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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period ended
Commission File Number 1-7211
Ionics, Incorporated
(Exact name of registrant as specified in it charter)
Massachusetts 04-2068530
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
65 Grove Street, Watertown, Massachusetts 02172
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-926-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
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State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date
within 60 days prior to the date of filing. The aggregate market
value of the voting stock held by non-affiliates as of March 17, 1995
was $392,303,896 (13,412,099 shares at $29.25 per share) (includes
shares owned by a trust for the indirect benefit of a non-employee
director, and by a trust for the indirect benefit of a spouse of a
non-employee director).
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date. As of March 17, 1995, 14,008,049 shares of Common Stock, $1 par
value, were issued and outstanding (reflects a 2-for-1 stock split by
way of a 100% stock dividend distributed on January 6, 1995 to
stockholders of record on December 14, 1994).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of 1994 Annual Report to Stockholders Parts I, II and IV
Portions of Definitive Proxy Statement for
the Annual Meeting of Stockholders to be held
on May 4, 1995 Part III
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PART I
Item 1. BUSINESS
Ionics, Incorporated ("Ionics," the "Company," or the
"Registrant") is a leading water purification company engaged
worldwide in the supply of water and of water treatment equipment
through the use of proprietary separations technologies and systems.
Ionics' products and services are used by the Company or its customers
to desalt brackish water and seawater, to purify and supply bottled
water, to treat water in the home, to manufacture and supply water
treatment chemicals and ultrapure water, to process food products,
recycle and reclaim process water and wastewater, and to measure
levels of water-borne contaminants and pollutants. The Company's
customers include industrial companies, consumers, municipalities and
utilities.
The Company's business activities are divided into three
segments: Membranes and Related Equipment, Water, Food and Chemical
Supply, and Consumer Products, which in 1994 accounted for
approximately 54%, 24% and 22% of revenues, respectively.
Approximately 37% of the Company's 1994 revenues were derived from
foreign sales or operations. Since 1985, the Company has pursued a
strategy of expanding beyond its traditional focus of selling
desalination plants and equipment by owning and operating its own
equipment to produce and sell water, food and chemicals. In 1994, the
Water, Food and Chemical Supply and Consumer Products business
segments accounted for 79% of the Company's earnings before interest
and taxes.
Over forty years ago, the Company pioneered the development of
the ion-exchange membrane and the electrodialysis process. Since that
time, the Company has expanded its separations technology base to
include a number of membrane and non-membrane-based separations
processes which the Company refers to as "The Ionics ToolboxSM."
These separations processes include the electrodialysis reversal
(EDR), reverse osmosis (RO), ultrafiltration (UF) and microfiltration
(MF) membrane processes, as well as related processes such as
electrodeionization (EDI), electrodialysis, ion-exchange and carbon
adsorption. With its acquisition of the business of Resources
Conservation Company, now called Ionics RCC, at the end of 1993, the
Company's separations technology base also includes thermal processes
such as evaporation and crystallization, as well as solvent extraction
and recovery processes. The Company believes that it is the world's
leading manufacturer of ion-exchange membranes and of membrane-based
systems for the desalination of water.
The Company was incorporated in Massachusetts in 1948. The
Company's principal executive offices are located at 65 Grove Street,
Watertown, Massachusetts 02172.
Financial Information About Business Segments
The information contained in Note 14 of Notes to Consolidated
Financial Statements contained in the Company's Annual Report to
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Stockholders for the year ended December 31, 1994 is incorporated
herein by reference.
Membranes and Related Equipment
The Company's Membranes and Related Equipment business segment,
which accounted for approximately 54% of revenues in 1994, currently
encompasses the following products: electrodialysis reversal systems;
reverse osmosis systems; microfiltration systems; ultrafiltration
systems; non-membrane water and wastewater treatment equipment; other
separations technology products; instruments for monitoring and on-
line detection of pollution levels; fabricated products; brine
concentrators, evaporators and crystallizers utilizing thermal
separations processes; and soil remediation equipment.
EDR Systems
The Company's AquamiteR desalination systems utilize Ionics' EDR
process to treat brackish water and produce potable water for
commercial, municipal, and a variety of industrial purposes. The
Company sells, under the Aquamite name, a number of standardized
versions of EDR equipment, which are designed for ease of installation
and low maintenance and have production capacities ranging from 500
gallons to 1.5 million gallons per day. Multiple unit configurations
are used for systems of larger capacities.
Customers for water purification systems increasingly have
requested the Company to supply complete turnkey plants. For such
customers, Ionics provides basic Aquamite equipment, peripheral water
treatment equipment, complete engineering services, process and
equipment design, project engineering, commissioning, operator
training and field service.
RO Systems
The Company manufactures seawater desalination plants as well as
systems for the production of ultrapure water which utilize RO
membrane technology. The Company owns and operates seawater
desalination plants in Grand Canary Island, Spain; Santa Barbara,
California; and at the Diablo Canyon Power Plant in California. See
"Water, Food and Chemical Supply."
MF Systems
Utilizing the Company's proprietary Aqua-PoreR microfiltration
membranes, the Company's EnviromatR Integrated Membrane Filtration
System removes toxic contaminants such as lead, nickel and other
materials from industrial wastewaters and enables manufacturers to
meet stringent regulations for effluent compliance.
UF Systems
In 1994, the Company commenced commercial manufacture of
ultrafiltration (UF) membranes and spiral wound UF membrane modules.
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The Company uses these modules in its own equipment and systems and
also sells them as components to end-users and original equipment
manufacturers.
Non-Membrane Water and Wastewater Treatment Equipment
Through its wholly owned Italian subsidiary, Ionics Italba,
S.p.A., Ionics designs, engineers and constructs customized systems
for wastewater and municipal water treatment. These include ion-
exchange systems which provide purified water for power stations,
chemical and petrochemical plants, metalworking and automobile
factories, textile manufacture and a variety of other industrial
applications. Other systems neutralize and filter industrial
wastewater, separate suspended solids and, in some cases, recover
chemicals. Ionics Italba also provides custom municipal and packaged
sewage treatment systems. Ionics Italba generally subcontracts the
construction activities associated with its projects.
Through its Ionics Resources Conservation Company (Ionics RCC)
business unit, Ionics designs, engineers and constructs brine
concentrators, evaporators and crystallizers which are used to clean,
recover and recycle wastewater, particularly in zero liquid discharge
industrial uses. Ionics RCC also developed, and holds an exclusive
license for, a patented solvent extraction technology known as
B.E.S.T. (Basic Extractive Sludge Technology), which separates
contaminated sludges, sediments and soils into oil, water and solids,
and has potential use for the cleanup of toxic organic materials at
Superfund sites.
In 1994, Ionics RCC entered into a $40 million contract to
deliver a wastewater treatment system in the Czech Republic to treat
an underground reservoir of contaminated water which threatens
drinking water supplies near Prague.
Other Separations Technology Products
Using its separations technology, Ionics manufactures, markets or
supplies products which are used in the recovery and recycling of
selected components from process streams, the manufacture of commodity
and specialty compounds and the purification of valuable fluids. The
Company's ElectromatR system is used in the demineralization of cheese
whey to produce a major component utilized extensively in infant
formula products. A similar Ionics system is used to deacidify fruit
juices for a manufacturer of canned fruit products.
Other Ionics process systems include the ChemomatR system to
generate organic acids and to recover, recycle, remove and separate
metals and other components from industrial wastewaters, and the
CloromatR system for the production of sodium hypochlorite and related
chlor-alkali chemicals.
Instruments for Monitoring and On-Line Detection
of Pollution Levels
The Company designs, manufactures and sells equipment to measure
the quality of treated or untreated water. Its products, which are
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used by industrial and governmental customers to measure organic and
toxic contaminants in water, food and chemical process streams,
include process and laboratory instruments to measure total carbon,
total organic carbon, chemical oxygen demand and total oxygen demand.
The Company has expanded the monitoring capabilities of its
instruments with the introduction of analyzers to measure
concentrations at the parts-per-billion level of dissolved metals such
as copper, lead, iron, mercury, and arsenic and specific chemical
analyzers for ammonia, phosphates, nitrates, and chlorine. The
process systems provide real-time measurement of the level of
contaminants in active waste streams. In 1994 in Europe, the Company
introduced SlickwatchTM, a new continuous water monitor that detects
oil slicks at thicknesses as low as 0.1 micron on the surface of
water.
Fabricated Products
At its Bridgeville, Pennsylvania facility, the Company fabricates
specially designed products for defense-related and industrial
applications. The Company's experience and expertise in design,
welding, machining and assembly to meet exceptionally fine tolerances
have been utilized to fabricate products ranging from intricate small
parts to very large multi-ton assemblies.
Water, Food and Chemical Supply
The Water, Food and Chemical Supply business segment accounted in
1994 for approximately 24% of the Company's revenues. With the
addition of whey processing to the Company's "own and operate"
activities in 1994, food product processing revenues have been added
to this business segment. In addition, commencing in 1994, revenues
from the sale of bleach and bleach-based cleaning products for the
consumer market have been moved from this segment to the Consumer
Products segment. As a result, certain prior year amounts in the
financial statements have been reclassified to conform to the current
year's presentation. The Company's strategy is to sell, where
appropriate, water, food products and chemicals produced by its
membrane-based equipment, rather than selling the equipment itself.
The water, food and chemical supply business segment can be divided
into four categories: sale of desalted water for municipal and
industrial use; sale of ultrapure water for electronics and other
industries; processing of food products, such as reduced mineral whey;
and sale of sodium hypochlorite and related chemicals to the
industrial and municipal markets.
Sale of Desalted Water for Municipal and Industrial Use
Ionics' position in water supply as a seller of purified or
treated water has evolved from its traditional role as a supplier of
water treatment equipment. In certain situations, opportunities are
available for the Company to provide a complete service package
involving financing, construction, operation and maintenance of water
treatment facilities.
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Ionics, through its wholly owned subsidiary, Ionics Iberica,
S.A., owns and operates a 5.5 million gallon per day capacity brackish
water EDR facility and a 2.2 million gallon per day RO seawater
facility on Grand Canary Island, Spain. Under long-term contracts,
the Company is selling the desalted water from both facilities to the
local water utility for distribution. In December 1994, the Company
contracted with the water utility to expand its seawater RO facility
to 3 million gallons per day.
The Company's wholly owned subsidiary, Ionics (Bermuda) Ltd.,
owns and operates a 600,000 gallon per day EDR brackish water
desalting plant on the island of Bermuda. This plant supplies fresh
water under a long-term contract with Watlington Waterworks Ltd., a
Bermuda corporation partially owned by Ionics.
The Company financed, constructed, owns and operates a seawater
RO desalination facility in Santa Barbara, California. The facility
began operation in March 1992, has the capacity to produce 7,500 acre-
feet per year (approximately 6.7 million gallons per day) of
desalinated water, and is expandable to 10,000 acre-feet per year.
Under the terms of the Company's contract with the City, the City can
either purchase water from the Company or, under conditions in which
the City deems it unnecessary to purchase water, pay the Company a
"stand-by fee" during the contract's five-year term and, if the City
elects to continue, a five-year extension term. The City has placed
the facility on "stand-by" status because of the alleviation of the
area's drought. At the end of the initial five-year term, the City
will have the right to renew the contract for another five-year term,
purchase the facility from the Company, or direct the Company to
remove the facility (most of which is housed in trailers) from its
site. In the event the City purchases the facility, the City must
reimburse the Company for all costs not previously recovered from
operations, plus a factor to cover general and administrative expenses
and profit. In 1994, the City approved a two-year extension of the
Company's current operation and maintenance contract into 1997.
Sale of Ultrapure Water for Electronics and Other Industries
In industries such as power generation, semiconductors,
pharmaceuticals and biotechnology, ultrapure water (water in which the
impurities have been reduced to concentrations of less than several
parts per billion) is critical to product quality and yield. In the
electric power industry, ultrapure boiler feedwater minimizes
corrosion, inefficiency and downtime in steam boilers and turbines.
Depending on the composition and quantity of the impurities to be
removed or treated, any one of several membrane separations methods
can be utilized to provide ultrapure water to the customer. Ionics
has pioneered in the application of three membrane technologies (EDR,
RO and UF) combined together in a mobile system called the "triple
membrane" trailer, which the Company believes to be the most advanced
technology used in the commercial processing of ultrapure water.
Ionics provides ultrapure water services through the sale of ultrapure
water in 6,000 gallon tank trucks and the production and sale of
ultrapure water from trailer-mounted units at the customer sites.
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Ionics has commercially implemented its new electrodeionization
(EDI) technology in the production of ultrapure water. EDI is a
continuous, electrically driven, membrane-based water purification
process which produces ultrapure water without the use of the strong
chemical regenerants, such as sulfuric acid and caustic soda, which
are commonly required. The Company's new TMT-II trailers utilize a
combination of EDI, RO and UF technologies to produce ultrapure water.
At the end of 1994, the Company had a total capacity, installed
or under construction, of approximately 8,000 gallons per minute for
the production of ultrapure water under long-term contracts with
various industries.
The Company serves the ultrapure water market from its
headquarters facilities in Watertown, Massachusetts, through the
Ionics Pure Solutions Division in Phoenix, Arizona, and through the
following subsidiaries: Ionics Ultrapure Water Corporation, Campbell,
California; Ionics (U.K.) Limited, London, England; Ionics Italba,
S.p.A., Milan, Italy; and Eau et Industrie, Paris, France.
Sale of Sodium Hypochlorite and Related Chemicals
In the chemical supply area, the Company uses its CloromatR
technology to produce sodium hypochlorite and related chlor-alkali
chemicals in a membrane-based process that principally relies on water
and salt as raw materials. The Company's wholly owned Australian
subsidiary, Elite Chemicals Pty. Ltd., utilizes Cloromat systems to
produce sodium hypochlorite on-site in Brisbane for industrial,
commercial and janitorial supply of bleach products. In 1994, the
Australian subsidiary signed a five-year contract to supply sodium
hypochlorite to treat the City of Brisbane's drinking water supply.
In 1993, the Company's wholly owned English subsidiary, Ionics
(U.K.) Limited, commenced bulk bleach sales at a new Cloromat facility
in Bridgwater, England. A large portion of the facility's output is
being sold to an English manufacturer for use in cellophane
manufacture, and the balance is being sold to the regional market. In
1994, the Company and the manufacturer agreed to an expansion of the
Cloromat facility. In addition, the Company entered into a long-term
bleach supply agreement with a major European cleaning products
manufacturer which will result in the Company's ownership and
operation of another Cloromat facility.
Food Processing Services
In 1994, the Company commenced operations under an agreement with
a major U.S. dairy cooperative overseeing whey processing activities
at two plants owned by the cooperative. Included in the equipment
being utilized by the Company at these plants are its ElectromatR
electrodialysis systems. The Company receives a processing fee based
on the production of demineralized whey for its services.
