UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
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 incorporation (IRS Employer Identification
or organization) Number)
65 Grove Street
Watertown, Massachusetts 02472
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 926-2500
Former name, former address and former fiscal year, if changed since last
report: None
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. At September 30, 2000 the
Company had 16,286,083 shares of Common Stock, par value $1 per share,
outstanding.
<PAGE>
IONICS, INCORPORATED
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2000
INDEX
Page Number
-----------
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 9
Part II Other Information 13
Signatures 14
Exhibit Index 15
Exhibit 27 - Financial Data Schedule 16
(for electronic purposes
only)
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
IONICS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
--------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ----------- ------------
Revenue:
<S> <C> <C> <C> <C>
Equipment Business Group $ 48,188 $ 31,810 $131,949 $ 96,989
Ultrapure Water Group 40,528 21,144 94,832 68,969
Consumer Water Group 28,389 26,668 81,741 72,199
Instrument Business Group 7,781 7,049 21,963 20,498
------------ ------------ ----------- ------------
124,886 86,671 330,485 258,655
------------ ------------ ----------- ------------
Costs and expenses:
Cost of sales of Equipment Business Group 37,107 22,767 99,591 69,218
Cost of sales of Ultrapure Water Group 33,190 16,174 76,433 51,860
Cost of sales of Consumer Water Group 16,993 14,237 47,593 39,371
Cost of sales of Instrument Business Group 3,658 2,781 9,697 8,661
Research and development 1,833 1,623 5,481 5,262
Selling, general and administrative 26,415 21,134 73,475 61,859
------------ ------------ ----------- ------------
119,196 78,716 312,270 236,231
------------ ------------ ----------- ------------
Income from operations 5,690 7,955 18,215 22,424
Interest income 265 92 850 604
Interest expense (1,270) (111) (3,196) (446)
Equity income 289 180 1,260 559
------------ ------------ ----------- ------------
Income before income taxes and minority interest 4,974 8,116 17,129 23,141
Provision for income taxes 1,690 2,653 5,824 7,514
------------ ------------ ----------- ------------
Income before minority interest 3,284 5,463 11,305 15,627
Minority interest expense 358 94 602 482
------------ ------------ ----------- ------------
Net income $ 2,926 $ 5,369 $ 10,703 $ 15,145
============ ============ =========== ============
Basic earnings per share $ 0.18 $ 0.33 $ 0.66 $ 0.94
============ ============ =========== ============
Diluted earnings per share $ 0.18 $ 0.33 $ 0.65 $ 0.93
============ ============ =========== ============
Shares used in basic earnings per share calculations 16,234 16,144 16,220 16,135
============ ============ =========== ============
Shares used in diluted earnings per share calculations 16,519 16,373 16,451 16,283
============ ============ =========== ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IONICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share and par value amounts)
September 30, December 31,
2000 1999
---------------- ---------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 20,444 $ 13,169
Short-term investments 377 195
Notes receivable, current 4,723 5,374
Accounts receivable 156,732 120,407
Receivables from affiliated companies 510 1,231
Inventories:
Raw materials 21,509 20,216
Work in process 11,248 8,913
Finished goods 5,265 4,751
---------------- ---------------
38,022 33,880
Other current assets 18,371 14,816
Deferred income taxes 4,730 4,730
---------------- ---------------
Total current assets 243,909 193,802
Notes receivable, long-term 11,217 10,027
Investments in affiliated companies 10,249 10,752
Property, plant and equipment:
Land 8,398 8,352
Buildings 47,101 44,858
Machinery and equipment 317,341 299,303
Other, including furniture, fixtures and vehicles 53,648 49,119
---------------- ---------------
426,488 401,632
Less accumulated depreciation (188,703) (174,382)
---------------- ---------------
237,785 227,250
Other assets 60,104 59,075
---------------- ---------------
Total assets $ 563,264 $ 500,906
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 76,992 $ 25,514
Accounts payable 42,008 41,867
Customer deposits 6,938 2,671
Accrued commissions 1,834 2,362
Accrued expenses 28,745 27,061
Taxes on income 1,012 -
---------------- ---------------
Total current liabilities 157,529 99,475
Long-term debt and notes payable 11,494 8,351
Deferred income taxes 22,106 26,803
Other liabilities 4,931 4,425
