<PAGE> 1
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 September 30, 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 September 30, 1994
Common Stock, Par Value $1 6,980,195 Shares
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IONICS, INCORPORATED
FORM 10-Q FOR
QUARTER ENDED SEPTEMBER 30, 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 Operations and Financial Condition 6
Part II - Other Information 8
Signatures 9
Exhibit Index 10
Exhibit 11 - Computation of Earnings Per Share 11
Exhibit 27 - Financial Data Schedule 12
(for electronic
purposes only)
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<TABLE>
PART I - FINANCIAL INFORMATION
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net revenue:
Membranes and related equipment $29,852 $21,956 $ 84,186 $ 67,382
Water, food and chemical supply 16,617 12,588 47,461 38,226
Consumer water products 9,981 8,247 27,666 23,959
56,450 42,791 159,313 129,567
Costs and expenses:
Cost of membranes and related equipment 22,746 15,756 64,291 47,743
Cost of water, food and chemical supply 11,507 8,734 32,854 26,802
Cost of consumer water products 4,851 3,987 13,236 11,717
Research and development 808 863 2,468 2,749
Selling, general and administrative 10,861 9,204 31,322 27,826
50,773 38,544 144,171 116,837
Income from operations 5,677 4,247 15,142 12,730
Interest income 278 343 807 1,418
Equity income 180 433 449 709
Income before income taxes 6,135 5,023 16,398 14,857
Provision for income taxes 1,963 1,507 5,247 4,457
Net income $ 4,172 $ 3,516 $ 11,151 $ 10,400
Earnings per share $ .59 $ .50 $ 1.58 $ 1.48
Shares used in earnings per
share calculations 7,095,000 7,033,000 7,077,000 7,047,000
The accompanying notes are an integral part of these financial statements.
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</TABLE>
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<TABLE>
IONICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share amounts)
<CAPTION>
September 30, December 31,
1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,498 $ 21,534
Short-term investments 668 8,603
Notes receivable, current 2,862 2,505
Accounts receivable 58,829 57,214
Receivables from affiliated companies 2,902 2,944
Inventories:
Raw materials 9,345 9,541
Work in process 6,121 3,016
Finished goods 2,128 1,369
17,594 13,926
Other current assets 4,899 3,231
Total current assets 105,252 109,957
Notes receivable, long-term 5,193 4,919
Investments in affiliated companies 5,250 4,989
Property, plant and equipment:
Land 2,404 1,261
Buildings 19,904 13,829
Machinery and equipment 142,399 121,792
Other, including furniture, fixtures and vehicles 21,710 18,918
186,417 155,800
Less accumulated depreciation (69,721) (55,355)
116,696 100,445
Other assets 28,738 29,252
Total assets $261,129 $249,562
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion
of long-term debt $ 592 $ 326
Accounts payable 21,524 12,496
Obligation for purchase of Ionics RCC - 10,974
Customer deposits 4,169 5,668
Accrued commissions 1,755 1,733
Accrued expenses 13,912 13,957
Taxes on income 2,525 928
Total current liabilities 44,477 46,082
Long-term debt and notes payable 110 109
Deferred income taxes 2,003 2,699
Other liabilities 791 591
Stockholders' equity:
Common stock, par value $1, 30,000,000 authorized shares;
issued: 6,980,195 in 1994 and 6,945,805 in 1993 6,980 6,946
Additional paid-in capital 124,980 124,189
Retained earnings 86,725 75,574
Cumulative translation adjustments (4,937) (6,628)
Total stockholders' equity 213,748 200,081
Total liabilities and stockholders' equity $261,129 $249,562
The accompanying notes are an integral part of these financial statements.
