1995. The Company believes it has valid defenses to the claims and is vigorously defending the action. The Company's product liability insurance carrier is paying the costs of defense under a reservation of rights. The Company believes that any judgment against it will be covered by its product liability insurance.
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.
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.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
FORM 10-K
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the registrant at March 23, 1995 and their positions and offices with the registrant are as follows:
(a) Mr. Wenzler was elected President and Chief Executive Officer on January 15, 1993. Mr. Wenzler came to the Company from Heartland Industries where he served as President and Chief Executive Officer from 1990 to 1992. Prior to that time, Mr. Wenzler was President and Chief Executive Officer of Akzo Coatings, Inc.
(b) Mr. Israel was elected Vice-President - Finance and Chief Financial Officer on February 25, 1993. Mr. Israel came to the Company from Chrysler Corporation where he served for 26 years in numerous financial positions. His most recent position was Vice President and Controller-Treasurer of Chrysler Canada Ltd.
(c) Mr. Schatt was elected Vice President - Human Resources on April 22, 1993. Mr. Schatt came to the Company from McLouth Steel where he served as Vice President - Administration.
(d) Mr. Porter was elected Vice President - Operations on June 1, 1994. Mr. Porter joined the Company on April 20, 1993, and served in various executive positions until his current appointment. Prior to that, he was employed by Akzo Coatings, Inc.
(e) Mr. Crandell was elected Vice President - Commercial Development on June 1, 1994. Mr. Crandell joined the Company on September 30, 1991, and served in various executive positions until his current appointment. Prior to that, he served as Assistant Controller of Pulte Home Corporation.
(f) Mr. Currie joined the Company as General Counsel on July 16, 1993. He was named Secretary and General Counsel on November 1, 1994. Prior to joining the Company, Mr. Currie was engaged in private law practice.
(g) Mr. Rondeau served as Assistant Controller of the Company for more than the past five years before being elected Controller on March 25, 1993.
All officers of the Company are elected annually and hold office until their successors are chosen and qualify in their stead.
FORM 10-K
PART II
CROSS REFERENCE SHEET
* Detrex Corporation's Annual Report to Stockholders for the year ended December 31, 1994 is incorporated herein as Exhibit 13 under Item 14(a) 1 of Part IV.
FORM 10-K
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from the information set forth under the caption "Respecting the Election of Directors" in the Detrex Corporation Proxy Statement (the "Proxy Statement") for the Annual Meeting of Stockholders to be held April 27, 1995. The information required for Executive Officers of the Company is included in Part I hereof.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the information set forth under the captions "Executive Compensation and Other Transactions" in the Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from the information set forth under the caption "Respecting the Election of Directors" in the Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the information set forth under the captions "Respecting the Election of Directors" and "Executive Compensation and Other Transactions" in the Proxy Statement.
FORM 10-K
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. All Financial Statements
Detrex Corporation and Subsidiaries (incorporated by reference to the Company's Annual Report to Stockholders for the year ended December 31, 1994-see Part II)
(a) 2. Financial Statement Schedules PAGE
Independent Auditors' Report 14
Schedule II - Valuation and Qualifying Accounts 15 for the Years Ended December 31, 1994, 1993, and 1992.
Financial Statement Schedules Omitted:
Other financial statement schedules are omitted because of the absence of the conditions under which they are required.
FORM 10-K
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Continued)
(a) 3. Exhibits
FORM 10-K
PART IV (CONCLUDED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Concluded)
(a) 3 Exhibits (Concluded)
10(f) Employment Agreement - Joseph F. Schatt is hereby incorporated by reference to Commission file #0-784 Annual Report on Form 10-K for the year ended December 31, 1993 as Exhibit 10(I) --
10(g) Employment Agreement - Robert M. Currie Attached as an Exhibit
10(h) Employment Agreement - Anthony E. Porter Attached as an Exhibit
Other Material Contracts
10(i) Revolving Credit Agreement and Amended Term Loan Agreement dated March 11, 1994 in the aggregate amount of $12 Million is hereby incorporated by reference to Commission file #0-784 Annual Report on Form 10-K for the ended December 31, 1993 --
10(j) First Amendment to Credit Agreement and Attached Waiver, dated as of December 31, 1994 as an Exhibit
11 Summary of significant accounting policies is hereby incorporated by reference to Annual Report to Stockholders, Note 1 of page 7, as Exhibit 11 --
13 Annual Report to Stockholders for the Attached year ended December 31, 1994 as an Exhibit
22 Subsidiaries of the Registrant Attached as an Exhibit
Consents of Experts and Counsel
23 Consent of Auditors Attached as an Exhibit
27 Financial Data Schedule Attached as an Exhibit
(b) No Form 8-K was filed in the fourth quarter of 1994.
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of Detrex Corporation:
We have audited the consolidated financial statements of Detrex Corporation and its subsidiaries as of December 31, 1994 and 1993 and for each of the three years in the period ended December 31, 1994, and have issued our report thereon dated February 22, 1995 (March 9, 1995 as to Note 4); such consolidated financial statements and report are included in your 1994 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Detrex Corporation and its subsidiaries, listed in Item 14(a)(2). This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
February 22, 1995
FORM 10-K
SCHEDULE II
DETREX CORPORATION AND SUBSIDIARIES
VALUATION RESERVES FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 (Registrant)
Date March 23, 1995 By J. L. Wenzler J. L. Wenzler President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this twenty-third day of March 1995 by the following persons on behalf of the Registrant and in the capacities indicated.
Signature Title
J. L. Wenzler President and Chief Executive Officer J. L. Wenzler
G. J. Israel Vice President, Treasurer and Chief Financial G. J. Israel Officer
E. R. Rondeau Controller and Chief Accounting Officer E. R. Rondeau
B. W. Cox Director B. W. Cox
R. A. Emmett, III Director R. A. Emmett, III
J. F. Mangold Director J. F. Mangold
B. W. McCleary Director B. W. McCleary
A. R. Thalacker Director A. R. Thalacker
J. D. Withrow Director J. D. Withrow
EXHIBIT INDEX