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Consumer Products
Ionics' consumer products business segment accounted for
approximately 22% of the Company's revenues in 1994. The Company's
consumer products include bottled water, over and under-the-sink
point-of-use devices, point-of-entry systems for treating the entire
home water supply, and bleach and bleach-based cleaning products and
related products, including windshield wash solution.
Aqua CoolR Pure Bottled Water
Ionics entered the bottled water business in 1984. The Company's
strategy is to utilize its proprietary desalination and purification
technology to create a brand of drinking water, named Aqua Cool Pure
Bottled Water, which can be reproduced with uniform consistency and
high quality at numerous locations around the world. Distribution
operations have been established to serve the areas in and around
London, Manchester, and Birmingham, England; a number of metropolitan
areas in the Eastern United States; and, through joint ventures, in
Bahrain, Kuwait and Saudi Arabia. The Company's business focuses on
the sale of Aqua Cool in five-gallon bottles to a variety of
commercial and residential customers. The Company also manufactures
coolers in a wide variety of colors which offer options for hot, cold
and room temperature water.
In 1989, the Company entered into agreements with Aqua Cool
Enterprises, Inc. (ACE), a newly formed, independently owned
corporation, which established ACE as a marketer and distributor of
Aqua Cool in 10 eastern states and the District of Columbia, and
provided for Ionics' supply to ACE of products, management services
and operational support. In May 1993, the Company loaned $8.25
million to ACE which was used by ACE to redeem debt and preferred
stock of ACE held by Westinghouse Credit Corporation. In June 1993,
the Company's loan was converted into preferred stock, and as a result
of these transactions, the Company began consolidating the operating
results of ACE.
ACE operates eight distribution centers in Massachusetts,
Connecticut, New York, New Jersey, Pennsylvania and Virginia, which
augment the Company's distribution network. At the end of 1994, there
were a total of 21 Aqua Cool distribution centers in the United States
and overseas, supplied with Aqua Cool by six regional water
purification and bottling facilities.
Point-of-Use Devices
The Company participates in the "point-of-use" market for over
and under-the-sink water purifiers through the manufacture and sale of
HYgeneR, a proprietary, EPA-registered, silver-impregnated activated
carbon filtering media, and through the sale of reverse osmosis and
activated carbon-based filtering devices. The Company incorporates
HYgene, which is designed to prevent bacterial build-up while
providing the capability of removing undesirable tastes and odors from
the water supply, into its own bacteriostatic water conditioners and
also sells HYgene to manufacturers of household point-of-use water
filters.
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Point-of-Entry Systems
Ionics' point-of-entry water products include ion-exchange water
conditioners to "soften" hard water, and chemicals and media for
filtration and treatment. The Company sells its products, under the
General Ionics and other brands, through both independent
distributorships and wholly owned sales and service dealerships. In
1994, the Company introduced new marketing assistance programs,
including retail financing, to its independent distributors, and also
increased its base of independent distributors.
Bleach-Based Cleaning Products
The Company's Elite Chemicals New England division operates a
Cloromat facility in Springfield, Massachusetts which produces and
distributes bleach-based products for the consumer market, primarily
one-gallon bleach products under private label or under the Company's
own "Elite" and "UltraPure" brands, and methanol-based automobile
windshield wash solution. In 1994, to expand these operations, the
Company purchased a 129,000 square foot manufacturing facility,
located in Ludlow, Massachusetts, which has now commenced operations.
The Company intends to pursue a strategy of utilizing Cloromat
equipment and technology at Company-owned facilities to produce high
quality bleach and other chlor-alkali products at selected regional
sites in the United States and overseas.
Raw Materials and Sources of Supply
All raw materials essential to the business of the Company can
normally be obtained from more than one source. In those few
instances where raw materials are being supplied by only one source,
the current supplier has given the Company a lead time for
cancellation, which the Company believes is sufficient to enable it to
obtain other suppliers. In addition, the Company maintains
inventories of single source items which it believes are adequate
under the circumstances.
The Company produces the membranes required for its equipment and
systems that use the ED, EDR, MF, UF and EDI processes. Membranes
used for the RO process are purchased from outside suppliers, and are
normally available from multiple sources.
Patents and Trademarks
The Company believes that its products, know-how, servicing
network and marketing skills are more significant to its business than
trademark or patent protection of its technology. Nevertheless, the
Company has a policy of applying for patents both in the United States
and abroad on inventions made in the course of its research and
development work for which a commercial use is considered likely. The
Company owns numerous United States and foreign patents and trademarks
and has issued licenses thereunder, and currently has additional
pending patent applications. Of the 92 active U.S. patents held by
the Company, a substantial portion involves membranes, membrane
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technology and related separations processes such as electrodialysis
and electrodialysis reversal, reverse osmosis, ultrafiltration and
electrodeionization. The Company believes that none of its individual
patents or groups of related patents, nor any of its trademarks, is of
sufficient importance for its termination or abandonment, or
cancellation of licenses extending rights thereunder, to have a
material adverse effect on the Company.
Seasonality
The activities of the Company's businesses are not of a seasonal
nature, except that bottled water sales and bleach products for
swimming pool use tend to increase during the summer months. Also,
the Company's Elite Chemicals New England facility produces windshield
wash solution, for which sales levels increase in the winter months.
Customers
The nature of the Company's business is such that it frequently
has in progress large contracts with one or more customers for
specific projects; however, there is no one customer whose purchases
account for 10% or more of the Company's consolidated revenues and
whose loss would have a material adverse effect on the Company and its
subsidiaries taken as a whole.
Backlog
The Company's backlog of firm orders was $152,340,000 at December
31, 1994 and $129,271,000 at December 31, 1993. In the case of multi-
year contracts entered into through June 30, 1991, the Company
initially included in reported backlog only the revenues expected from
the first four years of the contract. For multi-year contracts
entered into after that date, the Company has initially included in
reported backlog the revenues associated with the first five years of
the contract. Also, the Company now includes in backlog up to one
year of revenues relating to multi-year contracts which are not
otherwise included in backlog. Ionics expects to fill approximately
62% of its December 31, 1994 backlog during 1995. The Company does
not believe that there are any seasonal aspects to these backlog
figures.
Government Contracts
The Company does not believe that any of its sales under U.S.
Government contracts or subcontracts during 1994 are subject to
renegotiation. The Company has not had adjustments to its negotiated
contract prices, nor are any proceedings pending for such adjustments.
Research and Development
Since the development of the ion-exchange membrane and the EDR
process, Ionics has continued its commitment to research and
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development directed toward products for use in water purification,
processing and measurement, and separations technology. The Company's
research and development expenses were approximately $3,372,000 in
1994, $3,678,000 in 1993 and $3,084,000 in 1992.
Competition
The Company experiences competition from a variety of sources
with respect to virtually all of its products, systems and services,
although the Company knows of no single entity that competes with it
across the full range of its products and services. Competition in
the markets served by the Company is based on a number of factors,
which may include price, technology, applications experience, know-
how, availability of financing, reputation, product warranties,
reliability, service and distribution.
With respect to the Company's membrane and related equipment
business segment, there are a number of companies, including several
sizable chemical companies, that manufacture membranes, but not
equipment. There are numerous smaller companies, primarily
fabricators, that build water treatment and desalination equipment,
but which generally do not have their own proprietary membrane
technology. A limited number of companies manufacture both membranes
and equipment. The Company has numerous competitors in its
conventional water treatment, instruments and fabricated products
business lines.
In 1994, the International Desalination Association released a
report providing data regarding the manufacturers of desalination
equipment. According to the report, which covered land-based water
desalination plants delivered or under construction as of December
1993, with a capacity to produce 100 cubic meters (approximately
25,000 gallons) or more of fresh water daily, Ionics ranked first in
terms of the cumulative number of such plants sold, having sold 1,244
plants of such capacity, more than the next three manufacturers
combined. When compared only to manufacturers of membrane-type
desalination equipment, Ionics ranked first in both number of units
sold and the total capacity of units sold.
With respect to the water, food and chemical supply business
segment, the Company competes with regional suppliers of ultrapure
water services, and with other manufacturers of membrane-related
equipment. In the chemical supply activity, the Company competes with
manufacturers and distributors of sodium hypochlorite and water
treatment chemicals.
With respect to the Company's consumer products business segment,
there are numerous bottled water companies which compete with the
Company, including several which are much larger than the Company.
Most of the Company's competitors in point-of-entry and point-of use
products for the home are small assemblers, serving local or regional
markets. However, there are also several large companies competing
nationally in these markets. In the case of its silver impregnated
activated carbon product lines, the Company knows of two competitors
with which it competes on a national basis.
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The Company competes with many suppliers of bleach and bleach-
based cleaning products and automobile windshield wash for the
consumer market, a number of which are much larger than the Company.
The Company is unable to state with certainty its relative market
position in all aspects of its business. Many of its competitors have
financial and other resources greater than those of the Company.
Environmental Matters
Continued compliance by the Company or by its subsidiaries with
federal, state and local provisions regulating the discharge of
materials into the environment or otherwise relating to the protection
of the environment is expected to have no material effect upon capital
expenditures, earnings or the competitive position of the Company or
any of its subsidiaries.
The Company is one of more than 200 potentially responsible
parties (PRPs) in connection with the Silresim Superfund Site in
Lowell, Massachusetts. Under the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA or Superfund), the U.S.
Environmental Protection Agency (EPA) has the authority to undertake
remedial action at a Superfund site and hold responsible parties
liable, on a joint and several basis and without regard to fault or
negligence for costs incurred. Under the terms of a 1992 Settlement
Agreement among the PRPs, EPA and the Commonwealth of Massachusetts,
Ionics paid $381,000 as a settlement amount to the site settlement
trust fund, representing the Company's approximately 1% volumetric
contribution of wastes to the site. This fund will be used by the EPA
to clean up the Silresim Site. The amount paid by Ionics had been
fully reserved at December 31, 1991, and the payment had no material
adverse impact on the Company. Because the pollution problems at the
site have been extensively studied and because the funds collected
from the settling PRPs by the site settlement trust fund substantially
exceeds the EPA's own estimate of remediation costs, the Company
believes that it is highly unlikely that it will incur any further
monetary obligations with respect to this site, other than site access
costs that will be incurred by the EPA in connection with its
remediation activities. The Company's share of these site access
costs is expected to be $30,000 to $40,000 over the next several
years.
The Company was notified in 1992 that it is a potentially
responsible party (PRP) at a Superfund site, Solvent Recovery Service
of New England in Southington, Connecticut (the "SRS Site"). The
Environmental Protection Agency (EPA) has completed its remedial
investigation and its preliminary estimate of clean-up costs totaled
$30 million, of which the Company's share approximates $160,000. The
PRP group has presented a counterproposal for clean-up which the EPA
is considering. The cost of the counterproposal would approximate
$5.5 - $7.5 million, of which the Company's share would approximate
$30,000 - $40,000. The Company has to date been assessed a total of
$21,000 for the clean-up of the site. Based upon the very large
number of PRPs identified (over 1,000), the Company's small volumetric
ranking in comparison to the total volume of wastes (approximately
/13
I-11
<PAGE>
0.522%) and the identities of the larger PRPs, which include many
substantial companies, the Company believes that its liability in this
matter will not have a material effect on the Company or its financial
position.
The Company has never had a product liability claim grounded in
environmental liability, and believes that the nature of its products
and business makes such a claim unlikely.
Employees
The Company and its consolidated subsidiaries employ
approximately 1,300 full-time persons, none of whom are represented by
unions except for the employees of the Company's Australian subsidiary
and certain employees of the Company's Spanish subsidiary. The
Company considers its relations with its employees to be good.
Foreign Operations
The Company's sales to customers in foreign countries primarily
involve desalination systems, water and wastewater treatment systems,
sodium hypochlorite, Cloromat systems, and related products and
services. The Company seeks to minimize financial risks relating to
its international operations. Wherever possible, the Company obtains
letters of credit or similar payment assurances denominated in
dollars. If dollar payments cannot be secured, the Company, where
appropriate, enters into foreign currency hedging transactions. The
Company also uses foreign sources for equipment parts and may borrow
funds in local (foreign) currency to offset the asset risk of foreign
currency devaluation. Net foreign currency transaction gains included
in income before taxes totalled $23,000 in 1994, $157,000 in 1993, and
$587,000 in 1992.
Ionics engages in certain foreign operations both directly and
through the following wholly owned subsidiaries: Ionics (Bermuda)
Ltd.; Ionics Iberica, S.A.; Ionics (U.K.) Limited; Ionics Italba,
S.p.A.; Ionics Nederland B.V.; Global Water Services, S.A.; Elite
Chemicals Pty. Ltd.; Eau et Industrie; Resources Conservation Co.
International; and Ionics Foreign Sales Corporation Limited.
The Company engages in various foreign operations through
investments in affiliated companies and joint venture relationships.
The activities include the production, sale and distribution of
bottled water through a 40% owned affiliate in Bahrain, a 40% owned
affiliate in Saudi Arabia and a 49% owned affiliate in Kuwait.
In addition, the Company has a 23% ownership interest in Watlington
Waterworks Ltd. in Bermuda. Watlington collects, treats and
distributes water throughout Bermuda for both potable and non-potable
uses. The Company also has a 50% ownership interest in Yuasa-Ionics
Co., Ltd., Tokyo, Japan, which among its other activities serves as a
distributor of certain of the Company's products in Japan; and a 49%
ownership interest in Ionics-Mega s.r.o, a limited liability company
of the Czech Republic established to pursue water treatment
opportunities in that country.
/14
I-12
<PAGE>
Further geographical and financial information concerning the
Company's foreign operations appears in Notes 1, 5, 8, 12, and 14 to
the Company's Consolidated Financial Statements included as part of
the Company's 1994 Annual Report to the Stockholders, which Notes are
incorporated herein by reference.
Financial Information About Foreign and
Domestic Operations and Export Sales
The information contained in Note 14 of Notes to Consolidated
Financial Statements contained in the Company's Annual Report to
Stockholders for the year ended December 31, 1994 is incorporated
herein by reference.
Item 2. PROPERTIES
The Company owns or leases and occupies various manufacturing and
office facilities in the United States and abroad. The principal
facilities owned by the Company include two buildings in Watertown,
Massachusetts, containing approximately 250,000 square feet and
housing executive offices, laboratories and manufacturing and assembly
operations; a 129,000 square foot facility in Ludlow, Massachusetts
which will be utilized primarily for consumer bleach-based product
manufacturing; two buildings in Bridgeville, Pennsylvania containing
approximately 77,000 square feet and housing manufacturing operations
for home water treatment equipment and fabricated products; and other
facilities in Phoenix, Arizona; Lorton, Virginia; Union, New Jersey;
Fairfield, Ohio; Thetford, England; Wimbledon, England; Brisbane,
Australia; and Milan, Italy, for various operations relating to the
business of the Company.
