EXHIBIT 13
IONICS, INCORPORATED
ANNUAL REPORT TO STOCKHOLDERS OF
IONICS, INCORPORATED FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1994
(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 RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
The financial performance of Ionics continued to improve in 1994 with a
27% growth in revenues and a 12% improvement in earnings. The profit
improvement resulted primarily from the continued success of "own and
operate" and service-based activities relating to the Water, Food and
Chemical Supply segment and from strong growth within the Consumer Products
segment. These two segments experienced improvements over 1993 in earnings
before interest and taxes of 41% and 31%, respectively. In addition, the
earnings before interest and taxes of the Membranes and Related Equipment
segment improved 9%.
Total revenues were $222.4 million in 1994, compared with $175.3
million in 1993. Revenues were higher in all three business segments with
the largest growth occurring in the Membranes and Related Equipment
segment. This growth was primarily due to the acquisition of Resources
Conservation Company (Ionics RCC) effective December 1, 1993, and to the
growth in the sales of ultrapure water systems, particularly to the
semiconductor industry.
Water, Food and Chemical Supply segment revenues in 1994 increased as
Ionics initiated its operation of two cheese whey processing facilities for
Mid-America Dairymen, Inc. Ionics also realized significant growth in
revenues related to ownership and operation of ultrapure water systems. In
addition, demand continued to increase for chemical supply products
produced by the Elite Chemicals businesses in Australia and in the United
Kingdom, where the Company's newest bleach manufacturing facility began
operating in the fourth quarter of 1993.
Consumer Products revenues increased due to strong demand for consumer
windshield wash and bleach products produced by the Elite Chemicals
business in New England. Furthermore, higher volumes of bottled water were
sold by existing Aqua Cool locations and through new distribution
facilities in Cincinnati and Columbus, Ohio, Raleigh-Durham, North Carolina
and Birmingham, England. These volume increases have been partially
supported by an increase in production capacity resulting from the
replacement of the bottling facility in Maryland with one in Virginia and
the opening late in the year of a new bottling facility in New Jersey.
Home water product sales increased as the Company shipped additional water
conditioning units through an expanded network of independent and Company-
owned dealers.
The addition of Ionics RCC, the increase in revenues from ultrapure
water systems and the growth in consumer products were responsible for the
40% growth in the U.S. geographic segment. The decrease in the European
geographic segment was due to slowness in traditional capital equipment
sales.
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Total revenues were $175.3 million in 1993, compared with $155.2
million in 1992. Each business segment experienced improved revenues with
the largest growth occurring in the Membranes and Related Equipment segment
due to higher equipment sales and, to a lesser extent, the December 1992
acquisition of the Company's French subsidiary, Eau et Industrie, and the
December 1993 acquisition of Ionics RCC. Revenues from the Water, Food and
Chemical Supply segment increased primarily as large Company-owned plants,
which commenced operations in the first quarter of 1992, operated for the
entire period in 1993. Consumer Products revenues increased with further
development of the existing bottled water business, consolidation of Aqua
Cool Enterprises, Inc. (ACE), the Company's distributor, as of May 26,
1993, and as domestic consumer chemical product sales grew. The increases
in domestic equipment revenues, the expansion of the domestic consumer
chemical business, and the additions of ACE and Ionics RCC were responsible
for the 21% growth in the U.S. geographic segment.
Cost of sales as a percentage of revenues were 69.3%, 66.8%, and 64.4%
in 1994, 1993 and 1992, respectively.
Cost of sales as a percentage of revenues increased during 1994 for the
Membranes and Related Equipment and Consumer Products segments while it
declined for the Water, Food and Chemical Supply segment. The increase in
the Membranes and Related Equipment segment was due to a less favorable mix
between capital equipment and spare parts revenues and to an increase in
manufacturing overhead costs as a percentage of revenues resulting from
reduced sales of traditional capital equipment. The acquisition of Ionics
RCC also contributed to the increase as Ionics RCC classifies a greater
percentage of its total costs as cost of goods sold, which is offset by
lower operating costs, than does the traditional Membranes and Related
Equipment segment.
Cost of sales as a percentage of revenue declined in the Water, Food
and Chemical Supply segment due to operational efficiencies achieved at
certain own and operate sites. The increase in the Consumer Products
segment resulted from a fluctuation in the mix of sales of individual
consumer products.
The increase in 1993 compared to 1992 was due primarily to the
Membranes and Related Equipment segment which experienced greater than
anticipated costs on several sizeable capital equipment sales. The
Consumer Products segment showed an improvement in the cost of sales
percentage due primarily 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.
Operating expenses as a percentage of revenues were 21.2% in 1994, down
from 23.5% in 1993 and 26.1% in 1992. The decrease in operating expenses
as a percentage of revenues in 1994 and 1993 in all three business segments
was due to the absorption of relatively fixed operating expenses by
increased sales volume, and continued emphasis on expense controls.
