-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OkqGNUixR87QlCr3SztuCtB3oaN4rRtHzQcfpNh7Z4esCU4Gv4bFuyvVDrnmAd1A KLkDvb+L6C2XD8qarrCD9w== 0000052466-99-000021.txt : 19990816 0000052466-99-000021.hdr.sgml : 19990816 ACCESSION NUMBER: 0000052466-99-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IONICS INC CENTRAL INDEX KEY: 0000052466 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 042068530 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07211 FILM NUMBER: 99688310 BUSINESS ADDRESS: STREET 1: 65 GROVE ST CITY: WATERTOWN STATE: MA ZIP: 02172 BUSINESS PHONE: 6179262500 10-Q 1 FORM 10Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-7211 IONICS, INCORPORATED (exact name of registrant as specified in its charter) MASSACHUSETTS 04-2068530 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 65 Grove Street, Watertown, Massachusetts 02472 (Address of principal executive offices) (Zip Code) _____________ _______(617) 926-2500 ______ (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports, and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class ______ Outstanding at June 30, 1999 Common Stock, Par Value $1 16,135,609 Shares IONICS, INCORPORATED FORM 10-Q FOR QUARTER ENDED JUNE 30, 1999 INDEX Page No. Part I - Financial Information Consolidated Statements of Operations 2 Consolidated Balance Sheets 3 Consolidated Statements of Cash Flows 4 Notes to Consolidated Financial Statements 5 Management's Discussion and Analysis of Results of Operations and Financial Condition 8 Part II - Other Information 13 Signatures 14 Exhibit Index 15 Exhibit 27 - Financial Data Schedule 16 (for electronic purposes only) - 1 - PART I - FINANCIAL INFORMATION IONICS, INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, _ _June 30, 1999 1998 1999 1998 Net revenue: Equipment Business Group $30,740 $30,413 $ 65,179 $ 64,171 Ultrapure Water Group 23,292 21,076 47,825 39,858 Consumer Water Group 23,672 20,117 45,531 38,613 Instrument Business Group 6,864 8,661 13,449 16,599 84,568 80,267 171,984 159,241 Costs and expenses: Cost of sales of Equipment Business Group 21,736 22,689 46,451 46,120 Cost of sales of Ultrapure Water Group 17,448 16,026 35,686 30,032 Cost of sales of Consumer Water Group 12,851 11,182 25,134 21,480 Cost of sales of Instrument Business Group 2,864 3,549 5,880 6,503 Research and development 1,771 1,739 3,639 3,383 Selling, general and administrative 20,616 18,277 40,725 36,154 77,286 73,462 157,515 143,672 Income from operations 7,282 6,805 14,469 15,569 Interest income 404 150 512 301 Interest expense (205) (72) (335) (191) Equity income 216 147 379 258 Income before income taxes and minority interest 7,697 7,030 15,025 15,937 Provision for income taxes 2,479 2,222 4,861 5,118 Income before minority interest 5,218 4,808 10,164 10,819 Minority interest expense 114 188 388 191 Net income $ 5,104 $ 4,620 $ 9,776 $ 10,628 Basic earnings per share $ 0.32 $ 0.29 $ 0.61 $ 0.66 Diluted earnings per share $ 0.31 $ 0.28 $ 0.60 $ 0.65 Shares used in basic earnings per share calculation 16,133 16,074 16,130 16,051 Shares used in diluted earnings per share calculation 16,374 16,459 16,238 16,435 The accompanying notes are an integral part of these financial statements. - 2 -
IONICS, INCORPORATED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands, except share and par value amounts)
June 30, December 31, 1999 1998 ASSETS Current assets: Cash and cash equivalents $ 19,187 $ 28,770 Short-term investments 192 359 Notes receivable, current 3,769 4,144 Accounts receivable 109,897 111,844 Receivables from affiliated companies 1,544 2,329 Inventories: Raw materials 21,146 19,164 Work in process 6,950 8,523 Finished goods 4,206 3,862 32,302 31,549 Other current assets 7,963 8,098 Total current assets 174,854 187,093 Notes receivable, long-term 8,788 8,824 Investments in affiliated companies 8,267 7,057 Property, plant and equipment: Land 8,351 8,194 Buildings 45,756 41,594 Machinery and equipment 270,745 259,885 Other, including furniture, fixtures and vehicles 45,177 44,267 370,029 353,940 Less accumulated depreciation (166,646) (158,257) 203,383 195,683 Other assets 61,798 53,466 Total assets $457,090 $452,123 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 13,546 $ 6,873 Accounts payable 27,566 37,361 Customer deposits 3,614 3,965 Accrued commissions 1,955 2,203 Accrued expenses 34,461 31,884 Taxes on income 6,454 3,648 Total current liabilities 87,596 85,934 Long-term debt and notes payable 1,797 1,519 Deferred income taxes 13,737 17,036 Other liabilities 2,419 2,036 Stockholders' equity: Common stock, par value $1, 55,000,000 authorized shares; issued: 16,135,609 in 1999 and 16,116,649 in 1998 16,136 16,117 Additional paid-in capital 158,020 157,571 Retained earnings 189,719 179,943 Accumulated other comprehensive income (12,244) (7,889) Unearned compensation (90) (144) Total stockholders' equity 351,541 345,598 Total liabilities and stockholders' equity $457,090 $452,123 The accompanying notes are an integral part of these financial statements. - 3 -
