EX-13 2 0002.txt ANNUAL REPORT EXHIBIT 13 IONICS, INCORPORATED PORTIONS OF ANNUAL REPORT TO STOCKHOLDERS OF IONICS, INCORPORATED FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 (The following sections constitute an Exhibit to Form 10-K: Management's Discussion and Analysis of Results of Operations and Financial Condition; Report of Independent Accountants; Consolidated Statements of Operations; Consolidated Balance Sheets; Consolidated Statements of Cash Flow; Consolidated Statements of Stockholders' Equity; Notes to Consolidated Financial Statements; Selected Financial Data. ------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion and analysis of results of operations and financial condition refers to the activities of the Company's four business groups, which comprise the Company's reportable operating segments. These groups are the Equipment Business Group (EBG), Ultrapure Water Group (UWG), Consumer Water Group (CWG) and Instrument Business Group (IBG). See Note 16 to the consolidated financial statements for a more detailed description of these four business groups. RESULTS OF OPERATIONS 2000 Compared to 1999 The Company reported a 32.5% increase in revenues and a net loss of $1.9 million in 2000. The decrease in the Company's operating performance resulted primarily from the performance of CWG and EBG. CWG results reflect charges associated with the Company's decision to abandon plans to establish a bleach-manufacturing plant in Elkton, MD. Additionally, CWG results were impacted by inventory adjustments as well as charges relating to accounts receivable and notes receivable in both its domestic Aqua Cool and home water businesses, as well as residual costs associated with a system conversion in its domestic Aqua Cool business. The decrease in EBG operating performance was impacted by a shift in the product mix to lower margin capital projects, primarily the Trinidad project, as well as charges in inventory, accounts receivable and the Company's decision to write down the value of goodwill associated with an acquisition made in 1996. UWG operating performance reflected continued pricing pressure on the capital equipment business, as well as losses on several projects in the Far East. IBG operating performance improved from 1999 to 2000. IBG EBIT increased $0.5 million on increased revenues despite expenses recognized during 2000 for charges associated with relocating the Watertown, MA-based instrument operations to Boulder, CO. These expenses reflected charges for inventory, relocation expenses and accounts receivable. The Company also incurred significant litigation-related costs, primarily attributable to three patent infringement lawsuits brought against the Company. Revenues Consolidated revenues were $474.6 million in 2000, compared with $358.2 million in 1999. The increased revenues resulted from revenue growth across all four of the Company's business groups. EBG revenues increased by $64.5 million in 2000 over 1999, primarily due to increased sales of capital equipment (including the desalination plant project in Trinidad) and partial delivery of a storage system to manage the containment of spent nuclear fuel at a commercial U.S. nuclear energy plant. UWG revenues increased $38.7 million in 2000 from 1999, primarily as a result of increased capital equipment sales to the microelectronics industry, predominantly in the Far East. CWG revenues increased by $11.8 million in 2000 from 1999, reflecting growth in both domestic and European operations for Aqua Cool and home water. IBG revenues increased $1.4 million in 2000 compared to 1999, resulting primarily from increased sales to the microelectronics industry. 1999 Compared to 1998 Revenues Consolidated revenues were $358.2 million in 1999, compared with $351.3 million in 1998. Higher revenues in both EBG and CWG offset revenue declines in UWG and IBG. EBG revenues increased by $10.9 million in 1999 over 1998, primarily due to increased sales of capital equipment, particularly water reuse equipment and desalination equipment. The revenue increase also reflects engineering and design work begun on a contract to manufacture a storage system to manage the containment of spent nuclear fuel. UWG revenues decreased by $17.8 million in 1999 from 1998. UWG primarily serves the microelectronics industry and, to a lesser extent, the power and pharmaceutical industries. As was the case in 1998, revenues in 1999 from the microelectronics industry continued to reflect a significant decline, primarily due to a continuing slowdown in capital spending for new manufacturing facilities. CWG revenues increased by $15.7 million in 1999 from 1998, primarily reflecting continued growth for bottled water and home water products and services. Through the acquisition of Aquarelle SA (now called Aqua Cool France), the Company entered the French bottled water market at the beginning of 1999. The bottled water business also continued to expand its customer base in both the United States and the United Kingdom. Such expansion is being achieved primarily through internal growth and, to a lesser extent, through small acquisitions in geographic areas contiguous to existing locations. In the home water business, the Company opened its first international office, in the Republic of Ireland, during the second quarter of 1999. IBG revenues declined by $1.9 million in 1999 from 1998 levels. In the first half of 1998, IBG benefited from strong demand for the Group's TOC analyzers as a result of the adoption of a new U.S. pharmaceutical industry standard for measuring water purity. Sales of TOC instruments began to increase in the second half of 1999 as compared to the first half of the year, as a result of new European pharmaceutical regulations and new product offerings. Cost of Sales and Operating Expenses 2000 Compared to 1999 Cost of sales as a percentage of revenues was 73.8% and 66.4% in 2000 and 1999, respectively. The increase in cost of sales as a percentage of revenues from 1999 to 2000 includes increases in all four of the business groups and is attributable to several factors. For EBG, cost of sales as a percentage of revenues increased to 80.2% in 2000 from 72.3% in 1999, reflecting a shift in business mix to lower margin capital equipment, increased costs on certain long-term contracts, as well as inventory-related charges and unrecoverable business development expenses primarily relating to the Trinidad project. Cost of sales as a percentage of revenues for UWG increased from 75.5% in 1999 to 80.5% in 2000, reflecting the continued competitive environment in the microelectronics industry for ultrapure water capital equipment, as well as a change in product mix from higher margin service business to lower margin capital equipment sales. Cost of sales as a percentage of revenue increased from 56.0% in 1999 to 61.2% in 2000 for CWG. Factors affecting this increase are primarily attributable to increased fuel and labor costs associated with the bottled water group as well as inventory-related charges that occurred late in 2000. IBG cost of sales as a percentage of revenues increased from 41.9% in 1999 to 44.4% in 2000. The increase in cost of sales in 2000 is primarily attributable to inventory charges incurred in 2000, relating to the relocation of the Watertown, MA-based instrument group to Boulder, CO. Operating expenses as a percentage of revenues increased to 26.3% in 2000 compared to 25.7% in 1999. The increase in 2000 compared to 1999 was attributable to increased legal costs related primarily to the Company's involvement in patent infringement lawsuits, as well as additional charges relating to accounts receivable. Also, the Company recognized asset impairment charges attributable to the Company's decision to abandon plans to commence bleach-manufacturing operations in Elkton, Maryland and to write down the value of goodwill associated with an acquisition made in 1996. 1999 Compared to 1998 Cost of sales as a percentage of revenues was 66.4% and 67.4% in 1999 and 1998, respectively. The improvement in 1999 compared to 1998 is attributable to the decrease in cost of sales as a percentage of revenues for UWG to 75.5% in 1999 from 78.2% in 1998. This decrease resulted primarily from the higher proportion of the Group's revenues in 1999 which were derived from higher margin service business compared to equipment business. Cost of sales as a percentage of revenues for EBG increased to 72.3% in 1999 from 71.5% in 1998. This increase was the result of a shift in the mix of contracts to lower margin equipment business. Cost of sales as a percentage of revenues for IBG increased to 41.9% in 1999 from 39.9% in 1998, primarily due to a higher portion of revenues being derived from Ionics Sievers' lower margin service business. Cost of sales as a percentage of revenues for CWG remained the same in 1999 and 1998 at 56.0%. Overall gross margins for the Company also benefited from the change in mix of the Company's sales. CWG sales grew 19.4% in 1999 (with 44.0% gross margins), while UWG sales declined 16.0% in 1999 (with gross margins of 24.5%). Operating expenses as a percentage of revenues were 25.7% in 1999, an increase from 23.6% in 1998. Increased operating expenses as a percentage of revenues in 1999 as compared to 1998 were attributable to: start-up expenses for several new operating facilities in Asia, the United States and Europe; increased expenses relative to revenues in UWG; expenses relating to the Company's Y2K program; and continued expenses in defense of pending patent infringement litigation. In addition, the higher operating expenses as a percentage of revenues in 1999 reflected the impact of higher revenue growth in CWG, which generally has higher operating expenses as a percentage of revenues than the other business groups. The Company also established additional bad debt reserves in 1999, primarily for UWG and to a lesser extent for CWG and EBG. CWG also incurred additional expenses in 1999 in conjunction with the installation of a new information system for the U.S. Aqua Cool business. Interest, Equity Income and Taxes Interest income was $1.3 million in 2000, $1.0 million in 1999 and $1.1 million in 1998. Interest expense, net of capitalized interest, was $4.9 million, $0.7 million and $0.3 million in 2000, 1999 and 1998, respectively. The increased interest costs reflect the higher average borrowings of the Company in 2000, primarily from increased revenues and resulting accounts receivable increases, as well as borrowings related to certain long-term contracts. Equity income increased to $1.6 million in 2000 from $1.1 million and $0.6 million in 1999 and 1998, respectively. The increase in equity income in 2000 resulted primarily from realization of full-year equity income for two projects located in Mexico that began operation in 1999. The Company's effective tax rate was 34.0% in 2000, 32.0% in 1999 and 32.5% in 1998. The net loss for 2000 was $1.9 million, compared to net income of $19.4 million in 1999 and $21.4 million in 1998. FINANCIAL CONDITION At December 31, 2000, the Company had total assets of $577.5 million, compared to total assets of $500.9 million at December 31, 1999. The increase in assets reflects an increase in accounts receivable of $42.3 million, primarily attributable to the Company's increased sales volume in 2000. Deferred income taxes increased $8.0 million, reflecting future benefits for non-deductible charges in the current year, primarily accruals relating to legal charges. Investments in affiliated companies and long-term notes receivable increased $7.6 million and $7.5 million, respectively, from 1999 to 2000. Both increases were primarily attributable to the Company's investment in the Trinidad desalination project and a loan to the majority equity participant. Additional investments in affiliates relate to a joint venture formed with Toray Industries, Inc. and Mitsui & Co. (U.S.A.), Inc., called Toray Membrane America, Inc. (TMA), to manufacture and sell reverse osmosis membranes. Capital expenditures of $41.2 million were made during 2000 for "own and operate" facilities offset by disposals of fixed