EXHIBIT 13
IONICS, INCORPORATED
ANNUAL REPORT TO STOCKHOLDERS OF
IONICS, INCORPORATED FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1993
(Only pages 17 through 32 and the inside back cover
constitute an Exhibit to Form 10-K)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
In 1993, Ionics continued to improve its financial performance
with a 13% growth in revenues and a 6% improvement in earnings
per share. The profit improvement was driven primarily by the
continued success of "own and operate" and service-based
activities relating to the Water and Chemical Supply and Consumer
Water Products business segments which combined to produce an
improvement over 1992 in earnings before interest and taxes of
42%. This improvement more than offset a decline in the
profitability of the Membranes and Related Equipment segment
which was caused primarily by a slowdown in bookings and the
acceptance and execution of orders at lower than normal margins.
Total revenues were $175.3 million in 1993, compared with
$155.2 million in the prior year. Revenues increased for all
business segments with the largest growth in the Membranes and
Related Equipment segment. Revenue growth in this segment was due
to sales of ultrapure water systems, particularly to the
semiconductor industry. A portion of the increase in 1993
revenues was attributable to the acquisition of the French
subsidiary, Eau et Industrie, in December 1992, and Resources
Conservation Company (RCC) in December 1993. Revenues from the
Water and Chemical Supply business segment increased as large
Company-owned plants, which commenced operations in the first
quarter of 1992, operated for the entire period in 1993, and as
domestic chemicals sales grew. Consumer Water Products revenues
increased with the further development of the bottled water
business and the consolidation of Aqua Cool Enterprises, Inc.
(ACE), our domestic distributor, as of May 26, 1993. The
increases in domestic equipment revenues, the expansion of the
domestic chemical business, and the additions of ACE and RCC were
responsible for the 21% growth in the U.S. geographic segment.
Total revenues were $155.2 million in 1992, compared with
$138.1 million in the prior year. The primary reason for the
growth in 1992 over 1991 was the Company's increased investment
in own and operate facilities, including those brought on line
for the City of Santa Barbara and for the Diablo Canyon Power
Plant of Pacific Gas and Electric. These facilities were also
primarily responsible for the 48% growth in revenues of the Water
and Chemical Supply business segment and the 20% growth in
revenues of the U.S. geographic segment. The Membranes and
Related Equipment segment realized a 6% sales increase in 1992
primarily due to sales of membrane systems for water and food
processing applications. The Consumer Water Products segment's
1992 revenues declined 9% from 1991. This decline was largely
caused by reduced sales of our HYgeneR silver-impregnated
activated carbon filtering media to our largest HYgene customer
due to depressed economic conditions.
/49
Cost of sales as a percentage of revenues were 66.8%, 64.4%,
and 65.4% in 1993, 1992 and 1991, respectively. Cost of sales as
a percentage of revenues increased for the Membranes and Related
Equipment segment while it held steady or declined for the Water
and Chemical Supply and the Consumer Water Products segments,
respectively. The increase in the Membranes and Related Equipment
segment reflected greater than anticipated costs on several
sizable capital equipment sales. The Consumer Water Products
segment showed an improvement in the cost of sales percentage
primarily due to a steady decline in the Company's unit costs to
manufacture and distribute bottled water and coolers resulting
from significant increases in volume, route density and operating
efficiencies.
The improvement in 1992 compared to 1991 was due primarily to
reduced costs as a percentage of sales for membrane-based
equipment and bottled water products. Water and Chemical Supply
costs as a percentage of sales increased partially because of
start-up costs and initial excess capacity in connection with the
Company's expansion of its Elite Chemicals New England plant, and
because nearly all of the costs associated with the Santa
Barbara desalination plant are classified as cost of product,
resulting in superior operating margins but below average gross
margins.
Operating expenses as a percentage of revenues were 23.5% in
1993, down from 26.1% in 1992 and 27.2% in 1991. The improvement
in 1993 reflected the absorption of relatively fixed operating
expenses by increased sales volume, with further reductions
achieved through expense controls. The decrease in 1992 compared
to 1991 reflected the low operating expenses associated with
large own and operate facilities.
Interest income in 1993 was $1.8 million compared to $2.1
million in 1992 and $1.5 million in 1991. The decrease in 1993
was due to lower average interest rates combined with reduced
investments as a result of the 1993 purchase of ACE's preferred
stock, the 1992 acquisitions, and additions to property, plant
and equipment. The increase in 1992 compared to 1991 reflected
higher average invested balances due to the remaining proceeds of
the Company's public offerings of common stock in 1992 and 1991.
The Company had virtually no interest expense in either 1993 or
1992 after interest expense of $1.4 million in 1991. This
decrease primarily resulted from the repayment of debt with
public offering proceeds and cash from operations.
/50
The Company's effective tax rate was 30% in 1993, 29% in 1992
and 28% in 1991. The increase in the effective tax rate for both
1993 and 1992 was largely due to changes in the mix of earnings
and effective tax rates among the different jurisdictions in
which the Company operates, as well as a proportionately lower
benefit from the Company's foreign sales corporation. The
increase in 1992 was partially offset by a benefit from tax-
exempt interest and a lower state tax rate due to proportionately
lower domestic income.
Net income increased 7.7% to $13.8 million in 1993 compared to
$12.8 million in 1992. Net income in 1992 was 54.9% higher than
1991 net income of $8.3 million. Net income as a percentage of
revenues was 7.9% in 1993 compared to 8.3% in 1992 and 6.0% in
1991.
The Company adopted Financial Accounting Standards Board
(FASB) Statement No. 109 " Accounting for Income Taxes" for the
year 1993, with no material effect on its financial statements.
LEGAL PROCEEDINGS
The Company has been named as one of many potentially
responsible parties (PRPs) in connection with two Superfund
sites. During 1992, the Company paid $381,000 to the settlement
trust fund for the Silresim Site in Lowell, Massachusetts. The
Company was also notified during 1992 that it is one of more than
1,000 PRPs at a Superfund site in Southington, Connecticut. The
Company's volumetric share at this site is just under 0.5%, and a
remediation plan has not yet been adopted.
