UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
AMENDMENT NO. 1 TO FORM 8-K FILED ON FEBRUARY 27, 2004
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 13, 2004
IONICS, INCORPORATED
(Exact name of registrant as specified in its charter)
Massachusetts 1-7211 04-2068530
(State of incorporation) (Commission File Number) (IRS Employer Identification No.)
65 Grove Street, Watertown, MA 02472 (617) 926-2500
(Address of principal executive offices) (Zip Code) (Registrant's telephone number,
including area code)
This Current Report on Form 8-K/A is filed by Ionics, Incorporated, a
Massachusetts corporation ("Ionics"), as an amendment to that certain Current
Report on Form 8-K filed with the Securities and Exchange Commission on February
27, 2004 to include certain of the information required by Item 7(b).
Item 7. Financial Statements and Exhibits.
---------------------------------
The following financial statements and exhibits are filed as part of this report
(b) Pro Forma Financial Information.
The following unaudited pro forma financial information of Ionics is
included as Exhibit 99.1 to this Current Report on Form 8-K/A:
Unaudited Pro Forma Combined Condensed Balance Sheet as of
December 31, 2003.
Unaudited Pro Forma Combined Condensed Statement of Operations
for the Year Ended December 31, 2003.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial
Statements.
(c) Exhibits.
Exhibit Number Description
-------------- -----------
Exhibit 99.1 The following unaudited pro forma financial
information of Ionics:
Unaudited Pro Forma Combined Condensed
Balance Sheet as of December 31, 2003.
Unaudited Pro Forma Combined Condensed
Statement of Operations for the Year Ended
December 31, 2003.
Notes to the Unaudited Pro Forma Condensed
Consolidated Financial Statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IONICS, INCORPORATED
April 28, 2004 By: /s/Stephen Korn
-----------------------------------------
Name: Stephen Korn
Title: Vice President and General Counsel
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
Exhibit 99.1 The following unaudited pro forma financial information of
Ionics:
Unaudited Pro Forma Combined Condensed Balance Sheet as of
December 31, 2003.
Unaudited Pro Forma Combined Condensed Statement of
Operations for the Year Ended December 31, 2003.
Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements.
EXHIBIT 99.1
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed balance sheet as of December 31,
2003 gives pro forma effect to the acquisition by Ionics, Incorporated of
Ecolochem, Inc., Ecolochem International, Inc., Moson Holdings, LLC and
Ecolochem S.A.R.L. which was consummated on February 13, 2004 (the
"Acquisition") and the consummation of certain financing transactions relating
to the Acquisition as if the Acquisition and financing transactions had occurred
on December 31, 2003. The Acquisition was accounted for by the purchase method
of accounting pursuant to which the purchase price is allocated among the
acquired tangible and intangible assets and assumed liabilities in accordance
with estimates of their fair values on the date of acquisition. The unaudited
pro forma combined condensed balance sheet as of December 31, 2003 was prepared
by combining Ionics' historical consolidated balance sheet as of December 31,
2003 with the Ecolochem Group's historical combined balance sheet as of
September 30, 2003. The amounts reflected in the unaudited pro forma combined
condensed balance sheet as of December 31, 2003 presented below are preliminary
and subject to change and, therefore, the final values may differ substantially
from these amounts.
The unaudited pro forma combined condensed statement of operations for the
fiscal year ended December 31, 2003 gives pro forma effect to the Acquisition
and the consummation of certain financing transactions relating to the
Acquisition as if the transactions had occurred on January 1, 2003. The
unaudited pro forma combined condensed statement of operations for the fiscal
year ended December 31, 2003 was prepared by combining Ionics' historical
statement of operations for the fiscal year ended December 31, 2003 with the
Ecolochem Group's historical combined statement of operations for the fiscal
year ended September 30, 2003.
The pro forma adjustments represent Ionics' preliminary determination of
purchase accounting adjustments and are based upon available information and
certain assumptions that Ionics believes to be reasonable under the
circumstances. The pro forma adjustments and certain assumptions are described
in the accompanying notes. The allocation of the purchase price is preliminary
and will be revised upon the completion of the fixed asset and intangible asset
appraisals, which are in progress. The final allocation of purchase price could
differ materially from estimated allocated amounts included in these pro forma
financial statements. The unaudited pro forma combined condensed financial
information presented below does not purport to be indicative of the financial
position or results of operations of Ionics had such transactions actually been
completed as of the assumed dates and for the periods presented, and should not
be taken as representative of the future consolidated results of operations or
financial condition of Ionics.