assets primarily related to the sale of manufacturing equipment to TMA. Working capital decreased to $85.4 million in 2000 compared to $94.3 million in 1999, and the Company's current ratio decreased to 1.5 in 2000 from 1.9 in 1999. Net cash used by operating activities was $5.3 million in 2000, compared to net cash provided by operating activities of $26.9 million in 1999. The decrease was the result of a net loss in 2000 and increased accounts receivable offset by increased accounts payable and accrued expenses. Accounts receivable increases are attributable to increased sales activities while the increase in accounts payable and accrued expenses are primarily attributable to litigation-related charges accrued late in 2000. Net cash provided by operating activities decreased by $18.9 million in 1999 compared to 1998, primarily due to a decrease in accounts payable and accrued expenses in 1999 from 1998. The relatively high level of accounts payable and accrued expenses at December 31, 1998 resulted from significant purchasing activity late in the year relating to certain large customer contracts. Net cash used by investing activities decreased by $32.5 million in 2000 over 1999. The decrease in 2000 over 1999 reflects lower capital expenditures, as well as the sale of manufacturing equipment to TMA. Net cash used by investing activities increased by $27.5 million in 1999 over 1998. This increase was due primarily to capital expenditures and acquisitions completed in 1999. The Company spent $8.5 million in 1999 in acquiring Ionics Life Sciences, Ionics Agar and Aqua Cool France. The capital expenditures of $61.5 million were generally made to expand the Company's bottled water operations and to expand or build additional manufacturing and "own and operate" facilities. Cash from operations, borrowings of current and long-term debt and proceeds from stock option exercises provided funds for these expenditures. The Company spent $4.5 million for several acquisitions in 2000, compared to $8.5 million in 1999. (See Note 15.) In 2000, net cash provided by financing activities was $53.2 million, a change of $27.1 million from the $26.1 million that was used by financing activities in 1999. The change resulted primarily from the higher level of short-term borrowings at December 31, 2000 from prior year-end. In 1999, net cash provided by financing activities increased $28.9 million as compared to 1998. This change resulted primarily from increased short and long-term borrowings in 1999. The Company maintains several domestic and foreign lines of credit. At December 31, 2000, the Company had domestic credit arrangements under which it could borrow up to a total of $75 million. During 2000, the Company's revolving credit agreement with its principal domestic lender, Fleet National Bank (the Bank), was amended and restated to increase available borrowings to $70 million. On March 1, 2001, this agreement was further amended to increase the amount available for borrowing to $80 million. In consideration of this increase, the Company gave the Bank a "springing lien," which would result in a perfected security interest in the assets of the Company and its domestic subsidiaries (other than real estate and motor vehicles) in the event that the Company (i) defaults under any of its covenants or obligations in the credit agreement, or (ii) fails to pay down outstanding borrowings under the credit agreement to $50 million by May 15, 2001. (See Note 8.) The Company has a second U.S. credit line of $5 million. Foreign lines of credit outstanding at December 31, 2000 were $3.0 million, excluding those for specific project financing. The Company also has several facilities to accommodate its foreign trade requirements. At December 31, 2000, the Company's controlled Barbados affiliate had outstanding borrowings of $9.2 million in connection with the financing of a Barbados desalination facility. (See Note 8.) Although the Company believes that its cash from operations, lines of credit and foreign trade facilities are adequate to meet its currently anticipated operational needs, the Company is currently investigating additional sources of financing to augment current funding sources in order to pursue large project development and to replace a portion of its domestic credit line. Significant expenditures in 2001 are anticipated to include investments in additional "own and operate" facilities and the continued expansion of all four business groups. Also during 2001, construction will continue on the Trinidad desalination facility owned by Desalination Company of Trinidad and Tobago Ltd. (Desalcott), in which the Company has a 40% equity interest. During 2000 and through the first quarter of 2001, the Company loaned $10 million to the 60% equity owner, Hafeez Karamath Engineering Services Ltd. (HKES), as the source of HKES' equity contribution, in addition to the $10 million contributed by the Company for its 40% equity interest. Desalcott entered into a "bridge loan" agreement with a Trinidad bank providing $60 million in construction financing. However, the bridge loan plus the $20 million equity provided to Desalcott will not provide sufficient funds to complete construction of the project. Although Desalcott has received proposals for long-term debt financing, there is no assurance that such financing will be obtained on terms acceptable to Desalcott, or prior to completion of construction. If permanent financing is not obtained prior to the completion of construction, Desalcott will be required to obtain additional funds to complete construction, and the Company has committed to lend to Desalcott up to $10 million under such circumstances. Inflationary increases in material and labor costs remained moderate during the last three years. The Company has been working to offset such cost increases by redesigning its equipment to reduce costs. To the extent permitted by the competitive environment, the Company has raised prices where appropriate. ACCOUNTING PRONOUNCEMENTS In June 1999, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (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. Accordingly, the Company adopted the provisions of SFAS No. 133 for the fiscal year 2001 which commenced on January 1, 2001. This Statement should not have a material effect on the Company's financial statements. In December 1999, the Securities and Exchange Commission released Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. This bulletin summarizes certain views of the staff on applying generally accepted accounting principles to revenue recognition in financial statements. The staff believes that revenue is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the seller's price to the buyer is fixed or determinable; and collectibility is reasonably assured. The Company believes that its current revenue recognition policy complies with the Commission's guidelines. FORWARD-LOOKING INFORMATION Derivative Instruments The Company had no foreign exchange contracts outstanding at December 31, 2000. The Company has no other derivative financial instruments or other financial and commodity instruments for which fair value disclosure would be required under SFAS No. 119. The Company holds no investment securities that would require disclosure of market risk. Market Risk The Company's primary market risk exposures are in the areas of interest rate risk and foreign currency exchange rate risk. The Company's investment portfolio of cash equivalents is subject to interest rate fluctuations, but the Company believes this risk is not material due to the short-term nature of these investments. At December 31, 2000, the Company had $75.0 million of short-term debt and $10.9 million of long-term debt outstanding. The major portion of this debt has variable interest rates and, therefore, interest rate risk. However, a hypothetical increase of 10% in these interest rates for a one-year period would result in additional interest expense after taxes that would not be material in the aggregate. The Company's net foreign currency exchange loss was $0.8 million in 2000 compared to a gain of $11,000 in 1999. The Company's exposure to foreign currency exchange rate fluctuations is moderated by the fact that the operations of its international subsidiaries are primarily conducted in their respective local currencies. Also, in certain situations, the Company will consider entering into forward exchange contracts to mitigate the impact of foreign currency exchange fluctuations. 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 involved in litigation; regulations and laws affecting business in each of the Company's markets; market risk factors, as described above under "Derivative Instruments" and "Market Risk;" and other risks and uncertainties described from time to time in the Company's filings with the Securities and Exchange Commission. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Ionics, Incorporated: In our opinion, the accompanying consolidated statements of operations and the related consolidated balance sheets, consolidated statements of cash flows, and consolidated statements of stockholders' equity, present fairly, in all material respects, the financial position of Ionics, Incorporated and its subsidiaries (the "Company"), at December 31, 2000 and December 31, 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP Boston, Massachusetts March 19, 2001
Consolidated Statements of Operations ---------------------------------------------------------------------------------------------------------------------- For the years ended December 31 Amounts in Thousands, Except per Share Amounts 2000 1999 1998 ---------------------------------------------------------------------------------------------------------- Revenues: Equipment Business Group $ 205,181 $ 140,655 $129,751 Ultrapure Water Group 132,236 93,562 111,349 Consumer Water Group 108,324 96,569 80,884 Instrument Business Group 28,810 27,431 29,342 ---------------------------------------------------------------------------------------------------------- 474,551 358,217 351,326 ------------------------------------------------- Costs and expenses: Cost of sales of Equipment Business Group 164,556 101,744 92,826 Cost of sales of Ultrapure Water Group 106,498 70,636 87,039 Cost of sales of Consumer Water Group 66,327 54,052 45,261 Cost of sales of Instrument Business Group 12,794 11,500 11,716 Research and development 7,980 7,066 6,635 Selling, general and administrative 113,222 84,892 76,299 Impairment of long-lived assets 3,398 - - ---------------------------------------------------------------------------------------------------------- 474,775 329,890 319,776 ------------------------------------------------- (Loss) income from operations (224) 28,327 31,550 Interest income 1,286 961 1,058 Interest expense (4,909) (668) (331) Equity income 1,623 1,111 606 ---------------------------------------------------------------------------------------------------------- (Loss) income before income taxes and minority interest (2,224) 29,731 32,883 Benefit (provision) for income taxes 756 (9,522) (10,680) ---------------------------------------------------------------------------------------------------------- (Loss) income before minority interest (1,468) 20,209 22,203 Minority interest expense 402 848 817 ---------------------------------------------------------------------------------------------------------- Net (loss) income $ (1,870) $ 19,361 $ 21,386 ========================================================================================================== (Loss) earnings per basic share $ (0.12) $ 1.20 $ 1.33 ========================================================================================================== (Loss) earnings per diluted share $ (0.12) $ 1.18 $ 1.31 ========================================================================================================== Shares used in basic earnings per share calculations 16,243 16,148 16,077 Shares used in diluted earnings per share calculations 16,243 16,388 16,357
The accompanying notes are an integral part of these financial statements.