The Company considers the business facilities that it utilizes to
be adequate for the uses to which they are being put.
Item 3. LEGAL PROCEEDINGS
The Company is involved in the normal course of its business in
various litigation matters. Although the Company's counsel is unable
to determine at the present time whether the Company will have any
liability in any of the pending matters, some of which are in the
early stages of pretrial discovery, the Company believes it has
meritorious defenses and that none of the pending matters will have an
outcome material to the financial condition or business of the
Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
/15
I-13
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Reference is made to the Company's Annual Report to Stockholders
for the year ended December 31, 1994. The information set forth on
page 32 entitled "Common Stock Price Range" and the inside back cover
of such Annual Report is hereby incorporated by reference.
Item 6. SELECTED FINANCIAL DATA
Reference is made to the Company's Annual Report to Stockholders
for the year ended December 31, 1994. The information set forth on
page 32 of such Annual Report entitled "Selected Quarterly Financial
Data (unaudited)" is hereby incorporated by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Company's Annual Report to Stockholders
for the year ended December 31, 1994. The information set forth on
pages 17 through 19 of such Annual Report entitled "Management's
Discussion and Analysis of Results of Operations and Financial
Condition" is hereby incorporated by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Company's Annual Report to Stockholders
for the year ended December 31, 1994. The consolidated balance sheets
of the Registrant as of December 31, 1994 and 1993, the related
consolidated statements of operations, cash flows and stockholders'
equity for the years ended December 31, 1994, 1993 and 1992, and the
related notes with the opinion thereon of Coopers & Lybrand L.L.P.,
independent accountants, on pages 20 through 31, and Selected
Quarterly Financial Data (unaudited) on page 32, are hereby
incorporated by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
This item is not applicable to the Company.
/16
II-1
<PAGE>
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 with respect to Directors is
hereby incorporated by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held May 4,
1995 to be filed with the Securities and Exchange Commission on or
about March 30, 1995.
The information regarding executive officers is as follows:
Age as of Positions
Name March 1, 1995 Presently Held
Executive Officers:
Arthur L. Goldstein* 59 President, Chief Executive Officer
and Director since 1971; Chairman
of the Board since 1990
Kachig Kachadurian 45 Executive Vice President since 1994,
Senior Vice President from 1991 to
1994 and Vice President from 1983 to
1991; Director since 1986
William E. Katz 70 Executive Vice President since 1983;
Director since 1961
Robert J. Halliday 40 Vice President, Finance and Accounting
since December 1990; Chief Financial
Officer since August 1992
Stephen Korn 49 Vice President, General Counsel
and Clerk since September 1989
Theodore G. Papastavros 61 Vice President since 1975 and
Treasurer since February 1990
___________________
* Member of Executive Committee
There are no family relationships between any of the officers or directors.
Officers of the Registrant are elected each year at the annual meeting of
Directors.
All of the above executive officers have been employed by the Registrant in
various capacities for more than five years, except for Mr. Halliday. Prior to
joining the Company in December 1990, Mr. Halliday served from April 1987 to
December 1990 as Corporate Controller of Alliant Computer Systems Corporation, a
manufacturer of mini-supercomputers.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated by reference
from the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held May 4, 1995 to be filed with the Securities and
Exchange Commission on or about March 30, 1995.
/17
III-1
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by Item 12 is hereby incorporated by reference
from the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held May 4, 1995 to be filed with the Securities and
Exchange Commission on or about March 30, 1995.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is hereby incorporated by reference
from the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held May 4, 1995 to be filed with the Securities and
Exchange Commission on or about March 30, 1995.
/18
III-2
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
See Index to Financial Statements and Financial Statement
Schedules on page IV-7. The Financial Statement Schedules are
filed as part of this Annual Report on Form 10-K.
2. Financial Statement Schedules
See Index to Financial Statements and Financial Statement
Schedules on page IV-7.
3. Exhibits
Exhibit Page
No. Description No.
3.0 Articles of Organization and By-Laws
3.1 Restated Articles of Organization (filed *
as Exhibit 3(a) to Form 10-K for year
ended December 31, 1986).
3.1(a) Amendment to the Restated Articles of *
Organization (filed as Exhibit 3(b) to
Form 10-K for year ended December 31, 1987).
3.1(b) Amendment to Restated Articles of *
Organization (filed as Exhibit 3.1(b) to
Registration Statement No. 33-38290 on
Form S-2 effective January 24, 1991).
3.2 By-Laws, as amended (filed as Exhibit 19 to *
Form 10-Q for the quarter ended September 30,
1989).
4.0 Instruments defining the rights of security holders,
including indentures
4.1 Agreement for a loan payable by a consolidated **
subsidiary to a bank in Australia in the principal
amount of 725,000 Australian dollars guaranteed
by Registrant, and related documents.
4.2 Rights Agreement, dated as of December 22, 1987, *
as amended and restated as of August 15, 1989,
between Registrant and The First National Bank
of Boston (filed as Exhibit 1 to Registrant's
Current Report on Form 8-K dated August 30, 1989).
/19
IV-1
<PAGE>
4.3 Indenture, dated as of December 22, 1987, between *
Registrant and The First National Bank of Boston,
relating to Rights Agreement (filed as Exhibit 2
to Registrant's Current Report on Form 8-K dated
December 22, 1987).
4.4 Form of Common Stock Certificate (filed as Exhibit *
4.10 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990).
10. Material Contracts
10.1 1979 Stock Option Plan, as amended through *
February 17, 1994 (filed as Exhibit 10.1 to
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993).
10.2 1986 Stock Option Plan for Non-Employee Directors, *
as amended through February 18, 1992 (filed as
Exhibit 10.2 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991).
10.3 Amended and Restated Credit Agreement between *
Registrant and The First National Bank of Boston
dated as of December 31, 1992 (filed as Exhibit
10.3 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992).
10.4 Operating Agreement dated as of September 27, *
1989 between Registrant and Aqua Cool Enter-
prises, Inc. (filed as Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989).
10.5 Term Lease Master Agreement dated as of *
September 27, 1989 between Registrant and
Aqua Cool Enterprises, Inc. (filed as Exhibit
10.5 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1989).
10.6 Option Agreement dated as of September 27, 1989 *
among Registrant, Aqua Cool Enterprises, Inc.
and the other parties named therein (filed as
Exhibit 10.6 to Registrant's registration
statement on Form S-2, No. 33-38290,
effective January 24, 1991).
10.7 Agreement for Privatization of Water Supplies *
dated as of September 18, 1990 between the
Company and the City of Santa Barbara,
California (filed as Exhibit 10.7 to
Registrant's registration statement on Form S-2,
No. 33-38290, effective January 24, 1991).
10.8 Amendment No. 1, dated as of January 3, 1992, to *
Agreement for Privatization of Water Supplies
/20
IV-2
<PAGE>
dated as of September 18, 1990 between the Company
and the City of Santa Barbara, California (filed as
Exhibit 10.8 to Registrant's annual report on
Form 10-K for the year ended December 31, 1991).
10.9 Amendment No. 2, dated as of January 19, 1993, *
to Agreement for Privatization of Water Supplies
dated as of September 18, 1990 between the Company
and the City of Santa Barbara, California (filed as
Exhibit 10.9 to the Registrant's annual report on
Form 10-K for the year ended December 31, 1992).
10.10 Amendment No. 3, dated June 28, 1994, to Agreement *
for Privatization of Water Supplies dated as of
September 18, 1990 between the Company and the City
of Santa Barbara, California (filed electronically
as Exhibit 10.1 to the Registrant's Form 10-Q for
the period ended June 30, 1994).
10.11 Asset Purchase Agreement Among the Company, *
Resources Conservation Company, Resources
Conservation Co. International and Halliburton
NUS Corporation dated December 30, 1993 (filed as
Exhibit 2 to Registrant's current report on
Form 8-K dated February 7, 1994 and filed
electronically on the same date).
10.12 1994 Restricted Stock Plan.
11. Statement re Computation of Earnings Per Share.
13. Annual Report to Stockholders of the Registrant for
the year ended December 31, 1994 (only pages 17
through 32 and the inside back cover constitute an
exhibit to this report).
22. Subsidiaries of the Registrant.
24. Consents
24.1 Consent of Coopers & Lybrand L.L.P. to incorporation
by reference of that firm's report dated
February 22, 1995, which is included on page 31 of
the Registrant's Annual Report to Stockholders
for the year ended December 31, 1994.
25. Power of Attorney.
27. Financial Data Schedule ***
________________________________
* incorporated herein by reference
** copies of which will be filed by Registrant with the
Securities and Exchange Commission upon its request
*** for electronic purposes only
/21
IV-3
<PAGE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
last quarter of fiscal 1994.
Undertaking
For purposes of complying with the amendments to the rules governing
Form S-8 effective July 13, 1990 under the Securities Act of 1933, the
undersigned hereby undertakes as follows, which undertaking shall be
incorporated by reference into registrant's registration statements on
Form S-8 Nos. 33-14194, 33-5814, 33-2092, 2-72936, 2-82780, 2-64255,
33-41598, 33-54400 and 33-54293.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
/22
IV-4
<PAGE>
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.
IONICS, INCORPORATED
(Registrant)
By/s/ Arthur L. Goldstein
Arthur L. Goldstein, Chairman
of the Board, President and
Chief Executive Officer
Date: March 30, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 30, 1995 By/s/ Arthur L. Goldstein
Arthur L. Goldstein, Chairman
of the Board, President and
Chief Executive Officer
(principal executive officer)
and Director
Date: March 30, 1995 By/s/ Robert J. Halliday
Robert J. Halliday, Vice President,
Finance and Accounting and Chief
Financial Officer (principal
financial and accounting officer)
/23
IV-5
<PAGE>
Date: March 30, 1995 By/s/ William L. Brown
William L. Brown, Director
Date: March 30, 1995 By/s/ Arnaud de Vitry d'Avaucourt
Arnaud de Vitry d'Avaucourt,
Director
Date: March 30, 1995 By/s/ Lawrence E. Fouraker
Lawrence E. Fouraker, Director
Date: March 30, 1995 By/s/ Samuel A. Goldblith
Samuel A. Goldblith, Director
Date: March 30, 1995 By/s/ Kachig Kachadurian
Kachig Kachadurian, Director
Date: March 30, 1995 By/s/ William E. Katz
William E. Katz, Director
Date: March 30, 1995 By/s/ Robert B. Luick*
Robert B. Luick, Director
Date: March 30, 1995 By/s/ John J. Shields
John J. Shields, Director
Date: March 30, 1995 By/s/ Carl S. Sloane
Carl S. Sloane, Director
DATE: March 30, 1995 By/s/ Mark S. Wrighton
Mark S. Wrighton, Director
Date: March 30, 1995 By/s/ Allen S. aWyett
Allen S. Wyett, Director
*By/s/ Stephen Korn
Stephen Korn
Attorney-in-fact
/24
IV-6
<PAGE>
IONICS, INCORPORATED
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGES
Report of Independent Accountants 31*
Financial Statements:
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992 20*
Consolidated Balance Sheets as of December 31,
1994 and 1993 21*
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1993 and 1992 22*
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1994, 1993 and 1992 23*
Notes to Consolidated Financial Statements 24-31*
Supporting Financial Statement Schedules for the years Ended December 31,
1994, 1993 and 1992:
Schedule II - Valuation and Qualifying Accounts IV-8
Report of Independent Accountants on Financial Statement
Schedule IV-9
__________________
All other schedules are omitted because the amounts are immaterial, the
schedules are not applicable or the required information is shown in the
financial statements or the notes thereto.
* Page references are to the Annual Report to Stockholders of the Company
for the year ended December 31, 1994, which pages are incorporated herein
by reference.
/25
IV-7
<PAGE>
<TABLE>
IONICS, INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Additions Additions
Balance at Charged to Due to
Beginning Costs and Acquired Balance at
Description of Year Expenses Businesses(A) Deductions(B) End of Year
Allowance for doubtful
accounts and uncollectible
notes receivable:
Years ended:
<S> <C> <C> <C> <C> <C>
December 31, 1994 $2,022,068 $535,200 $ 0 $ 360,098 $2,197,170
December 31, 1993 $2,694,200 $390,489 $(124,000) $ 938,621 $2,022,068
December 31, 1992 $2,510,588 $944,203 $ 190,200 $ 950,791 $2,694,200
(A) 1993 amount includes reductions of $413,000 resulting from the consolidation of ACE.
(B) Deductions result primarily from the write-off of accounts.
/26
IV-8
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Ionics, Incorporated:
Our report on the consolidated financial statements of Ionics,
Incorporated as of December 31, 1994 and 1993 and for each of the three years
in the period ended December 31, 1994 has been incorporated by reference in
this Form 10-K from page 31 of the 1994 Annual Report to Stockholders of
Ionics, Incorporated. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule
listed in the Index on page IV-7 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 22, 1995
/27
IV-9
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Sequentially
Exhibit Numbered
No. Description Page No.
<S> <C> <C>
3.0 Articles of Organization and By-Laws
3.1 Restated Articles of Organization (filed *
as Exhibit 3(a) to Form 10-K for year
ended December 31, 1986).
3.1(a) Amendment to the Restated Articles of *
Organization (filed as Exhibit 3(b) to
Form 10-K for year ended December 31, 1987).
3.1(b) Amendment to Restated Articles of *
Organization (filed as Exhibit 3.1(b) to
Registration Statement No. 33-38290 on
Form S-2 effective January 24, 1991).
3.2 By-Laws, as amended (filed as Exhibit 19 to *
Form 10-Q for the quarter ended September 30,
1989).
4.0 Instruments defining the rights of security holders,
including indentures
4.2 Rights Agreement, dated as of December 22, 1987, *
as amended and restated as of August 15, 1989,
between Registrant and The First National Bank
of Boston (filed as Exhibit 1 to Registrant's
current Report on Form 8-K dated August 30, 1989).
4.3 Indenture, dated as of December 22, 1987, between *
Registrant and The First National Bank of Boston,
relating to Rights Agreement (filed as Exhibit 2
to Registrant's Current Report on Form 8-K dated
December 22, 1987).
4.4 Form of Common Stock Certificate (filed as Exhibit *
4.10 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990).
10. Material Contracts
10.1 1979 Stock Option Plan, as amended through *
February 17, 1994 (filed as Exhibit 10.1 to
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993).
/28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.2 1986 Stock Option Plan for Non-Employee Directors, *
as amended through February 18, 1992 (filed as
Exhibit 10.2 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991).
10.3 Amended and Restated Credit Agreement between *
Registrant and The First National Bank of Boston
dated as of December 31, 1992 (filed as Exhibit
10.3 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992).
10.4 Operating Agreement dated as of September 27, *
1989 between Registrant and Aqua Cool Enter-
prises, Inc. (filed as Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989).