Operating expenses allocable to "Corporate and Other" (Note 14) increased
in 1994 as the Company realized greater than anticipated losses in its
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self-insured workers' compensation and auto liability programs; recorded
year-end bonuses for employees; and allocated a greater percentage of
research and development expenses to "Corporate." Within the Membranes and
Related Equipment segment, Ionics RCC's operating expenses as a percentage
of revenues brought down the overall percentage for the segment.
Interest income in 1994 was $1.1 million compared to $1.8 million in
1993 and $2.1 million in 1992. The decrease in 1994 was due to lower
invested balances, resulting from payment of the Ionics RCC acquisition
obligation in the first quarter of 1994, and increased capital spending.
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 Company's effective tax rate was 32% in 1994, 30% in 1993 and 29%
in 1992. The increase in the effective tax rate for 1994 was due to a
higher applicable statutory rate, a higher state tax rate resulting from
proportionately greater domestic income and to a reduction in the benefit
from tax-exempt interest, partially offset by other miscellaneous items.
The increase in 1993 was due to a decrease in the benefit from a low state
tax rate on interest income resulting from lower average invested balances,
as well as a proportionately lower benefit from the Company's foreign sales
corporation.
Net income increased 11.9% to $15.4 million in 1994 compared to $13.8
million in 1993. Net income in 1993 was 7.7% higher than 1992 net income
of $12.8 million.
The Company adopted Financial Accounting Standard No. 115 (FAS 115),
"Accounting for Certain Investments in Debt and Equity Securities," as of
the beginning of 1994 with no material impact on its financial statements.
LEGAL PROCEEDINGS
The Company has been named as one of many potentially responsible
parties (PRPs) in connection with a Superfund site, Solvent Recovery
Service of New England in Southington, Connecticut. The Company's share of
estimated clean-up costs is not expected to be significant as its
volumetric share at this site is low (approximately 0.522%) 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 this
site will not have a material adverse impact on its results of operations
or financial condition.
FINANCIAL CONDITION
At December 31, 1994 the Company had total assets of $277.2 million
compared to total assets of $249.6 million at December 31, 1993 and $224.6
million at December 31, 1992. The major components of the increase in 1994
were for property, plant and equipment including expansion of the Company's
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bottled water operations, bleach production and distribution facilities,
trailers and other own and operate facilities. The major components of the
1993 increase included the consolidation of ACE, the acquisition of Ionics
RCC, and expenditures for property, plant and equipment relating primarily
to consumer products and triple-membrane trailers for the production of
ultrapure water.
Working capital in 1994 decreased by $5.3 million and the Company's
current ratio decreased to 2.1 in 1994 from 2.4 in 1993. Capital
expenditures totaled $38.2 million, $14.7 million, and $24.7 million in
1994, 1993 and 1992, respectively. Cash paid in 1994 to settle the Ionics
RCC acquisition obligation and in 1993 for the purchase of ACE's preferred
stock was $10.5 million and $8.0 million, respectively. Funds for these
expenditures were provided in both years through cash from operations and
through the sale of short-term investments.
Net cash generated by operating activities increased by $25.3 million
in 1994 with higher net income, depreciation and increases in liabilities,
primarily in accounts payable and accrued expenses, partially offset by
increases in operating assets, primarily in accounts receivable and
inventories. The decrease in 1993 as compared to 1992 resulted as higher
net income and depreciation were offset by increases in accounts receivable
and decreases in accounts payable and accrued expenses, excluding those
obtained through the consolidation of ACE and acquisition of Ionics RCC.
Net cash used by investing activities increased by $42.0 million in 1994 as
compared to 1993. During 1994, cash used for investments in property,
plant and equipment and for payment of the Ionics RCC acquisition
obligation was provided primarily from operations and the sale of short-
term investments. During 1993, cash used for investments in property,
plant and equipment and for the purchase of ACE's preferred stock was
provided primarily through the sale of short-term investments and from
operations. In 1994, net cash provided by financing activities increased
by $1.3 million, primarily from a reduction in debt payments and an
increase in proceeds from stock option exercises. The decrease in 1993 as
compared to 1992 resulted as no public offering of common stock occurred in
1993, while a public offering did occur in 1992.
Significant expenditures in 1995 are anticipated to include expansion
of own and operate facilities, bleach manufacturing and bottled water
operations 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 $20.6 million at the
beginning of 1995, 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.
