-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VHvWsLs1B30NsPZ/gsCPJIrui+i/XRI9LVv+1xR4cor1BnhLkmeMBbPrVzISrle0 P4fM09Zw94NzshnqgtXZwA== 0000052466-96-000051.txt : 19961118 0000052466-96-000051.hdr.sgml : 19961118 ACCESSION NUMBER: 0000052466-96-000051 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IONICS INC CENTRAL INDEX KEY: 0000052466 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 042068530 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07211 FILM NUMBER: 96663475 BUSINESS ADDRESS: STREET 1: 65 GROVE ST CITY: WATERTOWN STATE: MA ZIP: 02172 BUSINESS PHONE: 6179262500 10-Q 1 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, 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 September 30, 1996 Common Stock, Par Value $1 15,690,355 Shares /1 IONICS, INCORPORATED FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 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 9 Signatures 10 Exhibit Index 11 Exhibit 11 - Computation of Earnings Per Share 12 Exhibit 27 - Financial Data Schedule 13 (for electronic purposes only) - 1 - /2 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, 1996 1995 1996 1995 Net revenue: Membranes and related equipment $37,113 $33,350 $109,006 $ 92,962 Water, food and chemical supply 29,810 16,686 79,470 49,086 Consumer products 17,588 15,148 48,780 40,280 84,511 65,184 237,256 182,328 Costs and expenses: Cost of membranes and related equipment 26,280 23,910 77,453 66,590 Cost of water, food and chemical supply 20,781 11,173 53,892 32,505 Cost of consumer products 10,095 9,018 27,473 22,955 Research and development 1,256 1,030 3,701 3,054 Selling, general and administrative 16,036 12,034 46,491 35,870 74,448 57,165 209,010 160,974 Income from operations 10,063 8,019 28,246 21,354 Interest income 61 245 353 751 Equity income 104 170 323 417 Income before income taxes 10,228 8,434 28,922 22,522 Provision for income taxes 3,375 2,765 9,544 7,545 Net income $ 6,853 $ 5,669 $ 19,378 $ 14,977 Earnings per share $ .43 $ .37 $ 1.21 $ 1.00 Shares used in earnings per share calculations 16,044 15,153 16,042 14,990 The accompanying notes are an integral part of these financial statements.
-2- /3 IONICS, INCORPORATED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands, except share amounts)
September 30, December 31, 1996 1995 ASSETS Current assets: Cash and cash equivalents $ 11,262 $ 9,479 Notes receivable, current 3,637 4,529 Accounts receivable 87,072 78,376 Receivables from affiliated companies 2,085 1,421 Inventories: Raw materials 13,984 12,640 Work in process 7,799 5,411 Finished goods 2,849 2,513 24,632 20,564 Other current assets 9,433 8,018 Total current assets 138,121 122,387 Notes receivable, long-term 7,687 5,813 Investments in affiliated companies 4,215 4,874 Property, plant and equipment: Land 3,561 3,270 Buildings 30,033 26,018 Machinery and equipment 225,683 191,195 Other, including furniture, fixtures and vehicles 35,359 26,772 294,636 247,255 Less accumulated depreciation (113,957) (91,369) 180,679 155,886 Other assets 37,413 33,084 Total assets $368,115 $322,044 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 16,068 $ 4,884 Accounts payable 21,807 28,089 Customer deposits 4,803 3,131 Accrued commissions 2,268 2,184 Accrued expenses 25,505 20,384 Taxes on income 6,465 1,607 Total current liabilities 76,916 60,279 Long-term debt and notes payable 2,325 182 Deferred income taxes 5,816 7,780 Other liabilities 2,088 759 Stockholders' equity: Common stock, par value $1, 30,000,000 authorized shares; issued: 15,690,355 in 1996 and 14,801,230 in 1995 15,690 14,801 Additional paid-in capital 145,950 137,587 Retained earnings 123,103 104,795 Cumulative translation adjustments (3,386) (3,671) Unearned compensation (387) (468) Total stockholders' equity 280,970 253,044 Total liabilities and stockholders' equity $368,115 $322,044 The accompanying notes are an integral part of these financial statements.
