<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7211
IONICS, INCORPORATED
(exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2068530
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65 Grove Street, Watertown, Massachusetts 02172
(Address of principal executive offices)
(Zip Code)
(617) 926-2500
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
Common Stock, Par Value $1 14,962,085 Shares
/1
IONICS, INCORPORATED
FORM 10-Q FOR
QUARTER ENDED MARCH 31, 1996
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 10.1 - Supplemental Executive
Retirement Plan 11
Exhibit 11 - Computation of Earnings Per Share 34
Exhibit 27 - Financial Data Schedule 35
(for electronic
purposes only)
- 1 -
/2
<TABLE>
PART I - FINANCIAL INFORMATION
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except earnings per share)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Net revenue:
Membranes and related equipment $34,227 $28,040
Water, food and chemical supply 24,489 16,359
Consumer products 15,441 12,474
74,157 56,873
Costs and expenses:
Cost of membranes and related equipment 25,836 20,959
Cost of water, food and chemical supply 16,266 10,724
Cost of consumer products 8,813 6,998
Research and development 974 811
Selling, general and administrative 14,122 11,507
66,011 50,999
Income from operations 8,146 5,874
Interest income 157 237
Equity income 76 143
Income before income taxes 8,379 6,254
Provision for income taxes 2,807 2,126
Net income $ 5,572 $ 4,128
Earnings per share $ .36 $ .29
Shares used in earnings per
share calculations 15,486 14,429
The accompanying notes are an integral part of these financial statements.
-2-
/3
</TABLE>
<TABLE>
IONICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share amounts)
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,554 $ 8,086
Notes receivable, current 3,320 4,529
Accounts receivable 85,983 76,986
Receivables from affiliated companies 1,602 1,421
Inventories:
Raw materials 13,035 12,236
Work in process 6,718 4,856
Finished goods 2,627 2,116
22,380 19,208
Other current assets 8,023 7,978
Total current assets 129,862 118,208
Notes receivable, long-term 5,858 5,792
Investments in affiliated companies 4,742 4,874
Property, plant and equipment:
Land 3,413 3,270
Buildings 27,429 25,920
Machinery and equipment 207,036 191,195
Other, including furniture, fixtures and vehicles 32,165 26,015
270,043 246,400
Less accumulated depreciation (101,811) (91,042)
168,232 155,358
Other assets 32,876 32,996
Total assets $ 341,570 $317,228
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion
of long-term debt $ 13,149 $ 4,884
Accounts payable 28,752 27,387
Customer deposits 4,350 3,131
Accrued commissions 1,838 2,102
Accrued expenses 23,546 19,589
Taxes on income 3,207 1,049
Total current liabilities 74,842 58,142
Long-term debt and notes payable 2,123 182
Deferred income taxes 7,561 7,785
Other liabilities 898 759
Stockholders' equity:
Common stock, par value $1, 30,000,000 authorized shares;
issued: 14,962,085 in 1996 and 14,353,972 in 1995 14,962 14,354
Additional paid-in capital 136,542 136,436
Retained earnings 108,211 103,709
Cumulative translation adjustments (3,128) (3,671)
Unearned compensation (441) (468)
Total stockholders' equity 256,146 250,360
Total liabilities and stockholders' equity $ 341,570 $317,228
The accompanying notes are an integral part of these financial statements.
-3-
</TABLE> /4
<TABLE> IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Operating activities:
Net income $ 5,572 $ 4,128
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,113 4,955
Provision for losses on accounts and notes receivable 229 322
Compensation expense on restricted stock awards 27 -
Changes in assets and liabilities:
Notes receivable 1,043 24
Accounts receivable (7,134) 9,567
Inventories (2,874) 18
Other current assets (4) 77
Investments in affiliates 131 (130)
Accounts payable and accrued expenses 2,464 (9,290)
Income taxes 2,438 1,609
Other 438 (6)
Net cash provided by operating activities 8,443 11,274
Investing activities:
Additions to property, plant and equipment (13,383) (12,667)
Sale of short-term investments - 672
Purchase of long-term investments - (3,000)
Net cash used by investing activities (13,383) (14,995)
Financing activities:
Principal payments on current debt (1,882) (152)
Proceeds from issuance of current debt 9,030 -
Principal payments on long-term debt (2,335) -
Proceeds from stock option plans 619 459
Net cash provided by financing activities 5,432 307
Effect of exchange rate changes on cash (24) (79)
Net change in cash and cash equivalents 468 (3,493)
Cash and cash equivalents at beginning of period 8,086 14,966
Cash and cash equivalents at end of period $ 8,554 $ 11,473
The accompanying notes are an integral part of these financial statements.