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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, 1994 and 1993 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1994. 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, 1994 and 1993, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Boston, Massachusetts
February 22, 1995
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CONSOLIDATED STATEMENTS OF OPERATIONS Ionics, Incorporated
For the years ended December 31
Dollars in thousands, except per share amounts 1994____ 1993____ 1992
Net revenue:
Membranes and related equipment $119,426 $ 92,352 $ 81,019
Water, food and chemical supply 53,894 45,584 43,824
Consumer products 49,056 37,337 30,397
222,376 175,273 155,240
Costs and expenses:
Cost of membranes and related equipment 90,672 65,890 52,352
Cost of water, food and chemical supply 35,881 31,127 29,376
Cost of consumer products 27,640 19,986 18,203
Research and development 3,372 3,678 3,084
Selling, general and administrative 43,770 37,432 37,409
201,335 158,113 140,424
Income from operations 21,041 17,160 14,816
Interest income 1,057 1,789 2,087
Equity income 619 775 1,281
Income before income taxes
and minority interest 22,717 19,724 18,184
Provision for income taxes 7,269 5,917 5,273
Income before minority interest 15,448 13,807 12,911
Minority interest's share of income - - (91)
Net income $ 15,448 $ 13,807 $ 12,820
Earnings per share $ 1.09 $ 0.98 $ 0.93
Shares used in earnings per
share calculations 14,198,000 14,120,000 13,838,000
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED BALANCE SHEETS Ionics, Incorporated
December 31
Dollars in thousands, except per share amounts 1994 1993
Assets
Current assets:
Cash and cash equivalents $ 14,966 $ 21,534
Short-term investments 5,617 8,603
Notes receivable, current 3,126 2,505
Accounts receivable 61,675 57,214
Receivables from affiliated companies 2,170 2,944
Inventories 19,405 13,926
Other current assets 6,518 3,231
Total current assets 113,477 109,957
Notes receivable, long-term 5,246 4,919
Investments in affiliated companies 5,419 4,989
Property, plant and equipment, net 124,093 100,445
Other assets 28,929 29,252
Total assets $277,164 $249,562
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt $ 370 $ 326
Accounts payable 30,317 12,496
Other current liabilities 22,218 32,332
Taxes on income 1,972 928
Total current liabilities 54,877 46,082
Long-term debt and notes payable 99 109
Deferred income taxes 2,928 2,699
Other liabilities 650 591
Commitments - -
Stockholders' equity:
Common stock, par value $1, authorized shares:
30,000,000 in 1994 and 1993;
issued and outstanding: 13,989,896 in 1994 and 13,891,610 in 1993 13,990 13,892
Additional paid-in capital 125,529 124,189
Retained earnings 84,027 68,628
Cumulative translation adjustments (4,936) (6,628)
Total stockholders' equity 218,610 200,081
Total liabilities and stockholders' equity $277,164 $249,562
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS Ionics, Incorporated
For the years ended December 31
Dollars in thousands _____________________________________ 1994 1993 1992
Operating activities:
Net income $ 15,448 $ 13,807 $ 12,820
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,092 15,463 12,588
Provision for losses on accounts and notes receivable 535 390 944
Deferred income tax provision 2,051 1,589 562
Changes in assets and liabilities, net of effects
of businesses acquired:
Notes receivable (889) (1,175) (2,699)
Accounts receivable (3,634) (7,332) (2,209)
Inventories (5,296) (1,509) (748)
Other current assets (3,199) 498 (2,016)
Investments in affiliates (386) (641) (250)
Accounts payable and accrued expenses 16,998 (7,432) (1,819)
Income taxes (1,787) (987) (2,481)
Other (738) (825) (567)
Net cash provided by operating activities 37,195 11,846 14,125
Investing activities:
Additions to property, plant and equipment (38,220) (14,667) (24,698)
Sale/(Purchase) of short-term investments 3,222 19,129 (28,623)
Acquisitions, net of cash acquired (10,488) (7,959) (2,352)
Net cash used by investing activities (45,486) (3,497) (55,673)
Financing activities:
Principal payments on current debt (325) (8,845) (3,601)
Proceeds from issuance of current debt 347 8,176 682
Principal payments on long-term debt - (506) (4,717)
Proceeds from issuance of long-term debt - 256 235
Proceeds from stock option plans 1,389 1,078 1,227
Sale of common stock - - 53,991
Net cash provided by financing activities 1,411 159 47,817
Effect of exchange rate changes on cash 312 (509) (574)
Net change in cash and cash equivalents (6,568) 7,999 5,695
Cash and cash equivalents at beginning of year 21,534 13,535 7,840
Cash and cash equivalents at end of year $ 14,966 $ 21,534 $ 13,535
The accompanying notes are an integral part of these financial statements.
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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, 1991 11,416,738 $11,417 $ 69,131 $ 43,238 $ 4,145 $127,931
Sale of common stock 2,300,000 2,300 52,840 (1,149) - 53,991
Stock options exercised 100,288 100 497 (50) - 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 13,817,026 13,817 123,148 54,859 (1,484) 190,340
Stock options exercised 74,584 75 465 (38) - 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 13,891,610 13,892 124,189 68,628 (6,628) 200,081
Stock options exercised 98,286 98 896 (49) - 945
Tax benefit of stock option activity - - 444 - - 444
Translation adjustments, net
of income taxes of $(872) - - - - 1,692 1,692
Net income - - - 15,448 - 15,448
Balance December 31, 1994 13,989,896 $13,990 $125,529 $84,027 $ (4,936) $218,610
The accompanying notes are an integral part of these financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Interest
earned on notes receivable, totaling $989,000, $1,277,000 and $1,643,000
in 1994, 1993 and 1992, respectively, is included in revenues.