Stockholders' equity:
Common stock, par value $1, authorized
shares: 55,000,000; issued: 16,286,083 in 2000 and 16,201,483 in 1999 16,286 16,201
Additional paid-in capital 160,972 159,288
Retained earnings 210,007 199,304
Accumulated other comprehensive income (20,061) (12,905)
Unearned compensation - (36)
---------------- ---------------
Total stockholders' equity 367,204 361,852
---------------- ---------------
Total liabilities and stockholders' equity $ 563,264 $ 500,906
================ ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30,
---------------------------------------
Operating activities: 2000 1999
------------- -------------
<S> <C> <C>
Net income $ 10,703 $ 15,145
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Depreciation and amortization 24,116 21,491
Provision for losses on accounts and notes receivable 2,479 457
Compensation expense on restricted stock awards 36 81
Changes in assets and liabilities:
Notes receivable (2,049) (1,020)
Accounts receivable (42,017) (9,568)
Inventories (4,780) (1,303)
Other current assets (3,941) 628
Investments in affiliates (43) (3,464)
Accounts payable and accrued expenses 5,990 (10,035)
Income taxes 298 2,989
Other (678) (877)
------------- -------------
Net cash (used) provided by operating activities (9,886) 14,524
------------- -------------
Investing activities:
Additions to property, plant and equipment (35,822) (38,029)
Disposals of property, plant and equipment 1,427 1,371
Acquisitions, net of cash acquired (4,250) (8,394)
(Purchase) sale of short-term investments (443) 112
------------- -------------
Net cash used by investing activities (39,088) (44,940)
------------- -------------
Financing activities:
Principal payments on current debt (61,603) (7,475)
Proceeds from borrowings of current debt 112,178 20,886
Principal payments on long-term debt (838) (738)
Proceeds from borrowings of long-term debt 4,807 416
Proceeds from stock option plans 1,769 923
------------- -------------
Net cash provided by financing activities 56,313 14,012
------------- -------------
Effect of exchange rate changes on cash (64) (666)
------------- -------------
Net change in cash and cash equivalents 7,275 (17,070)
Cash and cash equivalents at beginning of period 13,169 28,770
------------- -------------
Cash and cash equivalents at end of period $ 20,444 $ 11,700
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
IONICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
In the opinion of the management of Ionics, Incorporated (the "Company"), all
adjustments have been made that are necessary to present fairly the consolidated
financial position of the Company, the consolidated results of its operations
and the consolidated cash flows for each period presented. The consolidated
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year. These financial
statements should be read in conjunction with the Company's 1999 Annual Report
as filed on Form 10-K with the Securities and Exchange Commission. Other than as
noted below, 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.
2. Earnings Per Share (EPS) Calculations:
<TABLE>
<CAPTION>
(Amounts in thousands, except per share amounts)
For the three months ended September 30,
---------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------- ---------------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------------ ------------ ------------ ------------ ------------ --------------
Basic EPS
<S> <C> <C> <C> <C> <C> <C>
Income available to
common stockholders $ 2,926 16,234 $ 0.18 $ 5,369 16,144 $ 0.33
Effect of dilutive
stock options - 285 - - 229 -
------------ ------------ ------------ ------------ ------------ --------------
Diluted EPS $ 2,926 16,519 $ 0.18 $ 5,369 16,373 $ 0.33
============ ============ ============ ============ ============ ==============
For the nine months ended September 30,
---------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------- ---------------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------------ ------------ ------------ ------------ ------------ --------------
Basic EPS
Income available to
common stockholders $ 10,703 16,220 $ 0.66 $ 15,145 16,135 $ 0.94
Effect of dilutive
stock options - 231 (0.01) - 148 (0.01)
------------ ------------ ------------ ------------ ------------ --------------
Diluted EPS $ 10,703 16,451 $ 0.65 $ 15,145 16,283 $ 0.93
============ ============ ============ ============ ============ ==============
</TABLE>
The effect of dilutive stock options excludes those stock options for which the
impact would have been antidilutive based on the exercise price of the options.