The Company's volumetric contribution at these sites is low
and there are many PRPs that are larger, financially sound
corporations with higher volumetric levels. The Company accrues
for estimated expenses as facts become known during these
proceedings. Based upon facts presently known, management
believes that the Company's liability in connection with these
sites will not have a material adverse impact on its results of
operations or financial condition.
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FINANCIAL CONDITION
At December 31, 1993, the Company had total assets of $249.6
million compared to total assets of $224.6 million at December
31, 1992 and $178.0 million at December 31, 1991. The major
components of the increase in 1993 related to: (1) the
consolidation of ACE in May 1993 and the acquisition of RCC in
December 1993, and (2) expenditures for property, plant and
equipment primarily relating to expansions of the Company's
bleach production and distribution operations; bottled water
operations; and triple-membrane trailers for the production of
ultrapure water. The major components of the 1992 increase were:
property, plant and equipment, due to expenditures for the
California projects for the City of Santa Barbara and the Diablo
Canyon Power Plant; triple membrane ultrapure water trailers; and
the expansion of the Company's bleach business. In addition, cash
and short-term investments increased due to the Company's
February 1992 public offering of common stock.
Working capital in 1993 decreased by $14.4 million and the
Company's current ratio decreased to 2.4 in 1993 from 3.6 in
1992. Capital expenditures totaled $14.7 million, $24.7 million,
and $34.9 million in 1993, 1992 and 1991, respectively. Cash paid
for the 1993 purchase of ACE's preferred stock and 1992
acquisitions, net of cash acquired, was $8.0 million and $2.4
million, respectively. Funds for these expenditures were provided
in 1993 through cash from operations and the sale of short-term
investments and in 1992 through the sale of common stock and cash
from operations.
Net cash generated by operating activities decreased by $2.3
million in 1993 with higher net income and depreciation offset by
increases in operating assets, primarily in accounts receivable,
and decreases in liabilities primarily in accounts payable and
accrued expenses, excluding those obtained through the
consolidation of ACE and acquisition of RCC. Net cash used by
investing activities decreased by $52.2 million in 1993 as
compared to 1992. During 1993, cash used for investments in
property, plant and equipment and for the purchase of ACE's
preferred stock was funded primarily by the sale of short- term
investments and partially by cash provided by operations. In
1992, purchases of short-term investments were funded primarily
by the sale of common stock and partially by cash provided by
operations. In 1993, net cash provided by financing activities
decreased by $47.7 million as no public offering of common stock
occurred in 1993. During 1992, cash of $54.0 million was provided
from the sale of common stock. Net payments of debt decreased to
$0.9 million in 1993 compared to $7.4 million in 1992.
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Significant expenditures in 1994 will include: payment for the
purchase of RCC; capital for ultrapure water trailers; expansion
of the bottled water and bleach businesses; and improvements to
manufacturing equipment. The Company maintains several lines of
credit, including unused domestic lines totaling $35 million,
which are available to meet working capital needs. In addition,
the Company has several facilities to accommodate its foreign
trade and exchange requirements. The Company believes that its
cash and short-term investments of $30.1 million at the beginning
of 1994, cash from operations, lines of credit and foreign
exchange facilities are adequate to meet its currently
anticipated needs.
Inflationary increases in material and labor costs remained
moderate during the last three years , and to the extent
permitted by the competitive environment, the Company has raised
prices to cover those inflationary increases.
/53
Consolidated Statements of Operations Ionics, Incorporated
For the years ended December 31
Dollars in thousands, except
per share amounts 1993 1992 1991
Net revenue :
Membranes and related equipment $ 92,352 $ 81,019 $ 76,267
Water and chemical supply 51,513 46,698 31,491
Consumer water products 31,408 27,523 30,362
175,273 155,240 138,120
Costs and expenses:
Cost of membranes and related equipment 65,890 52,352 51,610
Cost of water and chemical supply 36,035 32,594 21,312
Cost of consumer water products 15,078 14,985 17,387
Research and development 3,678 3,084 2,886
Selling, general and administrative 37,432 37,409 34,743
158,113 140,424 127,938
Income from operations 17,160 14,816 10,182
Interest income 1,789 2,092 1,491
Interest expense - (5) (1,436)
Equity income 775 1,281 1,412
Income before income taxes
and minority interest 19,724 18,184 11,649
Provision for income taxes 5,917 5,273 3,262
Income before minority interest 13,807 12,911 8,387
Minority interest's share of income - (91) (109)
Net income $ 13,807 $ 12,820 $ 8,278
Earnings per share $ 1.96 $ 1.85 $ 1.45
Shares used in earnings per
share calculations 7,060,000 6,919,000 5,703,000
The accompanying notes are an integral part of these financial statements.
/54
Consolidated Balance Sheets Ionics, Incorporated
December 31
Dollars in thousands 1993 1992
Assets
Current assets:
Cash and cash equivalents $ 21,534 $ 13,535
Short-term investments 8,603 28,281
Notes receivable, current 2,505 3,195
Accounts receivable 57,214 43,640
Receivables from affiliated companies 2,944 4,096
Inventories 13,926 12,314
Other current assets 3,231 3,696
Total current assets 109,957 108,757
Notes receivable, long-term 4,919 10,156
Investments in affiliated companies 4,989 4,279
Property, plant and equipment, net 100,445 97,801
Other assets 29,252 3,597
Total assets $249,562 $224,590
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current
portion of long-term debt $ 326 $ 975
Accounts payable 12,496 12,272
Other current liabilities 32,332 16,060
Taxes on income 928 1,192
Total current liabilities 46,082 30,499
Long-term debt and notes payable 109 439
Deferred income taxes 2,699 2,777
Other liabilities 591 535
Commitments - -
Stock holders' equity:
Common stock, par value $1, authorized shares:
30,000,000 in 1993 and 1992;
issued: 6,945,805 in 1993 and
6,908,513 in 1992 6,946 6,909
Additional paid-in capital 124,189 123,148
Retained earnings 75,574 61,767
Cumulative translation adjustments (6,628) (1,484)
Total stockholders' equity 200,081 190,340
Total liabilities and
stockholdersU equity $249,562 $224,590
The accompanying notes are an integral part of these financial statements.