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.
CASH EQUIVALENTS
Short-term investments with a maturity of 90 days or less from 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. All other investments are
classified as available for sale and carried at fair value with unrealized
gains and losses, net of tax, reported in a separate component of
stockholders' equity. The Company is not actively involved in the
purchase and sale of investments classified as trading.
NOTES RECEIVABLE
Notes receivable have been reported at their estimated realizable value.
The allowance for uncollectible notes receivable totaled $839,000 and
$702,000 at December 31, 1994 and 1993, respectively.
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.
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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 $104,000, $177,000 and $709,000 in 1994, 1993 and 1992,
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. The Company continually evaluates
the realizability of goodwill based upon expectations of non-discounted
cash flows and operating income for each subsidiary having a material
goodwill balance.
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 gains included in income before taxes totaled $23,000,
$157,000 and $587,000 for 1994, 1993 and 1992, 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 after giving retroactive
effect for a 2-for-1 stock split (Note 9) for all periods presented.
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.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified in order to conform to
the current year presentation with no impact on net income.
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NOTE 2. CONSOLIDATED BALANCE SHEET DETAILS
Dollars in thousands 1994 1993
Raw materials $ 11,088 $ 9,541
Work in process 5,964 3,016
Finished goods 2,353 1,369
Inventories $ 19,405 $ 13,926
Land $ 2,584 $ 1,261
Buildings 23,621 13,829
Machinery and equipment 148,881 121,792
Other, including furniture, fixtures and vehicles 22,122 18,918
197,208 155,800
Accumulated depreciation (73,115) (55,355)
Property, plant and equipment, net $124,093 $100,445
Goodwill $ 25,927 $ 25,660
Accumulated amortization (2,312) (1,608)
Other______________________________________________ 5,314 5,200
Other assets $ 28,929 $ 29,252
Obligation for purchase of Resources
Conservation Company (Ionics RCC) $ - $ 10,974
Customer deposits 4,959 5,668
Accrued commissions 1,852 1,733
Accrued expenses 15,407 13,957
Other current liabilities $ 22,218 $ 32,332
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NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION
Dollars in thousands __________________________ 1994 1993 1992
Cash payments for interest and income taxes:
Interest $ 159 $ 150 $ 783
Taxes $ 6,628 $ 4,403 $7,374
Liabilities assumed in conjunction with
acquisitions and ACE preferred stock purchase:
Fair value of assets consolidated $ - $ 47,825 $2,609
Net cash paid (10,488) (7,959) (375)
Liability associated with purchase of Ionics RCC
(net of cash acquired) 10,488 (10,488) -
Liabilities assumed $ - $29,378 $2,234
NOTE 4. ACCOUNTS RECEIVABLE
Dollars in thousands 1994 1993
Billed receivables $49,529 $36,819
Unbilled receivables 13,504 21,715
Allowance for doubtful accounts (1,358) (1,320)
Accounts receivable $61,675 $57,214
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, 1994 are expected
to be billed during 1995.
Billed receivables include retainage amounts of $3,355,000 and $3,054,000 at
December 31, 1994 and 1993, 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%
Ionics-Mega s.r.o. - Czech Republic 49%
Jalal-Ionics, Ltd. - Bahrain 40%
Watlington Waterworks Limited - Bermuda 23%
Yuasa-Ionics Co., Ltd. - Japan 50%
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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 1994 1993 1992
Investments at beginning of year $ 4,989 $ 4,279 $ 4,008
Equity in earnings 619 775 1,281
Distributions received (233) (134) (1,058)
Additional investment made during
the year - - 27
Cumulative translation adjustments 44 69 21
Investments at end of year $ 5,419 $ 4,989 $ 4,279
At December 31, 1994, the Company's equity in the total assets and in the
total liabilities of its foreign affiliates was $9,951,000 and $4,532,000,
respectively. The Company's equity in the 1994 total revenues of these
affiliates was $8,792,000.
NOTE 6. CONTINGENT LIABILITIES
The Company is involved in the normal course of its business in various
litigation matters. Although the Company's counsel is unable to determine
at the present time whether the Company will have any liability in any of
the pending matters, some of which are in the early stages of pretrial
discovery, the Company believes it has meritorious defenses and that none of
the pending matters will have an outcome material to the financial condition
or business of the Company.
The Company was notified in 1992 that it is a potentially responsible party
(PRP) at a Superfund site, Solvent Recovery Service of New England in
Southington, Connecticut (the "SRS Site"). The Environmental Protection
Agency (EPA) has completed its remedial investigation and its preliminary
estimate of clean-up costs totaled $30 million, of which the Company's share
approximates $160,000. The PRP group has presented a counterproposal for
clean-up which the EPA is considering. The cost of the counterproposal
would approximate $5.5 - $7.5 million, of which the Company's share would
approximate $30,000 - $40,000. The Company has to date been assessed a
total of $21,000 for the clean-up of the site. 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 (approximately 0.522%)
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 1994 1993
6-3/4% Industrial Revenue Bond due 1994, in equal
quarterly installments $ - $120
Other borrowings 272 162
272 282
Less installments due within one year 173 173
Long-term debt and notes payable $ 99 $109
The Industrial Revenue Bond was 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.