The number of options that were antidilutive at the three months ended September
30, 2000 and 1999 were 731,750 and 725,750, respectively. The number of options
that were antidilutive at the nine months ended September 30, 2000 and 1999 were
1,600,084 and 725,750, respectively.
<PAGE>
3. Comprehensive Income
The Company has adopted the Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income," which establishes standards for the
reporting and display of comprehensive income and its components. The table
below sets forth "comprehensive income" as defined by SFAS No. 130 for the three
and nine-month periods ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
(Amounts in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 2,926 $ 5,369 $10,703 $15,145
Other comprehensive income,
net of tax:
Translation adjustments (3,580) 1,674 (7,156) (2,681)
------------- ------------ ------------- -------------
Comprehensive income $ (654) $ 7,043 $ 3,547 $12,464
============= ============ ============= =============
</TABLE>
4. Segment Disclosures
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." At the end of 1998, the Company changed
from three reportable segments to four reportable "business group" segments
corresponding to a "business group" structure which was put into place in the
latter part of 1998. As of September 30, 2000, no changes have been made to the
basis of segmentation or the measurement of profit or loss from that which was
reported in the Company's 1999 Annual Report as filed on Form 10-K with the
Securities and Exchange Commission, and there were no material changes to total
assets by segment.
The following table summarizes the Company's operations by the four business
group segments and "Corporate" ("Corporate" includes the elimination of
intersegment transfers).
<PAGE>
<TABLE>
<CAPTION>
For the three months ended September 30, 2000
-------------------------------------------------------------------------------------
Equipment Ultrapure Consumer Instrument
Business Water Water Business
Group Group Group Group Corporate Total
------------- ------------ ------------ ------------- --------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue - unaffiliated
customers $48,188 $40,528 $28,389 $ 7,781 $ - $124,886
Inter-segment transfers 4,815 1,021 - 444 (6,280) -
Gross profit 11,081 7,338 11,396 4,123 - 33,938
For the three months ended September 30, 1999
-------------------------------------------------------------------------------------
Equipment Ultrapure Consumer Instrument
Business Water Water Business
Group Group Group Group Corporate Total
------------- ------------ ------------ ------------- --------------------------
(Amounts in thousands)
Revenue - unaffiliated
customers $31,810 $21,144 $26,668 $ 7,049 $ - $86,671
Inter-segment transfers 803 204 - 570 (1,577) -
Gross profit 9,043 4,970 12,431 4,268 - 30,712
For the nine months ended September 30, 2000
-------------------------------------------------------------------------------------
Equipment Ultrapure Consumer Instrument
Business Water Water Business
Group Group Group Group Corporate Total
------------- ------------ ------------ ------------- --------------------------
(Amounts in thousands)
Revenue - unaffiliated
customers $ 131,949 $94,832 $81,741 $ 21,963 $ - $330,485
Inter-segment transfers 6,853 2,585 - 1,816 (11,254) -
Gross profit 32,358 18,399 34,148 12,266 - 97,171
For the nine months ended September 30, 1999
-------------------------------------------------------------------------------------
Equipment Ultrapure Consumer Instrument
Business Water Water Business
Group Group Group Group Corporate Total
------------- ------------ ------------ ------------- --------------------------
(Amounts in thousands)
Revenue - unaffiliated
customers $96,989 $68,969 $72,199 $ 20,498 $ - $258,655
Inter-segment transfers 1,668 401 - 1,147 (3,216) -
Gross profit 27,771 17,109 32,828 11,837 - 89,545
</TABLE>
<PAGE>
5. Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 amends SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was issued in June 1998. SFAS No. 137
defers the effective date of SFAS No. 133 to all fiscal years beginning after
June 15, 2000. SFAS No. 133 requires that all derivatives be recognized as
either assets or liabilities at estimated fair value. In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities," which is an amendment of SFAS No. 133. This accounting
standard amended the accounting and reporting standards of SFAS No. 133 for
certain derivative instruments and hedging activities. The adoption of SFAS No.