-4- /5
</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 March
31, 1996 and December 31, 1995, the consolidated results of
its operations for the three months ended March 31, 1996 and
1995 and the consolidated cash flows for the three months then
ended.
2. The consolidated results of operations of the Company for the
three months ended March 31, 1996 and 1995 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 1995 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.
5. On January 3 and January 10, 1996, the Company completed
separate combination transactions with Aqua Design, Inc. (Aqua
Design) and Apollo Ultrapure Water Systems, Inc. (Apollo),
respectively. Under the terms of each agreement, the Company
issued 222,977 and 331,567 shares of common stock,
respectively, in exchange for more than 90% of the outstanding
common stock of each company. Each transaction was accounted
for as a pooling of interests. Because the operating results
from prior years of these former, privately held companies
were not material, both individually and in the aggregate,
compared to those of the Company, these transactions have been
recorded through a restatement of the appropriate
stockholders' equity accounts, including a reduction to
retained earnings of $1.1 million, as of January 1, 1996.
Accordingly, no restatement, of prior periods statements of
operations, has been made. Total 1995 revenues for Aqua
Design and Apollo were each approximately $10.0 million.
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/6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Comparison of the Three Months Ended March 31, 1996
with the Three Months Ended March 31, 1995
Revenues for the first quarter of 1996 increased 30.4% to $74.2
million from $56.9 million in 1995. Revenues were higher in all
three business segments. The largest growth was in the Water,
Food and Chemical Supply segment primarily due to the strong
performance of the Ultrapure Water Supply business. The
Company's strong internal growth in this business was augmented
by the acquisitions of Ahlfinger Water Company, servicing the
Texas area, in November 1995 and Apollo Ultrapure Water Systems,
Inc., servicing southern California, in January 1996. Revenues
also increased in the Company's Municipal Water Supply business
due to the acquisition of Aqua Design, Inc., providing a strong
base in the Caribbean, in January 1996. The Company's Chemical
Supply business increased during the current period as well,
reflecting expansion in the United Kingdom and higher sales in
Australia.
Growth in the Membranes and Related Equipment segment resulted
primarily from sales of ultrapure water equipment to the
semiconductor industry and increased sales in the Water Desalting
and Related Equipment business area. Revenues in the Consumer
Products segment increased due to higher sales of bottled water,
automobile windshield wash solution, bleach and home water
products.
Cost of sales as a percentage of revenues was 68.7% in 1996 as
compared to 68.0% in 1995. This increase resulted from
relatively small increases in each business segment. The minor
increase in Membranes and Related Equipment reflected changes in
the mix of various projects within the Ultrapure Water Equipment
business. Similarly, the increase in the cost of sales
percentage in the Water, Food and Chemical Supply segment
resulted from a change in the mix of revenues among the Municipal
Water and Chemical Supply businesses. The Consumer Products
segment increase reflected a change in the mix among various
consumer products.
-6- /7
Operating expenses as a percentage of revenues were 20.4% in the
first quarter of 1996, down from 21.7% in the first quarter of
1995. This decrease reflected the absorption of relatively fixed
operating expenses by increased sales volume and continued
emphasis on expense controls.
Interest income decreased during the first quarter due primarily
to lower average cash and invested balances.
