-----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, OsleAKGsw8GUoU9CFwoRFcgzU4d7Yvuy49g0xeWOEmUVociaYui3I/S0aW9Hg2K9 /t+xav3ufD8Sz7rHM4cSgg== 0000052466-97-000033.txt : 19970815 0000052466-97-000033.hdr.sgml : 19970815 ACCESSION NUMBER: 0000052466-97-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660578 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 June 30, 1997 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 June 30, 1997 Common Stock, Par Value $1 15,943,997 Shares IONICS, INCORPORATED FORM 10-Q FOR QUARTER ENDED JUNE 30, 1997 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 7 Part II - Other Information 10 Signatures 12 Exhibit Index 13 Exhibit 11 - Computation of Earnings Per Share 14 Exhibit 27 - Financial Data Schedule (for electronic purposes only) - 1 - PART I - FINANCIAL INFORMATION IONICS, INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 Net revenue: Membranes and related equipment $ 37,454 $34,639 $ 77,287 $ 73,261 Water, food and chemical supply 31,562 24,512 61,715 48,292 Consumer products 18,095 15,751 35,211 31,192 87,111 74,902 174,213 152,745 Costs and expenses: Cost of membranes and related equipment 26,079 24,003 53,879 52,194 Cost of water, food and chemical supply 22,648 16,362 44,112 32,090 Cost of consumer products 9,772 8,565 19,555 17,378 Research and development 1,282 1,199 2,584 2,445 Selling, general and administrative 16,717 15,488 33,228 30,455 76,498 65,617 153,358 134,562 Income from operations 10,613 9,285 20,855 18,183 Interest income 274 432 562 745 Interest expense (227) (316) (463) (453) Equity income 192 143 301 219 Income before income taxes 10,852 9,544 21,255 18,694 Provision for income taxes 3,583 3,104 7,014 6,169 Net income $ 7,269 $ 6,440 $ 14,241 $ 12,525 Earnings per share $ .44 $ .40 $ .87 $ .78 Shares used in earnings per share calculations 16,448 16,097 16,426 16,041 The accompanying notes are an integral part of these financial statements.
-2- IONICS, INCORPORATED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands, except par value)
June 30, December 31, 1997 1996 ASSETS Current assets: Cash and cash equivalents $ 20,466 $ 12,269 Notes receivable, current 3,533 3,496 Accounts receivable 88,997 91,392 Receivables from affiliated companies 2,985 2,999 Inventories: Raw materials 15,549 15,028 Work in process 8,544 8,120 Finished goods 2,700 2,852 26,793 26,000 Other current assets 5,494 8,266 Total current assets 148,268 144,422 Notes receivable, long-term 7,914 7,737 Investments in affiliated companies 3,011 2,908 Property, plant and equipment: Land 3,948 3,602 Buildings 32,837 33,157 Machinery and equipment 241,240 233,077 Other, including furniture, fixtures and vehicles 38,016 36,834 316,041 306,670 Less accumulated depreciation (130,776) (120,853) 185,265 185,817 Other assets 37,470 37,705 Total assets $381,928 $378,589 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 5,654 $ 11,513 Accounts payable 23,045 28,988 Customer deposits 7,884 7,147 Accrued commissions 2,375 2,402 Accrued expenses 20,549 18,123 Taxes on income 4,859 - Total current liabilities 64,366 68,173 Long-term debt and notes payable 85 2,132 Deferred income taxes 8,742 14,422 Other liabilities 1,297 1,645 Stockholders' equity: Common stock, par value $1, 30,000,000 authorized shares; issued: 15,943,997 in 1997 and 15,823,205 in 1996 15,944 15,823 Additional paid-in capital 153,055 149,337 Retained earnings 144,469 130,228 Cumulative translation adjustments (5,724) (2,811) Unearned compensation (306) (360) Total stockholders' equity 307,438 292,217 Total liabilities and stockholders' equity $381,928 $378,589 The accompanying notes are an integral part of these financial statements.
-3- IONICS, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Six Months Ended June 30, 1997 1996 Operating activities: Net income $14,241 $12,525 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,881 12,364 Provision for losses on accounts and notes receivable 784 329 Compensation expense on restricted stock awards 54 54 Changes in assets and liabilities: Notes receivable (1,151) (510) Accounts receivable 592 (2,586) Inventories (894) (2,023) Other current assets 2,774 278 Investments in affiliates (103) 372 Accounts payable and accrued expenses (2,033) (3,999) Income taxes 2,758 4,319 Other (509) 686 Net cash provided by operating activities 30,394 21,809 Investing activities: Additions to property, plant and equipment (16,093) (30,525) Net cash used by investing activities (16,093) (30,525) Financing activities: Principal payments on current debt (7,847) (3,541) Proceeds from issuance of current debt 207 16,984 Principal payments on long-term debt (28) (2,418) Proceeds from stock option plans 1,954 1,639 Net cash (used)/provided by financing activities (5,714) 12,664 Effect of exchange rate changes on cash (390) (39) Net change in cash and cash equivalents 8,197 3,909 Cash and cash equivalents at beginning of period 12,269 9,479 Cash and cash equivalents at end of period $20,466 $13,388 The accompanying notes are an integral part of these financial statements.