133, as amended, is not expected to have a material effect on the Company's
financial position or results of operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." It revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of SFAS
No. 125's provisions without reconsideration. This Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001 and is effective for recognition and
reclassification of collateral and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000.
Disclosures about securitization and collateral accepted need not be reported
for periods ending on or before December 15, 2000, for which financial
statements are presented for comparative purposes. The adoption of SFAS No. 140
is not expected to have a material effect on the Company's financial position or
results of operations.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation, an Interpretation of APB
Opinion No. 25" (FIN No. 44). This interpretation, which was generally effective
July 1, 2000, clarifies, among other issues, the definition of employee for the
purposes of applying the provisions of APB Opinion No. 25, the criteria for
determining whether a plan qualifies as a noncompensatory plan, and the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award. The adoption of FIN No. 44 is not expected to have
a material effect on the Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements"
which among other guidance, clarifies certain conditions to be met in order to
recognize revenue. In June 2000, the SEC issued SAB No. 101B which delayed the
implementation of SAB 101 until the fourth quarter of fiscal years beginning
after December 15, 1999. The implementation of SAB 101 is not expected to have a
material effect on the Company's financial position or results of operations.
<PAGE>
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, 2000 with the Three
-------------------------------------------------------------------------------
and Nine Months Ended September 30, 1999
----------------------------------------
Revenues for the third quarter of 2000 increased 44.1% to $124.9 million while
net income decreased 45.5% or $2.4 million, compared to the results of the third
quarter of 1999. Similarly, revenues for the nine-month period of 2000 increased
27.8% to $330.5 million while net income decreased $4.4 million or 29.3% from
the comparable nine-month period in 1999. Gross profit was $33.9 million in the
third quarter of 2000 compared to $30.7 million in the third quarter of 1999.
For the nine-month period of 2000, gross profit was $97.2 million, compared to
$89.5 million for the nine-month period of 1999. Gross profit increased in the
third quarter and nine-month period for the Equipment Business Group (EBG) and
Ultrapure Water Group (UWG). The Consumer Water Group (CWG) and Instrument
Business Group (IBG) had lower gross profit in the third quarter of 2000
compared to the third quarter of 1999, although both Groups' gross profit
increased for the nine-month period of 2000 compared to the nine-month period of
1999.
Revenues during 2000 were higher in all four business groups during the third
quarter compared to the respective period in 1999. For the 2000 nine-month
period, revenues were higher in all four business groups than in the comparable
1999 period.
Revenues of EBG increased 51.5% or $16.4 million in the third quarter of 2000
compared to the third quarter of 1999. EBG's revenues also increased 36.0% or
$35.0 million in the 2000 nine-month period from the 1999 nine-month period.
These increases were primarily due to higher capital equipment sales,
particularly for zero liquid discharge equipment, the commencement of operations
at water supply plants in Barbados and Curacao, and continuing work on a
contract to manufacture storage systems to manage the containment of spent
nuclear fuels.
UWG revenues increased by $19.4 million, or 91.7%, in the third quarter and
increased $25.9 million, or 37.5%, in the nine-month period of 2000, as compared
with the respective periods of 1999. These increases were primarily due to
higher sales to the microelectronics and power industries.
CWG revenues increased by $1.7 million, or 6.5%, for the third quarter and by
$9.5 million, or 13.2%, for the nine month period of 2000, compared to the
respective third quarter and nine month periods of 1999. The increase in
revenues for the third quarter was due to growth in both the bottled water
business, particularly in foreign operations, and the home water business,
primarily from independent dealers. For the nine-month period, revenue growth
also was attributable to growth in both the bottled water and home water
businesses, particularly the foreign operations of both businesses.
IBG revenues increased by 10.4%, or $0.7 million, in the third quarter and by
7.1%, or $1.5 million, in the nine-month period of 2000, as compared to the same
periods in 1999. These increases resulted primarily from increased sales volume,
predominantly to the microelectronics industry.