Financial Condition
Working capital decreased $5.0 million during the first three
months of 1996, while the Company's current ratio decreased to
1.7 at March 31, 1996 from 2.0 at December 31, 1995. Cash
provided from net income and depreciation totaled $11.7 million
in the first three months of 1996 while the primary uses of cash
were for additions to property, plant and equipment and an
increase in accounts receivable and inventory. Significant
capital expenditures were made for bleach manufacturing
operations, bottled water operations, trailers and other "own and
operate" facilities.
At March 31, 1996 the Company had $8.6 million in cash and cash
equivalents, an increase of $0.5 million from December 31, 1995.
Notes payable and long-term debt increased $10.2 million in the
same period. The Company believes that its cash, cash from
operations, lines of credit and foreign exchange facilities are
adequate to meet its currently anticipated needs.
-7- /8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 - Supplemental Executive Retirement Plan
Exhibit 11- Computation of Earnings Per Share (included on Page
34 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 March 31, 1996.
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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/9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
IONICS, INCORPORATED
Date: May 13, 1996 By: /s/Arthur L. Goldstein
Arthur L. Goldstein
Chairman and Chief Executive Officer
(duly authorized officer)
Date: May 13, 1996 By: /s/Robert J. Halliday
Robert J. Halliday
Vice President, Finance and
Accounting (chief financial officer)
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/10
EXHIBIT INDEX
Exhibit Page
10.1 Supplemental Executive Retirement Plan 12
11 Computation of Earnings Per Share 35
27 Financial Data Schedule 36
(for electronic
purposes only)
-10-
/11
Exhibit 10.1
IONICS, INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
/12
IONICS, INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
ARTICLE 1 PURPOSE 1
ARTICLE 2 DEFINITIONS 2
2.1 Account 2
2.2 Actuary 2
2.3 Additional Annuity Benefit 2
2.4 Beneficiary 3
2.5 Benefit 3
2.6 Board 3
2.7 Cause 3
2.8 Change of Control 4
2.9 Code 4
2.10 Committee 5
2.11 Company 5
2.12 Compensation 5
2.13 Employment Termination 5
2.14 ERISA 5
2.15 Executive 5
2.16 Interest Rate 6
2.17 Participant 6
2.18 Pension Plan 6
2.19 Pension Plan Amount 6
2.20 Plan 6
2.21 Plan Year 6
2.22 Tax-Qualified Limits 7
2.23 Trust 7
2.24 Trustee 7
ARTICLE 3 PARTICIPATION AND BENEFITS 7
3.1 Participation 7
3.2 Accounts 7
3.3 Benefit at Termination of Employment 8
3.4 Death Benefit 9
3.5 Forfeiture of Benefit 11
3.6 Minors and Incompetents 11
3.7 Source of Payment of Benefits 11
ARTICLE 4 THE TRUST 12
4.1 Establishment of Trust 12
/13
ARTICLE 5 ADMINISTRATION
5.1 Procedure 12
5.2 Cooperation with Actuary 12
5.3 Duties 13
5.4 Indemnification 14
5.5 Mutual Exclusion of Responsibility 14
5.6 Claims Procedure 14
ARTICLE 6 AMENDMENT AND TERMINATION 16
6.1 Amendment 16
6.2 Termination 16
ARTICLE 7 MISCELLANEOUS 17
7.1 Nonassignability of Benefits 17
7.2 Tax Withholding 17
7.3 Rights of Participants and Others 17
7.4 Release by Participants, Etc. 18
7.5 Construction 18
7.6 Notices 18
/14
IONICS, INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Ionics, Incorporated, a Massachusetts corporation (the
"Company"), hereby adopts the Ionics, Incorporated Supplemental
Executive Retirement Plan as set forth below, effective as of
January 1, 1996.
ARTICLE 1
Purpose
The purpose of the Plan is to provide specified retirement
benefits to the select group of officers and key employees
participating in the Plan, in addition to the benefits to which
they are entitled under the Pension Plan. The Company intends
that for purposes of Title I of ERISA, the Plan constitute an
unfunded arrangement maintained for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees. If the Committee determines that any
Participant, with respect to any period, is not a member of such a
select group for purposes of ERISA, the Committee may, after
notice to such person, terminate such person's participation in
the Plan, and cause such person's Account to be paid to him as
soon as practicable or to be transferred to a trust for his sole
benefit, which trust is not subject to Title I of ERISA.