/55
Consolidated Statements of Cash Flows Ionics, Incorporated
For the years ended December 31
Dollars in thousands 1993 1992 1991
Operating activities:
Net income $ 13,807 $ 12,820 $ 8,278
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,463 12,588 8,530
Provision for losses on accounts
and notes receivable 390 944 923
Deferred income tax provision (benefit) 1,589 562 (571)
Changes in assets and liabilities, net of effects
of businesses acquired:
Notes receivable (1,175) (2,699) (2,489)
Accounts receivable (7,332) (2,209) (5,989)
Inventories (1,509) (748) 2,594
Other current assets 498 (2,016) 282
Investments in affiliates (641) (250) (263)
Accounts payable and accrued expenses (7,432) (1,819) 6,129
Income taxes (987) (2,481) 472
Other (825) (567) 276
Net cash provided by operating
activities 11,846 14,125 18,172
Investing activities:
Additions to property, plant and
equipment (14,667) (24,698) (34,862)
Sale/(Purchase) of short-term
investments 19,129 (28,623) -
Acquisitions, net of cash acquired (7,959) (2,352) -
Net cash used by investing
activities (3,497) (55,673) (34,862)
Financing activities:
Principal payments on current debt (8,845) (3,601) (34,250)
Proceeds from issuance of current debt 8,176 682 9,745
Principal payments on long-term debt (506) (4,717) (778)
Proceeds from issuance of
long-term debt 256 235 1,655
Proceeds from stock option plans 1,078 1,227 419
Sale of common stock - 53,991 43,827
Net cash provided by
financing activities 159 47,817 20,618
Effect of exchange rate changes on cash (509) (574) (33)
Net change in cash and cash equivalents 7,999 5,695 3,895
Cash and cash equivalents at
beginning of year 13,535 7,840 3,945
Cash and cash equivalents at end of year $ 21,534 $ 13,535 $ 7,840
The accompanying notes are an integral part of these financial statements.
/56
Consolidated Statements of Stockholders' Equity Ionics, Incorporated
Common Stock Additional Cumulative Total
Par Paid-in Retained Translation Stockholders'
Dollars in thousands Shares Value Capital Earnings Adjustments Equity
Balance December 31, 1990 4,172,020 $4,172 $ 26,421 $40,669 $ 4,352 $ 75,614
Sale of common stock 1,495,000 1,495 42,332 - - 43,827
Stock options exercised 41,349 41 189 - - 230
Tax benefit of stock option activity - - 189 - - 189
Translation adjustments, net of
income taxes of $55 - - - - (207) (207)
Net income - - - 8,278 - 8,278
Balance December 31, 1991 5,708,369 5,708 69,131 48,947 4,145 127,931
Sale of common stock 1,150,000 1,151 52,840 - - 53,991
Stock options exercised 50,144 50 497 - - 547
Tax benefit of stock option activity - - 680 - - 680
Translation adjustments, net of
income taxes of $746 - - - - (5,629) (5,629)
Net income - - - 12,820 - 12,820
Balance December 31, 1992 6,908,513 6,909 123,148 61,767 (1,484) 190,340
Stock options exercised 37,292 37 465 - - 502
Tax benefit of stock option activity - - 576 - - 576
Translation adjustments, net of
income taxes of $1,165 - - - - (5,144) (5,144)
Net income - - - 13,807 - 13,807
Balance December 31, 1993 6,945,805 $6,946 $124,189 $75,574 $(6,628) $200,081
The accompanying notes are an integral part of these financial statements.
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NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly and majority-owned subsidiaries and Aqua Cool
Enterprises, Inc., a controlled affiliate. All significant intercompany
accounts and transactions have been eliminated.
Investments in affiliated companies, representing non-majority
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.
Most equipment leases to customers are accounted for as operating
leases wherein 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
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.
Interest earned on notes receivable, totaling $1,277,000, $1,643,000
and $1,309,000 in 1993, 1992 and 1991, respectively, is included in
revenues.
Cash Equivalents
Short-term investments with a maturity of 90 days or less from date of
acquisition a reclassified as cash equivalents.
Inventories
Inventories are carried at the lower of cost or market, principally on
the first-in, first-out basis. The Company had no deferred production
costs which exceeded the aggregate estimated cost of long-term sales
contracts.
/58
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 a
mounted to $177,000, $709,000 and $703,000 in 1993, 1992 and 1991,
respectively. 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
water supply equipment 3-25 years
Other 3-12 years
The Company's policy is to depreciate desalination plants, other than
leased equipment, over the shorter of their useful lives or the term of
the corresponding water supply contracts.
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 for up to 40 years.
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 for the year.
Translation gains and losses are accumulated net of income tax as a
separate component of stockholdersU 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 gains included in income before taxes totaled $157,000,
$587,000 and $180,000 for 1993, 1992 and 1991, 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. Earnings per Share Earnings per
share is computed based on the weighted average number of common and
common equivalent shares outstanding. Common equivalent shares result from
the assumed exercise of dilutive stock options. Fully diluted earnings per
share is substantially the same as earnings per share.
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NOTE 2. CONSOLIDATED BALANCE SHEET DETAILS
Dollars in thousands 1993 1992
Raw materials $ 9,541 $ 7,949
Work in process 3,016 2,928
Finished goods 1,369 1,437
Inventories $ 13,926 $ 12,314
Land $ 1,261 $ 1,279
Buildings 13,829 13,752
Machinery and equipment 121,792 110,382
Other, including furniture, fixtures
and vehicles 18,918 13,348
155,800 138,761
Accumulated depreciation (55,355) (40,960)
Property, plant and equipment, net $100,445 $ 97,801
Goodwill $ 25,660 $ 4,849
Accumulated amortization (1,608) (1,252)
Other 5,200 -
Other assets $ 29,252 $ 3,597
Obligation for purchase of RCC $ 10,974 $ -
Customer deposits 5,668 4,288
Accrued commissions 1,733 1,778
Accrued expenses 13,957 9,994
Other current liabilities $ 32,332 $ 16,060
NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION
Dollars in thousands 1993 1992 1991
Cash payments for interest and income taxes:
Interest $ 150 $ 783 $3,320
Taxes $ 4,403 $7,374 $3,119
Liabilities assumed in conjunction with
acquisitions and ACE preferred stock purchase:
Fair value of assets consolidated $47,825 $2,609
Net cash paid (7,959) (375)
Liability associated with purchase of
Resources Conservation Co. (net
of cash acquired) (10,488) -
Liabilities assumed $29,378 $2,234
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NOTE 4. ACCOUNTS RECEIVABLE
Dollars in thousands 1993 1992
Billed receivables $36,819 $29,068
Unbilled receivables 21,715 16,208
Allowance for doubtful accounts (1,320) (1,636)
Accounts receivable $57,214 $43,640
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, 1993 are
expected to be billed during 1994.