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</TABLE>
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<TABLE>
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Operating activities:
Net income $ 11,151 $ 10,400
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,512 11,280
Provision for losses on accounts and notes receivable 378 623
Changes in assets and liabilities:
Notes receivable (465) 6,135
Accounts receivable (1,034) (10,214)
Inventories (3,495) ( 3,788)
Other current assets (1,543) 1,870
Investments in affiliates (216) (581)
Accounts payable and accrued expenses 6,085 (4,358)
Income taxes (113) 113
Other 288 (6,788)
Net cash provided by operating activities 25,548 4,692
Investing activities:
Additions to property, plant and equipment (27,926) (11,150)
Sale of short-term investments 8,270 12,221
Payment for RCC acquisition (11,000) -
Acquisitions, net of cash - (7,959)
Net cash used by investing activities (30,656) (6,888)
Financing activities:
Principal payments on current debt (260) (8,755)
Proceeds from issuance of current debt 162 8,116
Principal payments on long-term debt - (435)
Proceeds from issuance of long-term debt - 257
Proceeds from stock option plans 825 909
Net cash provided by financing activities 727 92
Effect of exchange rate changes on cash 345 (178)
Net change in cash and cash equivalents (4,036) (2,282)
Cash and cash equivalents at beginning of period 21,534 13,535
Cash and cash equivalents at end of period $ 17,498 $ 11,253
The accompanying notes are an integral part of these financial statements.
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</TABLE>
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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
September 30, 1994 and December 31, 1993, the consolidated
results of its operations for the three and nine months ended
September 30, 1994 and 1993 and the consolidated cash flows
for the nine months then ended.
2. The consolidated results of operations of the Company for the
three and nine months ended September 30, 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 and Nine Months Ended September 30, 1994 with
the Three and Nine Months Ended September 30, 1993
Revenues for the third quarter of 1994 increased 31.9% to $56.5
million from $42.8 million in 1993. Revenues for the nine-month
period increased 23.0% to $159.3 million from $129.6 million in the
comparable period in 1993. Revenues were higher in all three business
segments for both the three and nine-month periods. The largest
growth in revenues for both periods was in the Membranes and Related
Equipment segment due primarily to the acquisition of Resources
Conservation Company (Ionics RCC), effective December 1, 1993, and to
growth in the sale of ultrapure water systems, particularly to the
semiconductor industry. This growth was partially offset by lower
sales of other traditional capital equipment.
Revenues within the Water, Food and Chemical Supply segment increased
during both periods due to strong demand for consumer products
produced by the Elite Chemicals Division in New England, Australia and
in the United Kingdom, where the Company's newest bleach manufacturing
facility began operating in the fourth quarter of 1993. Growth was
also experienced during both periods in the Ionics Ultrapure Water
subsidiary in California due to the strength of service business
activities, including own and operate activities and the regeneration
of ion-exchange resins. The commencement in the first quarter of 1994
of a contract to provide whey processing equipment and services to
Mid-America Dairymen, Inc. also produced revenue increases in both
periods.
Revenues within the Consumer Water Products segment also increased
during both periods primarily from higher volumes of bottled water at
existing locations and the addition of distribution facilities in
Cincinnati and Columbus, Ohio, Raleigh-Durham, North Carolina and
Birmingham, England. These volume increases have been partially
supported by an increase in production capacity resulting from the
replacement of the bottling facility in Maryland with one in Virginia.
Revenues also increased during both periods resulting from additional
home water product sales.
Cost of sales as a percentage of revenues for the third quarter was
69.3% in 1994 and 66.5% in 1993. For the nine-month period, cost of
sales as a percentage of revenues was 69.3% in 1994 and 66.6% in 1993.
The increase in 1994 in both periods occurred primarily in the
Membranes and Related Equipment segment. This increase was due to a
less favorable mix between capital equipment and spare parts revenues
and to an increase in manufacturing overhead costs as a percentage of
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<PAGE> 8
revenues resulting from reduced sales of traditional capital equipment
noted above. The increase also resulted because Ionics RCC (acquired as
of December 1993) has a greater percentage of its total costs classified
as cost of goods sold as compared to the rest of the Membranes and Related
Equipment segment. However, Ionics RCC's increased costs of goods sold
are offset by lower operating costs, as noted below.