Maturities of long-term debt and notes payable for the five years ending
December 31, 1995 to 1999 are approximately $173,000, $22,000, $9,000,
$9,000 and $9,000, 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, 1994 or 1993.
The Company utilizes 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 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 $627,000, $369,000 and $30,000 as of December 31, 1994, 1993
and 1992, respectively.
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 1994 1993 1992
U.S. $15,022 $10,902 $ 9,753
Non-U.S. 7,695 8,822 8,431
Income before income taxes and minority interest $22,717 $19,724 $18,184
/53
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Income tax provisions (benefits) consist of the following:
Dollars in thousands 1994 1993 1992
Federal $ 3,575 $ 2,124 $ 2,121
Foreign 926 1,729 2,290
State 717 475 300
Current provision 5,218 4,328 4,711
Federal 225 528 (441)
Foreign 1,625 1,013 976
State 201 48 27
Deferred provision 2,051 1,589 562
Provision for income taxes $ 7,269 $ 5,917 $ 5,273
Deferred tax provisions (benefits) consist of the following:
Dollars in thousands 1994 1993 1992
U.S. tax on unremitted earnings $ 1,486 $ 335 $ -
(net of foreign tax credit)
Goodwill amortization 137 - -
Use of different book/tax contract
accounting methods 450 257 (94)
Net reversal of deferred profit on sales
to foreign subsidiaries 122 71 44
Use of accelerated depreciation 194 651 672
DISC dividend (197) (197) (197)
Bad debt reserve activity (18) 87 (76)
Other, net (123) 385 213
Deferred tax provision $ 2,051 $ 1,589 $ 562
The United States statutory corporate tax rate is reconciled to the Company's
effective tax rate as follows:
1994 1993 1992
U.S. Federal statutory rate 35.0% 34.0% 34.0%
Foreign Sales Corporation (1.8) (1.9) (2.2)
Tax exempt interest income (2.4) (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 2.6 1.8 1.2
Foreign income taxed at different rates (1.1) (1.3) .3
Other, net (.3) .9 (.9)
Effective tax rate 32.0% 30.0% 29.0%
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, 1994 the tax
effects of the temporary differences are:
/54
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Deferred Deferred tax
Dollars in thousands tax assets liabilities
Depreciation $ - $3,309
Inventory valuation 197 -
Bad debt reserves 246 -
Profit on sales to foreign subsidiaries 1,045 -
Insurance reserves 571 -
Pensions 332 -
Sale versus lease 847 -
Foreign withholding taxes on
undistributed earnings - 1,842
Foreign deferred liabilities - 1,932
Net operating loss carryforwards 6,364 -
Miscellaneous 1,463 1,382
11,065 8,465
Valuation allowance for deferred
tax assets (1,800) -
Deferred income taxes $ 9,265 $8,465
At December 31, 1994, the Company had unused tax loss carryfoward benefits of
$6,364,000 (expiring in fiscal years 2004 to 2009). 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, 1994 and 1993.
The remaining unreserved portion is considered to be realizable. $4,540,000 of
the net unused tax loss carryforward benefit has been included in other assets
at December 31, 1994.
NOTE 9. STOCKHOLDERS' EQUITY
During November 1994, the Company's Board of Directors declared a 2-for-1
stock split to be effected by a 100% stock dividend payable January 6, 1995
to shareholders of record on December 14, 1994. All share and option
amounts, related prices and other stockholders' equity information have
been adjusted for all periods presented to give retroactive effect to this
split.
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. During 1994, an additional
650,000 shares of common stock were authorized for issuance as options. At
December 31, 1994, 62,408 shares were reserved for issuance of additional
options under the 1979 Plan.
Under the 1986 Stock Option Plan for Non-Employee Directors (the "1986
Plan"), options may be granted at a price not less than the fair market
value at the date of grant. No additional shares of common stock were
authorized for issuance as options during 1994. As of December 31, 1994,
123,000 shares were reserved for issuance of additional options under the
1986 Plan.
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 Osmomar S.A., a Spanish subsidiary of the Company which
was merged with Ionics Iberica, S.A. in 1992.