Unaudited Pro Forma Combined Condensed Balance Sheet
December 31, 2003
Amounts in Thousands
Historical Pro Forma
Historical Ecolochem Adjustments for Combined
Ionics Group Acquisition Pro Forma
------ ----- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents...................... $ 133,815 $ 4,074 $ (62,116)(a) $ 75,773
Short-term investments......................... -- 11,380 $ (11,380)(b) --
Notes receivable............................... 6,365 -- -- 6,365
Accounts receivable, net....................... 109,555 23,066 -- 132,621
Inventories.................................... 24,716 3,437 344(c) 28,497
Other current assets........................... 27,782 357 -- 28,139
Deferred income taxes.......................... 13,585 -- -- 13,585
--------------- --------------- ----------- -----------
Total current assets.......................... 315,818 42,314 (73,152) 284,980
Long-term notes receivable....................... 49,323 -- -- 49,323
Investments in affiliated companies.............. 14,362 -- -- 14,362
Property, plant and equipment, net............... 171,785 86,878 14,041(d) 272,704
Identifiable intangibles......................... -- -- 73,000(e) 73,000
Goodwill......................................... 7,695 -- 180,715(f) 188,410
Other long-term assets........................... 32,994 3,146 3,037(g) 39,177
--------------- --------------- ----------- -----------
Total assets.................................. $ 591,977 $ 132,338 $ 197,641 $ 921,956
=============== =============== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.................................. $ 6,276 2,099 $ (2,099)(h) $ 6,276
Accounts payable............................... 28,279 6,364 -- 34,643
Other current liabilities...................... 83,537 3,644 -- 87,181
--------------- --------------- ----------- -----------
Total current liabilities..................... 118,092 12,107 $ (2,099) 128,100
Long-term debt and notes payable................. 8,889 13,500 161,500(h) 183,889
Deferred income taxes............................ 30,979 1,438 2,280(i) 34,697
Other long-term liabilities...................... 17,852 1,329 -- 19,181
Stockholders' equity............................. 416,165 103,964 35,960(j) 556,089
--------------- --------------- ----------- -----------
Total liabilities and stockholders' equity.... $ 591,977 $ 132,338 $ 197,641 $ 921,956
=============== =============== =========== ===========
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Year Ended December 31, 2003
Amounts in Thousands, Except Per Share Amounts
Historical Pro Forma
Historical Ecolochem Adjustments for Combined
Ionics Group Acquisition Pro Forma
Revenues....................................... $ 347,407 $ 108,919 $ -- $ 456,326
----------- ---------- ----------- -----------
Cost of sales.................................. 259,772 58,818 (955)(k) 317,635
Research and development expenses.............. 7,449 -- -- 7,449
Selling, general and administrative expenses... 99,754 24,427 4,489(l) 128,670
Restructuring and impairment of long-lived
assets....................................... 7,053 -- -- 7,053
Impairments of goodwill........................ 12,731 -- -- 12,731
----------- ---------- ----------- -----------
Income (loss) from operations.................. (39,352) 25,674 (3,534) (17,212)
Interest income................................ 3,091 174 (1,161)(m) 2,104
Interest expense............................... (908) (539) (9,103)(n) (10,550)
Equity loss.................................... (7,164) -- -- (7,164)
Other income................................... 457 13,369 -- 13,826
----------- ---------- ----------- -----------
(Loss) income from continuing operations
before income taxes and minority interest.... (43,876) 38,678 (13,798) (18,996)
Income tax (benefit) expense................... (11,533) 1,810 3,726(o) (5,997)
----------- ---------- ----------- -----------
(Loss) income from continuing operations
before minority interest..................... (32,343) 36,868 (17,524) (12,999)
Minority interest expense...................... 925 -- -- 925
----------- ---------- ----------- -----------
(Loss) income from continuing operations....... $ (33,268) $ 36,868 $ (17,524) $ (13,924)
=========== ========== =========== ===========
Loss per basic and diluted share from
continuing operations........................ $ (1.88) $ (0.62)
=========== ===========
Shares used in basic and diluted loss per share 17,674 4,653(p) 22,327
Notes to the Unaudited Pro Forma Consolidated Financial Statements as of
December 31, 2003
(a) Reflects the total purchase price, for accounting purposes, of $373.0
million less the proceeds from issuance of senior secured debt of $175.0
million, the issuance of 4,652,648 shares of Ionics common stock valued at
approximately $139.9 million (see note (j)) and cash provided by Ionics of $58.0
million less the outstanding cash-on-hand of the Ecolochem Group of $4.1
million.