IONICS, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Six Months Ended June 30, 1999 1998 Operating activities: Net income $ 9,776 $10,628 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,107 13,284 Provision for losses on accounts and notes receivable 193 477 Compensation expense on restricted stock awards 54 54 Changes in assets and liabilities: Notes receivable (450) (111) Accounts receivable 2,101 474 Inventories (1,572) (3,258) Other current assets 121 (451) Investments in affiliates (1,580) (1,058) Accounts payable and accrued expenses (8,170) 520 Income taxes 1,792 622 Other (2,175) (2,628) Net cash provided by operating activities 14,197 18,553 Investing activities: Additions to property, plant and equipment (22,143) (16,878) Disposals of property, plant and equipment 936 578 Acquisitions, net of cash acquired (8,394) - Sale/(purchase) of short-term investments 167 (487) Net cash used by investing activities (29,434) (16,787) Financing activities: Principal payments on current debt (6,715) (11,718) Proceeds from issuance of current debt 13,096 2,519 Principal payments on long-term debt (672) (5) Proceeds from issuance of long term debt 355 274 Proceeds from stock option plans 402 2,019 Net cash provided/(used) by financing activities 6,466 (6,911) Effect of exchange rate changes on cash (812) (135) Net change in cash and cash equivalents (9,583) (5,280) Cash and cash equivalents at beginning of period 28,770 25,787 Cash and cash equivalents at end of period $19,187 $20,507 The accompanying notes are an integral part of these financial statements. - 4 -
IONICS, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of Ionics, Incorporated (the "Company"), the accompanying consolidated financial statements contain all adjustments (consisting of only normal, recurring accruals) necessary to present fairly the consolidated financial position of the Company as of June 30, 1999 and December 31, 1998, the consolidated results of its operations for the three months and six months ended June 30, 1999 and 1998 and the consolidated cash flows for the six months then ended. 2. The consolidated results of operations of the Company for the three and six months ended June 30, 1999 and 1998 are not necessarily indicative of the results of operations to be expected for the full year. 3. Reference is made to the Notes to Consolidated Financial Statements appearing in the Company's 1998 Annual Report as filed on Form 10-K with the Securities and Exchange Commission. There have been no significant changes in the information reported in those Notes, other than from the normal business activities of the Company, and there have been no changes which would, in the opinion of management, have a materially adverse effect upon the Company. 4. Certain prior year amounts have been reclassified to conform to the current year presentation with no impact on net income. 5. Earnings per share (EPS) calculations:
(Amounts in thousands, except per share amounts) For the three months ended June 30, _ 1999 _ 1998 Net Per Share Net Per Share Income Shares Amount Income Shares Amount Basic EPS Income available to common stockholders $ 5,104 16,133 $ 0.32 $ 4,620 16,074 $ 0.29 Effect of dilutive stock options - 241 - 385 Diluted EPS $ 5,104 16,374 $ 0.31 $ 4,620 16,459 $ 0.28
For the six months ended June 30, 1999 1998 Net Per Share Net Per Share Income Shares Amount Income Shares Amount Basic EPS Income available to common stockholders $ 9,776 16,130 $ 0.61 $10,628 16,051 $ 0.66 Effect of dilutive stock options - 108 - 384 Diluted EPS $ 9,776 16,238 $ 0.60 $10,628 16,435 $ 0.65 - 5 -
6. Comprehensive Income The Company has adopted the Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes standards for the reporting and display of comprehensive income and its components in general purpose financial statements for the year ended December 31, 1998. The table below sets forth "comprehensive income" as defined by SFAS No. 130 for the three month and six month periods ended June 30, 1999 and 1998.