/55
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A summary of changes in the total amount of outstanding options for the
three years ended December 31, 1994 follows:
1994 1993 1992
Shares under option,
beginning of year 1,665,572 1,060,750 1,111,560
Options granted 642,000 700,500 63,500
Options exercised (104,728) (79,678) (110,960)
Options cancelled (17,900) (16,000) (3,350)
Shares under option,
end of year 2,184,944 1,665,572 1,060,750
Shares exercisable 2,130,224 1,601,732 987,790
Price range of options
granted $22.56-24.31 $19.75-24.38 $1.00-30.38
Price range of options
exercised $ 1.00-24.38 $ 1.00-27.00 $5.50-21.50
Price range of options
exercisable $ 5.63-30.38 $ 1.00-30.38 $1.00-30.38
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 will normally be acquired for the
plan in the open market. However, the Board of Directors has reserved an
additional 120,000 shares for issuance by the Company from authorized but
unissued shares if required. Through December 31, 1994, no shares had been
issued under the plan.
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.
As a result of the 100% stock dividend distributed on January 6, 1995, each
share of common stock now carries one-half right.
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.
The Company's Board of Directors has adopted the 1994 Restricted Stock Plan
(the "1994 Plan") subject to approval by the Company's stockholders at the
/56
-18-
May 1995 Annual Meeting. The purpose of the 1994 Plan is to increase stock
ownership among officers and other key employees of the Company. As of
December 31, 1994, a total of 300,000 shares have been reserved for
issuance under the 1994 Plan; no shares have been issued.
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 $46,038,000 and $37,555,000 at December 31, 1994 and
1993, respectively. The accumulated depreciation for such equipment was
$14,134,000 and $9,914,000 at December 31, 1994 and 1993, respectively.
At December 31, 1994, future minimum rentals receivable under noncancelable
operating leases in the years 1995 through 1999 and later were approximately
$7,783,000, $5,894,000, $4,973,000, $3,778,000, $3,356,000 and $8,239,000,
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
participants' accounts in proportion to each participant's respective
compensation. Company contributions were $360,000, $381,000, and $372,000
in 1994, 1993 and 1992, 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 Ionics
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.
The following table sets forth the pension plan's funded status and amounts
recognized in the Company's balance sheet at December 31, 1994 and 1993:
Dollars in thousands 1994 1993
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $5,226 and $6,447, respectively $(5,712) $(6,778)
Projected benefit obligation for service
rendered to date (6,740) (7,736)
Plan assets at fair value 5,763 6,615
Projected benefit obligation in excess of plan assets (977) (1,121)
Unrecognized net loss 348 508
Unrecognized prior service cost 76 120
Unrecognized net assets being amortized
over approximately 17 years (468) (520)
Accrued pension cost at December 31 $(1,021) $(1,013)
/57
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Net pension cost included the following components:
Dollars in thousands 1994 1993 1992
Service cost $ 652 $ 568 $ 482
Interest cost 636 556 512
Return on plan assets 46 (632) (380)
Net amortization and deferral (703) 50 (137)
Net periodic pension cost $ 631 $ 542 $ 477
The discount rates used in determining the projected benefit obligation
were 8.5% in 1994 and 7.5% in 1993. The rate of increase in compensation
levels used was 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 $28.0 million and $19.2 million of
these letters were outstanding at December 31, 1994 and 1993, respectively.
Approximately 38% of the letters of credit outstanding at December 31, 1994
are scheduled to expire in 1995. 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, 1994 and 1993.
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
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.
/58
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INVESTMENTS IN SECURITIES
Effective January 1, 1994, the Company adopted Financial Accounting
Standard No. 115 (FAS 115), "Accounting for Certain Investments in Debt and
Equity Securities." The impact upon adoption was not material to the
Company's financial statements.
Investments which the Company intends to hold to maturity have been
recorded at amortized cost of $643,000 which approximated fair market
value. These investments were comprised of Spanish Government bonds and
have been classified as short-term investments.
All other investments, totaling $4,974,000, are considered to be available
for sale and have been recorded at fair market value, which approximated
amortized cost, based primarily upon reports received from an outside
investment service. These investments have been classified as short-term
investments as discussed in Note 1. Realized gains and losses from the
sale of such investments during fiscal 1994 were not significant.
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 since 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.
IONICS RESOURCES CONSERVATION COMPANY
Ionics Resources Conservation Company (Ionics RCC) designs, engineers and
installs wastewater treatment systems. Effective December 1, 1993, the
Company acquired a substantial portion of the assets and liabilities of
Ionics RCC for approximately $10.9 million. The acquisition was accounted
for under the purchase method with the results of Ionics RCC included from
December 1, 1993. Goodwill of $8.5 million is being amortized on a
straight-line basis over 40 years. Fiscal 1993 Ionics RCC revenues for the
period prior to December 1, 1993 were approximately $25.3 million.
Payment of the Ionics 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.
/59
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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, ultrafiltration 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, Food and Chemical Supply - water, food 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;
reduced mineral whey for food applications; and bleach and related
chemicals.
Consumer Products - 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.
/60
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The following table summarizes the Company's operations by the three
business segments and "Corporate and Other." Corporate and Other includes
corporate-sponsored research and development programs and certain employee
bonuses and insurance costs.