Reductions during the nine-month period in cost of sales as a percentage
of revenues in the Water, Food and Chemical Supply segment and the
Consumer Water Products segment partially offset the increases in the
Membranes and Related Equipment segment. These improvements were
attributable to lower unit costs of manufacturing due to increased volume
and to continued achievement of operating efficiencies.
Operating expenses as a percentage of revenues were 20.7% in the third
quarter of 1994, down from 23.5% in 1993. For the nine-month period,
operating expenses as a percentage of revenues decreased to 21.2% in 1994
compared to 23.6% in 1993. Both periods improved due to continued
emphasis on expense controls and the absorption of relatively fixed
operating expenses by increased sales volume. Furthermore, as noted
above, Ionics RCC's operating expenses are lower than those of the
traditional Membranes and Related Equipment segment.
Interest income decreased in the third quarter and nine-month periods due
to lower invested balances, resulting from payment of the RCC acquisition
obligation in the first quarter of 1994, and increased capital spending
during both periods.
Financial Condition
Working capital decreased by $3.1 million during the first nine months of
1994 and the Company's current ratio remained at 2.4 at September 30, 1994
compared to December 31, 1993. Cash provided from net income,
depreciation, an increase in accounts payable and a reduction of short-
term investments totaled $40.0 million in the first nine 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 manufacturing
operations, trailers and other "own and operate" facilities.
At September 30, 1994, the Company had $18.2 million in cash and short-
term investments, a decrease of $12.0 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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<PAGE> 9
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
No reports on Form 8-K were filed with the Securities and
Exchange Commission during the quarter ended September 30, 1994.
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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<PAGE> 10
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: November 11, 1994 By:/s/Arthur L. Goldstein
Arthur L. Goldstein
Chairman and Chief Executive Officer
(duly authorized officer)
Date: November 11, 1994 By:/s/Robert J. Halliday
Robert J. Halliday
Vice President, Finance and Accounting
(chief financial officer)
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<PAGE> 11
EXHIBIT INDEX
Exhibit Page
11 Computation of Earnings Per Share 12
27 Financial Data Schedule 13
(for electronic
purposes only)
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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 Nine months Ended
September 30, September 30,
1994 1993_ 1994 1993
<S> <C> <C> <C> <C>
Net income $4,172 $3,516 $11,151 $10,400
Earnings per common and common
equivalent share:
Weighted average number of shares
outstanding 6,966 6,941 6,956 6,932
Incremental shares for stock options
under treasury stock method 129 92 121 115
Weighted average number of common and
common equivalent shares outstanding 7,095 7,033 7,077 7,047
Earnings per common and common
equivalent share $ .59 $ .50 $ 1.58 $ 1.48
Earnings per common and common equivalent
share - assuming full dilution:
Weighted average number of shares
outstanding 6,966 6,941 6,956 6,932
Incremental shares for stock options
under treasury stock method 130 107 124 120
Weighted average number of common and
common equivalent shares outstanding -
assuming full dilution (A) 7,096 7,048 7,080 7,052
Earnings per common and common
equivalent share - assuming $ .59 $ .50 $ 1.58 $ 1.47
full dilution (A)
(A) Dilution is less than 3% so the primary
basis was used for per share calculations.
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 17,498
<SECURITIES> 668
<RECEIVABLES> 65,839
<ALLOWANCES> (1,246)
<INVENTORY> 17,594
<CURRENT-ASSETS> 105,252
<PP&E> 186,417
<DEPRECIATION> (69,721)
<TOTAL-ASSETS> 261,129
<CURRENT-LIABILITIES> 44,477
<BONDS> 0
<COMMON> 6,980
0
0
<OTHER-SE> 206,768
<TOTAL-LIABILITY-AND-EQUITY> 261,129
<SALES> 159,313
<TOTAL-REVENUES> 159,313
<CGS> 110,381
<TOTAL-COSTS> 110,381
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 378
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,398
<INCOME-TAX> 5,247
<INCOME-CONTINUING> 11,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,151
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
</TABLE>