Billed receivables include retainage amounts of $3,054,000 and
$1,626,000 at December 31, 1993 and 1992, respectively. Substantially all
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 and 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%
Jalal-Ionics, Ltd. - Bahrain 40%
Watlington Waterworks Limited - Bermuda 23%
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 1993 1992 1991
Investments at beginning of year $4,279 $ 4,008 $ 3,720
Equity in earnings 775 1,281 1,412
Distributions received (134) (1,058) (1,211)
Additional investment
made during the year - 27 62
Cumulative translation adjustments 69 21 25
Investments at end of year $4,989 $ 4,279 $ 4,008
At December 31, 1993, the Company's equity in the total assets and in
the total liabilities of its foreign affiliates was $10,480,000 and
$5,491,000, respectively. The Company's equity in the 1993 total revenues
of these affiliates was $9,094,000.
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Summarized data for foreign affiliates follows:
Dollars in thousands 1993 1992 1991
Current assets $ 9,056 $ 8,622 $ 7,773
Property and equipment, net 8,169 7,848 5,262
Current liabilities 7,069 7,505 4,479
Long-term debt 424 584 652
Revenues 15,288 14,724 13,387
Gross profit 6,701 6,929 6,312
Net income 1,364 2,076 1,981
NOTE 6. CONTINGENT LIABILITIES
The Company is from time to time involved in litigation in the normal
course of its business. None of these litigation matters is believed to be
material to the financial position or business of the Company.
Under the terms of a 1992 Settlement Agreement among the potentially
responsible parties (PRPs), the Environmental Protection Agency (EPA) and
the Commonwealth of Massachusetts, the Company paid $381,000 as a
settlement amount to the Silresim Superfund Site settlement trust fund,
representing the Company's approximately 1% volumetric contribution of
wastes to the site. This fund, which contains in excess of $40 million,
will be used by the EPA to clean up the Silresim Site in Lowell,
Massachusetts. The amount paid by the Company had been fully reserved at
December 31, 1991, and the payment had no material adverse impact on the
Company. Because the pollution problems at the site have been extensively
studied and because the funds collected from the settling PRPs by the site
settlement trust fund substantially exceed the EPA's own estimate of
remediation costs, the Company believes that it is unlikely that it will
incur any further monetary obligations with respect to this site, other
than site access costs that will be incurred by the EPA in connection with
its remediation activities. The Company's share of these site access costs
is expected to be $30,000 to $40,000 over the next several years.
The Company was notified in June, 1992 that it is a PRP at another
Superfund site, Solvent Recovery Service of New England in Southington,
Connecticut (the "SRS Site"). The EPA has not yet completed its remedial
investigation or issued a record of decision specifying estimated clean-up
costs, and therefore it is too early to determine what the Company's
liability might be with respect to the SRS Site. However, based upon the
very large number of PRPs identified (over 1,000), the Company's small
volumetric ranking in comparison to the total volume of wastes (less than
0.5%) and the identities of the larger PRPs, which include many
substantial companies, the Company believes that its liability in this
matter will not have a material effect on the Company or its financial
position.
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NOTE 7. LONG-TERM DEBT AND NOTES PAYABLE
Dollars in thousands 1993 1992
6 3/4% Industrial Revenue Bond
due 1994, in equal quarterly
installments $120 $360
9% mortgage note payable to bank due in
equal monthly installments - 198
Other credits 162 422
282 980
Less installments due within one year 173 541
Long-term debt and notes payable $109 $439
The Industrial Revenue Bond is a limited obligation of the Industrial
Development Financing Authority Board of the Town of Watertown,
Massachusetts, guaranteed by the Company and collateralized by property,
plant and equipment with a net book value of approximately $1,965,000 at
December 31, 1993.
Maturities of long-term debt and notes payable for the five years
ending December 31, 1994 to 1998 are approximately $173,000, $22,000,
$19,000, $8,000 and $7,000, respectively.
The Company has domestic credit arrangements with various banks under
which it can borrow up to an aggregate of approximately $35 million, at
the prime rate or the London Interbank Offered Rate plus 1/2%, at the
Company's option. There were no borrowings outstanding under these lines
of credit at December 31, 1993 or 1992.
The Company utilizes short-term bank loans to finance working capital
requirements for certain business units. During 1993 and 1992, the
weighted average amount of such borrowings was approximately $1,429,000
and $1,290,000, respectively, and the maximum short-term borrowings under
these arrangements in 1993 and 1992 were approximately $7,395,000 and
$3,174,000, respectively. The Company's various loan and note agreements
contain certain financial covenants typical to such agreements relating to
working capital and to consolidated tangible net worth.
NOTE 8. INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required
by Financial Accounting Standard No. 109 (FAS 109). As permitted under the
new rule, prior years' financial statements have not been restated. The
cumulative effect of adopting this Statement as of January 1, 1993 was
immaterial to net income.
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 $369,000, $30,000 and $1,418,000 as of December 31, 1993,
1992 and 1991, respectively. Reduced tax payments resulting from
allocating tax benefits associated with the exercise of stock options
directly to additional paid-in capital totaled $576,000, $680,000 and
$189,000 in 1993, 1992 and 1991, respectively.
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The following is a summary of U.S. and non-U.S. income before income
taxes and minority interest, the components of the provisions for income
taxes and deferred income taxes and a reconciliation of the U.S. statutory
income tax rate to the effective income tax rate.
