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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7211
IONICS, INCORPORATED
(exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2068530
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65 Grove Street, Watertown, Massachusetts 02172
(Address of principal executive offices)
(Zip Code)
(617) 926-2500
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1994
Common Stock, Par Value $1 6,949,556 Shares
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IONICS, INCORPORATED
FORM 10-Q FOR
QUARTER ENDED MARCH 31, 1994
INDEX
Page No.
Part I - Financial Information
Consolidated Statements of Operations 2
Consolidated Balance Sheets 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of
Results of Operation and Financial Condition 6
Part II - Other Information 8
Signatures 9
Exhibit Index 10
Exhibit 11 - Computation of Earnings Per Share 11
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PART I - FINANCIAL INFORMATION
<TABLE>
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
<CAPTION>
Three Months Ended
March 31,
1994 1993__
<S> <C> <C>
Net revenue:
Membranes and related equipment $28,534 $ 20,979
Water, food and chemical supply 16,054 13,143
Consumer water products 8,447 7,036
53,035 41,158
Costs and expenses:
Cost of membranes and related equipment 22,262 14,426
Cost of water, food and chemical supply 11,101 9,336
Cost of consumer water products 3,975 3,485
Research and development 803 904
Selling, general and administrative 10,250 8,891
48,391 37,042
Income from operations 4,644 4,116
Interest income 233 554
Equity income 118 136
Income before income taxes 4,995 4,806
Provision for income taxes 1,598 1,442
Net income $ 3,397 $ 3,364
Earnings per share $ .48 $ .48
Shares used in earnings per
share calculations 7,070,000 7,067,000
The accompanying notes are an integral part of these financial statements.
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<TABLE>
IONICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<CAPTION>
March 31, December 31,
1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,879 $ 21,534
Short-term investments 2,503 8,603
Notes receivable, current 2,581 2,505
Accounts receivable 55,007 57,214
Receivables from affiliated companies 3,509 2,944
Inventories:
Raw materials 9,209 9,541
Work in process 4,463 3,016
Finished goods 1,550 1,369
15,222 13,926
Other current assets 4,844 3,231
Total current assets 101,545 109,957
Notes receivable, long-term 5,002 4,919
Investments in affiliated companies 5,131 4,989
Property, plant and equipment:
Land 1,802 1,261
Buildings 14,930 13,829
Machinery and equipment 127,772 121,792
Other, including furniture, fixtures and vehicles 19,272 18,918
163,776 155,800
Less accumulated depreciation (59,773) (55,355)
104,003 100,445
Other assets 29,169 29,252
Total assets $244,850 $249,562
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion
of long-term debt $ 270 $ 326
Accounts payable 14,046 12,496
Obligation for purchase of Ionics RCC - 10,974
Customer deposits 6,937 5,668
Accrued commissions 1,650 1,733
Accrued expenses 11,230 13,957
Taxes on income 1,394 928
Total current liabilities 35,527 46,082
Long-term debt and notes payable 109 109
Deferred income taxes 4,010 2,699
Other liabilities 648 591
Stockholders' equity:
Common stock, par value $1, 30,000,000 authorized shares;
issued: 6,949,556 in 1994 and 6,945,805 in 1993 6,950 6,946
Additional paid-in capital 124,304 124,189
Retained earnings 78,971 75,574
Cumulative translation adjustments (5,669) (6,628)
Total stockholders' equity 204,556 200,081
Total liabilities and stockholders' equity $244,850 $249,562
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's Omitted)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Operating activities:
Net income $ 3,397 $ 3,364
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,258 3,652
Provision for losses on accounts and notes receivable 149 235
Changes in assets and liabilities:
Notes receivable (87) (644)
Accounts receivable 1,860 (6,298)
Inventories (1,248) (1,550)
Other current assets (1,576) 205
Investments in affiliates (111) (149)
Accounts payable and accrued expenses (284) 1,073
Income taxes 1,199 967
Other (9) 257
Net cash provided by operating activities 7,548 1,112
Investing activities:
Additions to property, plant and equipment (6,592) (3,602)
Sale (purchase) of short-term investments 6,226 (842)
Payment for Ionics RCC acquisition (11,000) -
Net cash used by investing activities (11,366) (4,444)
Financing activities:
Principal payments on current debt (302) (412)
Proceeds from issuance of current debt 179 57
Principal payments on long-term debt - (60)
Proceeds from issuance of long-term debt - 69
Proceeds from stock option plans 118 805
Net cash (used)provided by financing activities (5) 459
Effect of exchange rate changes on cash 168 (137)
Net change in cash and cash equivalents (3,655) (3,010)
Cash and cash equivalents at beginning of period 21,534 13,535
Cash and cash equivalents at end of period $ 17,879 $ 10,525
The accompanying notes are an integral part of these financial statements.
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IONICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying consolidated
financial statements contain all adjustments (consisting of
only normal, recurring accruals) necessary to present fairly
the consolidated financial position of the Company as of March
31, 1994 and December 31, 1993, the consolidated results of
its operations for the three months ended March 31, 1994 and
1993 and the consolidated cash flows for the three months then
ended.
2. The consolidated results of operations of the Company for the
three months ended March 31, 1994 and 1993 are not necessarily
indicative of the results of operations to be expected for the
full year.
