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 June 30, 1995
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 June 30, 1995
Common Stock, Par Value $1 14,049,271 Shares
/1
IONICS, INCORPORATED
FORM 10-Q FOR
QUARTER ENDED JUNE 30, 1995
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 10
Exhibit Index 11
Exhibit 11 - Computation of Earnings Per Share 12
Exhibit 27 - Financial Data Schedule (for electronic
purposes only)
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/2
PART I - FINANCIAL INFORMATION
<TABLE>
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share amounts)
<CAPTION>
Three Months Ended Six
Months Ended
June 30, June
30,
1995 1994 1995
1994
<S> <C> <C> <C>
<C>
Net revenue:
Membranes and related equipment $29,204 $25,800 $ 58,060
$ 54,334
Water, food and chemical supply 14,816 13,061 30,569
25,959
Consumer products 12,522 10,967 24,786
22,570
56,542 49,828 113,415
102,863
Costs and expenses:
Cost of membranes and related equipment 21,113 19,283 42,668
41,545
Cost of water, food and chemical supply 9,912 8,755 20,344
17,270
Cost of consumer products 6,719 5,901 13,413
12,462
Research and development 855 857 1,666
1,660
Selling, general and administrative 11,332 10,211 22,839
20,461
49,931 45,007 100,930
93,398
Income from operations 6,611 4,821 12,485
9,465
Interest income 267 296 504
529
Equity income 104 151 247
269
Income before income taxes 6,982 5,268 13,236
10,263
Provision for income taxes 2,364 1,686 4,490
3,284
Net income $ 4,618 $ 3,582 $ 8,746
$ 6,979
Earnings per share $ .32 $ .25 $ .61
$ .49
Shares used in earnings per
share calculations 14,476 14,130 14,453
14,134
The accompanying notes are an integral part of these financial statements.
-2-
/3
</TABLE>
<TABLE>
IONICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except par value)
<CAPTION>
June 30,
December 31,
1995
1994
<S> <C>
<C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,275 $
14,966
Short-term investments 7,485
5,617
Notes receivable, current 3,080
3,126
Accounts receivable 55,455
61,675
Receivables from affiliated companies 1,333
2,170
Inventories:
Raw materials 11,752
11,088
Work in process 5,200
5,964
Finished goods 2,276
2,353
19,228
19,405
Other current assets 7,228
6,518
Total current assets 100,084
113,477
Notes receivable, long-term 5,470
5,246
Investments in affiliated companies 5,334
5,419
Property, plant and equipment:
Land 2,559
2,584
Buildings 25,105
23,621
Machinery and equipment 173,935
148,881
Other, including furniture, fixtures and vehicles 24,031
22,122
225,630
197,208
Less accumulated depreciation (82,353)
(73,115)
143,277
124,093
Other assets 28,502
28,929
Total assets $282,667
$277,164
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion
of long-term debt $ 2,547 $
370
Accounts payable 22,053
30,317
Customer deposits 4,445
4,959
Accrued commissions 1,693
1,852
Accrued expenses 15,521
15,407
Taxes on income 1,861
1,972
Total current liabilities 48,120
54,877
Long-term debt and notes payable 84
99
Deferred income taxes 4,202
2,928
Other liabilities 734
650
Stockholders' equity:
Common stock, par value $1, 30,000,000 authorized shares;
issued: 14,049,271 in 1995 and 13,989,896 in 1994 14,049
13,990
Additional paid-in capital 126,755
125,529
Retained earnings 92,773
84,027
Cumulative translation adjustments (3,528)
(4,936)
Unearned compensation (522)
-
Total stockholders' equity 229,527
218,610
Total liabilities and stockholders' equity $282,667
$277,164
The accompanying notes are an integral part of these financial statements.