Consolidated Balance Sheets --------------------------------------------------------------------------------------------- For the years ended December 31 --------------------------------------------------------------------------------------------- Dollars in Thousands, Except Share Amounts 2000 1999 --------------------------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 25,497 $ 13,169 Short-term investments 1,105 195 Notes receivable, current 4,741 5,374 Accounts receivable 162,711 120,407 Receivables from affiliated companies 792 1,231 Inventories 34,701 33,880 Other current assets 16,443 14,816 Deferred income taxes 12,749 4,730 --------------------------------------------------------------------------------------------- Total current assets 258,739 193,802 --------------------------------------------------------------------------------------------- Notes receivable, long-term 17,502 10,027 Investments in affiliated companies 18,310 10,752 Property, plant and equipment, net 222,843 227,250 Other assets 60,072 59,075 --------------------------------------------------------------------------------------------- Total assets $ 577,466 $ 500,906 ============================================================================================= Liabilities and Stockholders' Equity Current liabilities: Notes payable and current portion of long-term debt $ 75,045 $ 25,514 Accounts payable 56,014 41,867 Other current liabilities 42,304 32,094 --------------------------------------------------------------------------------------------- Total current liabilities 173,363 99,475 --------------------------------------------------------------------------------------------- Long-term debt and notes payable 10,911 8,351 Deferred income taxes 30,334 26,803 Other liabilities 5,997 4,425 Commitments and contingencies Stockholders' equity: Common stock, par value $1, authorized shares: 55,000,000 in 2000 and 1999; issued and outstanding: 16,369,029 in 2000 and 16,201,483 in 1999. 16,369 16,201 Additional paid-in capital 162,114 159,288 Retained earnings 197,616 199,304 Accumulated other comprehensive income (19,238) (12,905) Unearned compensation - (36) --------------------------------------------------------------------------------------------- Total stockholders' equity 356,861 361,852 --------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 577,466 $ 500,906 ============================================================================================= The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Cash Flows --------------------------------------------------------------------------------------------------------------------- For the years ended December 31 --------------------------------------------------------------------------------------------------------------------- Dollars in Thousands 2000 1999 1998 --------------------------------------------------------------------------------------------------------------------- Operating activities: Net (loss) income $ (1,870) $19,361 $21,386 Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities: Depreciation and amortization 30,948 26,464 25,519 Amortization of intangibles 2,847 2,333 1,695 Impairment of long-lived assets 3,398 - - Provision for losses on accounts and notes receivable 5,204 2,643 1,319 Deferred income tax (benefit) provision (2,092) 3,723 2,478 Compensation expense on restricted stock awards 36 108 108 Changes in assets and liabilities, net of effects of businesses acquired: Notes receivable (7,913) (3,539) (168) Accounts receivable (48,579) (11,405) (14,695) Inventories (1,240) (2,081) (2,773) Deferred income taxes and other current assets (8,924) (11,566) (1,461) Investments in affiliates (7,695) (4,232) (2,815) Accounts payable and accrued expenses 22,758 (1,640) 20,267 Income taxes 6,913 5,234 (218) Other 878 1,502 (4,851) --------------------------------------------------------------------------------------------------------------------- Net cash (used) provided by operating activities (5,331) 26,905 45,791 ---------------------------------------------- Investing activities: Additions to property, plant and equipment (41,211) (61,515) (42,196) Disposals of property, plant and equipment 11,464 2,177 1,882 Sale and maturity of short-term investments - 164 137 Purchase of short-term investments (931) - - Acquisitions, net of cash acquired (4,491) (8,513) - --------------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (35,169) (67,687) (40,177) ---------------------------------------------- Financing activities: Principal payments on current debt (97,891) (10,393) (15,339) Proceeds from borrowings of current debt 145,508 28,762 9,716 Principal payments on long-term debt (2,827) (756) (8) Proceeds from borrowings of long-term debt 5,666 7,093 419 Proceeds from stock option plans 2,734 1,424 2,447 --------------------------------------------------------------------------------------------------------------------- Net cash provided (used) by financing activities 53,190 26,130 (2,765) ---------------------------------------------- Effect of exchange rate changes on cash (362) (949) 134 ---------------------------------------------- Net change in cash and cash equivalents 12,328 (15,601) 2,983 Cash and cash equivalents at end of prior year 13,169 28,770 25,787 --------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of current year $ 25,497 $13,169 $28,770 =====================================================================================================================
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Stockholders' Equity Accumulated Additional Other Total Common Stock Paid-In Retained Comprehensive Unearned Stockholders' Dollars in Thousands Shares Par Value Capital Earnings Income Compensation Equity ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1997 16,001,285 $16,001 $154,479 $158,557 $(9,126) $(252) $319,659 Comprehensive income: Net income - - - 21,386 - - 21,386 Translation adjustments, net of tax of $(619) - - - - 1,237 - 1,237 --------- Total comprehensive income 22,623 -------- Stock options exercised 115,364 116 2,331 - - - 2,447 Tax benefit of stock option activity - - 761 - - - 761 Amortization of unearned compensation - - - - - 108 108 ------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1998 16,116,649 16,117 157,571 179,943 (7,889) (144) 345,598 Comprehensive income: Net income - - - 19,361 - - 19,361 Translation adjustments, net of tax of $2,497 - - - - (5,016) - (5,016) --------- Total comprehensive income 14,345 -------- Stock options exercised 82,033 82 1,258 - - - 1,340 Tax benefit of stock option activity - - 377 - - - 377 Shares issued to directors 2,801 2 82 - - - 84 Amortization of unearned compensation - - - - - 108 108 ------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1999 16,201,483 16,201 159,288 199,304 (12,905) (36) 361,852 Comprehensive income: Net loss - - - (1,870) - - (1,870) Translation adjustments, net of tax of $2,227 - - - - (6,333) - (6,333) ------- Total comprehensive loss (8,203) ------- Stock options exercised 163,200 164 2,570 - - - 2,734 Tax benefit of stock option activity - - 156 - - - 156 Shares issued to directors 4,346 4 100 - - - 104 Restricted stock shares issued 17,937 18 - - - - 18 Restricted stock shares forfeited (17,937) (18) - - - - (18) Adjustment of equity ownership - - - 182 - - 182 Amortization of unearned compensation - - - - - 36 36 ------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 2000 16,369,029 $16,369 $162,114 $197,616 $(19,238) $ - $356,861 ===============================================================================================================================
The accompanying notes are an integral part of these financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Significant Accounting Policies Nature of Operations The Company is involved worldwide in the manufacture and sale of membranes, equipment for the purification, concentration, treatment and analysis of water and wastewater, in the supply of purified water, food and chemical products, and in the sale of bottled water and home water purifiers. Principal markets include the United States, Europe and Asia, as well as other international markets. Basis of Presentation Certain prior year amounts have been reclassified to conform to the current year presentation with no impact on net income. Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly and majority-owned subsidiaries and controlled affiliates. All significant intercompany accounts and transactions have been eliminated. Investments in affiliated companies, representing non-controlling ownership interests, are accounted for under the equity method. Revenue Recognition Product revenues are recorded upon shipment, and service revenues are recorded as the services are performed. Interest revenues on consumer water equipment loans are recognized over the life of the loans. Interest earned on customer notes receivable, totaling $1,728,000, $1,686,000 and $1,470,000 in 2000, 1999 and 1998, respectively, is included in revenues. Most equipment leases to customers are accounted for as operating leases. Therefore, rental revenues are recognized over the life of the lease, and the cost of the equipment is depreciated over its useful life. Some leases are accounted for as sales-type leases wherein the present value of the lease revenues and costs are recognized at the time of shipment of the product. Revenues from large contracts are recognized using the percentage of completion method of accounting in the proportion that costs incurred bear to total estimated costs at completion. Losses, if any, are provided for in the period in which the loss is determined. In December 1999, the Securities and Exchange Commission released Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. This bulletin summarizes certain views of the staff on applying generally accepted accounting principles to revenue recognition in financial statements. The staff believes that revenue is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the seller's price to the buyer is fixed or determinable; and collectibility is reasonably assured. The Company believes that its current revenue recognition policy complies with the Commission's guidelines. Cash Equivalents Short-term investments with a maturity of 90 days or less from the date of acquisition are classified as cash equivalents. Investments Management determines the appropriate classification of its investment in debt securities at the time of purchase. Debt securities which the Company has the ability and positive intent to hold to maturity are classified accordingly and carried at cost. The Company is not involved in activities classified as the trading of investments. Notes Receivable Notes