Membranes Water, Food Corporate
and Related and Chemical Consumer and
Dollars in thousands Equipment Supply Products Other Total
1994
Revenue - unaffiliated customers $119,426 $ 53,894 $ 49,056 $ - $222,376
Intersegment transfers 1,718 615 - (2,333) -
Income from operations 5,407 11,742 6,884 (2,992) 21,041
Equity income (loss) (349) 124 844 - 619
Earnings before interest and taxes (EBIT) 5,058 11,866 7,728 (2,992) 21,660
EBIT % of total EBIT, after allocation
of Corporate and Other 21% 48% 31% - 100%
Identifiable assets 88,010 83,043 85,667 15,025 271,745
Investments in affiliated companies 34 1,211 4,174 - 5,419
Depreciation and amortization 2,503 10,911 4,567 111 18,092
Capital expenditures 8,048 13,223 16,589 360 38,220
1993
Revenue - unaffiliated customers $ 92,352 $ 45,584 $ 37,337 $ - $175,273
Intersegment transfers 1,165 574 9 (1,748) -
Income from operations 4,850 8,234 5,074 (998) 17,160
Equity income (loss) (195) 155 815 - 775
Earnings before interest and taxes (EBIT) 4,655 8,389 5,889 (998) 17,935
EBIT % of total EBIT, after allocation
of Corporate and Other 25% 44% 31% - 100%
Identifiable assets 78,341 80,778 61,849 23,605 244,573
Investments in affiliated companies 338 1,108 3,543 - 4,989
Depreciation and amortization 2,159 10,041 3,052 211 15,463
Capital expenditures 2,605 8,520 3,042 500 14,667
1992
Revenue - unaffiliated customers $ 81,019 $ 43,824 $ 30,397 $ - $155,240
Intersegment transfers 1,939 597 3 (2,539) -
Income from operations 7,540 8,544 54 (1,322) 14,816
Equity income (loss) (185) 158 1,308 - 1,281
Earnings before interest and taxes (EBIT) 7,355 8,702 1,362 (1,322) 16,097
EBIT % of total EBIT, after allocation
of Corporate and Other 42% 50% 8% - 100%
Identifiable assets 55,833 86,634 41,649 36,195 220,311
Investments in affiliated companies 463 981 2,835 - 4,279
Depreciation and amortization 1,957 8,039 2,286 306 12,588
Capital expenditures 1,548 18,029 4,507 614 24,698
/61
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GEOGRAPHIC SEGMENTS
Revenues 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, comprise primarily 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
1994
Revenue - unaffiliated customers $172,864 $38,948 $10,564 $ - $222,376
Intersegment transfers 11,969 1,606 1,764 (15,339) -
Income from operations 16,229 4,679 1,046 (913) 21,041
Identifiable assets 193,832 53,941 14,664 9,308 271,745
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
Included in the United States segment are export sales of approximately 19%, 14% and 21% for
1994, 1993 and 1992, respectively. Including these U.S. export sales, the percentages of total
revenues attributable to activities outside the U.S. were 37%, 40% and 48% in 1994, 1993 and
1992, respectively.
/62
-24-
SELECTED FINANCIAL DATA
STATEMENT OF OPERATIONS DATA
Dollars in thousands, except
per share amounts 1994 % 1993 % 1992 % 1991 % 1990 %
Revenues $222,376 100.0 $175,273 100.0 $155,240 100.0 $138,120 100.0 $128,408 100.0
Income before income taxes 22,717 10.2 19,724 11.3 18,184 11.7 11,649 8.4 6,442 5.0
Net income 15,448 6.9 13,807 7.9 12,820 8.3 8,278 6.0 4,727 3.7
Earnings per share 1.09 .98 .93 .73 .55
BALANCE SHEET DATA
Dollars in thousands 1994 1993 1992 1991 1990
Current assets $113,477 $109,957 $108,757 $ 72,334 $ 66,572
Current liabilities 54,877 46,082 30,499 36,528 51,716
Working capital 58,600 63,875 78,258 35,806 14,856
Total assets 277,164 249,562 224,590 177,979 143,759
Long-term debt and notes
payable 99 109 439 5,579 8,027
Stockholders' equity 218,610 200,081 190,340 127,931 75,614
/63
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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
1994 1993
First Quarter $ 53,035 $ 15,697 $ 3,397 $ .24 First Quarter $ 41,158 $ 13,911 $ 3,364 $ .24
Second Quarter 49,828 15,889 3,582 .26 Second Quarter 45,618 15,080 3,520 .25
Third Quarter 56,450 17,346 4,172 .29 Third Quarter 42,791 14,314 3,516 .25
Fourth Quarter 63,063 19,251 4,297 .30 Fourth Quarter 45,706 14,965 3,407 .24
$222,376 $ 68,183 $15,448 $1.09 $175,273 $ 58,270 $ 13,807 $ .98