10.5 Term Lease Master Agreement dated as of *
September 27, 1989 between Registrant and
Aqua Cool Enterprises, Inc. (filed as Exhibit
10.5 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1989).
10.6 Option Agreement dated as of September 27, 1989 *
among Registrant, Aqua Cool Enterprises, Inc.
and the other parties named therein (filed as
Exhibit 10.6 to Registrant's registration
statement on Form S-2, No. 33-38290,
effective January 24, 1991).
10.7 Agreement for Privatization of Water Supplies *
dated as of September 18, 1990 between the
Company and the City of Santa Barbara,
California (filed as Exhibit 10.7 to
Registrant's registration statement on Form S-2,
No. 33-38290, effective January 24, 1991).
10.8 Amendment No. 1, dated as of January 3, 1992, to *
Agreement for Privatization of Water Supplies
dated as of September 18, 1990 between the Company
and the City of Santa Barbara, California (filed as
Exhibit 10.8 to Registrant's annual report on
Form 10-K for the year ended December 31, 1991).
10.9 Amendment No. 2, dated as of January 19, 1993, *
to Agreement for Privatization of Water Supplies
dated as of September 18, 1990 between the Company
and the City of Santa Barbara, California (filed as
Exhibit 10.9 to the Registrant's annual report on
Form 10-K for the year ended December 31, 1992).
10.10 Amendment No. 3, dated June 28, 1994, to Agreement *
for Privatization of Water Supplies dated as of
September 18, 1990 between the Company and the City
of Santa Barbara, California (filed electronically
as Exhibit 10.1 to the Registrant's Form 10-Q
for the period ended June 30, 1994).
/29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.11 Asset Purchase Agreement among the Company, *
Resources Conservation Company, Resources
Conservation Co. International and Halliburton
NUS Corporation dated December 30, 1993 (filed
as Exhibit 2 to Registrant's current report on
Form 8-K dated February 7, 1994 and filed
electronically on the same date).
10.12 1994 Restricted Stock Plan
11. Statement re Computation of Earnings Per Share.
13. Annual Report to Stockholders of the Registrant for
the year ended December 31, 1994 (only pages 17
through 32 and the inside back cover constitute an
exhibit to this report).
22. Subsidiaries of the Registrant.
24.1 Consent of Coopers & Lybrand L.L.P. to incorporation
by reference of that firm's report dated
February 22, 1995, which is included on page 31 of
the Registrant's Annual Report to Stockholders
for the year ended December 31, 1994.
25. Power of Attorney.
27. Financial Data Schedule (for electronic
purposes only)
* incorporated herein by reference
/30
</TABLE>
<PAGE>
EXHIBIT 10.12
Ionics, Incorporated
1994 Restricted Stock Plan
Adopted August 23, 1994
1. Purpose.
The purpose of this Restricted Stock Plan (the "Plan") is to attract,
motivate, and retain outstanding individuals as employees of Ionics,
Incorporated (the "Corporation") and its Subsidiaries, as hereinafter
defined, to align their future interests with those of the Corporation's
stockholders, and to reward appropriately those who make substantial
contributions to the success and welfare of the Corporation.
2. Stock Subject to the Plan.
The stock that may be granted under the Plan ("Restricted Stock") shall
be the Common Stock, $1.00 par value, of the Corporation. The maximum
total number of shares of such stock that may be issued under the Plan
shall be 150,000 shares (except as such amount may be adjusted in
accordance with the provisions of Section 9 hereof). Such shares may be
either unissued shares or treasury shares. No participant in the Plan may
be awarded more than 25,000 shares of Restricted Stock under the Plan in
any calendar year.
If previously awarded shares are forfeited to the Corporation by reason
of termination of employment during the applicable Restriction Period, or
for any other reason, such shares may again be awarded under the Plan,
provided that no more than 75,000 of such shares are so awarded again. In
the event the Corporation acquires or merges or consolidates with another
company, Common Stock issuable under the Plan as a result of the
Corporation's assumption of outstanding awards from such other company or
the substitution of grants under the Plan for outstanding awards of such
other company shall not reduce the shares available for grant under the
Plan.
3. Eligibility and Participation.
Individuals eligible to receive grants of Restricted Stock, as
hereinafter defined, under the Plan shall be those employees of the
Corporation and its Subsidiaries selected from time to time by the Plan's
administrative committee, provided, however, that each grant recipient must
have been employed by the Corporation or a Subsidiary for a period of at
least six months immediately preceding the date of grant. No person who is
not an officer or salaried employee of the Corporation or a Subsidiary
shall be eligible to receive a grant under the Plan. Grants made under the
Plan in any year shall neither preclude nor require selection of a grantee
to receive future grants or require that the grantee receive the same type
or amount of award as at any other time, or as may be received by any other
grant recipient at any time. Neither the Plan nor any action taken under
the Plan shall be construed as giving any grantee the right to be retained
in the employ of the Corporation or a Subsidiary.
/31
-1-
<PAGE>
4. Administration of the Plan.
The Plan shall be administratered by a Committee (the "Committee")
appointed by, and to serve at the pleasure of, the Board of Directors of
the Corporation and consisting of three or more directors, each of whom is
a "disinterested person" within the meaning of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, or any successor provision, as
applicable to the Corporation at the time. Until the Board of Directors
shall otherwise determine, that Committee shall be the Compensation
Committee of the Board of Directors. Subject to the express provisions
hereof, the Committee shall have sole and complete authority to make grants
of Restricted Stock. Such authority shall include, but not be limited to,
selecting individuals to receive grants under the Plan, determining the
number of shares of Common Stock (subject to the limitations in Section 2
hereof) to be awarded to each grant recipient under the plan and the terms
and conditions under which such grants shall be made, and determining the
duration and terms of each Restriction Period.
The Committee also shall have authority to adopt rules and regulations
for carrying out the Plan and to interpret, construe, implement, and
otherwise administer the provisions of the Plan. Decisions of the
Committee shall be final. A majority of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at
which a quorum is present (or acts approved in writing by a majority of the
Committee) shall be the acts of the Committee. The Committee shall keep
minutes of its proceedings and from time to time make such reports to the
Board of Directors as the Board shall direct.
5. Effective Date.
The Effective Date of the Plan shall be the date upon which the Plan is
adopted by the Board of Directors of the Corporation. The Plan shall
terminate if it is not approved within twelve months after the Effective
Date by vote of the holders of a majority of the stock of the Corporation
present in person or by proxy and entitled to vote at a special or annual
meeting of the stockholders of the Corporation.
6. Terms and Conditions of Grants.
6.1 Grants under the Plan shall consist of Restricted Stock, which
shall be shares of Common Stock of the Corporation transferred to grant
recipients in furtherance of the purposes of the Plan without, unless
otherwise provided, other payment and subject to the restrictions referred
to in this Section 6. All shares of Restricted Stock granted under the
Plan shall be so granted for, and in consideration of, past services
rendered to the Corporation or a Subsidiary and shall be subject to the
following terms and conditions and to such other terms and conditions, not
inconsistent with the Plan, as shall be prescribed by the Committee in its
sole discretion and as shall be contained in the Agreement referred to in
Section 6.1(d) hereof.
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<PAGE>
(a) At the time of a grant of shares of Restricted Stock, the
Committee shall establish for all such shares received by a grantee
(or, if it is the intent that the total of such shares shall be divided
into separate parts, for each part of such total) a period of time (the
"Restriction Period") commencing with the date of the grant of such
shares during which time the shares may not be sold, assigned,
transferred, pledged, or otherwise encumbered, except as herein
provided. Different Restriction Periods may be fixed for different
parts of the shares that are being granted to a recipient, and the
Restriction Period for one grant may differ from the Restriction Period
for other grants. Unless otherwise determined by the Committee, the
Restriction Period will be five (5) years, so that twenty percent (20%)
of the shares constituting a particular grant shall become free of
restrictions on each of the first five anniversary dates from the date
of grant. Except for such restrictions, unless otherwise determined by
the Committee, the grant recipient as owner of such Restricted Stock
shall have all the rights of a stockholder, including but not limited
to the right to receive any dividends paid on such Restricted Stock and
the right to vote such Restricted Stock. Unless otherwise determined
by the Committee, the restrictions shall terminate upon the earliest to
occur of the expiration of the Restriction Period or the grantee's
death, disability, or retirement at normal retirement age, or in any
other circumstances determined by the Committee at the time of the
grant or at any time thereafter.
(b) If a grant recipient ceases to be an employee of the Corporation
or a Subsidiary, all shares of Restricted Stock theretofore granted to
him as to which the restrictions imposed under this Section 6 have not
terminated or do not thereby terminate shall, except as provided in
Section 7 hereof, upon such cessation of employment be forfeited and
returned to the Corporation unless the Committee, in its discretion,
otherwise determines.
(c) Each certificate issued in respect of shares of Restricted Stock
granted under the Plan shall be registered in the name of the grantee
and deposited by him, together with a stock power endorsed in blank,
with the Corporation and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms, conditions and
restrictions (including forfeiture) contained in a Plan and an
Agreement between the registered owner and Ionics, Incorporated.
A copy of such Plan and Agreement will be furnished to the holder
of this certificate upon written request and without charge."
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<PAGE>
(d) The grant recipient shall enter into an Agreement with the
Corporation, in a form no inconsistent with the Plan, agreeing to the
terms and conditions of the grant and such other matters as the
Committee shall in its sole discretion determine. the Agreement may be
amended by the Committee at any time to modify the Restriction Period
with respect to any shares of Restricted Stock the restrictions on
which have not then lapsed or in any other respect; provided that,
except as provided in Section 12, no amendment shall adversely affect
the terms and conditions of an outstanding grant without the written
consent of the grant recipient.
(e) Upon the termination of the restrictions imposed under this
Section 6, the Corporation shall return to the grantee ( or his legal
representative, beneficiary, or heir) certificates, without a legend,
for the shares of Common Stock deposited with it pursuant to subsection
(c) hereof.
6.2 The Corporation or a Subsidiary, as the case may be, shall have
the right to deduct from amounts payable to the grantee, or to require the
grantee to pay, any taxes required by law to be withheld with respect to
such Restricted Stock. In the Committee's discretion such tax obligations
may be paid in whole or in part in shares of Common Stock, including shares
retained from the grant creating the tax obligation, valued at their fair
market value on the date of delivery.
6.3 No rights or interests of a grant recipient under the Plan may be
assigned, encumbered, or transferred except by will or the laws of descent
and distribution.
7. Change in Control.
In order to preserve the rights of a grant recipient in the event of a
merger or consolidation of the Corporation with another corporation or of a
Change in Control of the Corporation, the Committee may in its discretion
include in the grant Agreement or in any amendment thereto (subject to the
provisions of Section 6.1(d): (i) permitting restrictions on Restricted
Stock to lapse, in whole or in part, immediately prior to such event; (ii)
adjusting the terms of a grant in a manner determined by the Committee to
reflect the Change in Control; (iii) causing a grant to be assumed, or new
rights substituted therefor, by another entity; and/or (iv) making such
other provision as the Committee may consider equitable and in the best
interests of the Corporation. After a Change in Control of the
Corporation, the Corporation shall pay all reasonable legal fees, costs,
and other expenses incurred by any grantee in enforcing rights under this
Plan or the grant Agreement.
A "Change in Control" shall be deemed to have occurred if (a) any
entity, person or Group (other than the Company or a subsidiary) acquires
shares of Common Stock in a transaction or in a series of transactions that
/34
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<PAGE>
result in such entity, person or Group directly or indirectly owning
beneficially more than thirty percent (30%) of the outstanding shares of
Common Stock; (b) there is a merger, consolidation or sale of all or
substantially all of the assets of the Company; (c) there is a contested
election of directors of the Company which results in a majority of the
members of the Board recommended by the Company not being elected; (d)
there is a change in composition within a sixty (60) day period of a
majority of the Company's Board of Directors; or (e) there is any other
event which results in a change in voting power sufficient to elect a
majority of the Board.
A "Group" shall consist of two or more persons acting as a partnership,
limited partnership, syndicate, or other group for the purpose of
acquiring, holding or disposing of voting securities of the Company.
8. Securities and Other Laws.
In any case where in the opinion of the Committee, the issue and/or
delivery of shares of Common Stock under the Plan would violate
requirements of Federal or state securities or other laws, or the
requirements of any exchange on which the securities are listed, the
Corporation shall be entitled to postpone such issue and/or delivery until
such requirements have been met. The Committee may require representations
and agreements from any grant recipient in order to ensure compliance with
Federal or state securities or other laws.
9. Adjustment in Number of Shares.
In the event that there are any changes in the outstanding Common Stock
of the Corporation by reason of stock dividends, stock splits, or
recapitalizations (whether by way of mergers, consolidations, combinations,
or exchanges or shares or the like) the aggregate number and kind of shares
available under the Plan shall be appropriately adjusted by the Committee,
if necessary, to reflect equitably such change or changes. Any shares of
stock or other securities received by a grant recipient with respect to
shares still subject to the restrictions imposed by Section 6 will be
subject to the same restrictions and shall be deposited with the
Corporation in accordance with Section 6.
10. Notice of Election Under Section 83(b).
Each grant recipient making an election under Section 83(b) of the
Internal Revenue Code of 1986, as amended, and the regulations and rulings
promulgated thereunder, will provide a copy thereof to the Corporation
within thirty days of the filing of such election with the Internal Revenue
Service and the Agreement referred to in Section 6 shall so provide.
11. Term of Plan.
Unless sooner terminated the Plan shall terminate ten years from the
Effective Date and no Restricted Stock shall be granted thereafter.
/35
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<PAGE>
12. Amendments and Termination.
The Plan or any portion hereof may be amended at any time and from time
to time or terminated by the Board of Directors, subject to such approval
of the stockholders as the Board of Directors shall deem necessary or
advisable. No amendment or termination shall adversely affect the terms
and conditions of outstanding grants without the written consent of the
grantee, except that the Plan and any Agreement may be amended without the
consent of any grant recipient in order to conform to restrictions or
limitations imposed by securities or tax laws or regulations, or any other
laws or regulations deemed by the Corporation to be binding upon it.
13. Miscellaneous.
13.1 Transfer of Employment. The transfer of employment of an
employee from the Corporation to a Subsidiary or from a Subsidiary to the
Corporation or to another Subsidiary shall not constitute a termination of
employment for the purposes of the Plan.
13.2 Definition of Subsidiary. For all purposes of the Plan, the term
"Subsidiary" means any corporation of which the Corporation owns or
controls more than 50% of the outstanding shares of capital stock entitled
ordinarily (rather than in some contingency) to vote for the election of
directors (counting shares owned or controlled by a Subsidiary within this
definition as being owned or controlled by the Corporation).