(Amounts in thousands) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 Net income $ 5,104 $ 4,620 $ 9,776 $10,628 Other comprehensive income, net of tax: Translation adjustments (1,405) (289) (4,355) (483) Comprehensive income $ 3,699 $ 4,331 $ 5,421 $10,145
7. In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." At the end of 1998, the Company changed from three reportable segments to four reportable "business group" segments corresponding to a "business group" structure which was put into place in the latter part of 1998. Segment information for the prior year has been restated to reflect this change. As of June 30, 1999, no changes have been made to the basis of segmentation or the measurement of profit or loss from that which was reported in the Company's 1998 Annual Report as filed on Form 10-K with the Securities and Exchange Commission, and there were no material changes to total assets by segment. The following table summarizes the Company's operations by the four business group segments and "Corporate."
For the three months ended June 30, Equipment Ultrapure Consumer Instrument Business Water Water Business (Dollars in thousands) Group Group Group Group Corporate Total 1999 Revenue - unaffiliated customers $ 30,740 $ 23,292 $ 23,672 $ 6,864 $ - $ 84,568 Inter-segment transfers 546 - - 383 (929) - Gross profit 9,004 5,844 10,821 4,000 - 29,669 Research and development (1,771) Selling, general and administrative (20,616) Interest income 404 Interest expense (205) Equity income 216 Income before income taxes and minority interest 7,697 - 6 -
For the three months ended June 30, Equipment Ultrapure Consumer Instrument Business Water Water Business (Dollars in thousands) Group Group Group Group Corporate Total 1998 Revenue - unaffiliated customers $ 30,413 $ 21,076 $ 20,117 $ 8,661 $ - $80,267 Inter-segment transfers 462 602 - 367 (1,431) - Gross profit 7,724 5,050 8,935 5,112 - 26,821 Research and development (1,739) Selling, general and administrative (18,277) Interest income 150 Interest expense (72) Equity income 147 Income before income taxes and minority interest 7,030
For the six months ended June 30, Equipment Ultrapure Consumer Instrument Business Water Water Business (Dollars in Thousands) Group Group Group Group Corporate Total 1999 Revenue - unaffiliated customers $65,179 $47,825 $45,531 $13,449 $ - $171,984 Inter-segment transfers 865 197 - 577 (1,639) - Gross profit 18,728 12,139 20,397 7,569 - 58,833 Research and development (3,639) Selling, general and administrative (40,725) Interest income 512 Interest expense (335) Equity income 379 Income before income taxes and minority interest 15,025 1998 Revenue - unaffiliated customers $64,171 $39,858 $38,613 $16,599 $ - $159,241 Inter-segment transfers 1,208 679 - 563 (2,450) - Gross profit 18,051 9,826 17,133 10,096 - 55,106 Research and development (3,383) Selling, general and administrative (36,154) Interest income 301 Interest expense (191) Equity income 258 Income before income taxes and minority interest 15,937 - 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations Comparison of the Three and Six Months Ended June 30, 1999_with the Three and Six Months Ended June 30, 1998 Revenues for the second quarter of 1999 increased 5.4% to $84.6 million from $80.3 million in 1998. Revenues for the first six- month period of 1999 increased 8.0% to $172.0 million from $159.2 million in the comparable 1998 period. Revenues during 1999 were higher during the second quarter and the six-month period, compared to the respective periods in 1998, in the Equipment Business Group, the Ultrapure Water Group and the Consumer Water Group. The Instrument Business Group's revenues were lower in the second quarter and first half of 1999 than in the second quarter and first half of 1998. The Company's three acquisitions made at the beginning of the first quarter of 1999 did not provide significant revenues in the second quarter or in the six-month period of 1999 as these businesses were added to provide the Company with access to new markets rather than significant initial sales volume. Within the Equipment Business Group, the modest increase in revenues during the second quarter and the first six-month period of 1999, compared to the same periods in 1998, came from relatively strong international sales of desalination equipment, partially offset by a slight decline in revenue from the Equipment Business Group's water supply business. The Ultrapure Water Group's revenues increased by $2.2 million or 10.5% in the second quarter of 1999, as compared to the second quarter of 1998, due primarily to stronger sales activity in Asia. In addition, revenues increased by $8.0 million or 20.0% in the first half of 1999 compared to the first half of 1998. Revenues for this Group were down significantly in 1998 primarily due to a slowdown in capital spending by the microelectronics industry. Revenues from the Consumer Water Group increased $3.6 million, or 17.7%, in the second quarter of 1999 compared to the second quarter of 1998. The Consumer Water Group's revenues also increased $6.9 million, or 17.9%, in the first six months of 1999 from the first half of 1998. These increases were due to growth in both the bottled water and home water businesses. The Instrument Business Group's revenues declined $1.8 million and $3.2 million in the second quarter and first six months of 1999, respectively, as compared to the same periods in 1998. This Group benefited from strong demand in the first part of 1998 due to the implementation of United States Pharmacopoeial Convention's USP 23 which mandated the monitoring of Total Organic Carbon (TOC) in water processed by the pharmaceutical industry. Cost of sales as a percentage of revenues for the second quarter was 64.9% in 1999 and 66.6% in 1998. For the six-month period, cost of sales as a percentage of revenues was 65.8% in 1999 and 65.4% in 1998. Cost of sales as a percentage of revenues decreased for the Equipment Business Group, the Ultrapure Water Group and the Consumer Water Group for both the second quarter and six-month periods. The Instrument Business Group's cost of sales as a percentage of revenues increased in the second quarter and first half of 1999 compared to the second quarter and first half of 1998. The decrease in this percentage for the Equipment Business Group primarily reflected a shift in the mix of contracts to higher margin capital equipment projects and a greater volume of higher margin spare parts sales. The Ultrapure Water Group's decrease in cost of sales as a percentage of revenues reflects a more favorable mix of jobs for - 8 - the first two quarters of 1999 than in the first two quarters of 1998. Cost of sales as a percentage of revenue decreased for the Consumer Water Group in the second quarter and first half of 1999, as compared to the second quarter and first half of 1998, due to greater sales volume of bottled water and to price increases in the Home Water business. These decreases were offset by an increase in the Instrument Business Group's cost of sales as a percentage of revenues. The Instrument Business Group's increase in the cost of sales as a percentage of revenues was due to an increase in manufacturing overhead, including relocation to a larger facility, as well as a higher portion of revenues for the quarter and the first half derived from lower margin service business. Operating expenses as a percentage of revenues increased during the second quarter to 26.5% in 1999 from 24.9% in 1998. For the six-month period, operating expenses as a percentage of revenues increased to 25.8% in 1999 from 24.8% in 1998. The increase in operating expenses as a percentage of revenues primarily reflected the more rapid growth in the Consumer Water Group, which generally has higher operating expenses and higher gross margins than do the capital equipment businesses. The Consumer Water Group also had higher operating expenses in the first half of 1999 due to start-up expenses related to expansion into the French bottled water market and expenses for a major computer system implementation for the Aqua Cool business in the United States. In addition, operating expenses increased due to the decline in sales in the Instrument Business Group. Expanded marketing initiatives as well as the Company's continued commitment to investment in its research and development programs also contributed to the increase in operating expenses as a percentage of revenues. Interest income of $0.4 million and interest expense of $0.2 million during the second quarter of 1999 were higher than interest income of $0.2 million and interest expense of $0.1 million in 1998, reflecting overall higher average interest rates. During the six-month period, interest income of $0.5 million and interest expense of $0.3 million also were higher than interest income of $0.3 million and interest expense of $0.2 million in 1998 for the same reason. Financial Condition Working capital decreased $13.9 million during the first six months of 1999 while the Company's current ratio decreased to 2.0 at June 30, 1999 from 2.2 at December 31, 1998. Cash provided from net income and depreciation totaled $23.9 million during the first six months of 1999 while the primary uses of cash were for additions to property, plant and equipment, three acquisitions at the beginning of the first quarter of 1999 and a significant reduction in accounts payable. Significant capital expenditures were incurred to support growth in the bottled water operations, for new manufacturing and distribution facilities and for "own and operate" facilities. At June 30, 1999, the Company had $19.2 million in cash and cash equivalents, a decrease of $9.6 million from December 31, 1998. Accounts payable decreased by $9.8 million and other assets increased by $8.3 million. Notes payable and long-term debt increased by $7.0 million. The Company believes that its cash and cash equivalents balances, cash from operations, lines of credit and foreign exchange facilities are adequate to meet its currently anticipated needs. - 9 - Year 2000 Readiness Disclosure and Related Information The Company's State of Readiness The Company