</TABLE>
-3-
/
4
<TABLE>
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<CAPTION>
Six Months
Ended
June
30,
1995
1994
<S> <C>
<C>
Operating activities:
Net income $ 8,746 $
6,979
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,931
9,073
Provision for losses on accounts and notes receivable 377
238
Changes in assets and liabilities:
Notes receivable (82)
(68)
Accounts receivable 6,786
4,736
Inventories 122
(1,884)
Other current assets (562)
(1,706)
Investments in affiliates 85
(43)
Accounts payable and accrued expenses (8,937)
4,696
Income taxes 1,281
1,446
Other (88)
115
Net cash provided by operating activities 17,659
23,582
Investing activities:
Additions to property, plant and equipment (27,445)
(15,422)
Purchase of investments (3,000)
-
Sale of investments 1,203
1,327
Payment for Resources Conservation Company acquisition -__
(11,000)
Net cash used by investing activities (29,242)
(25,095)
Financing activities:
Principal payments on current debt (12,165)
(320)
Proceeds from issuance of current debt 14,322
10
Principal payments on long-term debt -
(247)
Proceeds from stock option plans 763
300
Net cash provided by financing activities 2,920
(257)
Effect of exchange rate changes on cash (28)
328
Net change in cash and cash equivalents (8,691)
(1,442)
Cash and cash equivalents at beginning of period 14,966
21,534
Cash and cash equivalents at end of period $ 6,275 $
20,092
The accompanying notes are an integral part of these financial statements.
</TABLE>
-4-
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 June
30, 1995 and December 31, 1994, the consolidated results of
its operations for the three and six months ended June 30,
1995 and 1994 and the consolidated cash flows for the six
months then ended.
2. The consolidated results of operations of the Company for the
three and six months ended June 30, 1995 and 1994 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 1994 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.
4. Certain prior year amounts have been reclassified to conform
to the current year presentation with no impact on net income.
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/6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Comparison of the Three and Six Months Ended June 30, 1995 with the
Three and Six Months Ended June 30, 1994
Revenues for the second quarter of 1995 increased 13.5% to $56.5
million from $49.8 million in 1994. Revenues for the six-month period
increased 10.3% to $113.4 million from $102.9 million in the
comparable period in 1994. Revenues were higher in all three business
segments for both the three and six-month periods. The largest
increase in revenues for the second quarter was in the Membranes and
Related Equipment segment, while the largest increase in revenues in
the six-month period was in the Water, Food and Chemical Supply
segment.
Revenues from the Membranes and Related Equipment segment grew in both
the second quarter and the six-month period with increased sales of
spare parts and traditional capital equipment. In addition, during
the six-month period this segment experienced continuing strength in
the sale of ultrapure water systems, particularly to the semiconductor
industry, and higher revenues from zero liquid discharge systems.
Revenues from the Water, Food and Chemical Supply segment increased in
both periods due to continuing growth in the Company's own and operate
and service businesses. Consumer Products revenues increased in both
the second quarter and the six-month period with higher revenues from
bottled water and home water products. During the six-month period,
these increases were partially offset by softness, experienced during
the first quarter of 1995, in sales of certain other consumer
products, particularly windshield wash.
Cost of sales as a percentage of revenues for the second quarter was
66.8% in 1995 and 68.1% in 1994. For the six-month period, cost of
sales as a percentage of revenues was 67.4% in 1995 and 69.3% in 1994.
The most significant improvement occurred during both periods in the
Membranes and Related Equipment segment due to a more favorable mix
between capital equipment and spare parts revenues and to a decrease
in manufacturing overhead costs as a percentage of revenues resulting
from increased sales of capital equipment.
Improvement during both periods in cost of sales as a percentage of
revenues in the Consumer Products segment resulted from an overall
improvement in product mix. Cost of sales as a percentage of revenues
remained substantially consistent during both periods in the Water,
Food and Chemical Supply segment.
-6-
/7
Operating expenses as a percentage of revenues decreased during the
second quarter to 21.6% in 1995 from 22.2% in 1994 due to higher
absorption of relatively fixed operating expenses by increased sales
volume. For the six-month period, operating expenses as a percentage
of revenues of 21.6% in 1995 remained substantially consistent with
1994.
Interest income decreased during both the second quarter and the six-
month period as lower average cash and invested balances were
partially offset by higher average interest rates.