/36
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<PAGE>
<TABLE>
EXHIBIT 11
IONICS, INCORPORATED
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
<CAPTION>
YEARS ENDED DECEMBER 31
1994 1993 1992
<S> <C> <C> <C>
Net Income $15,448,000 $13,807,000 $12,820,000
Calculation of primary earnings per
common and common equivalent share:
Weighted average common shares outstanding 13,926,000 13,870,000 13,512,000
Increase from assumed exercise of
stock options and investment of pro-
ceeds in treasury stock, based upon
average market prices 272,000 250,000 326,000
Weighted average number of common and
common equivalent shares outstanding 14,198,000 14,120,000 13,838,000
Earnings per common and common
equivalent share $1.09 $ .98 $ .93
Calculation of fully diluted earnings per
common and common equivalent share:
Weighted average common and common equivalent
shares outstanding used in calculation
of primary earnings per common and
common equivalent share 14,198,000 14,120,000 13,838,000
Increase from assumed exercise of stock
options and investment of proceeds in
treasury stock, based upon year-end
market price 42,000 8,000 24,000
Weighted average number of common and
common equivalent shares used to calculate
fully diluted earnings per common and
common equivalent share 14,240,000 14,128,000 13,862,000
Earnings per common and common
equivalent share assuming full dilution $1.08(A) $ .98 $ .92(A)
(A) Dilution is less than 3% so the primary
basis was used for per share calculations.
/37
</TABLE>
<PAGE>
EXHIBIT 13
IONICS, INCORPORATED
ANNUAL REPORT TO STOCKHOLDERS OF
IONICS, INCORPORATED FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1994
(Only pages 17 through 32 and the inside back cover
constitute an Exhibit to Form 10-K)
/38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
The financial performance of Ionics continued to improve in 1994 with a
27% growth in revenues and a 12% improvement in earnings. The profit
improvement resulted primarily from the continued success of "own and
operate" and service-based activities relating to the Water, Food and
Chemical Supply segment and from strong growth within the Consumer Products
segment. These two segments experienced improvements over 1993 in earnings
before interest and taxes of 41% and 31%, respectively. In addition, the
earnings before interest and taxes of the Membranes and Related Equipment
segment improved 9%.
Total revenues were $222.4 million in 1994, compared with $175.3
million in 1993. Revenues were higher in all three business segments with
the largest growth occurring in the Membranes and Related Equipment
segment. This growth was primarily due to the acquisition of Resources
Conservation Company (Ionics RCC) effective December 1, 1993, and to the
growth in the sales of ultrapure water systems, particularly to the
semiconductor industry.
Water, Food and Chemical Supply segment revenues in 1994 increased as
Ionics initiated its operation of two cheese whey processing facilities for
Mid-America Dairymen, Inc. Ionics also realized significant growth in
revenues related to ownership and operation of ultrapure water systems. In
addition, demand continued to increase for chemical supply products
produced by the Elite Chemicals businesses in Australia and in the United
Kingdom, where the Company's newest bleach manufacturing facility began
operating in the fourth quarter of 1993.
Consumer Products revenues increased due to strong demand for consumer
windshield wash and bleach products produced by the Elite Chemicals
business in New England. Furthermore, higher volumes of bottled water were
sold by existing Aqua Cool locations and through new 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 and
the opening late in the year of a new bottling facility in New Jersey.
Home water product sales increased as the Company shipped additional water
conditioning units through an expanded network of independent and Company-
owned dealers.
The addition of Ionics RCC, the increase in revenues from ultrapure
water systems and the growth in consumer products were responsible for the
40% growth in the U.S. geographic segment. The decrease in the European
geographic segment was due to slowness in traditional capital equipment
sales.
/39
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<PAGE>
Total revenues were $175.3 million in 1993, compared with $155.2
million in 1992. Each business segment experienced improved revenues with
the largest growth occurring in the Membranes and Related Equipment segment
due to higher equipment sales and, to a lesser extent, the December 1992
acquisition of the Company's French subsidiary, Eau et Industrie, and the
December 1993 acquisition of Ionics RCC. Revenues from the Water, Food and
Chemical Supply segment increased primarily as large Company-owned plants,
which commenced operations in the first quarter of 1992, operated for the
entire period in 1993. Consumer Products revenues increased with further
development of the existing bottled water business, consolidation of Aqua
Cool Enterprises, Inc. (ACE), the Company's distributor, as of May 26,
1993, and as domestic consumer chemical product sales grew. The increases
in domestic equipment revenues, the expansion of the domestic consumer
chemical business, and the additions of ACE and Ionics RCC were responsible
for the 21% growth in the U.S. geographic segment.
Cost of sales as a percentage of revenues were 69.3%, 66.8%, and 64.4%
in 1994, 1993 and 1992, respectively.
Cost of sales as a percentage of revenues increased during 1994 for the
Membranes and Related Equipment and Consumer Products segments while it
declined for the Water, Food and Chemical Supply segment. The increase in
the Membranes and Related Equipment segment 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 revenues resulting from
reduced sales of traditional capital equipment. The acquisition of Ionics
RCC also contributed to the increase as Ionics RCC classifies a greater
percentage of its total costs as cost of goods sold, which is offset by
lower operating costs, than does the traditional Membranes and Related
Equipment segment.
Cost of sales as a percentage of revenue declined in the Water, Food
and Chemical Supply segment due to operational efficiencies achieved at
certain own and operate sites. The increase in the Consumer Products
segment resulted from a fluctuation in the mix of sales of individual
consumer products.
The increase in 1993 compared to 1992 was due primarily to the
Membranes and Related Equipment segment which experienced greater than
anticipated costs on several sizeable capital equipment sales. The
Consumer Products segment showed an improvement in the cost of sales
percentage due primarily to a steady decline in the Company's unit costs to
manufacture and distribute bottled water and coolers resulting from
significant increases in volume, route density and operating efficiencies.
Operating expenses as a percentage of revenues were 21.2% in 1994, down
from 23.5% in 1993 and 26.1% in 1992. The decrease in operating expenses
as a percentage of revenues in 1994 and 1993 in all three business segments
was due to the absorption of relatively fixed operating expenses by
increased sales volume, and continued emphasis on expense controls.
Operating expenses allocable to "Corporate and Other" (Note 14) increased
in 1994 as the Company realized greater than anticipated losses in its
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<PAGE>
self-insured workers' compensation and auto liability programs; recorded
year-end bonuses for employees; and allocated a greater percentage of
research and development expenses to "Corporate." Within the Membranes and
Related Equipment segment, Ionics RCC's operating expenses as a percentage
of revenues brought down the overall percentage for the segment.
Interest income in 1994 was $1.1 million compared to $1.8 million in
1993 and $2.1 million in 1992. The decrease in 1994 was due to lower
invested balances, resulting from payment of the Ionics RCC acquisition
obligation in the first quarter of 1994, and increased capital spending.
The decrease in 1993 was due to lower average interest rates combined with
reduced investments as a result of the 1993 purchase of ACE's preferred
stock.
The Company's effective tax rate was 32% in 1994, 30% in 1993 and 29%
in 1992. The increase in the effective tax rate for 1994 was due to a
higher applicable statutory rate, a higher state tax rate resulting from
proportionately greater domestic income and to a reduction in the benefit
from tax-exempt interest, partially offset by other miscellaneous items.
The increase in 1993 was due to a decrease in the benefit from a low state
tax rate on interest income resulting from lower average invested balances,
as well as a proportionately lower benefit from the Company's foreign sales
corporation.
Net income increased 11.9% to $15.4 million in 1994 compared to $13.8
million in 1993. Net income in 1993 was 7.7% higher than 1992 net income
of $12.8 million.
The Company adopted Financial Accounting Standard No. 115 (FAS 115),
"Accounting for Certain Investments in Debt and Equity Securities," as of
the beginning of 1994 with no material impact on its financial statements.
LEGAL PROCEEDINGS
The Company has been named as one of many potentially responsible
parties (PRPs) in connection with a Superfund site, Solvent Recovery
Service of New England in Southington, Connecticut. The Company's share of
estimated clean-up costs is not expected to be significant as its
volumetric share at this site is low (approximately 0.522%) and there are
many PRPs that are larger, financially sound corporations with higher
volumetric levels. The Company accrues for estimated expenses as facts
become known during these proceedings. Based upon facts presently known,
management believes that the Company's liability in connection with this
site will not have a material adverse impact on its results of operations
or financial condition.
FINANCIAL CONDITION
At December 31, 1994 the Company had total assets of $277.2 million
compared to total assets of $249.6 million at December 31, 1993 and $224.6
million at December 31, 1992. The major components of the increase in 1994
were for property, plant and equipment including expansion of the Company's
/41
-3-
<PAGE>
bottled water operations, bleach production and distribution facilities,
trailers and other own and operate facilities. The major components of the
1993 increase included the consolidation of ACE, the acquisition of Ionics
RCC, and expenditures for property, plant and equipment relating primarily
to consumer products and triple-membrane trailers for the production of
ultrapure water.
Working capital in 1994 decreased by $5.3 million and the Company's
current ratio decreased to 2.1 in 1994 from 2.4 in 1993. Capital
expenditures totaled $38.2 million, $14.7 million, and $24.7 million in
1994, 1993 and 1992, respectively. Cash paid in 1994 to settle the Ionics
RCC acquisition obligation and in 1993 for the purchase of ACE's preferred
stock was $10.5 million and $8.0 million, respectively. Funds for these
expenditures were provided in both years through cash from operations and
through the sale of short-term investments.
Net cash generated by operating activities increased by $25.3 million
in 1994 with higher net income, depreciation and increases in liabilities,
primarily in accounts payable and accrued expenses, partially offset by
increases in operating assets, primarily in accounts receivable and
inventories. The decrease in 1993 as compared to 1992 resulted as higher
net income and depreciation were offset by increases in accounts receivable
and decreases in accounts payable and accrued expenses, excluding those
obtained through the consolidation of ACE and acquisition of Ionics RCC.
Net cash used by investing activities increased by $42.0 million in 1994 as
compared to 1993. During 1994, cash used for investments in property,
plant and equipment and for payment of the Ionics RCC acquisition
obligation was provided primarily from operations and the sale of short-
term investments. During 1993, cash used for investments in property,
plant and equipment and for the purchase of ACE's preferred stock was
provided primarily through the sale of short-term investments and from
operations. In 1994, net cash provided by financing activities increased
by $1.3 million, primarily from a reduction in debt payments and an
increase in proceeds from stock option exercises. The decrease in 1993 as
compared to 1992 resulted as no public offering of common stock occurred in
1993, while a public offering did occur in 1992.
Significant expenditures in 1995 are anticipated to include expansion
of own and operate facilities, bleach manufacturing and bottled water
operations and improvements to manufacturing equipment.
The Company maintains several lines of credit, including unused
domestic lines totaling $35 million, which are available to meet working
capital needs. In addition, the Company has several facilities to
accommodate its foreign trade and exchange requirements. The Company
believes that its cash and short-term investments of $20.6 million at the
beginning of 1995, cash from operations, lines of credit and foreign
exchange facilities are adequate to meet its currently anticipated needs.
Inflationary increases in material and labor costs remained moderate
during the last three years, and to the extent permitted by the competitive
environment, the Company has raised prices to cover those inflationary
increases.
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<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of Ionics, Incorporated:
We have audited the consolidated balance sheets of Ionics,
Incorporated at December 31, 1994 and 1993 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Ionics, Incorporated as of December 31, 1994 and 1993, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Boston, Massachusetts
February 22, 1995
/43
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<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS Ionics, Incorporated
<CAPTION>
For the years ended December 31
Dollars in thousands, except per share amounts 1994____ 1993____ 1992
<S> <C> <C> <C>
Net revenue:
Membranes and related equipment $119,426 $ 92,352 $ 81,019
Water, food and chemical supply 53,894 45,584 43,824
Consumer products 49,056 37,337 30,397
222,376 175,273 155,240
Costs and expenses:
Cost of membranes and related equipment 90,672 65,890 52,352
Cost of water, food and chemical supply 35,881 31,127 29,376
Cost of consumer products 27,640 19,986 18,203
Research and development 3,372 3,678 3,084
Selling, general and administrative 43,770 37,432 37,409
201,335 158,113 140,424
Income from operations 21,041 17,160 14,816
Interest income 1,057 1,789 2,087
Equity income 619 775 1,281
Income before income taxes
and minority interest 22,717 19,724 18,184
Provision for income taxes 7,269 5,917 5,273
Income before minority interest 15,448 13,807 12,911
Minority interest's share of income - - (91)
Net income $ 15,448 $ 13,807 $ 12,820
Earnings per share $ 1.09 $ 0.98 $ 0.93
Shares used in earnings per
share calculations 14,198,000 14,120,000 13,838,000
The accompanying notes are an integral part of these financial statements.
/44
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS Ionics, Incorporated
<CAPTION>
December 31
Dollars in thousands, except per share amounts 1994 1993
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 14,966 $ 21,534
Short-term investments 5,617 8,603
Notes receivable, current 3,126 2,505
Accounts receivable 61,675 57,214
Receivables from affiliated companies 2,170 2,944
Inventories 19,405 13,926
Other current assets 6,518 3,231
Total current assets 113,477 109,957
Notes receivable, long-term 5,246 4,919
Investments in affiliated companies 5,419 4,989
Property, plant and equipment, net 124,093 100,445
Other assets 28,929 29,252
Total assets $277,164 $249,562
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt $ 370 $ 326
Accounts payable 30,317 12,496
Other current liabilities 22,218 32,332
Taxes on income 1,972 928
Total current liabilities 54,877 46,082
Long-term debt and notes payable 99 109
Deferred income taxes 2,928 2,699
Other liabilities 650 591
Commitments - -
Stockholders' equity:
Common stock, par value $1, authorized shares:
30,000,000 in 1994 and 1993;
issued and outstanding: 13,989,896 in 1994 and 13,891,610 in 1993 13,990 13,892
Additional paid-in capital 125,529 124,189
Retained earnings 84,027 68,628
Cumulative translation adjustments (4,936) (6,628)
Total stockholders' equity 218,610 200,081
Total liabilities and stockholders' equity $277,164 $249,562
The accompanying notes are an integral part of these financial statements.