/15
ARTICLE 2
Definitions
2.1 "Account" means a bookkeeping account maintained for a
Participant, to which amounts are credited and charged as
described in Section 3.2.
2.2 "Actuary" means the enrolled actuary selected from time
to time by the Committee.
2.3 "Additional Annuity Benefit" means the excess, as of
the end of a Plan Year, of (a) a Participant's projected annuity
benefit at his Normal Retirement Date, calculated under the
normal retirement benefit formula in the Pension Plan but taking
into account his Compensation without reference to the Tax-
Qualified Limits, over (b) his projected annuity benefit at his
Normal Retirement Date as calculated for purposes of the Pension
Plan; provided, however, that if the Pension Plan is amended
after the date hereof to "update" again the Base Monthly Salary
(as defined in the Pension Plan) which is employed to calculate
such annuity benefit, the Board may in its discretion specify
that such amendment is to be disregarded under this clause (b),
is to be modified as the Board may specify, or is to be
implemented in accordance with an effective date or a schedule
specified by the Board for purposes of this Plan.
/16
2.4 "Beneficiary" means the person(s) or entity(ies)
identified with respect to a Participant pursuant to Section
3.4.
2.5 "Benefit" means the amount that a Participant is
entitled to be paid under the Plan upon the termination of his
employment.
2.6 "Board" means the Board of Directors of the Company.
2.7 "Cause" means any of the following: (a) the willful and
continued failure (other than by reason of incapacity due to
physical or mental illness) of a Participant to perform
satisfactorily the duties consistent with his title and position
reasonably required of him by the Board or supervising
management after a written demand for substantial performance is
delivered to the Participant by the Board or supervising
management, which demand specifically identifies the manner in
which the Board or supervising management believes the
Participant has not satisfactorily performed his duties; (b) the
commission by a Participant of a felony, or the perpetration by
a Participant of a dishonest act or common law fraud against the
Company; (c) the use by a Participant of confidential
information available to him by reason of his employment, for
any purpose other than the sole interest of the Company or its
client; or (d) any other willful act or omission which is
injurious to the financial condition or business reputation of
the Company; provided, however, that no act or failure to act
shall be deemed "willful" unless done, or
/17
omitted to be done, not in good faith and without reasonable
belief that the act or omission was in the best interest of the
Company.
2.8 "Change of Control" means the purchase or other
acquisition by any person, entity or group of persons, within
the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934 (the "Act"), or any comparable successor provisions,
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 30 percent or more of either the
outstanding shares of common stock or the combined voting power
of the Company's then outstanding voting securities entitled to
vote generally, or the approval by the stockholders of the
Company of a reorganization, merger or consolidation, in each
case, with respect to which persons who were stockholders of the
Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50
percent of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or
consolidated company's then outstanding securities, or a
liquidation or dissolution of the Company or the sale of all or
substantially all of the Company's assets.
2.9 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
/18
2.10 "Committee" means the Compensation Committee of the
Board or such other committee consisting of two or more
individuals (who may, but need not be, officers or directors of
the Company) which is appointed by the Board to administer this
Plan.
2.11 "Company" means Ionics, Incorporated and any successor
to all or a major portion of its property or business.
2.12 "Compensation" means the Compensation of a Participant
for a calendar year as defined in Article 2 of the Pension Plan.
2.13 "Employment Termination" means a Participant's
termination of employment by the Company within 24 months
following a Change of Control or the Participant's Retirement
(as defined in Section 2 of the Pension Plan) provided, however,
that a Participant's Employment Termination will be deemed to
have occurred in any event upon the later to occur of his 65th
birthday and his termination of employment by the Company.
2.14 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
2.15 "Executive" means any officer or key employee of the
Company whose Compensation exceeds the limit in effect pursuant
/19
to Section 401(a)(17) of the Code with respect to any Plan Year.