receivable have been reported at their estimated realizable value. The allowance for uncollectible notes receivable totaled $186,000 and $213,000 at December 31, 2000 and 1999, respectively. Inventories Inventories are carried at the lower of cost or market, principally on the first-in, first-out basis. Property, Plant and Equipment Property, plant and equipment is recorded at cost. When an asset is retired or sold, any resulting gain or loss is included in the results of operations. Interest capitalized as property, plant and equipment amounted to $320,000, $957,000 and $616,000 in 2000, 1999 and 1998, respectively. In general, depreciation is computed on a straight-line basis over the expected lives of the assets, as follows: Classification Depreciation Lives -------------------------------------------------------------------------------- Buildings and improvements 10 - 40 years Machinery and equipment, including supply equipment 3 - 25 years Other 3 - 12 years In certain situations the units of production method is utilized in order to achieve a more appropriate matching of revenues and expenses. The Company's policy is to depreciate processing plants, other than leased equipment, over the shorter of their useful lives or the term of the corresponding supply contracts. Asset Impairment The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. (See Note 6.) Goodwill Goodwill is included in other assets and represents the unamortized difference between acquisition cost and the fair value of net assets acquired in the purchase of various entities. Goodwill is amortized on a straight-line basis over its estimated useful life, which generally is a period ranging from 10 to 40 years. The Company evaluates its goodwill for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. (See Note 6.) Foreign Exchange Assets and liabilities of foreign affiliates and subsidiaries are translated at year-end exchange rates, and the related statements of operations are translated at average exchange rates during the year. Translation gains and losses are accumulated net of income tax as a separate component of stockholders' equity. Some transactions of the Company and its subsidiaries are made in currencies different from their own. Gains and losses from these transactions are included in income as they occur. Net foreign currency transaction (losses)/gains included in income before income taxes and minority interest totaled $(782,000), $11,000 and $(28,000) for 2000, 1999 and 1998, respectively. Income Taxes Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts using enacted rates in effect for the year in which the differences are expected to reverse. Earnings Per Share Basic earnings per share is computed based on the weighted-average number of shares outstanding. Diluted earnings per share is computed based on the weighted-average number of common shares outstanding while giving effect to all potentially dilutive common shares that were outstanding during the period. Use of Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Derivative Instruments and Hedging Activities In June 1999, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (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. Accordingly, the Company will adopt the provisions of SFAS No. 133 for the fiscal year 2001 which commenced on January 1, 2001. This Statement should not have a material effect on the Company's financial statements. Note 2. Consolidated Balance Sheet Details Dollars in Thousands 2000 1999 ------------------------------------------------------------------------- Raw materials $ 21,061 $ 20,216 Work in process 8,264 8,913 Finished goods 5,376 4,751 ------------------------------------------------------------------------- Inventories $ 34,701 $ 33,880 ========================================================================= Land $ 8,738 $ 8,352 Buildings 48,773 44,858 Machinery and equipment 312,138 299,303 Other, including furniture, fixtures and vehicles 48,470 49,119 ------------------------------------------------------------------------- 418,119 401,632 Accumulated depreciation (195,276) (174,382) ------------------------------------------------------------------------- Property, plant and equipment, net $222,843 $227,250 ========================================================================= Goodwill $ 64,829 $ 62,631 Accumulated amortization (12,650) (9,164) Other 7,893 5,608 ------------------------------------------------------------------------- Other assets $ 60,072 $ 59,075 ========================================================================= Customer deposits $ 4,883 $ 2,671 Accrued commissions 2,002 2,362 Accrued expenses 35,419 27,061 ------------------------------------------------------------------------- Other current liabilities $ 42,304 $ 32,094 ========================================================================= Note 3. Supplemental Schedule of Cash Flow Information Dollars in Thousands 2000 1999 1998 ------------------------------------------------------------------------- Cash payments for interest and income taxes: Interest $ 4,662 $ 1,740 $ 685 Taxes $ 6,974 $ 7,534 $ 8,481 Note 4. Accounts Receivable Dollars in Thousands 2000 1999 -------------------------------------------------------------- Billed receivables $112,065 $ 80,647 Unbilled receivables 55,710 43,167 Allowance for doubtful accounts (5,064) (3,407) --------------------------------------------------------------- Accounts receivable $162,711 $120,407 ============================================================== Unbilled receivables represent the excess of revenues recognized on percentage of completion contracts over amounts billed. These amounts will become billable as the Company achieves contractual milestones. Substantially all of the unbilled amounts at December 31, 2000 are expected to be billed during 2001. Billed receivables include retainage amounts of $6,007,000 and $1,416,000 at December 31, 2000 and 1999, respectively. Substantially all of the retainage amounts are collectible within one year. Note 5. Investments in Affiliated Companies The Company's investments in the following foreign affiliates are accounted for under the equity method. The principal business activities of these foreign affiliates involve the production, sale and distribution of bottled or treated water and the sale of equipment and replacement parts. Ownership Affiliate Percentage ------------------------------------------------------------------------------- Aqua Cool Kuwait - Kuwait 49% Aqua Cool Saudi Arabia - Saudi Arabia 40% Aqua Design Ltd. - Cayman Islands 39% Desalination Company of Trinidad and Tobago Ltd. - Trinidad 40% Grupo Empresarial de Mejoramiento Ambiental, S. de R.L. de C.V. - Mexico 20% Jalal-Ionics, Ltd. - Bahrain 40% Mega a.s. - Czech Republic 20% Toray Membrane America, Inc. - MA 43% Watlington Waterworks, Ltd. - Bermuda 26% Yuasa-Ionics Co., Ltd. - Japan 50% The Company's percentage ownership interest in a foreign affiliate may vary from its interest in the earnings of such affiliate. Activity in investments in affiliated companies: Dollars in Thousands 2000 1999 1998 ---------------------------------------------------------------------------- Investments at end of prior year $ 10,752 $ 7,057 $3,983 Equity in earnings 1,623 1,111 606 Distributions received (2,092) (475) (396) Cumulative translation adjustments (172) (540) 172 Reclassification of Agrinord S.r.l. resulting from change in ownership interest (see Note 15) (1,389) - - Reclassification of Watlington Waterworks from other assets resulting from change in ownership interest - - 1,208 Additional investments 9,588 3,599 1,484 ---------------------------------------------------------------------------- Investments at end of current year $ 18,310 $10,752 $7,057 ============================================================================ At December 31, 2000, the Company's equity in the total assets and in the total liabilities of its foreign affiliates was $31,922,000 and $13,612,000, respectively. The Company's equity in the 2000 total revenues of these affiliates was $12,599,000. Note 6. Impairment of Long-Lived Assets In accordance with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," the Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. During the fourth quarter of 2000, the Company wrote down approximately $3.4 million of impaired long-lived assets. The write-down primarily included approximately $2.0 million of bleach-manufacturing equipment and $0.8 million of goodwill associated with an acquisition made in 1996. The $2.0 million write-down of bleach-manufacturing equipment is attributable to the Company's decision in the fourth quarter of 2000 to abandon plans to commence bleach-manufacturing operations in Elkton, Maryland. The $0.8 million impairment of goodwill was indicated by the operating record of the related business unit. In both cases, the Company recognized impairment when the future undiscounted cash flows of the assets were estimated to be insufficient to recover its related carrying value. Note 7. Commitments and Contingencies Litigation The Company is involved in the normal course of its business in various litigation matters, some of which are in the pre-trial discovery stages. The Company believes generally that it has meritorious defenses and that none of the pending matters will have an outcome material to the financial condition or results of operations of the Company. The Company was notified in 1992 that it is a potentially responsible party (PRP) at a Superfund site, Solvent Recovery Services of New England in Southington, Connecticut (the "SRS Site"). Ionics' share of assessments to date for site work totals approximately $65,000. The United States Environmental Protection Agency ("EPA") has delayed issuing a decision regarding clean-up methods and costs. While it is too soon to predict the scope and cost of the final remedy that the EPA will select, based upon the large number of PRPs identified, the Company's small volumetric ranking (approximately 0.5%) and the identities of the larger PRPs, the Company believes that its liability in this matter will not have a material effect on the Company's financial position or results of operations. By letter dated March 29, 2000, the Company and other PRPs for the SRS Site were notified that they may also have potential liability with respect to the Angelillo Property Superfund Site, also in Southington, Connecticut (the "Angelillo Site"), because hazardous materials were allegedly shipped from the SRS Site to the Angelillo Site. It is too early to determine what liability, if any, the Company may incur arising out of the EPA's claim with respect to the Angelillo Site. On March 27, 1998, the Company was served