FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7211
IONICS, INCORPORATED
(exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2068530
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65 Grove Street, Watertown, Massachusetts 02172
(Address of principal executive offices)
(Zip Code)
(617) 926-2500
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1995
Common Stock, Par Value $1 14,137,517 Shares
/1
IONICS, INCORPORATED
FORM 10-Q FOR
QUARTER ENDED SEPTEMBER 30, 1995
INDEX
Page No.
Part I - Financial Information
Consolidated Statements of Operations 2
Consolidated Balance Sheets 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of
Results of Operations and Financial Condition 6
Part II - Other Information 8
Signatures 9
Exhibit Index 10
Exhibit 11 - Computation of Earnings Per Share 11
Exhibit 27 - Financial Data Schedule 12
(for electronic
purposes only)
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<TABLE>
PART I - FINANCIAL INFORMATION
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net revenue:
Membranes and related equipment $32,209 $29,852 $ 90,269 $ 84,186
Water, food and chemical supply 15,971 13,720 46,540 39,679
Consumer products 14,768 12,878 39,554 35,448
62,948 56,450 176,363 159,313
Costs and expenses:
Cost of membranes and related equipment 23,759 22,746 66,427 64,291
Cost of water, food and chemical supply 10,913 9,161 31,257 26,431
Cost of consumer products 8,571 7,197 21,984 19,659
Research and development 856 808 2,522 2,468
Selling, general and administrative 11,405 10,861 34,244 31,322
55,504 50,773 156,434 144,171
Income from operations 7,444 5,677 19,929 15,142
Interest income 243 278 747 807
Equity income 170 180 417 449
Income before income taxes 7,857 6,135 21,093 16,398
Provision for income taxes 2,576 1,963 7,066 5,247
Net income $ 5,281 $ 4,172 $ 14,027 $ 11,151
Earnings per share $ .36 $ .29 $ .97 $ .79
Shares used in earnings per
share calculations 14,698 14,190 14,535 14,154
<FN>
The accompanying notes are an integral part of these financial statements.
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</TABLE>
<TABLE>
IONICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share amounts)
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,426 $ 14,966
Short-term investments 4,665 5,617
Notes receivable, current 3,507 3,126
Accounts receivable 66,632 61,675
Receivables from affiliated companies 1,501 2,170
Inventories:
Raw materials 12,528 11,088
Work in process 6,793 5,964
Finished goods 1,813 2,353
21,134 19,405
Other current assets 7,090 6,518
Total current assets 110,955 113,477
Notes receivable, long-term 5,541 5,246
Investments in affiliated companies 4,932 5,419
Property, plant and equipment:
Land 2,616 2,584
Buildings 25,824 23,621
Machinery and equipment 180,818 148,881
Other, including furniture, fixtures and vehicles 25,124 22,122
234,382 197,208
Less accumulated depreciation (86,245) (73,115)
148,137 124,093
Other assets 29,107 28,929
Total assets $298,672 $277,164
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion
of long-term debt $ 5,527 $ 370
Accounts payable 27,037 30,317
Customer deposits 3,808 4,959
Accrued commissions 1,795 1,852
Accrued expenses 16,706 15,407
Taxes on income 1,635 1,972
Total current liabilities 56,508 54,877
Long-term debt and notes payable 85 99
Deferred income taxes 4,906 2,928
Other liabilities 800 650
Stockholders' equity:
Common stock, par value $1, 30,000,000 authorized shares;
issued: 14,137,517 in 1995 and 13,989,896 in 1994 14,138 13,990
Additional paid-in capital 128,282 125,529
Retained earnings 98,054 84,027
Cumulative translation adjustments (3,606) (4,936)
Unearned compensation (495) -
Total stockholders' equity 236,373 218,610
Total liabilities and stockholders' equity $298,672 $277,164
<FN>
The accompanying notes are an integral part of these financial statements.