2.16 "Interest Rate" means an annual rate of interest
specified for a Plan Year by the Committee, in consultation with
the Actuary.
2.17 "Participant" means an Executive who has commenced
participation in the Plan and whose Benefit has not been paid in
full.
2.18 "Pension Plan" means the Ionics, Incorporated
Retirement Plan as it may be amended from time to time.
2.19 "Pension Plan Amount" means the excess of (a) the
present value required to be invested on the last day of the
Plan Year in order to produce a future value on a Participant's
65th birthday equal to his Additional Annuity Benefit, assuming
an interest rate equal to the Interest Rate for the Plan Year
for which the Pension Plan Amount is being determined and
otherwise using the actuarial assumptions which are then
employed for purposes of the Pension Plan, over (b) the balance
of the Participant's Account as of the end of the Plan Year
(disregarding the Pension Plan Amount for that Plan Year).
2.20 "Plan" means the plan embodied in this instrument, as
from time to time amended.
/20
2.21 "Plan Year" means the calendar year.
2.22 "Tax-Qualified Limits" means the dollar amount in
effect from time to time pursuant to Section 401(a)(17) of the
Code and the limitations on benefits in effect from time to time
under Section 415 of the Code.
2.23 "Trust" means the trust fund established pursuant to
the Plan.
2.24 "Trustee" means the trustee named in the agreement
establishing the Trust and such successor and/or additional
trustees as may be named pursuant to the terms of the agreement
establishing the Trust.
ARTICLE 3
Participation and Benefits
3.1 Participation. Each Executive employed by the Company
on the last day of the initial Plan Year (1996) shall become a
Participant in the Plan as of the effective date hereof, or as
of the first date of such later Plan Year in which he becomes an
Executive.
3.2 Accounts. The Committee or its delegate shall maintain
on the books of the Company and in the Trust an Account for each
/21
Participant, and shall credit to each Account as of the last day
of each Plan Year the Pension Plan Amount, as calculated by the
Committee or its delegate, in consultation with the Actuary.
The balance of the Account shall be reduced by the amount of any
Benefit paid to or in respect of a Participant. The Company
will pay an amount to the Trust with reasonable promptness after
the Pension Plan Amount for any Plan Year has been determined so
that the Trust is caused to hold assets equal in value to the
sum of each Participant's Account. The Company shall direct the
Trustee to invest the Account as the Company shall determine.
3.3 Benefit at Termination of Employment. A Benefit shall
be payable to a Participant by reason of his Employment
Termination in the amount credited to the vested portion of his
Account at the time of payment. A Participant's Account shall
vest to the extent his benefit under the Pension Plan is vested.
The balance of his Account shall be credited with interest at
the short-term "applicable federal rate" under Section 1274(d)
of the Code from the last day of the Plan Year for which he last
accrues Benefit Service under the Pension Plan until such
Account has been completely paid. Subject to Sections 3.4 and
3.5, a Participant's Benefit shall be paid in one of the
following forms, according to the Participant's written
election:
/22
(a) a single sum paid within 90 days after the end of the
Plan Year following the Participant's Employment
Termination;
(b) a series of two substantially equal annual installments
beginning within 90 days after the date of the
Participant's Employment Termination;
(c) a series of five substantially equal annual
installments beginning within 90 days after the date of
the Participant's Employment Termination; or
(d) a series of ten substantially equal annual installments
beginning within 90 days after the date of the
Participant's Employment Termination.
A Participant's election pursuant to this Section 3.3 must be
delivered to the Committee or its delegate no later than 30 days
after he becomes a Participant, and may be changed only at such
time and in such manner as the Committee may permit. If a
Participant fails to deliver an election within that 30-day
period, his Benefit shall be paid in a single sum no later than
90 days after the end of the Plan Year following his Employment
Termination.
/23
A series of installments shall be considered substantially
equal if the amount distributed in each Plan Year equals (a) the
balance of the Participant's Account as of the last day of the
Plan Year most recently ended before the date of payment,
divided by (b) the number of installments remaining to be paid.