with a summons and complaint in connection with a lawsuit now captioned United States Filter Corporation, U.S. Filter/Ionpure, Inc., IP Holding Company, Millipore Corporation and Millipore Investment Holdings Limited v. Ionics, Incorporated, filed in the U.S. District Court, District of Massachusetts (Boston). Plaintiffs allege that the Company is infringing a certain reissue patent, which was issued on March 10, 1998, by making, selling, offering to sell and using the Company's electrodeionization (EDI) systems within the United States. On June 10, 1999, the Company was served by the plaintiffs in the pending suit with a second summons and complaint alleging infringement of six EDI-related patents issued earlier than the reissue patent which is the subject of the first lawsuit. The Company has been vigorously defending plaintiffs' infringement claims in these lawsuits, and believes that it has valid defenses to such claims. Trial has been scheduled in the first case, and the second case is still in the discovery stages. On October 14, 2000, the Company was served with a summons and complaint in connection with a lawsuit captioned United States Filter Corporation and U.S. Filter/Ionpure, Inc. v. Ionics, Incorporated, filed in the U.S. District Court, District of Massachusetts (Boston). Plaintiffs allege infringement of a U.S. patent involving a certain aspect of reverse osmosis technology. This case is in the pre-discovery stage. The Company is engaged in settlement discussions with United States Filter Corporation with respect to all pending patent infringement litigation matters, although there is no assurance that settlement will be achieved. The Company established a reserve in the fourth quarter of 2000 that it believes will be sufficient to cover future charges in connection with the resolution of the litigation. Other The Company has a 40% equity interest in the Desalination Company of Trinidad and Tobago Ltd. (Desalcott) which owns the Trinidad desalination facility currently under construction. During 2000 and through the first quarter of 2001, the Company loaned $10 million to the 60% equity owner, Hafeez Karamath Engineering Services Ltd. (HKES), as the source of HKES' equity contribution, in addition to the $10 million contributed by the Company for its 40% equity interest. Desalcott entered into a "bridge loan" agreement with a Trinidad bank providing $60 million in construction financing. However, the bridge loan plus the $20 million equity provided to Desalcott will not provide sufficient funds to complete construction of the project. Although Desalcott has received proposals for long-term debt financing, there is no assurance that such financing will be obtained on terms acceptable to Desalcott, or prior to completion of construction. If permanent financing is not obtained prior to completion of construction, Desalcott will be required to obtain additional funds to complete construction, and the Company has committed to lend to Desalcott up to $10 million under such circumstances. Note 8. Long-Term Debt and Notes Payable Dollars in Thousands 2000 1999 ------------------------------------------------------------------------ Borrowings outstanding $85,956 $33,865 Less installments due within one year 75,045 25,514 ------------------------------------------------------------------------ Long-term debt and notes payable $10,911 $ 8,351 ======================================================================== Maturities of borrowings outstanding for the five years ending December 31, 2001 through 2005 are approximately $75,045,000, $1,336,000, $1,182,000, $1,210,000 and $1,251,000, respectively. At December 31, 2000, the Company had domestic credit arrangements under which it could borrow up to a total of $75 million. During 2000, the Company's revolving credit agreement with its principal domestic lender, Fleet National Bank (the Bank), was amended and restated to increase available borrowings to $70 million. On March 1, 2001, this agreement was further amended to increase the amount available for borrowing to $80 million. In consideration of this increase, the Company gave the Bank a "springing lien," which would result in a perfected security interest in the assets of the Company and its domestic subsidiaries (other than real estate and motor vehicles) in the event that the Company (i) defaults under any of its covenants or obligations in the credit agreement, or (ii) fails to pay down outstanding borrowings under the credit agreement to $50 million by May 15, 2001. The credit agreement does not permit the Company to pay cash dividends. Borrowings from the Bank under the credit agreement as amended bear interest at 0.25% above the prime rate or from 1% to 2.25% above the London Interbank Offered Rate (LIBOR), at the Company's option (the precise interest rate depends on the Company's leverage ratio). At December 31, 2000, the prime rate was 9.5% and LIBOR was 6.48%. The Company had outstanding borrowings of $65,000,000 and $14,500,000 against its domestic lines of credit at December 31, 2000 and 1999, respectively. Under foreign lines of credit, excluding those related to specific project financing, the Company can borrow an aggregate of approximately $11.9 million at interest rates of LIBOR plus 1/2% (6.98% at December 31, 2000), at the lending bank's Base Cost of Funds plus 1 3/4% (7.0% at December 31, 2000) or at lending rates of 7.3% and 8.0%. The Company had outstanding borrowings of $3.0 million and $6.4 million against these lines of credit at December 31, 2000 and 1999, respectively. The Company has arranged lines of credit totaling $10.0 million for its controlled affiliate in Barbados to provide project financing for a desalination plant at LIBOR plus 2.0% (8.69% at December 31, 2000) for its $6.4 million line, at a fixed rate of 8.0% for its $2.7 million line and at a fixed rate of 8.75% for its $0.9 million line. These lines of credit are payable in equal quarterly installments over a ten-year period beginning in 2000. The controlled affiliate had outstanding borrowings of $9.2 million and $7.2 million against these lines of credit at December 31, 2000 and 1999, respectively. The Company utilizes other short-term bank loans to finance working capital requirements for certain business units. The Company's various loan and note agreements contain certain financial covenants relating to working capital, cash flow, capital expenditures and consolidated tangible net worth. The weighted-average interest rate on all borrowings at December 31, 2000 and 1999 was 8% and 7%, respectively. Although the Company believes that its cash from operations, lines of credit and foreign trade facilities are adequate to meet its currently anticipated operational needs, the Company is currently investigating additional sources of financing to augment current funding sources in order to pursue large project development and to replace a portion of its domestic credit line. Note 9. Income Taxes The components of domestic and foreign income before income taxes and minority interest were as follows: Dollars in Thousands 2000 1999 1998 ---------------------------------------------------------------------------- U.S. $(16,974) $15,317 $21,468 Non-U.S. 14,750 14,414 11,415 ---------------------------------------------------------------------------- (Loss) income before income taxes and minority interest $ (2,224) $29,731 $32,883 ============================================================================ The provision for income taxes consisted of the following: Dollars in Thousands 2000 1999 1998 -------------------------------------------------------------------------- Federal $ 3,264 $(1,353) $ (4,925) Foreign (5,304) (3,814) (2,386) State 704 (632) (891) --------------------------------------------------------------------------- Current provision (1,336) (5,799) (8,202) --------------------------------------------------------------------------- Federal 555 (4,176) (2,317) Foreign 1,546 318 116 State (9) 135 (277) --------------------------------------------------------------------------- Deferred benefit (provision) 2,092 (3,723) (2,478) --------------------------------------------------------------------------- Benefit (provision) for income taxes $ 756 $(9,522) $(10,680) =========================================================================== Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2000, the tax effects of the temporary differences were: Deferred Deferred Tax Dollars in Thousands Tax Assets Liabilities ---------------------------------------------------------------------------- Depreciation $ - $20,253 Goodwill amortization - 1,189 Inventory valuation 1,654 - Bad debt reserves 1,130 - Legal 1,842 - Accrued commissions 488 - Profit on sales to foreign subsidiaries 862 - Insurance accruals 745 - U.S. tax on unrepatriated earnings - 7,535 Alternative minimum tax 2,307 - Foreign withholding taxes on undistributed earnings - 1,684 Foreign deferred liabilities, net - 3,305 Tax effect of currency translation loss 7,013 - Net operating loss carryforwards 5,642 - Miscellaneous 3,512 4,715 ---------------------------------------------------------------------------- 25,195 38,681 Valuation allowance for deferred tax assets (1,800) - ---------------------------------------------------------------------------- Deferred income taxes $23,395 $38,681 ============================================================================ The United States statutory corporate tax rate is reconciled to the Company's effective tax rate as follows: 2000 1999 1998 ---------------------------------------------------------------------------- U.S. Federal statutory rate 34.0% 35.0% 35.0% Foreign Sales Corporation (33.9) (2.1) (2.1) Goodwill 34.3 1.0 0.4 State income taxes, net of federal tax benefit (20.5) 1.7 2.3 Foreign income taxed at different rates 7.2 (3.8) (3.0) Non-deductible charges 13.9 0.4 0.3 Other, net (1.0) (0.2) (0.4) ----------------------------------------------------------------------------- Effective tax rate 34.0% 32.0% 32.5% ============================================================================= At December 31, 2000, the Company had unused tax loss carryforward benefits of $5,642,000. Domestic tax loss carryforwards of $5,158,000 include $3,912,000 which expire in fiscal years 2004 to 2009 and $1,246,000 which expires in 2020. Foreign tax loss carryforwards of $484,000 expire beginning in 2005. Because certain provisions of the tax law may limit the utilization of these benefits, the Company has established $1,800,000 as a valuation allowance at December 31, 2000 and 1999. In the event this valuation allowance is no longer considered necessary, the valuation allowance will reduce the related entity's goodwill. The remaining unreserved portion is considered to be realizable. $2,112,000 of the net unused tax loss carryforward benefit of $3,842,000 has been included in other assets at December 31, 2000. The Company has elected not to provide tax on certain undistributed earnings of its foreign subsidiaries which it considers to be permanently reinvested. The cumulative amount of such unprovided taxes was approximately $6,426,000, $5,065,000 and $3,932,000 as of December 31, 2000, 1999 and 1998, respectively. Note 10. Stockholders' Equity The Company adopted the disclosure-only provision of SFAS No. 123, "Accounting for Stock-Based Compensation," in 1996. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 2000, 1999 and 1998: expected volatility of 37.4% in 2000, 30.5% in 1999 and 27.3% in 1998; weighted-average, risk-free interest rates of 6.25%, 5.27% and 5.41% in 2000, 1999 and 1998, respectively; and expected lives of five years. No dividends are assumed. The weighted-average fair value of options granted during 2000, 1999 and 1998 was $9.65, $11.07 and $10.43, respectively. At December 31, 2000, the Company had the stock-based compensation plans described below. The Company applies Accounting Principles Board Opinion 25 in accounting for its plans. Accordingly, any difference between the option price and the fair market value of the stock at the date of grant is charged to operations over the expected period of benefit to the Company. Had compensation cost for the Company's plans been determined based on the fair value of the options at the grant dates for awards under those plans consistent with the method of SFAS No. 123, the Company's net income and earnings per share would have been adjusted. On a pro forma basis, net loss as reported for 2000 of $1.9 million would have been $4.9 million, net income as reported for 1999 of $19.4 million would have been $16.6 million and 1998 net income of $21.4 million would have been $19.3 million. Diluted earnings per share as reported for 2000 of $(0.12) would have been $(0.30), 1999 diluted earnings per share of $1.18 would have been $1.01 and 1998 diluted earnings per share of $1.31 would have been $1.18. Basic earnings per share as reported for 2000 of $(0.12) would have been $(0.30), 1999 basic earnings per share of $1.20 would have been $1.03 and 1998 basic earnings per share of $1.33 would have been $1.20. The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future awards, which are anticipated. SFAS No. 123 does not apply to awards prior to 1995. Under the 1979 Stock Option Plan (the "1979 Plan"), stock options (only non-qualified stock options after February 1989) were granted to officers and other key employees of the Company. Options granted under the 1979 Plan are immediately exercisable, are subject to repurchase rights that lapse generally over a five-year period, and have a term of ten years and one day. Effective May 8, 1997, the 1979 Plan was replaced by the 1997 Stock Incentive Plan (the "1997 Plan"), and no additional options will be granted under the 1979 Plan. At December 31, 2000 and 1999, respectively, no shares were reserved for issuance of additional options under the 1979 Plan. Under the 1997 Plan, incentive stock options, non-qualified stock options, and long-term performance awards may be awarded to officers and other key employees as well as to consultants. The 1997 Plan contains an automatic addition provision under which a number of shares equal to two percent (2%) of the Company's outstanding stock were added to the 1997 Plan at the end of each of the four fiscal year-ends of the Company following adoption of the 1997 Plan, commencing December 31, 1997 and ending December 31, 2000. At December 31, 2000 and 1999, there were 527,256 and 835,950 shares, respectively, reserved for issuance of additional options under the 1997 Plan after giving effect to the automatic addition provision. Options granted under the 1997 Plan vest over a five-year period and have a term of ten years. Under the 1986 Stock Option Plan for Non-Employee Directors (the "1986 Plan"), options are granted automatically at a price not less than the fair market value of the stock at the date of grant. The options become fully exercisable after a six-month period, are exercisable only during certain "window" periods, and have a term of ten years and one day. As of December 31, 2000 and 1999, 36,000 and 54,000 shares, respectively, were reserved for issuance of additional options under the 1986 Plan. The Company has adopted a restricted stock plan (the "1994 Plan") under which shares of common stock may be granted to officers and other key employees of the Company. Restrictions on the sale of such common stock typically lapse over a five-year vesting period. In 2000, 17,937 shares were granted under the restricted stock plan to an executive officer. The executive officer subsequently terminated his employment with the Company in 2000, and the restricted stock was forfeited pursuant to the 1994 Plan. No shares were issued under the 1994 Plan in 1999 or 1998. As of December 31, 2000, a total of 280,178 shares remain reserved for issuance. On August 19, 1998, the Company adopted the 1998 Non-Employee Directors' Fee Plan ("Fee Plan"). The Fee Plan permits non-employee directors to elect to receive payment of their annual retainer fee in cash or in common stock. The valuation of the common stock is based on the last reported sales price of the common stock on the New York Stock Exchange on the trading date next preceding the date of the Board meeting at which payment will be made. Annual retainer fees are paid in two equal installments during the year. A total of 92,853 shares were reserved for issuance under the Fee Plan as of December 31, 2000. The Company reserved 91,200 shares for options granted in 1990 to certain non-employees in exchange for a previously granted option to purchase 50% of the shares of a Spanish subsidiary of the Company which was merged with Ionics Iberica, S.A. in 1992. During 1995, an additional 30,000 options were granted to the same persons in connection with an increase in production capacity and projected increases in the sale of water under a long-term water sale agreement between Ionics Iberica, S.A. and the local water utility. The fair value of these options is being charged to operations over the 10-year vesting period. During 2000, the original 91,200 options were exercised. A summary of the status of the Company's stock option plans as of December 31, 2000, 1999 and 1998 and changes during the years ending on those dates is presented below:
2000 1999 1998 ------------------------------------------------------------------ ------------------- ------------------ Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Options in Thousands Options Price Options Price Options Price ------------------------------------------------------------------ ------------------- ------------------ Outstanding at end of prior year 2,734 $30.04 2,796 $29.70 2,035 $29.31 Granted 941 22.28 80 30.27 956 29.81 Exercised (163) 16.74 (82) 16.31 (115) 21.25 Canceled (286) 30.70 (60) 33.25 (80) 33.48 ---------------------------------------------------------------------------------------------------------------- Outstanding at end of current year 3,226 $28.38 2,734 $30.04 2,796 $29.70 Options exercisable at year-end 1,835 $30.86 1,918 $30.29 1,814 $29.89
The following table summarizes the information about stock options outstanding at December 31, 2000:
Options in Thousands Options Outstanding Options Exercisable Weighted- Average Weighted Weighted- Number Remaining Average Number Average Range of Outstanding Contract Exercise Exercisable Exercise Exercise Prices at 12/31/00 Years Price at 12/31/00 Price $19.75-$26.50 1,667 6.1 $22.09 842 $22.13 $27.00-$29.88 903 7.5 29.33 353 29.31 $30.00-$33.81 29 8.0 32.54 21 33.28 $42.38-$48.25 627 5.8 43.52 619 43.54 ----------------------------------------------------------------------------------------------------------- $19.75-$48.25 3,226 6.4 $28.38 1,835 $30.86
The Company has a Section 401(k) stock savings plan under which 150,000 shares have been registered with the Securities and Exchange Commission for purchase on behalf of employees. Shares are normally acquired for the plan in the open market. Through December 31, 2000, no shares had been issued under the plan. The Company has adopted a Renewed Stockholder Rights Plan designed to protect stockholders against abusive takeover tactics. Each share of common stock now carries one right. Each right entitles the holder to purchase from the Company one share of common stock (or in certain circumstances, to receive cash, property or other securities of the Company) at a purchase price of $175 subject to adjustment. In certain circumstances, rights become exercisable for common stock (or a combination of cash, property or other securities of the Company) worth twice the exercise price of the right. The rights are not exercisable until the occurrence of certain events as defined in the Renewed Stockholder Rights Plan. The rights may be redeemed by the Company at $.01 per right at any time unless certain events occur. Unless redeemed earlier, the rights, which have no voting power, expire on August 19, 2007. Note 11. Earnings Per Share Calculations (EPS)
Dollars in Thousands, Except Per Share Amounts For the Year Ended 2000 For the Year Ended 1999 For the Year Ended 1998 -------------------------------------------------------- ----------------------- ----------------------- Net Per Share Net Per Share Net Per Share Loss Shares Amount Income Shares Amount Income Shares Amount ----------------------------------------------------------- -------------------------- -------------------------- Basic EPS (Loss) income available to common stockholders $ (1,870) 16,243 $(0.12) $19,361 16,148 $1.20 $21,386 16,077 $1.33 Effect of dilutive stock options - - - - 240 (0.02) - 280 (0.02) ---------------------------------------------------------------------------------------------------------------------------- Diluted EPS $ (1,870) 16,243 $(0.12) $19,361 16,388 $1.18 $21,386 16,357 $1.31 ===========================================================================================================================