Income before income taxes and minority interest:
Dollars in thousands 1993 1992 1991
U.S. $10,902 $ 9,753 $ 5,867
Non-U.S. 8,822 8,431 5,782
Income before income taxes and
minority interest $19,724 $18,184 $11,649
Income tax provisions (benefits) consist of the following:
Dollars in thousands 1993 1992 1991
Federal $2,124 $2,121 $ 2,603
Foreign 1,729 2,290 755
State 475 300 475
Current provision 4,328 4,711 3,833
Federal 528 (441) (1,061)
Foreign 1,013 976 625
State 48 27 (135)
Deferred provision (benefit) 1,589 562 (571)
Provision for income taxes $5,917 $5,273 $ 3,262
Deferred tax provisions (benefits) consist of the following:
Dollars in thousands 1993 1992 1991
U.S. tax on unremitted earnings
(net of foreign tax credit ) $ 335 $ - $ -
Use of installment method - - (744)
Use of different book/tax contract
accounting methods 257 (94) (1,090)
Net reversal of deferred profit on
sales to foreign subsidiaries 71 44 33
Use of accelerated depreciation 651 672 970
DISC dividend (197) (197) (197)
Bad debt reserve activity 87 (76) 126
Other, net 385 213 331
Deferred tax provision (benefit) $1,589 $ 562 $ (571)
/64
The United States statutory corporate tax rate is reconciled to the
Company's effective tax rate as follows:
1993 1992 1991
U.S. Federal statutory rate 34.0% 34.0% 34.0%
Foreign Sales Corporation (1.9) (2.2) (4.4)
Tax exempt interest income (3.5) (3.7) -
Provision on undistributed
foreign earnings - 7.8 -
Timing items completely reversed - (7.5) -
State income taxes,
net of federal tax benefit 1.8 1.2 1.9
Foreign income taxed at different rates (1.3) .3 (3.8)
Other, net .9 (.9 ) .3
Effective tax rate 30.0% 29.0% 28.0%
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, 1993 the temporary differences are:
Deferred Deferred tax
Dollars in thousands tax assets liabilities
Depreciation $ - $ 2,992
Inventory valuation 257 -
Unremitted earnings - 512
Bad debt reserves 224 -
Sales to foreign subsidiaries 1,150 -
Insurance reserves 234 -
Pensions 298 -
Sale versus lease 1,186 -
Foreign withholding taxes on
undistributed earnings - 1,333
Foreign deferred liabilities - 1,524
Net operating loss carryforwards 6,340 -
Miscellaneous 1,103 1,162
10,792 7,523
Valuation allowance for deferred
tax assets (1,800) -
Deferred income taxes $ 8,992 $ 7,523
At December 31, 1993, the Company had unused tax loss carryforward
benefits of $6,340,000 (expiring in fiscal years 2004 to 2008). Because
certain provisions of the tax law may limit the utilization of these
benefits, the Company has established a $1,800,000 valuation allowance at
December 31, 1993. The net unused tax loss carryforward benefit of
$4,540,000 has been included in other assets.
/65
NOTE 9. STOCKHOLDERS' EQUITY
The Company maintains two stock option plans. Under its 1979 Stock
Option Plan (the "1979 Plan"), options may be granted to officers and
other employees of the Company (either as non-qualified options or until
February 15, 1989, as incentive stock options) and are exercisable at a
price of not less than $1.00 per share. Any difference between the option
price and the fair market value at the date of grant is charged to
operations over the expected period of benefit to the Company. No
additional shares of common stock were authorized for issuance as options
during 1993. At December 31, 1993, 12,754 shares were reserved for
issuance of additional options under the 1979 Plan.
During 1992, an additional 70,000 shares of common stock were
authorized for issuance as options under the 1986 Stock Option Plan for
Non-Employee Directors (the "1986 Plan"). These options may be granted at
a price not less than fair market value at the date of grant. No
additional shares of common stock were authorized for issuance as options
under the 1986 Plan during 1993. As of December 31, 1993, 67,000 shares
were reserved for issuance of additional options under the 1986 Plan.
The Company has also reserved 45,600 shares for options granted in
1990 to certain non-employees in exchange for a previously granted option
to purchase 50% of the shares of Osmomar S.A., a Spanish subsidiary of the
Company which was merged with Ionics Iberica, S.A. in 1992.
A summary of changes in the total amount of outstanding options for
the three years ended December 31, 1993 follows:
1993 1992 1991
Shares under option,
beginning of year 530,375 555,780 361,769
Options granted 350,250 31,750 245,500
Options exercised (39,839) (55,480) (51,489)
Options cancelled (8,000) (1,675) -
Shares under option,
end of year 832,786 530,375 555,780
Shares exercisable 800,866 493,895 514,740
Price range of
options granted $39.50-48.75 $ 1.00-60.75 $40.13-46.25
Price range of
options exercised $ 1.00-54.00 $11.00-43.00 $ 1.00-24.50
Price range of
options exercisable $ 1.00-60.75 $ 1.00-60.75 $ 1.00-46.25
The Company also has a Section 401(k) stock savings plan under which 75,000 shares
have been registered with the Securities and Exchange Commission for purchase on behalf
of employees. Shares will normally be acquired for the plan in the open market. However,
the Board of Directors has reserved an additional 60,000 shares for issuance by the
Company from authorized but unissued shares if required. Through December 31, 1993, no
shares had been issued under the plan.
/66
The Company has adopted a Stockholder Rights Plan designed to protect
stockholders against abusive takeover tactics. Rights were distributed as a
dividend at the rate of one right for each share of the Company's stock. Each
right entitles the holder to purchase from the Company one unit, consisting
initially of one-fifth share of common stock and one note in principal amount
equal to four-fifths of the current market price of the common stock on the
date of exercise, at a purchase price of $50 subject to adjustment. In certain
circumstances, rights cease to be exercisable for a unit and become
exercisable for $100 worth of common stock (or a combination of cash, property
or other securities of the Company) for $50.