Payments made after the initial installment shall be made on or
about the anniversary date of the initial installment.
3.4 Death Benefit. A death benefit shall be payable to the
Beneficiary of a Participant who dies while employed by the
Company, or who dies after his employment by the Company has
terminated but before the Benefit to which he is entitled has
been paid. The amount of the death benefit shall be equal to
the balance of the deceased Participant's Account as of the date
of his death. A Participant may designate one or more persons
or entities to receive death benefits under the Plan by
completing and delivering to the Committee or its delegate
during his lifetime a written designation in the form prescribed
by the Committee or its delegate. A Participant may change or
revoke any such designation, without the knowledge or consent of
any party, by completing and delivering to the Committee or its
delegate another such form. In every case, the form most
recently dated and delivered to the Committee or its delegate
before the date of a Participant's death shall cancel and
supersede any such form dated earlier. Payment of any benefit
due under the Plan with respect to a Participant who fails to
/24
designate a Beneficiary, or whose designated Beneficiary is no
longer living at the Participant's death, will be made to the
Participant's surviving spouse; or if he is not survived by his
spouse, to his children by right of representation; or if he is
survived by neither spouse nor children, to his parents; or if
he is survived by none of the foregoing, to his estate.
The death benefit shall be paid in a single sum as soon as
practicable after the Participant's death. Payment with respect
to a Beneficiary who survives the Participant but dies before
payment of the Benefit under this Section 3.4 has been made will
be made to the Beneficiary's estate.
3.5 Forfeiture of Benefit. Notwithstanding any other
provision of the Plan, neither a Participant nor any Beneficiary
of a Participant shall receive any Benefit under the Plan if the
Participant is dismissed from employment with the Company for
Cause.
3.6 Minors and Incompetents. In the event that any Benefit
becomes payable to a minor or to a person under legal
disability, or to a person not judicially declared incompetent
but whom the Committee or its delegate considers unable properly
to administer the Benefit by reason of physical or mental
disability, then the Benefit shall be paid out in such of the
following ways as the Committee or its delegate deems best, and
the Committee and the
/25
Company shall incur no liability therefor: (a) directly to such
person; (b) to the legally appointed guardian or conservator of
such person; or (c) to some relative or friend for the care and
support of such person.
3.7 Source of Payment of Benefits. The Benefit provided
under the Plan with respect to a Participant shall be payable
from the Trust or from the general assets of the Company. If
the Trust does not have sufficient assets to pay any amount owed
under the Plan with respect to a Participant, the Company shall
make such Payment. At no time shall a Participant or
Beneficiary have, by reason of the Plan, any right, title, or
interest superior to that of a general unsecured creditor of the
Company, in or to any asset or assets or of the Company.
ARTICLE 4
The Trust
4.1 Establishment of Trust. The Company shall establish
the Trust with the Trustee, pursuant to such terms and
conditions as are set forth in the Trust agreement to be entered
into between the Company and the Trustee. The Trust is intended
to be treated as a "grantor" trust under the Code, and the
establishment of the Trust is not intended to cause any
Participant to realize current income on amounts contributed
thereto, and the Trust shall be so interpreted.
/26
ARTICLE 5
Administration
5.1 Procedure. The Committee will be the administrator of
the Plan. The Committee may take any decision or action in
connection with the Plan by a majority of its members.
Decisions in connection with the Plan may be made and evidenced
by a written document signed by a majority of the Committee's
members, without a formal meeting of the Committee. The
Committee may delegate to one or more officers of the Company
any duty as to which the Plan specifically permits such
delegation, but no duty of the Committee may be delegated to an
Executive who is or has been a Participant.
5.2 Cooperation with Actuary. The Committee or its
delegate shall provide to the Actuary such information as to
Participants' Compensation, accrued benefits under the Pension
Plan, length of service, age and other information that the
Actuary may request in connection with the calculation of the
Pension Plan Amount.