-3- /4 IONICS, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Nine Months Ended September 30, 1996 1995 Operating activities: Net income $ 19,378 $ 14,977 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,007 15,154 Provision for losses on accounts and notes receivable 700 477 Compensation expense on restricted stock awards 81 45 Changes in assets and liabilities: Notes receivable (1,074) (583) Accounts receivable (5,829) (4,921) Inventories (3,668) (2,183) Other current assets (709) (561) Investments in affiliates 658 487 Accounts payable and accrued expenses (8,830) (3,626) Income taxes 6,053 2,238 Other 1,950 (802) Net cash provided by operating activities 27,717 20,702 Investing activities: Additions to property, plant and equipment (36,797) (37,767) Purchase of long-term investments - (3,000) Sale of short-term investments - 4,047 Net cash used by investing activities (36,797) (36,720) Financing activities: Principal payments on current debt (10,445) (12,499) Proceeds from issuance of current debt 20,385 17,303 Principal payments on long-term debt (2,340) - Proceeds from stock option plans 3,330 2,959 Net cash provided by financing activities 10,930 7,763 Effect of exchange rate changes on cash (67) (2) Net change in cash and cash equivalents 1,783 (8,257) Cash and cash equivalents at beginning of period 9,479 15,062 Cash and cash equivalents at end of period $ 11,262 $ 6,805 The accompanying notes are an integral part of these financial statements.
-4- /5 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, 1996 and December 31, 1995, the consolidated results of its operations for the three and nine months ended September 30, 1996 and 1995 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, 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. In July 1996, the Company acquired 100% of the stock of Separation Technology, Inc. (STI) for approximately $2.5 million through the issuance of 58,000 shares of common stock. STI is a leading supplier of membrane-based purification equipment and related services to the food industry with particular emphasis on dairy and beverage applications. The acquisition was accounted for under the purchase method with the results of STI included from July 1, 1996. Goodwill of approximately $4 million is being amortized on a straight- line basis over twenty years. Pro forma results of operations have not been presented, as the effect of this acquisition on the financial statements was not material. -5- /6 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, 1996 with the Three and Nine Months Ended September 30, 1995 Revenues for the third quarter of 1996 increased 29.6% to $84.5 million from $65.2 million in 1995. Revenues for the nine-month period increased 30.1% to $237.3 million from $182.3 million in the comparable period in 1995. Revenues were higher in all three business segments for both the three and nine-month periods. The largest increase in revenues for both the third quarter and 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 due primarily to continuing strength in the sale of ultrapure water systems to the semiconductor market. Growth was also experienced through increased sales of instrumentation and water desalting equipment during both periods. The increase in this segment was partially offset by a decrease in revenues from the sale of wastewater treatment equipment during both the quarter and nine-month period. Revenues from the Water, Food and Chemical Supply segment increased in both periods due primarily to strength in the ultrapure water supply business. The Company's internal growth in ultrapure water supply was augmented by the acquisitions of Ahlfinger Water Company in November 1995 and Apollo Ultrapure Water Systems in January 1996. Revenues also increased in the municipal water supply and food processing businesses during both periods, primarily due to the acquisitions of Aqua Design, Inc. in January 1996 and Separation Technology, Inc. in July 1996. Consumer Products revenues increased in both the third quarter and the nine-month period. Revenues increased in the bottled water, home water purification and bleach-based consumer products businesses during each period. These increases resulted from both increases in the customer base and the openings of three new bottled water distribution facilities in Richmond, Virginia; Cleveland, Ohio; and Providence, Rhode Island. Cost of sales as a percentage of revenues for the third quarter was 67.6% in 1996 and 67.7% in 1995. For the nine-month period, cost of sales as a percentage of revenues was 66.9% both in 1996 and in 1995. -6- /7 In the Membranes and Related Equipment segment, the gross margin percentage improved in both the third quarter and the nine-month period. This primarily reflected an improvement in the mix of contracts, particularly within the wastewater