COMMON STOCK PRICE RANGE
High Low High Low
1994 1993
First Quarter $25 3/8 $21 7/8 First Quarter $33 15/16 $26 3/4
Second Quarter 23 3/4 21 3/8 Second Quarter 28 3/16 19 1/2
Third Quarter 27 1/8 21 3/4 Third Quarter 25 19 1/4
Fourth Quarter 31 3/8 23 11/16 Fourth Quarter 26 3/16 23 3/8
/64
-26-
BOARD OF CORPORATE PRINCIPAL CORPORATE
DIRECTORS OFFICERS OFFICES, HEADQUARTERS
AFFILIATES &
ARTHUR L. ARTHUR L. SUBSIDIARIES
GOLDSTEIN * GOLDSTEIN Ionics,
Chairman of the Chairman of the Ionics, Incorporated
Board, President Board, President Incorporated Watertown,
and Chief and Chief Bridgeville, Massachusetts
Executive Executive Officer Pennsylvania
Officer INVESTOR
Ionics, K. KACHADURIAN General Ionics INFORMATION
Incorporated Executive Vice Cuyahoga
President Falls, Ohio The Annual
WILLIAM L. BROWN #+ Meeting of
Retired Chairman WILLIAM E. KATZ Ionics Pure Ionics
of the Board, Executive Vice Solutions shareholders
The First President Phoenix, will be held
National Bank of Arizona Thursday, May
Boston ROBERT J. 4, 1995 at 2:00
HALLIDAY Elite P.M. at Bank of
ARNAUD DE VITRY Vice President, Chemicals, Boston, 100
D'AVAUCOURT #+ Finance and N.E., Federal Street,
Engineering Accounting and Springfield, Boston,
Consultant and Chief Financial Massachusetts Massachusetts
Director of Officer
Various Ionics Ionics common
Organizations STEPHEN KORN Ultrapure stock is traded
Vice President, Water Corp. on the New York
LAWRENCE E. General Counsel Campbell, Stock exchange
FOURAKER *#+ and Clerk California under the
Trustee and symbol ION. As
Director of THEODORE G. Ionics of March 17,
Various PAPASTAVROS Resources 1995 there were
Organizations Vice President, Conservation Co.approximately
Strategic Bellevue, 1,800
SAMUEL A. Planning and Washington shareholders of
GOLDBLITH *#+ Treasurer record. No
Professor Resources cash dividends
Emeritus, Conservation were paid in
Massachusetts Co. either 1994 or
Institute of International 1993 pursuant
Technology, and Bellevue, to Ionics
Consultant Washington current policy
to retain
K. KACHADURIAN Ionics Italba, earnings for
Executive Vice S.p.A. use in its
President Milan, Italy business.
Ionics,
Incorporated
/65
Ionics For information
Iberica, S.A. or assistance
WILLIAM E. KATZ Grand Canary, regarding
Executive Vice Spain individual
President stock records,
Ionics, Ionics transactions or
Incorporated Nederland, certificates,
B.V. please call the
ROBERT B. LUICK Maastricht, Transfer
Of Counsel, the Agent
Sullivan and Netherlands Telephone
Worcester, Response
Attorneys Ionics (UK) Center: 1-800-
Ltd. 426-5523
JOHN J. SHIELDS #+ London, between 9 A.M.
President and England and 5 P.M.
Chief Executive
Officer, King's Global Water A copy of
Point Holdings Services, S.A. Ionics' Annual
Incorporated Panama City, Report on Form
Panama 10-K, which is
CARL S. SLOANE filed with the
Ernest L. Ionics, Securities and
Arbuckle Incorporated Exchange
Professor of Hong Kong Commission,
Business will be sent to
Administration, Ionics any shareholder
Harvard (Bermuda) Ltd. upon request
University Hamilton, directed to
Graduate School Bermuda Investor
of Business Relations,
Administration Elite Ionics,
Chemicals Pty. Incorporated,
MARK S. WRIGHTON #+ Ltd. P.O. Box 9131,
Provost and Brisbane, Qld. Watertown,
Professor of Australia Massachusetts
Chemistry, 02272-9131, or
Massachusetts Eau et by calling
Institute of Industrie (617)926-2510
Technology Paris, France ext. 874.
ALLEN S. WYETT #+ Ionics-Mega TRANSFER AGENT
President, Wyett s.r.o. & REGISTRAR
Consulting Prague, Czech
Group, Inc. Republic State Street
Bank and Trust
Watlington Company,
Waterworks Boston,
Ltd. Massachusetts
Devonshire,
Bermuda AUDITORS
/66
*Member of
Executive Jalal-Ionics, Coopers &
Committee Ltd. Lybrand L.L.P.
Manama, Boston,
#Member of Audit Bahrain Massachusetts
Committee
Aqua Cool
+Member of Saudi Arabia
Compensation Dammam, Saudi
Committee Arabia
Aqua Cool
Kuwait
Kuwait City,
Kuwait
Aqua Cool
Enterprises,
Inc.
Watertown,
Massachusetts
Yuasa-Ionics
Co., Ltd.
Tokyo, Japan
/67