5.3 Duties. In addition to the powers and duties specified
elsewhere in the Plan, the Committee shall:
(a) determine all matters relating to the eligibility of
persons to become Participants in the Plan;
/27
(b) determine whether or not any employee of the Company
has become a Participant in the Plan;
(c) determine whether and when the employment of any
Participant has been terminated and, to the extent
material to a determination of a benefit hereunder, the
cause of such termination; and
(d) decide all questions which may arise from time to time
with respect to the rights under the Plan of employees
of the Company, Participants, and any other persons who
claim to be entitled to benefits under the Plan.
The Committee shall have exclusive discretionary authority
to construe and interpret the Plan document; provided, however,
that in exercising its powers and duties the Committee shall
treat alike Participants and Beneficiaries in like
circumstances.
5.4 Indemnification. The Company agrees to indemnify and
save harmless each member of the Committee and any delegate of
the Committee against any and all liability occasioned by or
arising out of any action with respect to the Plan taken,
suffered or omitted in good faith by him.
5.5 Mutual Exclusion of Responsibility. Neither the
Trustee nor the Company shall be obliged to inquire into or be
responsible for any act or failure to act, or the authority
/28
therefor, on the part of the other.
5.6 Claims Procedure. A Participant or other person who
asserts a right to any benefit under the Plan which he has not
received must file a written claim with the Administrator. If
the Administrator wholly or partially denies the claim, it shall
within 90 days of receipt of the claim provide a written notice
of denial to the claimant, setting forth:
(a) specific reasons for the denial of the claim,
(b) specific reference to pertinent provisions of the
Plan on which the denial is based,
(c) a description of any additional material or
information necessary to perfect the claim and an
explanation of why such material or information is
necessary, and
(d) an explanation of the Plan's claims review
procedure.
A claimant whose application for benefits is denied, or who
has received neither an affirmative reply nor a notice of denial
within 90 days after filing his claim, may request a full and
fair review of the decision denying the claim. The request must
be made in writing to the Administrator within 60 days after
/29
receipt of the notice of denial (or, if no notice of denial is
issued, within 60 days after the expiration of 90 days from the
filing of the claim). In connection with the review, the
claimant or his authorized representative may:
(a) request a hearing by the Administrator upon
written application to the Administrator,
(b) review pertinent documents in the possession of
the Administrator, and
(c) submit issues and comments in writing to the
Administrator to review.
A decision on review by the Administrator shall be made
promptly, and not later than 60 days after the receipt by the
Administrator of a request for review, unless special
circumstances (such as a need to hold a hearing) require an
extension of time for processing, in which case the claimant
will be so notified of the extension and a decision shall be
rendered as soon as possible, and not later than 120 days after
the receipt of the request for review. The decision shall be in
writing and shall include specific reasons for the decision
written in a manner calculated to be understood by the claimant,
and specific reference to the pertinent provisions of the Plan
on
/30
which the decision is based. The decision of the Administrator
shall be final and binding upon all parties.
ARTICLE 6
Amendment and Termination
6.1 Amendment. The Company shall have the right, at any
time and from time to time, to modify or amend the Plan by an
instrument in writing, executed by a duly authorized officer of
the Company and delivered to the Committee; provided, however,
that no amendment shall reduce the balance of a Participant's
Account without his written consent.
6.2 Termination. Although the Company expects to continue
the Plan indefinitely, it expressly reserves the right to
terminate it in whole or in part at any time by an instrument in
writing delivered to the Committee, effective on the date
specified in such instrument. Upon termination of the Plan, the
Committee may in its discretion permit each Participant who is
then employed with the Company (or if the Plan is partially
terminated, each Participant affected by the termination) to
receive a Benefit equal to the balance of his Account as of the
date of such termination or partial termination, payable as if
the Participant had then terminated his employment. To the
extent a Participant does not receive his Benefit upon
termination of the Plan, his Account shall continue to be
maintained in accordance with Section 3.2, and shall be payable
/31
in accordance with Section 3.3, notwithstanding that thereafter
there will be no Pension Plan Amount added to the Account.