treatment and instrumentation businesses, partially offset by a change in the mix of ultrapure water equipment contracts. In the Water, Food and Chemical Supply segment, cost of goods sold increased as a percentage of revenues during both periods. This increase reflected the acquisition of Separation Technology, Inc. whose manufacturing costs have not yet reflected the synergies which we believe will be available through continued integration with the other businesses within this segment. This increase also reflected increased competitive pressure within the industrial bleach market in the United Kingdom. The Consumer Products segment experienced improvement in the gross margin percentage in both the third quarter and nine-month period. This improvement primarily reflected the achievement of certain product cost reductions, price increases and an overall improvement in the mix of consumer products sold. Operating expenses as a percentage of revenues increased slightly in the third quarter to 20.5% in 1996 from 20.0% in 1995, reflecting a change in the mix of various selling expenses. For the nine-month period, operating expenses as a percentage of revenues of 21.2% in 1996 were approximately the same as 1995. Interest income decreased during both the third quarter and nine-month period. This was a result of lower average invested cash balances for both periods. Financial Condition Working capital decreased by $0.9 million during the first nine months of 1996 and the current ratio decreased to 1.8 at September 30, 1996 from 2.0 at December 31, 1995. Cash provided from net income and depreciation totaled $38.4 million during the first nine months of 1996, while the primary uses of cash were for additions to property, plant and equipment and for payments on current debt. Significant capital expenditures were incurred to support growth in bottled water operations, bleach operations, trailers and other "own and operate" facilities. At September 30, 1996, the Company had $11.3 million in cash and cash equivalents, an increase of $1.8 million from December 31, 1995. This increase was, however, offset by an increase in short-term borrowings of $11.2 million over the corresponding period. The Company believes that its cash and cash equivalent balances, cash from operations, lines of credit and foreign exchange facilities are adequate to meet its currently anticipated needs. -7- /8 Forward-Looking Information The Company's future results of operations, as well as statements contained in this Management's Discussion and Analysis which are forward-looking statements, depend upon a number of 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; and regulations and laws affecting business in each of the Company's markets. -8- /9 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 12 of this report). (b) Reports on Form 8-K No reports on Form 8-K were filed with the Securities and Exchange Commission during the quarter ended September 30, 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. -9- /10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IONICS, INCORPORATED Date: November 13, 1996 By: /s/Arthur L. Goldstein Arthur L. Goldstein Chairman and Chief Executive Officer (duly authorized officer) Date: November 13, 1996 By: /s/Robert J. Halliday Robert J. Halliday Vice President, Finance (chief financial officer) -10- /11 EXHIBIT INDEX Sequentially Numbered Exhibit Page 11 Computation of Earnings Per Share 13 27 Financial Data Schedule 14 (for electronic purposes only) -11- /12 EX-11 2 EXHIBIT 11 IONICS, INCORPORATED COMPUTATION OF EARNINGS PER SHARE (Amounts in thousands, except earnings per share)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Net income $ 6,853 $ 5,669 $19,378 $14,977 Earnings per common and common equivalent share: Weighted average number of shares outstanding 15,563 14,537 15,467 14,490 Incremental shares for stock options under treasury stock method 481 616 575 500 Weighted average number of common and common equivalent shares outstanding 16,044 15,153 16,042 14,990 Earnings per common and common equivalent share $ .43 $ .37 $ 1.21 $ 1.00 Earnings per common and common equivalent share - assuming full dilution: Weighted average number of shares outstanding 15,563 14,537 15,467 14,490 Incremental shares for stock options under treasury stock method 554 677 609 583 Weighted average number of common and common equivalent shares outstanding - assuming full dilution 16,117 15,214 16,076 15,073 Earnings per common and common equivalent share - assuming full dilution $ .43 $ .37 $ 1.21 $ .99
/13 EX-27 3
5 1,000 9-MOS DEC-31-1995 SEP-30-1996 11,262 0 92,838 2,129 24,632 138,121 294,636 113,957 368,115 76,916 0 15,690 0 0 265,280 368,115 237,256 237,256 158,818 158,818 0 700 0 28,599 9,544 19,378 0 0 0 19,378 1.21 1.21
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