<PAGE>
For the Company, cost of sales as a percentage of revenues for the third quarter
was 72.8% in 2000 and 64.6% in 1999. For the nine-month period, cost of sales as
a percentage of revenues was 70.6% in 2000 and 65.4% in 1999.
Cost of sales as a percentage of revenues increased for all four business groups
for both the third quarter and the nine-month period of 2000, as compared to the
respective periods in 1999. The increases in this percentage for EBG reflected a
shift in the mix of business to lower margin capital equipment. Additionally,
the Company incurred losses in the third quarter of 2000 on two projects in
Australia and Malaysia. These losses impacted EBG and UWG cost of sales amounts
for the third quarter and year-to-date period of 2000. The increases in cost of
sales as a percentage of revenues for UWG also reflect the continued competitive
environment in the microelectronics industry for ultrapure water capital
equipment. CWG's increases in cost of sales as a percentage of revenues reflect
an increase in distribution expenses, particularly fuel and driver (labor)
costs. IBG had increased cost of sales as a percentage of revenue due to
increased raw material costs.
Operating expenses as a percentage of revenues decreased during the third
quarter to 22.6% in 2000 from 26.3% in 1999. For the nine-month period,
operating expenses as a percentage of revenues decreased to 23.9% in 2000 from
26.0% in 1999. The decreases in operating expenses as a percentage of revenues
primarily reflected higher revenue growth in EBG and UWG, which generally have
lower selling costs relative to revenues than do the other business groups.
However, total spending increased for the third quarter and for the nine-month
period of 2000 primarily due to increased legal expenses related to the
Company's defense in a patent infringement lawsuit (which is expected to go to
trial in the fourth quarter of 2000) and to increased bad debt expense.
Interest income of $0.3 million for the third quarter of 2000 increased from
$0.1 million for the third quarter in 1999. Interest income of $0.9 million for
the nine-month period of 2000 also increased from $0.6 million for the
nine-month period of 1999. Interest expense of $1.3 million and $3.2 million for
the third quarter and nine-month period of 2000, respectively, increased from
$0.1 million and $0.4 million for the third quarter and nine-month period of
1999, respectively. The increases in interest expense in 2000 reflect the higher
average borrowings of the Company in 2000.
Financial Condition
-------------------
Working capital decreased $7.9 million during the first nine months of 2000
while the Company's current ratio decreased to 1.5 at September 30, 2000 from
2.0 at December 31, 1999. At September 30, 2000, the Company had $20.4 million
in cash and cash equivalents, an increase of $7.3 million from December 31,
1999. Notes payable and the current portion of long-term debt increased by $51.5
million, and accounts receivable increased by $36.3 million.
Cash used by operating activities totaled $9.9 million for the first nine-month
period of 2000. The primary uses of cash for investing purposes included
additions to property, plant and equipment and for acquisitions. Significant
capital expenditures were made for "own and operate" facilities and to expand
the Company's bottled water operations. Net cash provided by financing
activities was $56.3 million for the nine-month period of 2000, primarily from
short-term and long-term borrowings.
<PAGE>
At September 30, 2000, the Company had incurred approximately $6.3 million in
costs related to a major seawater desalination project in Trinidad announced in
September 1999. Bridge financing arrangements for the project were completed in
October 2000, and consequently, these costs will be treated as project charges
in the fourth quarter of 2000.
The Company believes that its cash and cash equivalents, cash from operations,
lines of credit and foreign exchange facilities are adequate to meet its
currently anticipated needs.
Accounting Pronouncements
-------------------------
In June 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 amends SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was issued in June 1998. SFAS No. 137
defers the effective date of SFAS No. 133 to all fiscal years beginning after
June 15, 2000. SFAS No. 133 requires that all derivatives be recognized as
either assets or liabilities at estimated fair value. In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities," which is an amendment of SFAS No. 133. This accounting
standard amended the accounting and reporting standards of SFAS No. 133 for
certain derivative instruments and hedging activities. The adoption of SFAS No.
133, as amended, is not expected to have a material effect on the Company's
financial position or results of operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." It revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of SFAS
No. 125's provisions without reconsideration. This Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001 and is effective for recognition and
reclassification of collateral and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000.