-4- 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 June 30, 1997 and December 31, 1996, the consolidated results of its operations for the three and six months ended June 30, 1997 and 1996 and the consolidated cash flows for the six months then ended. 2. The consolidated results of operations of the Company for the three and six months ended June 30, 1997 and 1996 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 1996 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 1997, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 128 ("SFAS128"), "Earnings per Share." SFAS128 simplifies the standards for computing earnings per share ("EPS") and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. SFAS128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. SFAS128 requires restatement of all prior-period EPS data presented. Neither basic nor diluted EPS computed in accordance with SFAS128 would be materially different from the Company's primary EPS presented in the financial statements. In 1997, the FASB released Statement of Financial Accounting Standards No. 130 ("SFAS130"), "Reporting Comprehensive Income." SFAS130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. SFAS130 is effective for fiscal years beginning after December 15, 1997. This Statement is a disclosure-only statement. -5- Also in 1997, the FASB released Statement of Financial Accounting Standards No. 131 ("SFAS131"), "Disclosures About Segments of an Enterprise and Related Information." SFAS131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial statements. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS131 is effective for fiscal years beginning after December 15, 1997. This Statement is a disclosure-only statement. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations Comparison of the Three and Six Months Ended June 30, 1997 with the Three and Six Months Ended June 30, 1996 Revenues for the second quarter of 1997 increased 16.3% to $87.1 million from $74.9 million in 1996. Revenues for the six-month period increased 14.1% to $174.2 million from $152.7 million in the comparable period in 1996. Revenues were higher in all three business segments for both the three and six-month periods. The largest increase in revenues for both the second quarter and the six-month period was in the Water, Food and Chemical Supply segment. Revenues from the Membranes and Related Equipment segment grew in both the second quarter and the six-month period due primarily to continuing strength in the sale of ultrapure water systems, particularly to the semiconductor industry. In addition, sales of instrumentation and water desalting equipment increased during both periods. This increase was partially offset by a decline in revenues from the sale of wastewater equipment during both periods. Revenues from the Water, Food and Chemical Supply segment increased in both periods due primarily to the continuing growth of the ultrapure water supply business. Revenue growth also occurred in the food processing business due to the acquisition of Separation Technology, Inc. (STI) in July 1996. Consumer Products revenues increased during both periods, reflecting higher revenues from bottled water and home water conditioners. During the six-month period, revenues from the sales of automobile windshield wash solution decreased as a result of the relatively mild winter in the northeastern United States. Cost of sales as a percentage of revenues for the second quarter was 67.2% in 1997 and 65.3% in 1996. For the six-month period, cost of sales as a percentage of revenues was 67.5% in 1997 and 66.6% in 1996. In the Membranes and Related Equipment segment, cost of sales increased slightly for the second quarter due primarily to increased competitive pressure within the water desalting and related equipment business. For the six-month period, cost of sales as a percentage of revenues decreased due to improvements in the mix of contracts in the ultrapure equipment, wastewater and instrumentation businesses. The increase in the cost of sales as a percentage of revenues during both periods in the Water, Food and Chemical Supply segment resulted primarily from changes in the mix of revenues from contracts within the ultrapure water supply business. The increase also reflected the acquisition of STI, whose manufacturing costs do not yet reflect the synergies we believe will be available through continued integration with other businesses. Cost of sales in the Water, Food and Chemical Supply segment also increased due to continued competitive pressure within the industrial bleach market in the United Kingdom. -7- Operating expenses as a percentage of revenues decreased during the second quarter to 20.7% in 1997 from 22.3% in 1996. For the six-month period, operating expenses as a percentage of revenues decreased to 20.6% in 1997 from 21.5% in 1996. The improvement during both periods reflected higher absorption of relatively fixed operating costs by increased sales volume. Interest expense decreased in the second quarter due to lower borrowings outstanding. The increase in interest expense for the six- month period resulted from a reduction in the amount of capitalized interest costs. Interest income decreased for the second quarter and six-month period due primarily to lower average interest rates and foreign exchange fluctuations. Financial Condition Working capital increased by $7.7 million during the first six months of 1997 and the current ratio increased to 2.3 at June 30, 1997 from 2.1 at December 