has undertaken a program to assure that its computer software and systems (including information technology (IT) and manufacturing systems), facilities and products will be able to distinguish 21st century dates from 20th century dates (so-called "Year 2000 (Y2K) Compliance or Compliant"). The Company's program is divided into the following three phases: Phase One - Inventory and Planning The Company completed this phase in July 1998. In this phase, the Company inventoried all hardware and software that potentially is susceptible to Y2K problems, prepared plans for assessing compliance and completing remediation, and prepared vendor compliance letters. Phase Two - Assessment In this phase, the Company is assessing which of its systems and products are Y2K Compliant. The Company has requested compliance statements from hardware and software vendors, supply manufacturers and providers of services to the Company, has received responses from many vendors and service providers and has not discovered any significant compliance problems. This phase also includes the planning for remediation of non-compliant systems. The Company had anticipated that this phase would be completed by the end of the first quarter of 1999. This phase has been substantially completed. The Company's assessment plan includes assessment of Y2K Compliance of non-information technology (non-IT) components including the Company's membrane-related equipment, "own and operate" equipment, other products, manufacturing equipment and facilities. This assessment has also been substantially completed. The Company is obtaining compliance statements from vendors of both IT and non-IT systems and is revising its vendors' status on an on-going basis based upon information it is receiving. The Company is working with its most important vendors to resolve remediation and compliance problems as they are identified. Phase Three - Remediation and Testing In this phase, the Company is deploying plans for elimination, upgrade, replacement or modification of non-compliant systems and products and is testing Y2K Compliance. The Company has scheduled completion of this phase by the end of the third quarter of 1999. Approximately 90% of non-IT components within the Company's "own and operate" facilities and its products and systems are Y2K Compliant. The remediation of the remaining 10% is under way and completion is expected by the end of the third quarter of 1999. The Company's core operating (IT and manufacturing) system for its headquarters operations is not yet Y2K Compliant. To date, the Company has completed modifications and unit testing of the system, and full implementation is expected by the end of the third quarter of 1999. The Company's bottled water accounting system in the United States is not yet fully Y2K Compliant. The - 10 - Company has purchased a new integrated distribution and accounting system, which management believes will significantly enhance its bottled water operations. This new system is Y2K Compliant and its installation is approximately 70% complete, with the remaining sites scheduled to be fully operational before year-end. Individual bottled water business locations are running this new system as it is implemented, which the Company believes should reduce the risks associated with potential Y2K non-compliance in the event implementation is not fully completed by the end of 1999. The Company's other IT systems are not uniform across all operations and locations. The systems for all non-headquarters operations have been reviewed. The Company is currently implementing new Y2K Compliant IT systems at two major locations in the U.S. Completion of implementation of these systems was expected by mid-1999, and is now expected by the end of the third quarter of 1999. The Company has either completed remediation or implemented new IT systems which are Y2K Compliant at its other significant non-headquarters operations. Remediation or replacement of IT systems at other locations is under way and was expected to be completed by mid-1999; the Company now expects completion of this work by the end of the third quarter of 1999. The Company believes that failure of these systems to become Y2K Compliant would be unlikely to have a material impact on the Company due to the relatively small size of these operations and the opportunity to perform relevant tasks manually. Costs to Address Y2K Issues The Company's assessment and remediation of Y2K Compliance issues is anticipated to cost approximately $1.5 million, excluding the cost of new systems implementation. Expenses to date of approximately $1.1 million are consistent with such expectations. The Company does not currently expect that actual Y2K expenses finally incurred will materially exceed its estimate. Risk of the Company's Y2K Issues If the Company fails to achieve Y2K Compliance in all its systems, the Company could lose the ability to process certain of its customers' orders, manufacture products or provide services to customers until compliance is achieved or a means to work around the failure is