The rights are not exercisable until: (i) 10 days following a public
announcement that a person or group has acquired 20 percent or more of the
Company's common stock; or (ii) 10 business days following the commencement
of a tender offer that could result in the person or group owning at least
30 percent of the Company's stock; or (iii) immediately after a declaration
by the Company's independent directors that a person is an "Adverse Person,"
as defined in the Rights Plan.
Subject to possible extension, the rights may be redeemed by the Company
at $.01 per right at any time until 10 days after a public announcement that
20 percent or more of the Company's outstanding common stock has been acquired
by a person or group. Unless redeemed earlier, the rights, which have no
voting power, expire on December 31, 1997.
NOTE 10. OPERATING LEASES
The Company leases equipment, primarily triple-membrane trailers and
bottled water coolers, to customers through operating leases. The original
cost of this equipment was $37,555,000 and $27,657,000 at December 31, 1993
and 1992, respectively. The accumulated depreciation for such equipment was
$9,914,000 and $6,173,000 at December 31, 1993 and 1992, respectively.
At December 31, 1993, future minimum rentals receivable under
noncancelable operating leases in the years 1994 through 1998 and later were
approximately $5,582,000, $5,019,000, $4,019,000, $3,329,000, $2,705,000 and
$7,745,000, respectively.
NOTE 11. PROFIT SHARING AND PENSION PLANS
The Company has a contributory profit-sharing plan covering substantially
all of the employees of its Bridgeville, Pennsylvania operations and certain
related operations. Company contributions are made from pre-tax profits and
may vary from 8% to 15% of participants' compensation and are allocated to
participantsU accounts in proportion to each participants' respective
compensation. Company contributions were $381,000, $372,000 and $387,000 in
1993, 1992 and 1991, respectively.
The Company also has a contributory defined benefit pension plan for its
Watertown-based employees as well as personnel at Ionics Pure Solutions in
Arizona, Ionics Ultrapure Water Corporation in California and Resources
Conservation Company in Washington. The 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.
/67
The following table sets forth the pension plan's funded status and amounts
recognized in the Company's balance sheets at December 31, 1993 and 1992:
Dollars in thousands 1993 1992
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$6,447 and $5,734, respectively $6,778 $5,957
Projected benefit obligation for service
rendered to date $7,736 $6,678
Plan assets at fair value 6,615 5,829
Projected benefit obligation in excess
of plan assets 1,121 849
Unrecognized net loss (508) (287)
Unrecognized prior service cost (120) (130)
Unrecognized net assets being amortized
over approximately 17 years 520 573
Accrued pension cost at December 31 $1,013 $1,005
Net pension cost included the following components:
Dollars in thousands 1993 1992 1991
Service cost $568 $482 $386
Interest cost 556 512 478
Return on plan assets (632) (380) (886)
Net amortization (deferral) 50 (137) 416
Net periodic pension cost $542 $477 $394
The discount rates used in determining the projected benefit obligation
are 7.5% in 1993 and 8% in 1992. The rate of increase in compensation
levels used is 6%. The expected long-term rate of return on assets was 9%.
Plan assets consist primarily of money market, equity and fixed income
securities and are administered by an independent trustee.
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 12. FINANCIAL INSTRUMENTS
Off-Balance-Sheet Risk
The Company issues letters of credit as guarantees for various performance and bid
obligations. Approximately $19.2 million and $5.2 million of these letters were
outstanding at December 31, 1993 and 1992, respectively. Approximately 11% of the
letters of credit outstanding at December 31, 1993 are scheduled to expire in 1994. 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 otherwise result from changes in
currency exchange rates. The Company had no foreign exchange contracts
outstanding at December 31, 1993 and 1992.
/68
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. government securities and with major financial institutions. 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
approximates 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 approximates their fair values.
INVESTMENTS IN SECURITIES
In May 1993, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," which requires the expanded use of fair value accounting
for certain investments in debt and equity securities. The Statement is
effective for fiscal years beginning after December 15, 1993. The impact of
adoption on the Company's financial position is not expected to be material.
NOTE 13. CONSOLIDATION AND ACQUISITION
AQUA COOL ENTERPRISES, INC.
Prior to May 26, 1993, Aqua Cool Enterprises, Inc. ("ACE") was an
independently owned distributor of the Company's Aqua Cool bottled water
products. The Company sold bottled water and related supplies to ACE; leased
coolers and vehicles to ACE; and provided management services and operational
support to ACE. In addition to equipment lease financing it received from the
Company, ACE had received $12.5 million in debt and preferred equity financing
from Westinghouse Credit Corporation ("Westinghouse") over a three- year
period beginning in 1989.
Effective May 26, 1993, the Company loaned $8.25 million to ACE with
which ACE subsequently redeemed the outstanding senior note and preferred
stock of ACE held by Westinghouse. On June 10, 1993, the Company exchanged
its $8.25 million loan to ACE for ACE preferred stock. The Company holds an
option to acquire the outstanding common stock of ACE for a nominal amount.
As a result of these transactions, the Company has consolidated the
operating results of ACE as if ACE were a wholly owned subsidiary. ACE's
results of operations are included in the Company's consolidated financial
statements from May 26, 1993. The combination has been accounted for under
the purchase method with goodwill of $12.2 million, net of federal income
tax benefits of $4.5 million, being amortized on a straight-line basis over
40 years.
/69
For purposes of presenting the following unaudited pro forma
consolidated results all transactions between the Company and ACE have
been eliminated as if the consolidation had occurred on January 1, 1992.
The pro forma results also reflect adjustments that are attributable to
the consolidation such as interest expense, goodwill amortization,
operational efficiencies, asset revaluations and related tax effects.
Twelve Months Ended December 31 (unaudited)
1993 1992
Net revenues $174,400 $155,569
Income before extraordinary items $ 12,702 $ 10,401
Net income $ 12,702 $ 10,401
Earnings per share $ 1.80 $ 1.50
RESOURCES CONSERVATION COMPANY
Effective December 1, 1993, the Company acquired a substantial portion of the assets and
liabilities of Resources Conservation Company (RCC) for approximately $10.9 million. RCC
designs, engineers and installs wastewater treatment systems.
The acquisition was accounted for under the purchase method with the results of RCC
included from December 1, 1993. Goodwill of $8.3 million is being amortized on a
straight-line basis over 40 years. Pro forma results of operations have not been
presented as the effect of this acquisition on the financial statements was immaterial.