/45
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS Ionics, Incorporated
<CAPTION>
For the years ended December 31
Dollars in thousands _____________________________________ 1994 1993 1992
<S> <C> <C> <C>
Operating activities:
Net income $ 15,448 $ 13,807 $ 12,820
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,092 15,463 12,588
Provision for losses on accounts and notes receivable 535 390 944
Deferred income tax provision 2,051 1,589 562
Changes in assets and liabilities, net of effects
of businesses acquired:
Notes receivable (889) (1,175) (2,699)
Accounts receivable (3,634) (7,332) (2,209)
Inventories (5,296) (1,509) (748)
Other current assets (3,199) 498 (2,016)
Investments in affiliates (386) (641) (250)
Accounts payable and accrued expenses 16,998 (7,432) (1,819)
Income taxes (1,787) (987) (2,481)
Other (738) (825) (567)
Net cash provided by operating activities 37,195 11,846 14,125
Investing activities:
Additions to property, plant and equipment (38,220) (14,667) (24,698)
Sale/(Purchase) of short-term investments 3,222 19,129 (28,623)
Acquisitions, net of cash acquired (10,488) (7,959) (2,352)
Net cash used by investing activities (45,486) (3,497) (55,673)
Financing activities:
Principal payments on current debt (325) (8,845) (3,601)
Proceeds from issuance of current debt 347 8,176 682
Principal payments on long-term debt - (506) (4,717)
Proceeds from issuance of long-term debt - 256 235
Proceeds from stock option plans 1,389 1,078 1,227
Sale of common stock - - 53,991
Net cash provided by financing activities 1,411 159 47,817
Effect of exchange rate changes on cash 312 (509) (574)
Net change in cash and cash equivalents (6,568) 7,999 5,695
Cash and cash equivalents at beginning of year 21,534 13,535 7,840
Cash and cash equivalents at end of year $ 14,966 $ 21,534 $ 13,535
The accompanying notes are an integral part of these financial statements.
/46
-8-
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Ionics, Incorporated
<CAPTION>
Common Stock Additional Cumulative Total
Par Paid-in Retained Translation Stockholders'
Dollars in thousands Shares Value Capital Earnings Adjustments Equity
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991 11,416,738 $11,417 $ 69,131 $ 43,238 $ 4,145 $127,931
Sale of common stock 2,300,000 2,300 52,840 (1,149) - 53,991
Stock options exercised 100,288 100 497 (50) - 547
Tax benefit of stock option activity - - 680 - - 680
Translation adjustments, net
of income taxes of $746 - - - - (5,629) (5,629)
Net income - - - 12,820 - 12,820
Balance December 31, 1992 13,817,026 13,817 123,148 54,859 (1,484) 190,340
Stock options exercised 74,584 75 465 (38) - 502
Tax benefit of stock option activity - - 576 - - 576
Translation adjustments, net
of income taxes of $1,165 - - - - (5,144) (5,144)
Net income____________________________________ -_______ -_________-______ 13,807_______ -______13,807
Balance December 31, 1993 13,891,610 13,892 124,189 68,628 (6,628) 200,081
Stock options exercised 98,286 98 896 (49) - 945
Tax benefit of stock option activity - - 444 - - 444
Translation adjustments, net
of income taxes of $(872) - - - - 1,692 1,692
Net income - - - 15,448 - 15,448
Balance December 31, 1994 13,989,896 $13,990 $125,529 $84,027 $ (4,936) $218,610
The accompanying notes are an integral part of these financial statements.
/47
-9-
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its wholly and majority-owned subsidiaries and Aqua Cool Enterprises,
Inc., a controlled affiliate. All significant intercompany accounts and
transactions have been eliminated.
Investments in affiliated companies, representing non-majority ownership
interests, are accounted for under the equity method.
REVENUE RECOGNITION
Product revenues are recorded upon shipment, and service revenues are
recorded as the services are performed. Interest revenues on consumer
water equipment loans are recognized over the life of the loans. Interest
earned on notes receivable, totaling $989,000, $1,277,000 and $1,643,000
in 1994, 1993 and 1992, respectively, is included in revenues.
Most equipment leases to customers are accounted for as operating leases
wherein rental revenues are recognized over the life of the lease and the
cost of the equipment is depreciated over its useful life. Some leases
are accounted for as sales-type leases wherein the present value of the
lease revenues and costs are recognized at the time of shipment of the
product.
Revenues from large contracts are recognized using the percentage
completion method of accounting in the proportion that costs incurred bear
to total estimated costs at completion. Losses, if any, are provided for
in the period in which the loss is determined.
CASH EQUIVALENTS
Short-term investments with a maturity of 90 days or less from date of
acquisition are classified as cash equivalents.
INVESTMENTS
Management determines the appropriate classification of its investment in
debt securities at the time of purchase. Debt securities which the
Company has the ability and positive intent to hold to maturity are
classified accordingly and carried at cost. All other investments are
classified as available for sale and carried at fair value with unrealized
gains and losses, net of tax, reported in a separate component of
stockholders' equity. The Company is not actively involved in the
purchase and sale of investments classified as trading.
NOTES RECEIVABLE
Notes receivable have been reported at their estimated realizable value.
The allowance for uncollectible notes receivable totaled $839,000 and
$702,000 at December 31, 1994 and 1993, respectively.
INVENTORIES
Inventories are carried at the lower of cost or market, principally on the
first-in, first-out basis. The Company had no deferred production costs
which exceeded the aggregate estimated cost of long-term sales contracts.
/48
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<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. When an asset is
retired or sold, any resulting gain or loss is included in the results of
operations. Interest capitalized as property, plant and equipment
amounted to $104,000, $177,000 and $709,000 in 1994, 1993 and 1992,
respectively. Depreciation is computed on a straight-line basis over the
expected lives of the assets, as follows:
Classification Depreciation Lives
Buildings and improvements 10 - 40 years
Machinery and equipment, including
water supply equipment 3 - 25 years
Other 3 - 12 years
The Company's policy is to depreciate desalination plants, other than
leased equipment, over the shorter of their useful lives or the term of
the corresponding water supply contracts.
GOODWILL
Goodwill is included in other assets and represents the unamortized
difference between acquisition cost and the fair value of net assets
acquired in the purchase of various entities. Goodwill is amortized on a
straight-line basis for up to 40 years. The Company continually evaluates
the realizability of goodwill based upon expectations of non-discounted
cash flows and operating income for each subsidiary having a material
goodwill balance.
FOREIGN EXCHANGE
Assets and liabilities of foreign affiliates and subsidiaries are
translated at year-end exchange rates, and the related statements of
operations are translated at average exchange rates during the year.
Translation gains and losses are accumulated net of income tax as a
separate component of stockholders' equity.
Some transactions of the Company and its subsidiaries are made in
currencies different from their own. Gains and losses from these
transactions are included in income as they occur. Net foreign currency
transaction gains included in income before taxes totaled $23,000,
$157,000 and $587,000 for 1994, 1993 and 1992, respectively.
INCOME TAXES
Income tax expense is based on pretax financial accounting income.
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax basis of assets and
liabilities and their reported amounts.
EARNINGS PER SHARE
Earnings per share is computed based on the weighted average number of
common and common equivalent shares outstanding after giving retroactive
effect for a 2-for-1 stock split (Note 9) for all periods presented.
Common equivalent shares result from the assumed exercise of dilutive
stock options. Fully diluted earnings per share is substantially the same
as earnings per share.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified in order to conform to
the current year presentation with no impact on net income.
/49
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<PAGE>
<TABLE>
NOTE 2. CONSOLIDATED BALANCE SHEET DETAILS
<CAPTION>
Dollars in thousands 1994 1993
<S> <C> <C>
Raw materials $ 11,088 $ 9,541
Work in process 5,964 3,016
Finished goods 2,353 1,369
Inventories $ 19,405 $ 13,926
Land $ 2,584 $ 1,261
Buildings 23,621 13,829
Machinery and equipment 148,881 121,792
Other, including furniture, fixtures and vehicles 22,122 18,918
197,208 155,800
Accumulated depreciation (73,115) (55,355)
Property, plant and equipment, net $124,093 $100,445
Goodwill $ 25,927 $ 25,660
Accumulated amortization (2,312) (1,608)
Other______________________________________________ 5,314 5,200
Other assets $ 28,929 $ 29,252
Obligation for purchase of Resources
Conservation Company (Ionics RCC) $ - $ 10,974
Customer deposits 4,959 5,668
Accrued commissions 1,852 1,733
Accrued expenses 15,407 13,957
Other current liabilities $ 22,218 $ 32,332
/50
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</TABLE>
<PAGE>
<TABLE>
NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION
<CAPTION>
Dollars in thousands __________________________ 1994 1993 1992
<S> <C> <C> <C>
Cash payments for interest and income taxes:
Interest $ 159 $ 150 $ 783
Taxes $ 6,628 $ 4,403 $7,374
Liabilities assumed in conjunction with
acquisitions and ACE preferred stock purchase:
Fair value of assets consolidated $ - $ 47,825 $2,609
Net cash paid (10,488) (7,959) (375)
Liability associated with purchase of Ionics RCC
(net of cash acquired) 10,488 (10,488) -
Liabilities assumed $ - $29,378 $2,234
</TABLE>
<TABLE>
NOTE 4. ACCOUNTS RECEIVABLE
<CAPTION>
Dollars in thousands 1994 1993
<S> <C> <C>
Billed receivables $49,529 $36,819
Unbilled receivables 13,504 21,715
Allowance for doubtful accounts (1,358) (1,320)
Accounts receivable $61,675 $57,214
</TABLE>
Unbilled receivables represent the excess of revenues recognized on
percentage of completion contracts over amounts billed. These amounts will
become billable as the Company achieves contractual milestones.
Substantially all of the unbilled amounts at December 31, 1994 are expected
to be billed during 1995.
Billed receivables include retainage amounts of $3,355,000 and $3,054,000 at
December 31, 1994 and 1993, respectively. Substantially all retainage
amounts are collectible within one year.
NOTE 5. INVESTMENTS IN AFFILIATED COMPANIES
The Company's investments in the following foreign affiliates
are accounted for under the equity method. The principal business
activities of these foreign affiliates involve the production, sale and
distribution of bottled and treated water and the sale of equipment and
replacement parts.
Ownership
Affiliate Percentage
Aqua Cool Kuwait - Kuwait 49%
Aqua Cool Saudi Arabia - Saudi Arabia 40%
Ionics-Mega s.r.o. - Czech Republic 49%
Jalal-Ionics, Ltd. - Bahrain 40%
Watlington Waterworks Limited - Bermuda 23%
Yuasa-Ionics Co., Ltd. - Japan 50%
/51
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<PAGE>
<TABLE>
The Company's percentage ownership interest in a foreign affiliate may vary
from its interest in the earnings of such affiliate.
<CAPTION>
Activity in investments in affiliated companies:
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
Investments at beginning of year $ 4,989 $ 4,279 $ 4,008
Equity in earnings 619 775 1,281
Distributions received (233) (134) (1,058)
Additional investment made during
the year - - 27
Cumulative translation adjustments 44 69 21
Investments at end of year $ 5,419 $ 4,989 $ 4,279
</TABLE>
At December 31, 1994, the Company's equity in the total assets and in the
total liabilities of its foreign affiliates was $9,951,000 and $4,532,000,
respectively. The Company's equity in the 1994 total revenues of these
affiliates was $8,792,000.
NOTE 6. CONTINGENT LIABILITIES
The Company is involved in the normal course of its business in various
litigation matters. Although the Company's counsel is unable to determine
at the present time whether the Company will have any liability in any of
the pending matters, some of which are in the early stages of pretrial
discovery, the Company believes it has meritorious defenses and that none of
the pending matters will have an outcome material to the financial condition
or business of the Company.
The Company was notified in 1992 that it is a potentially responsible party
(PRP) at a Superfund site, Solvent Recovery Service of New England in
Southington, Connecticut (the "SRS Site"). The Environmental Protection
Agency (EPA) has completed its remedial investigation and its preliminary
estimate of clean-up costs totaled $30 million, of which the Company's share
approximates $160,000. The PRP group has presented a counterproposal for
clean-up which the EPA is considering. The cost of the counterproposal
would approximate $5.5 - $7.5 million, of which the Company's share would
approximate $30,000 - $40,000. The Company has to date been assessed a
total of $21,000 for the clean-up of the site. Based upon the very large
number of PRPs identified (over 1,000), the Company's small volumetric
ranking in comparison to the total volume of wastes (approximately 0.522%)
and the identities of the larger PRPs, which include many substantial
companies, the Company believes that its liability in this matter will not
have a material effect on the Company or its financial position.
/52
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<PAGE>
<TABLE>
NOTE 7. LONG-TERM DEBT AND NOTES PAYABLE
<CAPTION>
Dollars in thousands 1994 1993
<S> <C> <C>
6-3/4% Industrial Revenue Bond due 1994, in equal
quarterly installments $ - $120
Other borrowings 272 162
272 282
Less installments due within one year 173 173
Long-term debt and notes payable $ 99 $109
</TABLE>
The Industrial Revenue Bond was a limited obligation of the Industrial
Development Financing Authority Board of the Town of Watertown,
Massachusetts, guaranteed by the Company and collateralized by property,
plant and equipment.
Maturities of long-term debt and notes payable for the five years ending
December 31, 1995 to 1999 are approximately $173,000, $22,000, $9,000,
$9,000 and $9,000, respectively.
The Company has domestic credit arrangements with various banks under which
it can borrow up to an aggregate of approximately $35 million, at the prime
rate or the London Interbank Offered Rate plus 1/2%, at the Company's
option. There were no borrowings outstanding under these lines of credit
at December 31, 1994 or 1993.
The Company utilizes short-term bank loans to finance working capital
requirements for certain business units. The Company's various loan and
note agreements contain certain financial covenants typical to such
agreements relating to working capital and to consolidated tangible net
worth.
NOTE 8. INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required
by Financial Accounting Standard No. 109 (FAS 109). As permitted under
the new rule, prior years' financial statements have not been restated.
The cumulative effect of adopting this Statement as of January 1, 1993 was
immaterial to net income.
The Company has elected not to provide tax on certain undistributed
earnings of its foreign subsidiaries which it considers to be permanently
reinvested. The cumulative amount of such unprovided taxes was
approximately $627,000, $369,000 and $30,000 as of December 31, 1994, 1993
and 1992, respectively.
The following is a summary of U.S. and non-U.S. income before income taxes
and minority interest, the components of the provisions for income taxes
and deferred income taxes and a reconciliation of the U.S. statutory
income tax rate to the effective income tax rate.
