-----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, SwstdH1bmBLKCL44zw0Pk6odyffq6ae5MaRd9OxcNo8K6dqRaFhgdM3kxb9BozBn 4ws5lnW56mD8UESuc6GHzw== /in/edgar/work/0000052466-00-000019/0000052466-00-000019.txt : 20001115 0000052466-00-000019.hdr.sgml : 20001115 ACCESSION NUMBER: 0000052466-00-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IONICS INC CENTRAL INDEX KEY: 0000052466 STANDARD INDUSTRIAL CLASSIFICATION: [3559 ] IRS NUMBER: 042068530 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07211 FILM NUMBER: 764285 BUSINESS ADDRESS: STREET 1: 65 GROVE ST CITY: WATERTOWN STATE: MA ZIP: 02172 BUSINESS PHONE: 6179262500 10-Q 1 0001.txt FORM 10-Q 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. 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)
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: 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.
IONICS, INCORPORATED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands, except share and par value amounts) September 30, December 31, 2000 1999 ---------------- --------------- ASSETS Current assets: 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.
IONICS, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Nine Months Ended September 30, --------------------------------------- Operating activities: 2000 1999 ------------- ------------- 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.
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:
(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 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 ============ ============ ============ ============ ============ ==============
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. 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.
(Amounts in thousands) Three Months Ended Nine Months Ended September 30, September 30, ------------------------------- ------------------------------- 2000 1999 2000 1999 ------------- ------------ ------------- ------------- 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 ============= ============ ============= =============
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).
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) 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
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. 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. 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. 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. 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. PART II - OTHER INFORMATION Item 5. Other Information - ------- ----------------- 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 - ------- -------------------------------- (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. 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 ----------------- ---------------------- Arthur L. Goldstein Chairman and Chief Executive Officer (duly authorized officer) Date: November 14, 2000 By: /s/Anthony DiPaola ----------------- ------------------ Anthony DiPaola Vice President and Corporate Controller (principal accounting officer) EXHIBIT INDEX Exhibit Sequentially Numbered Page - ------- -------------------------- 27.0 Financial Data Schedule 16 (for electronic purposes only) EX-27 2 0002.txt FDS --
5 (Replace this text with the legend) 0000052466 Exhibit 27 1,000 9-MOS DEC-31-2000 JAN-1-2000 SEP-30-2000 20,444 377 160,875 (4,143) 38,022 243,909 426,488 (188,703) 563,264 157,529 0 0 0 16,286 350,918 563,264 330,485 330,485 233,314 233,314 0 2,479 3,196 15,869 5,824 10,703 0 0 0 10,703 .66 .65
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