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 December 31, 2000, 1999 and 1998 were 1,649,000, 1,661,000, and 729,000, respectively. The number of options that were antidilutive at December 31, 2000 include 175,000 shares whose dilutive effect was included as a result of the Company's net loss. Note 12. Operating Leases The Company leases equipment, primarily for industrial water purification and bottled water coolers, to customers through operating leases. The original cost of this equipment was $116,152,000 and $118,495,000 at December 31, 2000 and 1999, respectively. The accumulated depreciation for such equipment was $53,497,000 and $46,964,000 at December 31, 2000 and 1999, respectively. At December 31, 2000, future minimum rentals receivable under noncancelable operating leases in the years 2001 through 2005 and later were approximately $24,187,000, $20,800,000, $19,290,000, $16,313,000, $17,591,000 and $102,557,000, respectively. The Company leases facilities and personal property under various operating leases. Future minimum payments due under lease arrangements are as follows: $4,845,000 in 2001, $3,363,000 in 2002, $2,950,000 in 2003, $2,359,000 in 2004 and $1,815,000 in 2005. Rent expense under these leases was approximately $5,695,000, $4,368,000 and $4,428,000 for 2000, 1999 and 1998, respectively. Note 13. Profit-Sharing and Pension Plans The Company has a contributory profit-sharing plan (defined contribution plan) which covers employees of the Company who are members of the Fabricated Products group of the Bridgeville Division. Company contributions to the defined contribution plan are made from the group's pretax profits, may vary from 8% to 15% of participants' compensation, and are allocated to participants' accounts in proportion to each participant's respective compensation. Company contributions were $300,000, $281,000 and $254,000 in 2000, 1999 and 1998, respectively. The Company also has a contributory defined benefit pension plan for its other domestic employees. Benefits are based on years of service and the employee's average compensation. The Company's funding policy is to contribute annually an amount that can be deducted for federal income tax purposes. The plan's assets are comprised of money market funds, equity funds, short-term bonds and intermediate-term bonds. The following table sets forth the defined benefit plan's funded status and amounts recognized in the Company's balance sheets at December 31, 2000 and 1999: Dollars in Thousands 2000 1999 ------------------------------------------------------------------------------ Change in Benefit Obligation Benefit obligation as of prior year-end $14,464 $15,296 Service cost 1,055 1,239 Interest cost 1,107 1,186 Assumption changes 1,932 (4,444) Actuarial (gain) loss (792) 2,097 Expenses paid (115) (105) Benefits paid (1,852) (805) ------------------------------------------------------------------------------- Projected benefit obligation as of year-end $15,799 $14,464 ============================================================================== Change in Plan Assets Fair value of plan assets as of prior year-end $16,258 $14,145 Actual return on plan assets 632 (178) Employer contributions - 3,201 Expenses paid (115) (105) Benefits paid (1,852) (805) ------------------------------------------------------------------------------- Fair value of plan assets as of year-end $14,923 $16,258 ============================================================================== Funded Status Funded status as of year-end $ (876) $ 1,794 Unrecognized transition asset (150) (203) Unrecognized prior service cost 375 412 Unrecognized net actuarial loss 2,824 870 ------------------------------------------------------------------------------ Prepaid benefit cost as of year-end $ 2,173 $ 2,873 ============================================================================== The expense of the defined benefit plan was as follows: Dollars in Thousands 2000 1999 1998 -------------------------------------------------------------------------- Components of Net Periodic Benefit Cost Service cost $1,055 $1,239 $1,347 Interest cost 1,107 1,186 987 Expected return on plan assets (1,445) (1,376) (1,153) Amortization of transition asset (53) (53) (53) Amortization of prior service cost 37 37 37 Recognized net actuarial loss - 155 1 -------------------------------------------------------------------------- Net periodic benefit cost $ 701 $1,188 $1,166 ========================================================================== The Company determined the defined benefit plan's funded status and amounts recognized in the Company's balance sheet and the expense of the defined benefit plan using the following assumptions: expected return on plan assets of 9.0% at December 31, 2000, 1999 and 1998; rate of compensation increase of 5.0% at December 31, 2000 and 4.75% at December 31, 1999 and 1998; and a discount rate of 7.50%, 8.25% and 6.75% at December 31, 2000, 1999 and 1998, respectively. The Ionics Section 401(k) Stock Savings Plan is available to substantially all U.S. employees of the Company. Employees may contribute from 1% to 12% of compensation subject to certain limits. The Company matches 50% of employee contributions allocated to the Company's common stock up to 6% of their salary. The Company recognized expense of $716,000, $735,000 and $778,000 in 2000, 1999 and 1998, respectively, under this plan. The Company does not provide post-retirement health care to its employees or any other significant post-retirement benefits other than those described above. Note 14. Financial Instruments Off-Balance-Sheet Risk The Company issues letters of credit and performance bonds as guarantees for various performance and bid obligations. Approximately $96.3 million and $72.9 million of these guarantees were outstanding at December 31, 2000 and 1999, respectively. Approximately 41% of the guarantees outstanding at December 31, 2000 are scheduled to expire in 2001. These instruments were executed with creditworthy institutions. The Company periodically enters into foreign exchange contracts to hedge certain operational and balance sheet exposures against changes in foreign currency exchange rates. Because the impact of movements in currency exchange rates on foreign exchange contracts offsets the related impact on the underlying items being hedged, these instruments do not subject the Company to risk that would not otherwise result from changes in currency exchange rates. The Company had no foreign exchange contracts outstanding at December 31, 2000 and 1999. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, investments, trade accounts receivable and notes receivable. The credit risk of cash equivalents and investments is low as the funds are primarily invested in U.S. money market investments and in Spanish Government securities. The Company's concentrations of credit risk with respect to trade accounts receivable and notes receivable is considered low. The Company's customer base is spread across many different industries and geographies, and the Company obtains guaranteed letters of credit for many of its foreign orders. Fair Value of Financial Instruments The carrying amounts of cash equivalents and investments closely approximate their fair values as these items have relatively short maturities and are highly liquid. Based on market information, the carrying amounts of notes receivable and debt approximate their fair values. Investments in Securities Realized gains and losses from the sale of debt and equity securities during fiscal 2000 and 1999 were not significant. Long-term investments, maturing in 2001, 2003, 2004 and 2005, which the Company intends to hold to maturity have been recorded at a net cost of $2,551,000 and $2,228,000 at December 31, 2000 and 1999, respectively. At December 31, 2000 and 1999, the Company also had short-term investments of $1,105,000 and $195,000, respectively, which the Company intends to hold to maturity. The cost of these investments approximates fair value. Note 15. Acquisitions 2000 Purchases Agrinord S.r.l. At the end of 1999, the Company owned a 50% interest in Agrinord S.r.l., an Italian company in the wastewater treatment business, and accounted for the investment using the equity method. In January 2000, the Company acquired an additional 25% interest in Agrinord S.r.l. for a total ownership interest of 75%. The original 50% interest was transferred out of investments in affiliates, and, together with the additional 25% interest, was accounted for under the purchase method with the results of Agrinord S.r.l. included from January 2000. The total cost of the investment was approximately $2 million, and goodwill of approximately $1.7 million is being amortized on a straight-line basis over a 20-year period. Pro forma results of operations have not been presented as the effect of this acquisition on the financial statements was not material. Miller Spring Water In January 2000, the Company acquired substantially all the assets of Miller Spring Water for approximately $1.6 million. The acquisition was accounted for under the purchase method with the results of Miller Spring Water included from January 1, 2000. Goodwill of approximately $1.2 million is being amortized on a straight-line basis over a 10-year period. Pro forma results of operations have not been presented as the effect of this acquisition on the financial statements was not material. Miller Spring Water is a domestic company in the five-gallon bottled water market. O'Viv Sarl In February 2000, the Company acquired a 100% interest in O'Viv Sarl for approximately $0.8 million. The acquisition was accounted for under the purchase method with the results of O'Viv Sarl included from February 2000. Goodwill of approximately $0.6 million is being amortized on a straight-line basis over a 10-year period. Pro forma results of operations have not been presented as the effect of this acquisition on the financial statements was not material. O'Viv Sarl is a French company in the five-gallon bottled water market. Coffee de Juan In March 2000, the Company acquired substantially all the assets of Coffee de Juan for approximately $1.3 million. The acquisition was accounted for under the purchase method with the results of Coffee de Juan included from March 2000. Goodwill of approximately $1.1 million is being amortized on a straight-line basis over a 10-year period. Pro forma results of operations have not been presented as the effect of this acquisition on the financial statements was not material. Coffee de Juan is a domestic company in the office coffee service business. Prior Years' Purchases M2 Innovative Solutions, Inc. In January 1999, the Company acquired a 100% interest in M2 Innovative Solutions, Inc. (now called Ionics Life Sciences, Inc.) for approximately $2.6 million. The acquisition was accounted for under the purchase method with the results of Ionics Life Sciences included from January 1, 1999. Goodwill of approximately $2.6 million is being amortized on a straight-line basis over 20 years. Pro forma results of operations have not been presented as the effect of this acquisition on the financial statements was not material. Ionics Life Sciences is a supplier of ultrapure water