<TABLE>
Income before income taxes and minority interest:
<CAPTION>
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
U.S. $15,022 $10,902 $ 9,753
Non-U.S. 7,695 8,822 8,431
Income before income taxes and minority interest $22,717 $19,724 $18,184
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</TABLE>
<PAGE>
<TABLE>
Income tax provisions (benefits) consist of the following:
<CAPTION>
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
Federal $ 3,575 $ 2,124 $ 2,121
Foreign 926 1,729 2,290
State 717 475 300
Current provision 5,218 4,328 4,711
Federal 225 528 (441)
Foreign 1,625 1,013 976
State 201 48 27
Deferred provision 2,051 1,589 562
Provision for income taxes $ 7,269 $ 5,917 $ 5,273
Deferred tax provisions (benefits) consist of the following:
Dollars in thousands 1994 1993 1992
U.S. tax on unremitted earnings $ 1,486 $ 335 $ -
(net of foreign tax credit)
Goodwill amortization 137 - -
Use of different book/tax contract
accounting methods 450 257 (94)
Net reversal of deferred profit on sales
to foreign subsidiaries 122 71 44
Use of accelerated depreciation 194 651 672
DISC dividend (197) (197) (197)
Bad debt reserve activity (18) 87 (76)
Other, net (123) 385 213
Deferred tax provision $ 2,051 $ 1,589 $ 562
</TABLE>
<TABLE>
The United States statutory corporate tax rate is reconciled to the Company's
effective tax rate as follows:
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
U.S. Federal statutory rate 35.0% 34.0% 34.0%
Foreign Sales Corporation (1.8) (1.9) (2.2)
Tax exempt interest income (2.4) (3.5) (3.7)
Provision on undistributed foreign earnings - - 7.8
Timing items completely reversed - - (7.5)
State income taxes, net of federal tax benefit 2.6 1.8 1.2
Foreign income taxed at different rates (1.1) (1.3) .3
Other, net (.3) .9 (.9)
Effective tax rate 32.0% 30.0% 29.0%
Deferred income taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. At December 31, 1994 the tax
effects of the temporary differences are:
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Deferred Deferred tax
Dollars in thousands tax assets liabilities
<S> <C> <C>
Depreciation $ - $3,309
Inventory valuation 197 -
Bad debt reserves 246 -
Profit on sales to foreign subsidiaries 1,045 -
Insurance reserves 571 -
Pensions 332 -
Sale versus lease 847 -
Foreign withholding taxes on
undistributed earnings - 1,842
Foreign deferred liabilities - 1,932
Net operating loss carryforwards 6,364 -
Miscellaneous 1,463 1,382
11,065 8,465
Valuation allowance for deferred
tax assets (1,800) -
Deferred income taxes $ 9,265 $8,465
</TABLE>
At December 31, 1994, the Company had unused tax loss carryfoward benefits of
$6,364,000 (expiring in fiscal years 2004 to 2009). Because certain provisions
of the tax law may limit the utilization of these benefits, the Company has
established $1,800,000 as a valuation allowance at December 31, 1994 and 1993.
The remaining unreserved portion is considered to be realizable. $4,540,000 of
the net unused tax loss carryforward benefit has been included in other assets
at December 31, 1994.
NOTE 9. STOCKHOLDERS' EQUITY
During November 1994, the Company's Board of Directors declared a 2-for-1
stock split to be effected by a 100% stock dividend payable January 6, 1995
to shareholders of record on December 14, 1994. All share and option
amounts, related prices and other stockholders' equity information have
been adjusted for all periods presented to give retroactive effect to this
split.
The Company maintains two stock option plans. Under its 1979 Stock Option
Plan (the "1979 Plan"), options may be granted to officers and other
employees of the Company (either as non-qualified options or until February
15, 1989, as incentive stock options) and are exercisable at a price of not
less than $1.00 per share. Any difference between the option price and the
fair market value at the date of grant is charged to operations over the
expected period of benefit to the Company. During 1994, an additional
650,000 shares of common stock were authorized for issuance as options. At
December 31, 1994, 62,408 shares were reserved for issuance of additional
options under the 1979 Plan.
Under the 1986 Stock Option Plan for Non-Employee Directors (the "1986
Plan"), options may be granted at a price not less than the fair market
value at the date of grant. No additional shares of common stock were
authorized for issuance as options during 1994. As of December 31, 1994,
123,000 shares were reserved for issuance of additional options under the
1986 Plan.
The Company reserved 91,200 shares for options granted in 1990 to certain
non-employees in exchange for a previously granted option to purchase 50%
of the shares of Osmomar S.A., a Spanish subsidiary of the Company which
was merged with Ionics Iberica, S.A. in 1992.
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<PAGE>
<TABLE>
A summary of changes in the total amount of outstanding options for the
three years ended December 31, 1994 follows:
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Shares under option,
beginning of year 1,665,572 1,060,750 1,111,560
Options granted 642,000 700,500 63,500
Options exercised (104,728) (79,678) (110,960)
Options cancelled (17,900) (16,000) (3,350)
Shares under option,
end of year 2,184,944 1,665,572 1,060,750
Shares exercisable 2,130,224 1,601,732 987,790
Price range of options
granted $22.56-24.31 $19.75-24.38 $1.00-30.38
Price range of options
exercised $ 1.00-24.38 $ 1.00-27.00 $5.50-21.50
Price range of options
exercisable $ 5.63-30.38 $ 1.00-30.38 $1.00-30.38
</TABLE>
The Company has a Section 401(k) stock savings plan under which 150,000
shares have been registered with the Securities and Exchange Commission for
purchase on behalf of employees. Shares will normally be acquired for the
plan in the open market. However, the Board of Directors has reserved an
additional 120,000 shares for issuance by the Company from authorized but
unissued shares if required. Through December 31, 1994, no shares had been
issued under the plan.
The Company has adopted a Stockholder Rights Plan designed to protect
stockholders against abusive takeover tactics. Rights were distributed as
a dividend at the rate of one right for each share of the Company's stock.
Each right entitles the holder to purchase from the Company one unit,
consisting initially of one-fifth share of common stock and one note in
principal amount equal to four-fifths of the current market price of the
common stock on the date of exercise, at a purchase price of $50 subject to
adjustment. In certain circumstances, rights cease to be exercisable for a
unit and become exercisable for $100 worth of common stock (or a
combination of cash, property or other securities of the Company) for $50.
As a result of the 100% stock dividend distributed on January 6, 1995, each
share of common stock now carries one-half right.
The rights are not exercisable until (i) 10 days following a public
announcement that a person or group has acquired 20 percent or more of the
Company's common stock; or (ii) 10 business days following the
commencement of a tender offer that could result in the person or group
owning at least 30 percent of the Company's stock; or (iii) immediately
after a declaration by the Company's independent directors that a person is
an "Adverse Person," as defined in the Rights Plan.
Subject to possible extension, the rights may be redeemed by the Company at
$.01 per right at any time until 10 days after a public announcement that
20 percent or more of the Company's outstanding common stock has been
acquired by a person or group. Unless redeemed earlier, the rights, which
have no voting power, expire on December 31, 1997.
The Company's Board of Directors has adopted the 1994 Restricted Stock Plan
(the "1994 Plan") subject to approval by the Company's stockholders at the
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<PAGE>
May 1995 Annual Meeting. The purpose of the 1994 Plan is to increase stock
ownership among officers and other key employees of the Company. As of
December 31, 1994, a total of 300,000 shares have been reserved for
issuance under the 1994 Plan; no shares have been issued.
NOTE 10. OPERATING LEASES
The Company leases equipment, primarily triple-membrane trailers and bottled
water coolers, to customers through operating leases. The original cost of
this equipment was $46,038,000 and $37,555,000 at December 31, 1994 and
1993, respectively. The accumulated depreciation for such equipment was
$14,134,000 and $9,914,000 at December 31, 1994 and 1993, respectively.
At December 31, 1994, future minimum rentals receivable under noncancelable
operating leases in the years 1995 through 1999 and later were approximately
$7,783,000, $5,894,000, $4,973,000, $3,778,000, $3,356,000 and $8,239,000,
respectively.
NOTE 11. PROFIT-SHARING AND PENSION PLANS
The Company has a contributory profit-sharing plan covering substantially
all of the employees of its Bridgeville, Pennsylvania operations and certain
related operations. Company contributions are made from pre-tax profits and
may vary from 8% to 15% of participants' compensation and are allocated to
participants' accounts in proportion to each participant's respective
compensation. Company contributions were $360,000, $381,000, and $372,000
in 1994, 1993 and 1992, respectively.
The Company also has a contributory defined benefit pension plan for its
Watertown-based employees as well as personnel at Ionics Pure Solutions in
Arizona, Ionics Ultrapure Water Corporation in California and Ionics
Resources Conservation Company in Washington. The benefits are based on
years of service and the employee's average compensation. The Company's
funding policy is to contribute annually an amount that can be deducted for
federal income tax purposes.
The following table sets forth the pension plan's funded status and amounts
recognized in the Company's balance sheet at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $5,226 and $6,447, respectively $(5,712) $(6,778)
Projected benefit obligation for service
rendered to date (6,740) (7,736)
Plan assets at fair value 5,763 6,615
Projected benefit obligation in excess of plan assets (977) (1,121)
Unrecognized net loss 348 508
Unrecognized prior service cost 76 120
Unrecognized net assets being amortized
over approximately 17 years (468) (520)
Accrued pension cost at December 31 $(1,021) $(1,013)
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net pension cost included the following components:
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
Service cost $ 652 $ 568 $ 482
Interest cost 636 556 512
Return on plan assets 46 (632) (380)
Net amortization and deferral (703) 50 (137)
Net periodic pension cost $ 631 $ 542 $ 477
</TABLE>
The discount rates used in determining the projected benefit obligation
were 8.5% in 1994 and 7.5% in 1993. The rate of increase in compensation
levels used was 6%. The expected long-term rate of return on assets was
9%. Plan assets consist primarily of money market, equity and fixed income
securities and are administered by an independent trustee.
The Company does not provide post-retirement health care to its employees
or any other significant post-retirement benefits other than those
described above.
NOTE 12. FINANCIAL INSTRUMENTS
OFF-BALANCE-SHEET RISK
The Company issues letters of credit as guarantees for various performance
and bid obligations. Approximately $28.0 million and $19.2 million of
these letters were outstanding at December 31, 1994 and 1993, respectively.
Approximately 38% of the letters of credit outstanding at December 31, 1994
are scheduled to expire in 1995. The Company periodically enters into
foreign exchange contracts to hedge certain operational and balance sheet
exposures against changes in foreign currency exchange rates. Because the
impact of movements in currency exchange rates on foreign exchange
contracts offsets the related impact on the underlying items being hedged,
these instruments do not subject the Company to risk that would otherwise
result from changes in currency exchange rates. The Company had no foreign
exchange contracts outstanding at December 31, 1994 and 1993.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash equivalents,
investments, trade accounts receivable and notes receivable. The credit
risk of cash equivalents and investments is low as the funds are primarily
invested in U.S. government securities and with major financial
institutions. The Company's concentrations of credit risk with respect to
trade accounts receivable and notes receivable is considered low. The
Company's customer base is spread across many different industries and
geographies and the Company obtains guaranteed letters of credit for many
of its foreign orders.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash equivalents and investments closely
approximate their fair values as these items have relatively short
maturities and are highly liquid. Based on market information, the
carrying amounts of notes receivable and debt approximate their fair
values.
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<PAGE>
INVESTMENTS IN SECURITIES
Effective January 1, 1994, the Company adopted Financial Accounting
Standard No. 115 (FAS 115), "Accounting for Certain Investments in Debt and
Equity Securities." The impact upon adoption was not material to the
Company's financial statements.
Investments which the Company intends to hold to maturity have been
recorded at amortized cost of $643,000 which approximated fair market
value. These investments were comprised of Spanish Government bonds and
have been classified as short-term investments.
All other investments, totaling $4,974,000, are considered to be available
for sale and have been recorded at fair market value, which approximated
amortized cost, based primarily upon reports received from an outside
investment service. These investments have been classified as short-term
investments as discussed in Note 1. Realized gains and losses from the
sale of such investments during fiscal 1994 were not significant.
NOTE 13. CONSOLIDATION AND ACQUISITION
AQUA COOL ENTERPRISES, INC.
Prior to May 26, 1993, Aqua Cool Enterprises, Inc. ("ACE") was an
independently owned distributor of the Company's Aqua Cool bottled water
products. The Company sold bottled water and related supplies to ACE;
leased coolers and vehicles to ACE; and provided management services and
operational support to ACE. In addition to equipment lease financing it
received from the Company, ACE had received $12.5 million in debt and
preferred equity financing from Westinghouse Credit Corporation
("Westinghouse") over a three-year period beginning in 1989.
Effective May 26, 1993, the Company loaned $8.25 million to ACE with which
ACE subsequently redeemed the outstanding senior note and preferred stock
of ACE held by Westinghouse. On June 10, 1993, the Company exchanged its
$8.25 million loan to ACE for ACE preferred stock. The company holds an
option to acquire the outstanding common stock of ACE for a nominal amount.
As a result of these transactions, the Company has consolidated the
operating results of ACE as if ACE were a wholly owned subsidiary. ACE's
results of operations are included in the Company's consolidated financial
statements since May 26, 1993. The combination has been accounted for
under the purchase method with goodwill of $12.2 million, net of federal
income tax benefits of $4.5 million, being amortized on a straight-line
basis over 40 years.
IONICS RESOURCES CONSERVATION COMPANY
Ionics Resources Conservation Company (Ionics RCC) designs, engineers and
installs wastewater treatment systems. Effective December 1, 1993, the
Company acquired a substantial portion of the assets and liabilities of
Ionics RCC for approximately $10.9 million. The acquisition was accounted
for under the purchase method with the results of Ionics RCC included from
December 1, 1993. Goodwill of $8.5 million is being amortized on a
straight-line basis over 40 years. Fiscal 1993 Ionics RCC revenues for the
period prior to December 1, 1993 were approximately $25.3 million.
Payment of the Ionics RCC purchase price of $10.9 million plus related
interest expense of approximately $100,000 occurred on January 27, 1994.
The obligation for payment plus related accrued interest was included in
other current liabilities at December 31, 1993.
/59
-21-
<PAGE>
NOTE 14. SEGMENT INFORMATION
BUSINESS SEGMENTS
The Company conducts its business in three business segments:
Membranes and Related Equipment - electrodialysis reversal systems, reverse
osmosis systems, microfiltration systems, ultrafiltration systems,
conventional water and wastewater treatment equipment, other separations
technology products, zero liquid
discharge systems, instruments for monitoring and on-line detection of
pollution levels and fabricated products.
Water, Food and Chemical Supply - water, food and chemicals produced by the
Company's membrane-based equipment, including desalted water for municipal
and industrial use; ultrapure water for electronics and other industries;
reduced mineral whey for food applications; and bleach and related
chemicals.
Consumer Products - bottled water, over and under-the-sink point of use
devices, carbon filtering media, point-of-entry systems for treating the
entire home water supply, household bleach and other cleaning products.
/60
-22-
<PAGE>
<TABLE>
The following table summarizes the Company's operations by the three
business segments and "Corporate and Other." Corporate and Other includes
corporate-sponsored research and development programs and certain employee
bonuses and insurance costs.