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</TABLE>
<TABLE>
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Operating activities:
Net income $ 14,027 $ 11,151
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,081 14,512
Provision for losses on accounts and notes receivable 468 378
Changes in assets and liabilities:
Notes receivable (583) (465)
Accounts receivable (4,593) (1,034)
Inventories (1,736) (3,495)
Other current assets (495) (1,543)
Investments in affiliates 487 (216)
Accounts payable and accrued expenses (3,862) 6,085
Income taxes 1,770 (113)
Other (756) 288
Net cash provided by operating activities 19,808 25,548
Investing activities:
Additions to property, plant and equipment (37,425) (27,926)
Purchase of investments (3,000) -
Sale of investments 4,047 8,270
Payment for Resources Conservation Company acquisition - (11,000)
Net cash used by investing activities (36,378) (30,656)
Financing activities:
Principal payments on current debt (12,172) (260)
Proceeds from issuance of current debt 17,303 162
Proceeds from stock option plans 2,901 825
Net cash provided by financing activities 8,032 727
Effect of exchange rate changes on cash (2) 345
Net change in cash and cash equivalents (8,540) (4,036)
Cash and cash equivalents at beginning of period 14,966 21,534
Cash and cash equivalents at end of period $ 6,426 $ 17,498
<FN>
The accompanying notes are an integral part of these financial statements.
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</TABLE>
IONICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying consolidated
financial statements contain all adjustments (consisting of
only normal, recurring accruals) necessary to present fairly
the consolidated financial position of the Company as of
September 30, 1995 and December 31, 1994, the consolidated
results of its operations for the three and nine months ended
September 30, 1995 and 1994 and the consolidated cash flows
for the nine months then ended.
2. The consolidated results of operations of the Company for the
three and nine months ended September 30, 1995 and 1994 are
not necessarily indicative of the results of operations to be
expected for the full year.
3. Reference is made to the Notes to Consolidated Financial
Statements appearing in the Company's 1994 Annual Report as
filed on Form 10-K with the Securities and Exchange
Commission. There have been no significant changes in the
information reported in those Notes, other than from the
normal business activities of the Company, and there have been
no changes which would, in the opinion of Management, have a
materially adverse effect upon the Company.
4. Certain prior year amounts have been reclassified to conform
to the current year presentation with no impact on net income.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 1995 with
the Three and Nine Months Ended September 30, 1994
Revenues for the third quarter of 1995 increased 11.5% to $62.9
million from $56.5 million in 1994. Revenues for the nine-month
period increased 10.7% to $176.4 million from $159.3 million in the
comparable period in 1994. Revenues were higher in all three business
segments for both the three and nine-month periods. The largest
increase in revenues for the third quarter was in the Membranes and
Related Equipment segment, while the largest increase in revenues in
the nine-month period was in the Water, Food and Chemical Supply
segment.
Revenues from the Membranes and Related Equipment segment grew in both
the third quarter and the nine-month period with increased sales of
capital equipment, including equipment for water desalination and
treatment, wastewater treatment and zero liquid discharge. Sales of
spare parts also increased during both periods.
Revenues from the Water, Food and Chemical Supply segment increased in
both periods due to continued growth in the Company's own and operate
and service businesses. Consumer Products revenues increased in both
the third quarter and the nine-month period with higher revenues from
bottled water and home water products. These increases were partially
offset by softness in sales of certain other consumer products,
particularly automobile windshield wash solution.
Cost of sales as a percentage of revenues for the third quarter was
68.7% in 1995 and 69.3% in 1994. For the nine-month period, cost of
sales as a percentage of revenues was 67.9% in 1995 and 69.3% in 1994.
Improvement occurred during both periods in the Membranes and Related
Equipment segment due to a more favorable mix between capital
equipment and spare parts revenues and to a decrease in manufacturing
overhead costs as a percentage of revenues resulting from increased
sales of capital equipment.
Cost of sales increased as a percentage of revenues in the Consumer
Products segment for the third quarter but remained substantially
consistent for the nine-month period. The increase resulted from
variability in certain product costs (particularly methanol), price
pressure related to certain products and a change in the mix of
products sold. The increase in cost of sales as a percentage of
revenues in the Water, Food and Chemical Supply segment during the
third quarter reflected different prices associated with the mix of
"own and operate" contracts.