products and services, including validated pharmaceutical systems, to the life sciences industry. Aquarelle SA In January 1999, the Company acquired a 100% interest in Aquarelle SA (now called Aqua Cool France) for approximately $4.4 million. The acquisition was accounted for under the purchase method with the results of Aqua Cool France included from January 1, 1999. Goodwill of approximately $4 million is being amortized on a straight-line basis over a 20-year period. Pro forma results of operations have not been presented as the effect of this acquisition on the financial statements was not material. Aqua Cool France is a French company in the five-gallon bottled water market. Agar Technologies Process and Environmental Control, Ltd. In January 1999, the Company acquired a 100% interest in Agar Technologies Process and Environmental Control, Ltd. (now called Ionics Agar Environmental Ltd.) for approximately $1.5 million. The acquisition was accounted for under the purchase method with the results of Ionics Agar included from January 1, 1999. Goodwill of approximately $1.9 million is being amortized on a straight-line basis over 20 years. Pro forma results of operations have not been presented as the effect of this acquisition on the financial statements was not material. Ionics Agar is an Israeli company which produces instruments that monitor, detect and measure oil on water surfaces. Note 16. Segment Information In 1998, the Company adopted SFAS No. 131. At the end of 1998, the Company changed from three reportable segments to four reportable "business group" segments corresponding to a "business group" structure, summarized below, which was put into place in the latter part of 1998. Equipment Business Group - equipment, supply, "own and operate" and related services for seawater desalination, brackish water desalination, water and wastewater treatment and food and chemical processing, for municipalities and communities, and for the petrochemical, nuclear and electric utilities, pulp and paper, chemical processing and related industries. Ultrapure Water Group - equipment, supply, "own and operate" and related services for the production of ultrapure water for the semiconductor, power and pharmaceutical industries. Consumer Water Group - equipment and supply services for the consumer market including bottled water, over and under-the-sink point-of-use devices, carbon filtering media, point-of-entry systems for treating the entire home water supply, household bleach, and other cleaning products. Instrument Business Group - instruments for the analysis and on-line monitoring of certain constituents, impurities or contaminants in water or wastewater for industrial and municipal customers. The accounting policies of the four business group segments are the same as those described in "Significant Accounting Policies." The Company evaluates the performance of each business group segment and considers allocation of resources to it based on earnings before interest, taxes, and minority interest (EBIT), and the evaluation of EBIT with respect to capital employed. The business group structure reflects the segmentation of the product lines, services, and markets within defined areas of management responsibility. Four business group managers, one for each of the reportable segments, are directly accountable to, and maintain regular contact, with the Chief Executive Officer to discuss operating activities, financial results, forecasts and plans. The table on the following page summarizes the Company's operations by the four business group segments and "Corporate." Corporate includes legal and research and development expenses not allocated to the business groups and certain corporate administrative and insurance costs. Geographic Areas Revenues are reflected in the country from which the sales are made. Long-lived assets include all long-term assets except for notes receivable. No foreign country's revenues to unaffiliated customers or long-lived assets were material. Included in the United States segment are export sales of approximately 15%, 16% and 23% for 2000, 1999 and 1998, respectively. Including these U.S. export sales, the percentages of total revenues attributable to activities outside the U.S. were 42%, 44% and 47% in 2000, 1999 and 1998, respectively. Information about the Company's operations by geographic area follows: United Dollars in Thousands States International Total 2000 Revenue - unaffiliated customers $323,071 $151,480 $474,551 Long-lived assets 174,063 127,162 301,225 ------------------------------------------------------------------------------ 1999 Revenue - unaffiliated customers $239,591 $118,626 $358,217 Long-lived assets 192,416 104,661 297,077 ------------------------------------------------------------------------------ 1998 Revenue - unaffiliated customers $242,363 $108,963 $351,326 Long-lived assets 170,528 85,678 256,206 ------------------------------------------------------------------------------
Equipment Ultrapure Consumer Instrument Business Water Water Business Dollars in Thousands Group Group Group Group Corporate Total ----------------------------------------------------------------------------------------------------------------------------------- 2000 Revenue - unaffiliated customers $205,181 $132,236 $108,324 $28,810 $ - $474,551 Inter-segment transfers 6,087 3,444 - 3,088 (12,619) - Income (loss) from operations 8,338 3,177 (1,541) 2,598 (12,796) (224) Equity income (loss) 976 (20) 667 - - 1,623 Earnings before interest, taxes and minority interest (EBIT) 9,314 3,157 (874) 2,598 (12,796) 1,399 Interest income - - - - - 1,286 Interest expense - - - - - (4,909) Loss before income taxes and minority interest - - - - - (2,224) Capital employed 152,319 144,174 164,819 34,126 (52,621) 442,817 Identifiable assets 250,241 138,321 163,281 18,454 (11,141) 559,156 Investments in affiliated companies 15,394 44 2,872 - - 18,310 Depreciation and amortization 11,688 7,595 13,270 1,098 144 33,795 Capital expenditures 8,924 12,800 17,034 766 1,687 41,211 =================================================================================================================================== 1999 Revenue - unaffiliated customers $140,655 $ 93,562 $ 96,569 $27,431$ - $358,217 Inter-segment transfers 2,214 593 - 1,926 (4,733) - Income from operations 14,507 3,842 10,869 2,148 (3,039) 28,327 Equity income 444 - 667 - - 1,111 Earnings before interest, taxes and minority interest (EBIT) 14,951 3,842 11,536 2,148 (3,039) 29,438 Interest income - - - - - 961 Interest expense - - - - - (668) Income before income taxes and minority interest - - - - - 29,731 Capital employed 177,506 106,190 140,697 30,124 (58,800) 395,717 Identifiable assets 209,798 111,128 153,069 17,657 (1,498) 490,154 Investments in affiliated companies 7,503 - 3,249 - - 10,752 Depreciation and amortization 9,889 6,532 11,088 931 357 28,797 Capital expenditures 28,327 14,213 17,059 1,389 527 61,515 =================================================================================================================================== 1998 Revenue - unaffiliated customers $129,751 $111,349 $ 80,884 $29,342$ - $351,326 Inter-segment transfers 3,916 437 - 1,673 (6,026) - Income from operations 11,129 7,668 10,686 5,408 (3,341) 31,550 Equity income 78 - 528 - - 606 Earnings before interest, taxes and minority interest (EBIT) 11,207 7,668 11,214 5,408 (3,341) 32,156 Interest income - - - - - 1,058 Interest expense - - - - - (331) Income before income taxes and minority interest - - - - - 32,883 Capital employed 158,189 88,715 122,382 26,879 (42,175) 353,990 Identifiable assets 178,197 102,292 135,880 12,587 16,110 445,066 Investments in affiliated companies 4,081 - 2,976 - - 7,057 Depreciation and amortization 10,554 6,117 9,751 524 268 27,214 Capital expenditures 13,625 14,536 12,429 1,310 296 42,196 ===================================================================================================================================
SELECTED FINANCIAL DATA Statement of Operations Data Dollars in Thousands, Except Per Share Amounts 2000 % 1999 % 1998 % 1997 % 1996 % -------------------------------------------------------------------------------------------------------------------------------- Revenues $474,551 100.0 $358,217 100.0 $351,326 100.0 $352,469 100.0 $326,662 100.0 (Loss) income before income taxes and minority interest (2,224) (0.5) 29,731 8.3 32,883 9.4 43,222 12.3 39,556 12.1 Net (loss) income (1,870) (0.4) 19,361 5.4 21,386 6.1 28,329 8.0 26,503 8.1 (Loss) earnings per basic share (0.12) 1.20 1.33 1.78 1.71 (Loss) earnings per diluted share (0.12) 1.18 1.31 1.73 1.65
Balance Sheet Data Dollars in Thousands 2000 1999 1998 1997 1996 --------------------------------------------------------------------------------------------- Current assets $258,739 $193,802 $187,093 $165,850 $144,422 Current liabilities 173,363 99,475 85,934 66,012 68,173 --------------------------------------------------------------------------------------------- Working capital 85,376 94,327 101,159 99,838 76,249 Total assets 577,466 500,906 452,123 406,736 378,589 Long-term debt and notes payable 10,911 8,351 1,519 804 2,132 Stockholders' equity 356,861 361,852 345,598 319,659 292,217
Selected Quarterly Financial Data (Unaudited) Earnings Earnings (Loss) (Loss) Earnings Earnings Dollars in Thousands, Net Per Per Per Per Except Per Gross Income Basic Diluted Gross Net Basic Diluted Share Amounts Revenues Profit (Loss) Share Share Revenues Profit Income Share Share ----------------------------------------------------------------------------------------------------------------------------------- 2000 1999 First Quarter $102,795 $ 30,546 $ 3,562 $0.22 $0.22 First Quarter $ 87,416 $ 29,164 $ 4,672 $0.29 $0.29 Second Quarter 102,804 32,687 4,215 0.26 0.26 Second Quarter 84,568 29,669 5,104 0.32 0.31 Third Quarter 124,886 33,938 2,926 0.18 0.18 Third Quarter 86,671 30,712 5,369 0.33 0.33 Fourth Quarter 144,066 27,205 (12,573) (0.77) (0.77) Fourth Quarter 99,562 30,740 4,216 0.26 0.26 ----------------------------------------------------------------------------------------------------------------------------------- $474,551 $124,376 $ (1,870) $(0.12) $(0.12) $358,217 $120,285 $19,361 $1.20 $1.18 ===================================================================================================================================
Common Stock Price Range 2000 High Low 1999 High Low ------------------------------------------------------------------------------- First Quarter $37 11/16 $24 1/2 First Quarter $35 3/4 $24 7/8 Second Quarter 30 5/8 20 5/8 Second Quarter 36 11/16 29 3/8 Third Quarter 34 1/16 20 13/16 Third Quarter 36 15/16 27 1/4 Fourth Quarter 29 7/16 18 3/16 Fourth Quarter 33 1/4 25 1/2