Fiscal 1993 RCC revenues for the period prior to December 1, 1993 were approximately
$25.3 million.
Payment of the RCC purchase price of $10.9 million plus related interest expense of
approximately $100,000 occurred on January 27, 1994. The obligation for payment plus
related accrued interest was included in other current liabilities at December 31, 1993.
NOTE 14. SEGMENT INFORMATION
Business Segments The Company conducts its business in three business segments:
Membranes and Related Equipment - electrodialysis reversal systems; reverse osmosis
systems; microfiltration systems; conventional water and wastewater treatment equipment;
other separations technology products; zero liquid discharge systems; instruments for
monitoring and on-line detection of pollution levels; and fabricated products.
Water and Chemical Supply - water and chemicals produced by the Company's membrane-
based equipment, including desalted water for municipal and industrial use; ultrapure
water for electronics and other industries; and bleach and related chemicals.
Consumer Water Products - bottled water; over and under-the-sink point of use
devices; carbon filtering media; and point-of-entry systems for treating the entire home
water supply.
/70
A summary of the Company's operations by business segment follows on the next page:
Membranes Water and Consumer Corporate
and Related Chemical Water and
Dollars in thousands Equipment Supply Products Other Total
1993
Revenue - unaffiliated customers $92,352 $51,513 $31,408 $ - $175,273
Intersegment transfers 1,165 574 9 (1,748) -
Income from operations 4,850 8,629 4,679 (998) 17,160
Equity income (195) 155 815 - 775
Earnings before interest and taxes (EBIT) 4,655 8,784 5,494 (998) 17,935
EBIT % of total EBIT 26% 49% 31% (6%) 100%
Identifiable assets 78,341 88,094 54,533 23,605 244,573
Investments in affiliated companies 338 1,108 3,543 - 4,989
Depreciation and amortization 2,159 10,431 2,662 211 15,463
Capital expenditures 2,605 9,470 2,092 500 14,667
1992
Revenue - unaffiliated customers $81,019 $46,698 $27,523 $ - $155,240
Intersegment transfers 1,939 597 3 (2,539) -
Income from operations 7,540 7,585 1,013 (1,322) 14,816
Equity income (185) 158 1,308 - 1,281
Earnings before interest and taxes (EBIT) 7,355 7,743 2,321 (1,322) 16,097
EBIT % of total EBIT 46% 48% 14% (8%) 100%
Identifiable assets 55,833 92,906 35,377 36,195 220,311
Investments in affiliated companies 463 981 2,835 - 4,279
Depreciation and amortization 1,957 8,212 2,113 306 12,588
Capital expenditures 1,548 19,467 3,069 614 24,698
1991
Revenue - unaffiliated customers $76,267 $31,491 $30,362 $ - $138,120
Intersegment transfers 1,231 780 - (2,011) -
Income from operations 4,653 5,022 1,699 (1,192) 10,182
Equity income (19) 116 1,315 - 1,412
Earnings before interest and taxes (EBIT) 4,634 5,138 3,014 (1,192) 11,594
EBIT % of total EBIT 40% 44% 26% (10%) 100%
Identifiable assets 53,628 86,891 32,572 880 173,971
Investments in affiliated companies 628 829 2,551 - 4,008
Depreciation and amortization 1,968 3,758 2,483 321 8,530
Capital expenditures 1,802 30,797 2,006 257 34,862
/71
Geographic Segments
Sales are reflected in the segment from which the sales are made. Transfers between
areas are generally made at cost plus a markup which approximates prices charged to
unaffiliated customers. Certain corporate expenses are included with the elimination of
intersegment profit in the "Corporate and Eliminations" segment. Identifiable corporate
assets, which are net of eliminations, consist primarily of cash and short-term
investments. Information about the Company's operations by geographic segment follows:
Corporate
United Other and
Dollars in thousands States Europe International Eliminations Total
1993
Revenue - unaffiliated customers $123,599 $42,571 $ 9,103 $ - $175,273
Intersegment transfers 9,375 420 2,824 (12,619) -
Income from operations 10,968 5,417 985 (210) 17,160
Identifiable assets 171,483 42,041 11,771 19,278 244,573
1992 Revenue - unaffiliated customers $102,498 $41,992 $10,750 $ - $155,240
Intersegment transfers 7,033 223 1,731 (8,987) -
Income from operations 8,852 6,546 907 (1,489) 14,816
Identifiable assets 137,562 41,580 10,387 30,782 220,311
1991
Revenue Q unaffiliated customers $ 85,427 $40,754 $11,939 $ - $138,120
Intersegment transfers 8,581 1,342 2,049 (11,972) -
Income from operations 5,234 4,910 947 (909) 10,182
Identifiable assets 113,237 55,383 10,066 (4,715) 173,971
Included in the United States segment are export sales of approximately 22%, 27% and 26% for 1993, 1992 and 1991,
respectively. Including these U.S. export sales, the percent ages of total revenues attributable to activities outside
the U.S. were 45%, 52% and 54% in 1993, 1992 and 1991, respectively.
/72
Report of Independent Accountants
To the Board of Directors and Stockholders of Ionics, Incorporated:
We have audited the consolidated balance sheets of Ionics, Incorporated at
December 31, 1993 and 1992 and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the three years
in the period ended December 31, 1993. 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 in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ionics,
Incorporated as of December 31, 1993 and 1992, and the consolidated results
of its operations and its cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles.