Financial Condition
Working capital decreased by $6.6 million during the first six months
of 1995 while the current ratio remained consistent at 2.1 as of both
June 30, 1995 and December 31, 1994. Cash provided from net income,
depreciation and collection of accounts receivable totaled $25.5
million during the first six months of 1995 while the primary uses of
cash were for additions to property, plant and equipment and for
payment of accounts payable. Significant capital expenditures were
incurred to support growth in the bottled water operations, bleach
operations, trailers and other "own and operate" facilities.
At June 30, 1995, the Company had $13.8 million in cash and short-term
investments, a decrease of $6.8 million from December 31, 1994. 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.
-7-
/8
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on May 4, 1995.
(b) William L. Brown, Robert B. Luick, John J. Shields and Allen S.
Wyett were each re-elected as a Class III Director for a three-
year term. Continuing as Class II Directors until the 1997
Annual Meeting are Arnaud de Vitry d'Avaucourt, Kachig
Kachadurian, William E. Katz and Mark S. Wrighton. Continuing as
Class I Directors until the 1996 Annual Meeting are Lawrence E.
Fouraker, Samuel A. Goldblith, Arthur L. Goldstein, and Carl S.
Sloane.
The tabulation of votes for all nominees is as follows:
Votes for: 10,990,372
Votes withheld: 61,535
(c) The other matters submitted for stockholder approval were:
(i) Approval of the Corporation's 1994 Restricted Stock Plan.
Votes for: 9,751,892
Votes against: 1,168,855
Abstentions and
broker non-votes: 131,162
(ii) the selection of Coopers & Lybrand as the Company's auditors
for 1995:
Votes for: 10,920,266
Votes against: 45,340
Abstentions and
broker non-votes: 36,303
-8-
/9
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11- Computation of Net Earnings Per Share (included on
Page 12 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 June 30, 1995.
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.
-9-
/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: August 9, 1995 By: /s/Arthur L. Goldstein
Arthur L. Goldstein
Chairman and
Chief Executive Officer
(duly authorized officer)
Date: August 9, 1995 By: /s/Robert J. Halliday
Robert J. Halliday
Vice President of Finance
(chief financial officer)
-10-
/11
EXHIBIT INDEX
Exhibit Page
11. Computation of Earnings Per Share 13
27. Financial Data Schedule (for electronic
purposes only)
-11-
/12
<TABLE>
EXHIBIT 11
IONICS, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands, except earnings per share)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net income $ 4,618 $ 3,582 $ 8,746 $ 6,979
Earnings per common and common
equivalent share:
Weighted average number of shares
outstanding 14,034 13,906 14,019 13,900
Incremental shares for stock options
under treasury stock method 442 224 434 234
Weighted average number of common and
common equivalent shares outstanding 14,476 14,130 14,453 14,134
Earnings per common and common
equivalent share $ .32 $ .25 $ .61 $ .49
Earnings per common and common equivalent
share - assuming full dilution:
Weighted average number of shares
outstanding 14,034 13,906 14,019 13,900
Incremental shares for stock options
under treasury stock method 593 224 528 244
Weighted average number of common and
common equivalent shares outstanding -
assuming full dilution 14,627 14,130 14,547 14,144
Earnings per common and common
equivalent share - assuming
full dilution $ .32 $ .25B $ .60A $ .49B
<FN>
A Dilution is less than 3% so the primary basis was used for per share calculations.
B Reflects rounding due to January 1995 2-for-1 stock split.
</TABLE>
-12- /13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,275
<SECURITIES> 7,485
<RECEIVABLES> 60,605
<ALLOWANCES> (2,070)
<INVENTORY> 19,228
<CURRENT-ASSETS> 100,084
<PP&E> 225,630
<DEPRECIATION> (82,353)
<TOTAL-ASSETS> 282,667
<CURRENT-LIABILITIES> 48,120
<BONDS> 0
<COMMON> 14,049
0
0
<OTHER-SE> 215,478
<TOTAL-LIABILITY-AND-EQUITY> 282,667
<SALES> 113,415
<TOTAL-REVENUES> 113,415
<CGS> 76,425
<TOTAL-COSTS> 76,425
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 377
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,989
<INCOME-TAX> 4,490
<INCOME-CONTINUING> 8,746
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,746
<EPS-PRIMARY> .61
<EPS-DILUTED> .60
</TABLE>