Disclosures about securitization and collateral accepted need not be reported
for periods ending on or before December 15, 2000, for which financial
statements are presented for comparative purposes. The adoption of SFAS No. 140
is not expected to have a material effect on the Company's financial position or
results of operations.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation, an Interpretation of APB
Opinion No. 25" (FIN No. 44). This interpretation, which was generally effective
July 1, 2000, clarifies, among other issues, the definition of employee for the
purposes of applying the provisions of APB Opinion No. 25, the criteria for
determining whether a plan qualifies as a noncompensatory plan, and the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award. The adoption of FIN No. 44 is not expected to have
a material effect on the Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements"
which among other guidance, clarifies certain conditions to be met in order to
recognize revenue. In June 2000, the SEC issued SAB No. 101B which delayed the
implementation of SAB 101 until the fourth quarter of fiscal years beginning
after December 15, 1999. The implementation of SAB 101 is not expected to have a
material effect on the Company's financial position or results of operations.
<PAGE>
Year 2000 (Y2K) Disclosure
--------------------------
The Company undertook a program in years 1998 and 1999 to assure the ability of
its information and manufacturing systems to properly recognize and process
date-sensitive information beginning on January 1, 2000. To date, the Company
has completed the transition from calendar 1999 to 2000 with no reported
significant impact to operations. The Company continues to monitor Y2K related
matters at suppliers and customers, as well as the Company's systems, facilities
and products, to ensure that latent defects do not manifest themselves over the
next several months.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
Derivative Instruments and Market Risk
There has been no material change in the information reported in the Company's
1999 Annual Report as filed on Form 10-K with the Securities and Exchange
Commission with respect to these risk matters.
Forward-Looking Information
---------------------------
Safe Harbor Statement under Private Securities Litigation Reform Act of 1995
The Company's future results of operations and certain statements contained in
this report, including, without limitation, "Management's Discussion and
Analysis of Results of Operations and Financial Condition," constitute
forward-looking statements. Such statements are based on management's current
views and assumptions and involve risks, uncertainties and other factors that
could cause actual results to differ materially from management's current
expectations. Among these factors are business conditions and the general
economy; competitive factors, such as acceptance of new products and price
pressures; risk of nonpayment of accounts receivable; risks associated with
foreign operations; risks of latent Y2K defects; risks involved in litigation;
regulations and laws affecting business in each of the Company's markets; market
risk factors, as described above from time to time in the Company's filings with
the Securities and Exchange Commission.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
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On October 26, 2000, the Company announced that bridge financing arrangements
had been completed for the construction of a 28.8 million gallon per day
desalination plant in Trinidad.
The plant will be owned by Desalination Company of Trinidad and Tobago Ltd.
("Desalcott"), a project company established under the laws of Trinidad and
Tobago. The Company has acquired a 40% equity interest in Desalcott, and a local
contracting firm, Hafeez Karamath Engineering Services Ltd. ("HKES") holds a 60%
equity interest in Desalcott. Desalcott has entered into a loan agreement with a
Trinidad bank providing up to U.S. $60 million in construction financing.
Desalcott has also received several proposals for long-term debt financing.
The Company, through a local subsidiary, has also entered into an engineering,
procurement and construction (EPC) agreement with Desalcott, under which it will
be responsible for the desalination process portion of the desalination
facility, and will subcontract construction and civil work responsibilities to
local contractors.
The Company will include anticipated revenues from this project in its bookings
for the fourth quarter of 2000 in accordance with its booking policies. Costs of
approximately $6.3 million previously incurred by the Company related to the
project will be treated as project charges in the fourth quarter of 2000.
Item 6. Exhibits and Reports on Form 8-K
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(a) 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, 2000.
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.
<PAGE>
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, 2000 By: /s/Arthur L. Goldstein
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Arthur L. Goldstein
Chairman and Chief Executive Officer
(duly authorized officer)
Date: November 14, 2000 By: /s/Anthony DiPaola
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Anthony DiPaola
Vice President and
Corporate Controller
(principal accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially Numbered Page
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27.0 Financial Data Schedule 16
(for electronic purposes only)