<CAPTION>
Membranes Water, Food Corporate
and Related and Chemical Consumer and
Dollars in thousands Equipment Supply Products Other Total
<S> <C> <C> <C> <C> <C>
1994
Revenue - unaffiliated customers $119,426 $ 53,894 $ 49,056 $ - $222,376
Intersegment transfers 1,718 615 - (2,333) -
Income from operations 5,407 11,742 6,884 (2,992) 21,041
Equity income (loss) (349) 124 844 - 619
Earnings before interest and taxes (EBIT) 5,058 11,866 7,728 (2,992) 21,660
EBIT % of total EBIT, after allocation
of Corporate and Other 21% 48% 31% - 100%
Identifiable assets 88,010 83,043 85,667 15,025 271,745
Investments in affiliated companies 34 1,211 4,174 - 5,419
Depreciation and amortization 2,503 10,911 4,567 111 18,092
Capital expenditures 8,048 13,223 16,589 360 38,220
1993
Revenue - unaffiliated customers $ 92,352 $ 45,584 $ 37,337 $ - $175,273
Intersegment transfers 1,165 574 9 (1,748) -
Income from operations 4,850 8,234 5,074 (998) 17,160
Equity income (loss) (195) 155 815 - 775
Earnings before interest and taxes (EBIT) 4,655 8,389 5,889 (998) 17,935
EBIT % of total EBIT, after allocation
of Corporate and Other 25% 44% 31% - 100%
Identifiable assets 78,341 80,778 61,849 23,605 244,573
Investments in affiliated companies 338 1,108 3,543 - 4,989
Depreciation and amortization 2,159 10,041 3,052 211 15,463
Capital expenditures 2,605 8,520 3,042 500 14,667
1992
Revenue - unaffiliated customers $ 81,019 $ 43,824 $ 30,397 $ - $155,240
Intersegment transfers 1,939 597 3 (2,539) -
Income from operations 7,540 8,544 54 (1,322) 14,816
Equity income (loss) (185) 158 1,308 - 1,281
Earnings before interest and taxes (EBIT) 7,355 8,702 1,362 (1,322) 16,097
EBIT % of total EBIT, after allocation
of Corporate and Other 42% 50% 8% - 100%
Identifiable assets 55,833 86,634 41,649 36,195 220,311
Investments in affiliated companies 463 981 2,835 - 4,279
Depreciation and amortization 1,957 8,039 2,286 306 12,588
Capital expenditures 1,548 18,029 4,507 614 24,698
/61
-23-
</TABLE>
<PAGE>
<TABLE>
GEOGRAPHIC SEGMENTS
Revenues are reflected in the segment from which the sales are made. Transfers between areas are
generally made at cost plus a markup which approximates prices charged to unaffiliated customers.
Certain corporate expenses are included with the elimination of intersegment profit in the
"Corporate and Eliminations" segment. Identifiable corporate assets, which are net of
eliminations, comprise primarily cash and short-term investments. Information about the Company's
operations by geographic segment follows:
<CAPTION>
Corporate
United Other and
Dollars in thousands States Europe International Eliminations Total
<S> <C> <C> <C> <C> <C>
1994
Revenue - unaffiliated customers $172,864 $38,948 $10,564 $ - $222,376
Intersegment transfers 11,969 1,606 1,764 (15,339) -
Income from operations 16,229 4,679 1,046 (913) 21,041
Identifiable assets 193,832 53,941 14,664 9,308 271,745
1993
Revenue - unaffiliated customers $123,599 $42,571 $ 9,103 $ - $175,273
Intersegment transfers 9,375 420 2,824 (12,619) -
Income from operations 10,968 5,417 985 (210) 17,160
Identifiable assets 171,483 42,041 11,771 19,278 244,573
1992
Revenue - unaffiliated customers $102,498 $41,992 $10,750 $ - $155,240
Intersegment transfers 7,033 223 1,731 (8,987) -
Income from operations 8,852 6,546 907 (1,489) 14,816
Identifiable assets 137,562 41,580 10,387 30,782 220,311
Included in the United States segment are export sales of approximately 19%, 14% and 21% for
1994, 1993 and 1992, respectively. Including these U.S. export sales, the percentages of total
revenues attributable to activities outside the U.S. were 37%, 40% and 48% in 1994, 1993 and
1992, respectively.
/62
-24-
</TABLE>
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
STATEMENT OF OPERATIONS DATA
<CAPTION>
Dollars in thousands, except
per share amounts 1994 % 1993 % 1992 % 1991 % 1990 %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $222,376 100.0 $175,273 100.0 $155,240 100.0 $138,120 100.0 $128,408 100.0
Income before income taxes 22,717 10.2 19,724 11.3 18,184 11.7 11,649 8.4 6,442 5.0
Net income 15,448 6.9 13,807 7.9 12,820 8.3 8,278 6.0 4,727 3.7
Earnings per share 1.09 .98 .93 .73 .55
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA
Dollars in thousands 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Current assets $113,477 $109,957 $108,757 $ 72,334 $ 66,572
Current liabilities 54,877 46,082 30,499 36,528 51,716
Working capital 58,600 63,875 78,258 35,806 14,856
Total assets 277,164 249,562 224,590 177,979 143,759
Long-term debt and notes
payable 99 109 439 5,579 8,027
Stockholders' equity 218,610 200,081 190,340 127,931 75,614
/63
-25-
</TABLE>
<PAGE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (unaudited)
<CAPTION>
Dollars in thousands, Earnings Earnings
except per Gross Net per Gross Net per
share amounts Revenues Profit Income Share Revenues Profit Income Share
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993
First Quarter $ 53,035 $ 15,697 $ 3,397 $ .24 First Quarter $ 41,158 $ 13,911 $ 3,364 $ .24
Second Quarter 49,828 15,889 3,582 .26 Second Quarter 45,618 15,080 3,520 .25
Third Quarter 56,450 17,346 4,172 .29 Third Quarter 42,791 14,314 3,516 .25
Fourth Quarter 63,063 19,251 4,297 .30 Fourth Quarter 45,706 14,965 3,407 .24
$222,376 $ 68,183 $15,448 $1.09 $175,273 $ 58,270 $ 13,807 $ .98
</TABLE>
<TABLE>
COMMON STOCK PRICE RANGE
<CAPTION>
High Low High Low
<S> <C> <C> <C> <C> <C>
1994 1993
First Quarter $25 3/8 $21 7/8 First Quarter $33 15/16 $26 3/4
Second Quarter 23 3/4 21 3/8 Second Quarter 28 3/16 19 1/2
Third Quarter 27 1/8 21 3/4 Third Quarter 25 19 1/4
Fourth Quarter 31 3/8 23 11/16 Fourth Quarter 26 3/16 23 3/8
/64
-26-
</TABLE>
<PAGE>
BOARD OF CORPORATE PRINCIPAL CORPORATE
DIRECTORS OFFICERS OFFICES, HEADQUARTERS
AFFILIATES &
ARTHUR L. ARTHUR L. SUBSIDIARIES
GOLDSTEIN * GOLDSTEIN Ionics,
Chairman of the Chairman of the Ionics, Incorporated
Board, President Board, President Incorporated Watertown,
and Chief and Chief Bridgeville, Massachusetts
Executive Executive Officer Pennsylvania
Officer INVESTOR
Ionics, K. KACHADURIAN General Ionics INFORMATION
Incorporated Executive Vice Cuyahoga
President Falls, Ohio The Annual
WILLIAM L. BROWN #+ Meeting of
Retired Chairman WILLIAM E. KATZ Ionics Pure Ionics
of the Board, Executive Vice Solutions shareholders
The First President Phoenix, will be held
National Bank of Arizona Thursday, May
Boston ROBERT J. 4, 1995 at 2:00
HALLIDAY Elite P.M. at Bank of
ARNAUD DE VITRY Vice President, Chemicals, Boston, 100
D'AVAUCOURT #+ Finance and N.E., Federal Street,
Engineering Accounting and Springfield, Boston,
Consultant and Chief Financial Massachusetts Massachusetts
Director of Officer
Various Ionics Ionics common
Organizations STEPHEN KORN Ultrapure stock is traded
Vice President, Water Corp. on the New York
LAWRENCE E. General Counsel Campbell, Stock exchange
FOURAKER *#+ and Clerk California under the
Trustee and symbol ION. As
Director of THEODORE G. Ionics of March 17,
Various PAPASTAVROS Resources 1995 there were
Organizations Vice President, Conservation Co.approximately
Strategic Bellevue, 1,800
SAMUEL A. Planning and Washington shareholders of
GOLDBLITH *#+ Treasurer record. No
Professor Resources cash dividends
Emeritus, Conservation were paid in
Massachusetts Co. either 1994 or
Institute of International 1993 pursuant
Technology, and Bellevue, to Ionics
Consultant Washington current policy
to retain
K. KACHADURIAN Ionics Italba, earnings for
Executive Vice S.p.A. use in its
President Milan, Italy business.
Ionics,
Incorporated
/65
<PAGE>
Ionics For information
Iberica, S.A. or assistance
WILLIAM E. KATZ Grand Canary, regarding
Executive Vice Spain individual
President stock records,
Ionics, Ionics transactions or
Incorporated Nederland, certificates,
B.V. please call the
ROBERT B. LUICK Maastricht, Transfer
Of Counsel, the Agent
Sullivan and Netherlands Telephone
Worcester, Response
Attorneys Ionics (UK) Center: 1-800-
Ltd. 426-5523
JOHN J. SHIELDS #+ London, between 9 A.M.
President and England and 5 P.M.
Chief Executive
Officer, King's Global Water A copy of
Point Holdings Services, S.A. Ionics' Annual
Incorporated Panama City, Report on Form
Panama 10-K, which is
CARL S. SLOANE filed with the
Ernest L. Ionics, Securities and
Arbuckle Incorporated Exchange
Professor of Hong Kong Commission,
Business will be sent to
Administration, Ionics any shareholder
Harvard (Bermuda) Ltd. upon request
University Hamilton, directed to
Graduate School Bermuda Investor
of Business Relations,
Administration Elite Ionics,
Chemicals Pty. Incorporated,
MARK S. WRIGHTON #+ Ltd. P.O. Box 9131,
Provost and Brisbane, Qld. Watertown,
Professor of Australia Massachusetts
Chemistry, 02272-9131, or
Massachusetts Eau et by calling
Institute of Industrie (617)926-2510
Technology Paris, France ext. 874.
ALLEN S. WYETT #+ Ionics-Mega TRANSFER AGENT
President, Wyett s.r.o. & REGISTRAR
Consulting Prague, Czech
Group, Inc. Republic State Street
Bank and Trust
Watlington Company,
Waterworks Boston,
Ltd. Massachusetts
Devonshire,
Bermuda AUDITORS
/66
<PAGE>
*Member of
Executive Jalal-Ionics, Coopers &
Committee Ltd. Lybrand L.L.P.
Manama, Boston,
#Member of Audit Bahrain Massachusetts
Committee
Aqua Cool
+Member of Saudi Arabia
Compensation Dammam, Saudi
Committee Arabia
Aqua Cool
Kuwait
Kuwait City,
Kuwait
Aqua Cool
Enterprises,
Inc.
Watertown,
Massachusetts
Yuasa-Ionics
Co., Ltd.
Tokyo, Japan
/67
<PAGE>
EXHIBIT 22
IONICS, INCORPORATED
SUBSIDIARIES OF THE REGISTRANT
State or Other Jurisdiction
Name of Incorporation
Ionics Foreign Sales Corporation Limited Jamaica
Global Water Services, S.A. Panama
Ionics Italba, S.p.A. Italy
Ionics Iberica, S.A. Spain
Ionics Nederland B.V. The Netherlands
Ionics Ultrapure Water Corporation California
Ionics Securities Corporation Massachusetts
Ionics (U.K.) Limited United Kingdom
Ionics (Bermuda) Ltd. Bermuda
Elite Chemicals Pty. Ltd. Australia
Eau et Industrie France
Resources Conservation Co. International Delaware
/68
<PAGE>
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements for the Ionics 1979 Stock Option Plan on Form S-8 (registration
nos. 33-54293, 33-41598, 33-5814, 33-14194, 2-64255, 2-72936 and 2-82780);
in the registration statement for the Ionics Section 401(k) Stock Savings
Plan on Form S-8 (registration no. 33-2092); and in the registration
statement for the Ionics 1986 Stock Option Plan for Non-Employee Directors
(registration no. 33-54400), of our reports dated February 22, 1995, on
our audits of the consolidated financial statements and the financial
statement schedule of Ionics, Incorporated as of December 31, 1994 and
1993 and for each of the three years in the period ended December 31,
1994, which are included or incorporated by reference in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 30, 1995
/69
<PAGE>
EXHIBIT 25
POWER OF ATTORNEY
We, the undersigned officers and directors of Ionics, Incorporated (the
"Company"), hereby severally constitute Arthur L. Goldstein and Stephen
Korn, and each of them, to sign for us, and in our names in the capacities
indicated below, the Annual Report on Form 10-K of the Company for the
fiscal year ended December 31, 1994, and any and all amendments to such
Annual Report, hereby ratifying and confirming our signatures as they may be
signed by our attorneys to such Annual Report and any and all amendments
thereto.
Witness our hands on the respective dates set forth below.
Signature Title Date
/s/William L. Brown Director March 29, 1995
William L. Brown
/s/Arnaud de Vitry d'Avaucourt Director March 29, 1995
Arnaud de Vitry
d'Avaucourt
/s/Lawrence E. Fouraker Director March 29, 1995
Lawrence E. Fouraker
/s/Samuel A. Goldblith Director March 29, 1995
Samuel A. Goldblith
/s/Arthur L. Goldstein Chairman of the Board March 29, 1995
Arthur L. Goldstein of Directors, Chief
Executive Officer and
President (Principal
Executive Officer)
/s/Kachig Kachadurian Director March 29, 1995
Kachig Kachadurian
/s/William E. Katz Director March 29, 1995
William E. Katz
/s/Robert B. Luick Director March 29, 1995
Robert B. Luick
/s/John J. Shields Director March 29, 1995
John J. Shields
/s/Carl S. Sloane Director March 29, 1995
Carl S. Sloane
/s/Mark S. Wrighton Director March 29, 1995
Mark S. Wrighton
/s/Allen S. Wyett Director March 29, 1995
Allen S. Wyett
/70
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 14,966
<SECURITIES> 5,617
<RECEIVABLES> 66,633
<ALLOWANCES> 1,832
<INVENTORY> 19,405
<CURRENT-ASSETS> 113,477
<PP&E> 197,208
<DEPRECIATION> (73,115)
<TOTAL-ASSETS> 277,164
<CURRENT-LIABILITIES> 54,877
<BONDS> 0
<COMMON> 13,990
0
0
<OTHER-SE> 204,620
<TOTAL-LIABILITY-AND-EQUITY> 277,164
<SALES> 222,376
<TOTAL-REVENUES> 222,376
<CGS> 154,193
<TOTAL-COSTS> 154,193
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 535
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,098
<INCOME-TAX> 7,269
<INCOME-CONTINUING> 15,448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,448
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