31, 1996. Cash provided from net income and depreciation totaled $28.1 million during the first six months of 1997 while the primary uses of cash were for additions to property, plant and equipment and principal payments on current debt. Significant capital expenditures were incurred to support growth in bottled water operations, trailers and other "own and operate" facilities. At June 30, 1997, the Company had $20.5 million in cash and cash equivalents, an increase of $8.2 million from December 31, 1996. In addition, short-term borrowings decreased by $5.9 million during the same 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. Recent Accounting Pronouncements In 1997, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 128 ("SFAS128"), "Earnings per Share." SFAS128 simplifies the standards for computing earnings per share ("EPS") and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS and requires dual presentation of basic and diluted EPS on the face of the income statement. SFAS128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Neither basic nor diluted EPS computed in accordance with SFAS128 would be materially different from the Company's primary EPS presented in the financial statements. -8- In 1997, the FASB released Statement of Financial Accounting Standards No. 130 ("SFAS130"), "Reporting Comprehensive Income." SFAS130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. SFAS130 is effective for fiscal years beginning after December 15, 1997. This Statement is a disclosure-only statement. Also in 1997, the FASB released Statement of Financial Accounting Standards No. 131 ("SFAS131"), "Disclosures About Segments of an Enterprise and Related Information." SFAS131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial statements. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS131 is effective for fiscal years beginning after December 15, 1997. This Statement is a disclosure-only statement. 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. -9- PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Stockholders was held on May 8, 1997. (b) Arnaud de Vitry d'Avaucourt, William E. Katz and Mark S. Wrighton were re-elected as Class II Directors for a three-year term, and Daniel I.C. Wang was newly elected as a Class II Director for a three-year term. Continuing as Class III Directors until the 1998 Annual Meeting are William L. Brown, Robert B. Luick, John J. Shields and Allen S. Wyett. Continuing as Class I Directors until the 1999 Annual Meeting are Douglas R. Brown, Arthur L. Goldstein and Carl S. Sloane. Each of the Class II Directors received at least the following votes "for" election and no more than the following votes withheld: Votes for: 13,679,772 Votes withheld: 112,113 (c) The other matters submitted for stockholder approval were: (i) Approval and adoption of the Ionics, Incorporated 1997 Stock Incentive Plan, which replaces the 1979 Stock Option Plan as the primary employee stock incentive plan. Votes for: 9,489,811 Votes against: 1,338,449 Abstentions and broker non-votes: 2,963,625 (ii) Approval of an amendment to the Corporation's 1986 Stock Option Plan for Non-employee Directors to provide for limited transferability of options granted under such Plan. Votes for: 13,038,797 Votes against: 637,865 Abstentions and broker non-votes: 115,223 (iii) The selection of Coopers & Lybrand L.L.P. as the Company's auditors for 1997. Votes for: 13,729,678 Votes against: 30,099 Abstentions and broker non-votes: 32,107 -10- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11- Computation of Earnings Per Share (included on Page 14 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 June 30, 1997. 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. -11- 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: August 14, 1997 By: /s/Arthur L. Goldstein Arthur L. Goldstein Chairman and Chief Executive Officer (duly authorized officer) Date: August 14, 1997 By: /s/Robert J. Halliday Robert J. Halliday Vice President, Finance and Chief Financial Officer -12- EXHIBIT INDEX Sequential Exhibit Page No. 11. Computation of Earnings Per Share 15 27. Financial Data Schedule (for electronic purposes only) -13- EX-11 2 EXHIBIT 11 IONICS, INCORPORATED COMPUTATION OF EARNINGS PER SHARE (Amounts in thousands, except earnings per share)
Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 Net income $ 7,269 $ 6,440 $14,241 $12,525 Earnings per common and common equivalent share: Weighted average number of shares outstanding 15,925 15,459 15,895 15,418 Incremental shares for stock options under treasury stock method 523 638 531 623 Weighted average number of common and common equivalent shares outstanding 16,448 16,097 16,426 16,041 Earnings per common and common equivalent share $ .44 $ .40 $ .87 $ .78 Earnings per common and common equivalent share - assuming full dilution: Weighted average number of shares outstanding 15,925 15,459 15,895 15,418 Incremental shares for stock options under treasury stock method 523 646 531 638 Weighted average number of common and common equivalent shares outstanding - assuming full dilution 16,448 16,105 16,426 16,056 Earnings per common and common equivalent share - assuming full dilution $ .44 $ .40 $ .87 $ .78
-14- /15 EX-27 3
5 1,000 6-MOS DEC-31-1996 JUN-30-1997 20,466 0 94,978 2,448 26,793 148,268 316,041 130,776 381,928 64,366 0 15,944 0 0 291,494 381,928 174,213 174,213 117,546 117,546 0 784 463 20,954 7,014 14,241 0 0 0 14,241 .87 .87
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