ARTICLE 7
Miscellaneous
7.1 Nonassignability of Benefits. No right or claim to any
benefit hereunder will be assignable by any Participant or
Beneficiary, nor subject to garnishment, attachment, execution
or levy of any kind. Any attempt to assign, transfer, pledge,
encumber, commute or anticipate payment of benefits hereunder
will be void.
7.2 Tax Withholding. All payments under this Plan shall be
subject to such tax withholding as may be required by law.
7.3 Rights of Participants and Others. Except as expressly
set forth herein, nothing contained in the Plan shall be deemed
to give any Participant the right to be retained in the employ
of the Company, or to confer upon or create in any Participant
or other person any rights of any name or nature, legal or
equitable. Neither anything contained herein nor any action
taken by the Company hereunder shall in any way prevent it from
terminating the employment of any Participant at any time, or
subject it to any liability for such termination, nor shall it
be deemed to give the Company the right to require the
Participant
/32
to remain in its service or to interfere with the Participant's
right to terminate his service at any time.
7.4 Release by Participants, Etc. Except to the extent
that it relieves the Company or the Committee from
responsibility or liability for any responsibility, obligation
or duty owing to the Plan or to any Participant or Beneficiary,
any payment made in accordance with the provisions of the Plan
to any person entitled to a Benefit shall to the extent thereof
be in full satisfaction of all claims against the Company and
the Committee, either of which may require as a condition
precedent to such payment that the recipient execute a receipt
and release therefor in such form as shall be determined by the
Company or the Committee, as the case may be.
7.5 Construction. The Plan shall be construed, and the
rights and liabilities of all persons hereunder shall be
determined, in accordance with the laws of the Commonwealth of
Massachusetts, to the extent that they are not preempted by
ERISA. Masculine pronouns shall include both masculine and
feminine genders, and singular words shall include the plural,
wherever the context permits.
7.6 Notices. Any notice under the Plan will be deemed to
have been properly delivered if it is in writing and is
delivered in hand or sent by registered mail, postage prepaid,
to the party
/33
addressed as follows, unless another address has been substituted
by notice so given:
To a Participant: To his address as set forth in the
payroll records of the Company.
To the Committee: Care of the Company, at its address as
shown directly below.
To the Company: Ionics, Incorporated
65 Grove Street
Watertown, MA 02172
Attention: Stephen Korn, Esq.
IN WITNESS WHEREOF, the Company has caused this document to
be executed this _____ day of ____________, 1996.
Ionics, Incorporated
By:
Attest:
/34
<TABLE>
EXHIBIT 11
IONICS, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands, except earnings per share)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Net income $ 5,572 $ 4,128
Earnings per common and common
equivalent share:
Weighted average number of shares
outstanding 14,886 14,004
Incremental shares for stock options
under treasury stock method 600 425
Weighted average number of common and
common equivalent shares outstanding 15,486 14,429
Earnings per common and common
equivalent share $ .36 $ .29
Earnings per common and common equivalent
share - assuming full dilution:
Weighted averge number of shares
outstanding 14,886 14,004
Incremental shares for stock options
under treasury stock method 621 464
Weighted average number of common and
common equivalent shares outstanding -
assuming full dilution 15,507 14,468
Earnings per common and common
equivalent share - assuming
full dilution $ .36 $ .29
-34-
/35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,554
<SECURITIES> 0
<RECEIVABLES> 91,767
<ALLOWANCES> (2,464)
<INVENTORY> 22,380
<CURRENT-ASSETS> 129,862
<PP&E> 270,043
<DEPRECIATION> (101,811)
<TOTAL-ASSETS> 341,570
<CURRENT-LIABILITIES> 74,842
<BONDS> 0
<COMMON> 14,962
0
0
<OTHER-SE> 241,184
<TOTAL-LIABILITY-AND-EQUITY> 341,570
<SALES> 74,157
<TOTAL-REVENUES> 74,157
<CGS> 50,915
<TOTAL-COSTS> 50,915
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 229
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,303
<INCOME-TAX> 2,807
<INCOME-CONTINUING> 5,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,572
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
