Detrex Cp (OTCQX:DTRX)

Second Quarter 2012 Results

• 2012 second quarter net income from continuing operations of $584,696, or $0.34 per fully diluted share, compared to net income from continuing operations of $660,784, or $0.41 per fully diluted share, in the second quarter of 2011.
• Second quarter net sales declined 12% to $11.1 million from $12.7 million in the comparable period last year.

While we experienced a slow-down in sales during the second quarter as conditions softened and expect that this may continue for several months to come, we are continuing to pursue additional business opportunities and will adjust costs accordingly.” said President and CEO, Tom Mark. “Our financial condition is strong, and we are continuing to investigate strategic opportunities to enhance shareholder value.”

Results reported on 3/9/2012

Full year 2011 results

• Net sales for fiscal 2011 were $48.9 million vs $35.3 in 2010
• Net income for fiscal 2011 more than doubled to $4.3 million, or $2.53 per fully diluted share, compared to net income of $2.1 million, or $1.31 per fully diluted share, in 2010.

The 2011 financial results include full-year financials from The Elco Corporation as well as Harvel Plastics, Inc., which was sold January 1, 2012. As a result of the sale, Harvel is reported as a discontinued operation in the year-end financials. Harvel’s 2011 sales were $67.6 million compared to $58.4 million in 2010. Pre-tax earnings grew to $3.6 million from $1.5 million in 2010. Detrex sales from continuing operations consist solely of revenue generated by Elco. The year-on-year sales growth was 38.7% to $48.9 million. Elco’s strong growth was fueled primarily by substantial revenue gains in the export markets. The volume gains, in combination with operating efficiencies, resulted in Elco reporting pre-tax earnings of $10.2 million in 2011, versus $6.9 million in 2010. Elco made capital expenditures ($2.3 million) during 2011 to support growth and enhance technical capabilities and manufacturing capacity. Continued strong financial performance is expected during 2012 as customer interest in Elco products continues to grow.

Detrex said the 105% increase in net earnings was the result of higher earnings from the operating units partially offset by an increase in the Company’s environmental reserve charge. In 2011, the Company spent $2.5 million on environmental matters compared to $2.1 million in 2010. The 2011 spending was concentrated on two projects which represented 65% of the total amount spent. Certain areas were cleaned up at the Company-owned Ashtabula site and past EPA oversight costs were paid. The other site is a former solvent distribution center where sampling and evaluation is ongoing. The uncertainties inherent in environmental matters continued to present a challenge in 2011 as new developments and changed conditions resulted in a $2.7 million charge to increase reserve amounts for several projects. The Company’s 2010 charge to its environmental reserve totaled $0.8 million. At year-end 2011, the reserve was $4.1 million, and Detrex anticipates spending approximately $2.4 million on these matters in 2012. While the Company believes that the recorded reserves are appropriate based on currently available information, the estimates may be subject to change.

The underfunded status of the Company’s pension plans increased in 2011 primarily due to changes in actuarial assumptions. The assumed rate of return on the investment portfolio was reduced from 8.5% to 7.5%; more significantly, the discount rate used in calculating the present value of the liability was reduced to 5.25% from 5.75%. The Harvel pension plan was assumed by the Buyer on January 1, 2012 and therefore is not recognized as part of the pension obligation from continuing operations on the December 31, 2011 balance sheet. The pension plans included in continuing operations had an underfunded balance of $9.0 million at the end of the year. For the remaining pension plans, the Company plans to fund $5.0 million in 2012.

“The achievements in 2011 marked a significant step in our quest to effectively position Detrex to deliver shareholder value. Not only did we achieve strong operational and financial results, but we also succeeded in monetizing the value in Harvel,” said Detrex President and CEO Tom Mark. “Moving forward, we will continue to evaluate and embrace strategic opportunities to generate shareholder value, including the payment of a quarterly dividend.”