Boston, Massachusetts February 22, 1994
/73
Selected Financial Data Ionics, Incorporated
Statement of Operations Data
Dollars in thousands, except
per share amounts 1993 % 1992 % 1991 % 1990 % 1989 %
Revenues $175,273 100.0 $155,240 100.0 $138,120 100.0 $128,408 100.0 $108,915 100.0
Income before income taxes 19,724 11.3 18,184 11.7 11,649 8.4 6,442 5.0 5,310 4.9
Net income 13,807 7.9 12,820 8.3 8,278 6.0 4,727 3.7 3,590 3.3
EarnEarnings per share 1.96 1.85 1.45 1.10 .85
Balance Sheet Data
Dollars in thousands 1993 1992 1991 1990 1989
Current assets $109,957 $108,757 $ 72,334 $ 66,572 $ 67,018
Current liabilities 46,082 30,499 36,528 51,716 44,833
Working capital 63,875 78,258 35,806 14,856 22,185
Total assets 249,562 224,590 177,979 143,759 134,874
Long-term debt and notes payable 109 439 5,579 8,027 14,419
Stockholders' equity 200,081 190,340 127,931 75,614 68,102
Selected Quarterly Financial Data (unaudited)
Dollars in thousands, Earnings Earnings
except per Gross Net per Gross Net per
share amounts Revenues Profit Income Share Revenues Profit Income Share
1993 1992
First Quarter $ 41,158 $13,911 $ 3,364 .48 First Quarter $ 36,248 $13,182 $ 2,607 $ .40
Second Quarter 45,618 15,080 3,520 .50 Second Quarter 40,063 14,183 3,183 .45
Third Quarter 42,791 14,314 3,516 .50 Third Quarter 37,111 13,620 3,372 .48
Fourth Quarter 45,706 14,965 3,407 .48 Fourth Quarter 41,818 14,324 3,658 .52
$175,273 $58,270 $13,807 $1.96 $155,240 $55,309 $12,820 $1.85
Common Stock Price Range High Low High Low
1993 1992
First Quarter $67 7/8 $53 1/2 First Quarter $67 1/2 $42 1/4
Second Quarter $56 3/8 $39 Second Quarter $59 7/8 $51
Third Quarter $50 $38 1/2 Third Quarter $57 1/2 $50
Fourth Quarter $52 3/8 $46 3/4 Fourth Quarter $68 1/2 $51 3/4
/74
Board of Directors
ARTHUR L. GOLDSTEIN u
Chairman of the Board,
President and Chief
Executive Officer
Ionics, Incorporated
WILLIAM L. BROWN s n
Retired Chairman of the
Board, The First National
Bank of Boston
ARNAUD DE VITRY D'AVAUCOURT s n
Engineering Consultant
and Director of Various
Organizations
LAWRENCE E. FOURAKER u s n
Trustee and Director of
Various Organizations
SAMUEL A. GOLDBLITH u s n
Professor Emeritus
Massachusetts Institute
of Technology, and
Consultant
K. KACHADURIAN
Senior Vice President
Ionics, Incorporated
WILLIAM E. KATZ
Executive Vice President
Ionics, Incorporated
ROBERT B. LUICK
Of Counsel, Sullivan and
Worcester, Attorneys
JOHN J. SHIELDS s n
President and Chief
Executive Officer
King's Point
Holdings Incorporated
MARK S. WRIGHTON
Provost and Professor of Chemistry,
Massachusetts Institute of Technology
/75
ALLEN S. WYETT s n
President, Wyett
Consulting Group, Inc.
u Member of Executive
Committee
s Member of Audit
Committee
n Member of Compensation
Committee
/76
Corporate Officers
ARTHUR L. GOLDSTEIN
Chairman of the Board,
President and Chief
Executive Officer
WILLIAM E. KATZ
Executive Vice President
K. KACHADURIAN
Senior Vice President
ROBERT J. HALLIDAY
Vice President
Finance and Accounting
and Chief Financial
Officer
STEPHEN KORN
Vice President, General
Counsel and Clerk
THEODORE G. PAPASTAVROS
Vice President
Strategic Planning
and Treasurer
/77
Principal Offices,
Affiliates &
Subsidiaries
Ionics, Incorporated
Bridgeville, Pennsylvania
General Ionics
Cuyahoga Falls, Ohio
Ionics Pure Solutions
Phoenix, Arizona
Elite Chemicals N.E.,
Springfield, Massachusetts
Ionics Ultrapure Water Corp.
Campbell, California
Resources Conservation Co.
Bellevue, Washington
Resources Conservation Co. International
Bellevue, Washington
Ionics Italba, S.p.A.
Milan, Italy
Ionics Iberica, S.A.
Grand Canary, Spain
Ionics Nederland, B.V.
Maastricht, the Netherlands
Ionics
(UK) Ltd.
London, England
Global Water Services, S.A.
Panama City, Panama
Ionics, Incorporated
Hong Kong
Ionics (Bermuda) Ltd.
Hamilton, Bermuda
Elite Chemicals Pty. Ltd.
Brisbane, Qld. Australia
/78
Eau et Industrie
Paris, France
Watlington Waterworks Ltd.
Devonshire, Bermuda
Jalal-Ionics, Ltd.
Manama, Bahrain
Aqua Cool Saudi Arabia
Dammam, Saudi Arabia
Aqua Cool Kuwait
Kuwait City, Kuwait
Aqua Cool Enterprises, Inc.
Watertown, Massachusetts
Yuasa-Ionics Co., Ltd.
Tokyo,
Japan
Corporate Headquarters
Ionics, Incorporated
Watertown, Massachusetts
Investor Information
The Annual Meeting of Ionics'
shareholders will be held
Thursday, May 5, 1994 at
2:00 P.M. at Bank of Boston
100 Federal Street,
Boston, Massachusetts
Ionics' common stock is traded
on the New York Stock Exchange under
the symbol ION. As of March 18, 1994
there were approximately
1,800 shareholders of record. No cash
dividends were paid in either 1993 or
1992 pursuant to Ionics' current policy to
retain earnings for use in its business.
For information or assistance
regarding individual stock
records, transactions or
certificates, please call the
Transfer Agent's Telephone
Response Center: (617)575-2900 between 8 A.M. and 7 P.M.
/79
A copy of Ionics' Annual
Report on Form 10-K, which
is filed with the Securities and
Exchange Commission, will be
sent to any shareholder upon
request directed to Investor
Relations, Ionics, Incorporated,
P.O. Box 9131, Watertown, Massachusetts
02272-9131,
or by calling (617)926-2510
ext. 874.
TRANSFER AGENT
& REGISTRAR
The First National Bank of
Boston, Boston, Massachusetts
AUDITORS
Coopers & Lybrand
Boston, Massachusetts
/80