implemented. However, most of the Company's businesses process a small number of relatively large transactions, mitigating the short-term dependence on information systems. Also, because the Company's systems are not uniform across the Company, it is anticipated that any failure would not be Company-wide. Furthermore, a failure to fill an order may not necessarily result in complete loss of the order. Some orders could be filled through alternative methods within a relatively short period. Nevertheless, any disruption in order fulfillment, manufacturing or the provision of services to customers could result in some loss of revenue or claims against the Company. Moreover, there is uncertainty as to whether the Company may experience any disruption in these areas as a result of uncertainty concerning the Y2K readiness of third-party vendors. If disruption in any of these areas resulting from Y2K non- compliance is greater than anticipated, the loss of revenue could be material. - 11 - Contingency Plans The Company has commenced a process for preparing contingency plans and expects to complete contingency plans early in the fourth quarter of 1999 to deal with possible failures in systems which it determines may not achieve Y2K Compliance on a timely basis. Quantitative and Qualitative Disclosures about Market Risk Derivative Instruments and Market Risk There has been no material change in the information reported in the Company's 1998 Annual Report on Form 10-K as filed with the Securities and Exchange Commission with respect to these risk matters. Forward-Looking Information Safe Harbor Statement under Private Securities Litigation Reform Act of 1996 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; the ability of the Company to achieve Y2K Compliance in accordance with its current program, including the ability of the Company to ascertain and plan for compliance issues of third- party vendors; 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. - 12 - PART II - OTHER INFORMATION Item 1. Legal Proceedings On June 9, 1999, the Company was served with a summons and complaint in connection with a lawsuit captioned United States Filter Corporation, U.S. Filter/Ionpure, Inc. and IP Holding Company v. Ionics, Incorporated, Millipore Corporation and Millipore Investment Holdings Limited, filed in the U.S. District Court, District of Massachusetts (Boston). In this litigation, plaintiffs allege that the Company is infringing six patents relating to electrodeionization (EDI) technology. This lawsuit is the second patent infringement suit brought by the plaintiffs against the Company; a pending lawsuit filed by the plaintiffs against the Company in March 1998 alleges infringement of a certain reissue patent also involving EDI technology. The Company, which pioneered the development of the EDI process over 30 years ago and holds a number of patents related to EDI technology, believes that it has valid defenses to the plaintiffs' infringement claims in both lawsuits and intends vigorously to defend itself against the infringement charges. Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Stockholders was held on May 6, 1999. (b) Douglas R. Brown, Kathleen F. Feldstein, Arthur L. Goldstein and Carl S. Sloane were re-elected as Class I Directors for a three-year term. Continuing as Class II Directors until the 2000 Annual Meeting are Arnaud de Vitry d'Avaucourt, William E. Katz, Mark S. Wrighton and Daniel I.C. Wang. Continuing as Class III Directors until the 2001 Annual Meeting are William L. Brown, John J. Shields and Allen S. Wyett. Each of the Class I Directors received at least the following votes "for" election and no more than the following votes withheld: Votes for: 11,982,524 Votes withheld: 1,684,454 (c) The other matter submitted for stockholder approval was the selection of PricewaterhouseCoopers LLP as the Company auditors for 1999. The following votes were cast: Votes for: 13,627,168 Votes against: 21,557 Abstentions: 18,253 Item 6. Exhibits and Reports on Form 8-K (a) Reports on Form 8-K No reports on Form 8-K were filed with the Securities and Exchange Commission during the quarter ended June 30, 1999. All other items reportable under Part II have been omitted as inapplicable or because the answer is negative, or because the information was previously reported to the Securities and Exchange Commission. - 13 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IONICS, INCORPORATED Date: August 13, 1999_ By: /s/Arthur L. Goldstein Arthur L. Goldstein Chairman and Chief Executive Officer (duly authorized officer) Date: August 13, 1999_ By: /s/Robert J. Halliday Robert J. Halliday Vice President, Finance and Chief Financial Officer - 14 - EXHIBIT INDEX Sequentially Numbered Page Exhibit 27.0 Financial Data Schedule 16 (for electronic purposes only) - 15 - EX-27 2 EXHIBIT 27
5 1,000 6-MOS DEC-31-1999 JUN-30-1999 19,187 192 116,495 ( 2,829) 32,302 174,854 370,029 (166,646) 457,090 87,596 0 0 0 16,136 335,405 457,090 171,984 171,984 113,151 113,151 0 193 335 14,646 4,861 9,776 0 0 0 9,776 .61 .60
-----END PRIVACY-ENHANCED MESSAGE-----