3. Reference is made to the Notes to Consolidated Financial
Statements appearing in the Company's 1993 Annual Report as
filed on form 10-K with the Securities and Exchange
Commission. There have been no significant changes in the
information reported in those Notes, other than from the
normal business activities of the Company, and there have been
no changes which would, in the opinion of Management, have a
materially adverse effect upon the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Comparison of the Three Months Ended March 31, 1994
with the Three Months Ended March 31, 1993
Revenues for the first quarter of 1994 increased 28.9% to $53.0
million from $41.2 million in 1993. Revenues were higher in all
three business segments. The largest growth was in the Membranes
and Related Equipment segment where the growth was due primarily
to the acquisition of Resources Conservation Company (Ionics RCC),
effective December 1, 1993.
The Water, Food and Chemical Supply segment revenues increased due
primarily to strong demand for consumer products produced by the
Elite Chemicals division, particularly in New England. Higher
Elite Chemicals revenues were also experienced in Australia and in
the United Kingdom, where the Company's newest bleach
manufacturing facility began operating in the fourth quarter of
1993. Revenues also increased with the commencement in the first
quarter of 1994 of a contract to provide whey processing equipment
and services to Mid-America Dairymen, Inc. in the midwestern
United States. The Consumer Water Products segment revenues
increased due to a higher volume of bottled water and related
products sales and increased sales of home water conditioners.
Cost of sales as a percentage of revenues was 70.4% in 1994 and
66.2% in 1993. The increase in 1994 occurred in the Membranes and
Related Equipment segment. This increase was due to a less
favorable mix between capital equipment and spare parts revenues
and the continuing weakness in this segment's membrane-based
capital equipment business resulting from slow bookings throughout
most of 1993. The acquisition of Ionics RCC, which had gross
margins (and operating expenses) below those for the traditional
Membranes and Related Equipment segment, also contributed to the
1994 increase. The increase in cost of sales as a percentage of
revenues for the Membranes and Related Equipment segment was
partially offset by improvements in both the Water, Food and
Chemical Supply segment and the Consumer Water Products segment as
increased volume and operating efficiencies in the Elite Chemicals
and Aqua Cool businesses reduced the unit costs of manufacturing.
Operating expenses as a percentage of revenues were 20.8% in the
first quarter of 1994, down from 23.8% in the first quarter of
1993. As noted above, Ionics RCC's operating expenses as a
percentage of revenues were lower than those of the traditional
Membranes and Related Equipment segment. Furthermore, the
improvement reflected the absorption of relatively fixed operating
expenses by increased sales volume and continued emphasis on
expense controls.
Interest income decreased in the first quarter of 1994 due to
lower invested balances, resulting from payment for the Ionics RCC
acquisition, debt repayment of Aqua Cool Enterprises, Inc. in the
second quarter of 1993 and capital spending.
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Financial Condition
Working capital increased by $2.1 million during the first three
months of 1994 and the Company's current ratio increased to 2.9 at
March 31, 1994 from 2.4 at December 31, 1993. Cash provided from
net income, depreciation and a reduction in short-term investments
totaled $13.9 million in the first three months of 1994 while the
primary uses of cash were for the payment of the Ionics RCC
acquisition obligation and capital expenditures. Significant
capital expenditures were made for bottled water operations,
bleach operations, trailers and other "own and operate"
facilities.
At March 31, 1994 the Company had $20.4 million in cash and short-
term investments, a decrease of $9.8 million from December 31,
1993. The Company believes that its cash and short-term
investments, cash from operations, lines of credit and foreign
exchange facilities are adequate to meet its currently anticipated
needs.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share (included on Page 11 of
this report).
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated February 7, 1994,
reporting under Item 5 the completion of the acquisition of certain
assets of Resources Conservation Company. No financial statements
were required or filed.
All other items reportable under Part II have been omitted as
inapplicable or because the answer is negative, or because the
information was previously reported to the Securities and Exchange
Commission.
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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.
IONICS, INCORPORATED
Date: May 13, 1994 By: /s/Arthur L. Goldstein
Arthur L. Goldstein
Chairman and Chief Executive Officer
(duly authorized officer)
Date: May 13, 1994 By: /s/Robert J. Halliday
Robert J. Halliday
Vice President, Finance and Accounting
(chief financial officer)
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EXHIBIT INDEX
Exhibit Page
11 Computation of Earnings Per Share 11
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<TABLE>
EXHIBIT 11
IONICS, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands except per share data)
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Net income $3,397 $3,364
Earnings per common and common
equivalent share:
Weighted average number of shares
outstanding 6,947 6,918
Incremental shares for stock options
under treasury stock method 123 149
Weighted average number of common and
common equivalent shares outstanding 7,070 7,067
Earnings per common and common
equivalent share $ .48 $ .48
Earnings per common and common equivalent
share - assuming full dilution:
Weighted average number of shares
outstanding 6,947 6,918
Incremental shares for stock options
under treasury stock method 131 149
Weighted average number of common and
common equivalent shares outstanding -
assuming full dilution 7,078 7,067
Earnings per common and common
equivalent share - assuming
full dilution $ .48 $ .48
</TABLE>
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