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Operating expenses as a percentage of revenues decreased during the third
quarter to 19.5% in 1995 from 20.7% in 1994. For the nine-month period,
operating expenses as a percentage of revenues decreased to 20.8% in 1995
from 21.2% in 1994. These reductions resulted primarily from higher
absorption of relatively fixed operating expenses by increased sales
volume.
Interest income decreased during both the third quarter and the nine-month
period due primarily to lower average cash and invested balances.
Financial Condition
Working capital decreased by $4.2 million during the first nine months of
1995 while the current ratio decreased slightly to 2.0 at September 30,
1995 from 2.1 at December 31, 1994. Cash provided from net income,
depreciation and net short-term borrowings totaled $34.2 million during the
first nine months of 1995 while the primary uses of cash were for additions
to property, plant and equipment, an increase in accounts receivable and
payment of accounts payable. Significant capital expenditures were
incurred to support growth in the bottled water operations, bleach
operations, water purification trailers and other "own and operate"
facilities.
At September 30, 1995, the Company had $11.1 million in cash and short-term
investments, a decrease of $9.5 million from December 31, 1994. The
Company believes that its cash and short-term investments, cash from
operations, lines of credit and foreign exchange facilities are adequate to
meet its currently anticipated needs.
On November 2, 1995, the Company acquired substantially all of the assets
and certain liabilities of the Ahlfinger Water Company, based in Dallas,
Texas, and the real estate on which the business is conducted, in exchange
for approximately $5.9 million in common stock.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share (included on Page
11 of this report).
(b) Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and
Exchange Commission during the quarter ended September 30, 1995.
All other items reportable under Part II have been omitted as
inapplicable or because the answer is negative, or because the
information was previously reported to the Securities and
Exchange Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
IONICS, INCORPORATED
Date: November 14, 1995 By: /s/Arthur L. Goldstein
Arthur L. Goldstein
Chairman and Chief Executive Officer
(duly authorized officer)
Date: November 14, 1995 By: /s/Robert J. Halliday
Robert J. Halliday
Vice President, Finance
(chief financial officer)
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EXHIBIT INDEX
Exhibit Page
11 Computation of Earnings Per Share 12
27 Financial Data Schedule 13
(for electronic
purposes only)
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<TABLE>
EXHIBIT 11
IONICS, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands, except earnings per share)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net income $ 5,281 $ 4,172 $14,027 $11,151
Earnings per common and common
equivalent share:
Weighted average number of shares
outstanding 14,089 13,932 14,043 13,912
Incremental shares for stock options
under treasury stock method 609 258 492 242
Weighted average number of common and
common equivalent shares outstanding 14,698 14,190 14,535 14,154
Earnings per common and common
equivalent share $ .36 $ .29 $ .97 $ .79
Earnings per common and common equivalent
share - assuming full dilution:
Weighted average number of shares
outstanding 14,089 13,932 14,043 13,912
Incremental shares for stock options
under treasury stock method 670 260 575 249
Weighted average number of common and
common equivalent shares outstanding -
assuming full dilution 14,759 14,192 14,618 14,161
Earnings per common and common
equivalent share - assuming
full dilution $ .36 $ .29 $ .96A $ .79
<FN>
A Dilution is less than 3% so the primary basis was used for per share calculations.
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</TABLE
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 6,426
<SECURITIES> 4,665
<RECEIVABLES> 72,077
<ALLOWANCES> (1,938)
<INVENTORY> 21,134
<CURRENT-ASSETS> 110,955
<PP&E> 234,382
<DEPRECIATION> (86,245)
<TOTAL-ASSETS> 298,672
<CURRENT-LIABILITIES> 56,508
<BONDS> 0
<COMMON> 14,138
0
0
<OTHER-SE> 222,235
<TOTAL-LIABILITY-AND-EQUITY> 298,672
<SALES> 176,363
<TOTAL-REVENUES> 176,363
<CGS> 119,668
<TOTAL-COSTS> 119,668
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 468
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,510
<INCOME-TAX> 7,066
<INCOME-CONTINUING> 14,027
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,027
<EPS-PRIMARY> .97
<EPS-DILUTED> .96
</TABLE>