(b) Reflects the elimination of investments from the Ecolochem Group balance
sheet.
(c) Reflects the increase in inventory to estimated fair market value.
(d) Reflects the increase in property, plant, and equipment of $14.0 million
to its estimated fair market value, as follows:
Furniture and fixtures.... $ 69.5 million 3-25-year estimated useful life
Buildings................. $ 15.0 million 10-40-year estimated useful life
Construction in process... $ 12.9 million
Land...................... $ 3.5 million
----------------
$ 100.9 million
(e) Reflects the recognition of the estimated fair value of the following
acquired intangible assets:
Contractual relationships...... $56.7 million 10-15-year estimated useful life
Technology and know-how........ $11.5 million 10-year estimated useful life
Non-compete agreements......... $ 0.7 million 3-year estimated useful life
Trade names and trademarks..... $ 2.4 million 9-year estimated useful life
Discharge permits.............. $ 1.7 million Indefinite life
--------------
$73.0 million
(f) Reflects the excess of the purchase price over the fair market value of
the acquired tangible and intangible assets and assumed liabilities.
(g) Reflects the increase in deferred financing costs of $4.5 million
associated with the issuance of long-term debt to finance a portion of the
Acquisition, offset by the decrease in patents and trademarks to its estimated
fair market value and reclassification to intangible assets of $1.5 million (see
note (e)).
(h) Reflects issuance of $175.0 million of senior debt to finance a portion
of the Acquisition and the elimination of the outstanding debt of the Ecolochem
Group of $15.6 million.
(i) Reflects the tax effect at Ionics' statutory tax rate applied to the
difference between the book basis and the tax basis in certain foreign fixed
assets of Ecolochem International where Ionics does not intend to make an
election under Section 338(h)(10) of the Code. Ionics currently intends to make
an election under Section 338(h)(10) of the Code with respect to Ecolochem.
(j) Reflects the issuance of 4,652,648 shares of Ionics common stock valued
at $139.9 million based on the closing price of the common stock for the two
days before, the day of and the two days after the announcement by Ionics of its
agreement to acquire the Ecolochem Group, offset by the elimination of the
Ecolochem Group's stockholders' equity.
(k) Reflects incremental cost of sales associated with increased costs on
long-term construction contracts of $1.0 million for 2003 for amending existing
letters of credit relating to the new credit facilities and incremental
amortization expense of $1.2 million for 2003 relating to the acquired
intangible assets recorded at fair market value, offset by lower depreciation
expense of $3.1 million for 2003 reflecting fixed assets recorded at fair market
value and estimates of useful lives.
(l) Reflects incremental operating costs associated with administrative fees
of $0.1 million for 2003 relating to the new credit facilities and incremental
amortization expense of $5.2 million for 2003 relating to the acquired
intangible assets recorded at fair market value, offset by lower depreciation
expense of $0.2 million for 2003 reflecting fixed assets at fair market value
and estimates of useful lives, and estimated savings from executive salary
adjustments of approximately $0.6 million.
(m) Reflects reduction of interest income associated with Ionics' use of
$58.0 million of cash to finance a portion of the Acquisition.
(n) Reflects additional interest, borrowing costs and amortization of
deferred financing costs associated with the $175 million senior debt obtained
to finance a portion of the Acquisition. A one-eighth of a percent change in the
variable interest rate will have a $0.1 million effect on annual interest
expense.
(o) Reflects tax effects of Ecolochem's pre-tax income and other pro forma
adjustments at Ionics' statutory tax rate.
(p) Reflects the issuance of 4,652,648 shares of Ionics common stock to the
Sellers to finance a portion of the Acquisition.