UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
FORM 10-Q/A
Amendment No. 1 to Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 1-7211
IONICS, INCORPORATED
(Exact name of registrant as specified in its charter)
Massachusetts 04-2068530
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
65 Grove Street
Watertown, Massachusetts 02472-2882
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 926-2500
Former name, former address and former fiscal year, if changed since
last report: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At March 31, 2003 the Company had 17,555,046 shares of Common Stock,
par value $1.00 per share, outstanding.
EXPLANATORY NOTE
Ionics, Incorporated (the "Company") is filing this Amendment No. 1 to Form 10-Q
to amend its Quarterly Report on Form 10-Q for the period ended March 31, 2003,
originally filed on May 15, 2003, to clarify the disclosure previously made with
respect to Item 4 of Part I, "Controls and Procedures."
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The Company hereby amends in its entirety Item 4 of Part I to read as follows:
ITEM 4. CONTROLS AND PROCEDURES
As part of the Company's continuing efforts to ensure that information required
to be disclosed by the Company in its Securities and Exchange Commission filings
is appropriately accumulated and disseminated to allow timely decisions
regarding required disclosure, the Company has been taking various actions to
strengthen its system of internal controls and disclosure controls and
procedures. Such actions were also taken to enhance the processes by which the
Company manages its various divisions and subsidiaries, because managing a large
number of relatively small, locally managed businesses around the world presents
significant challenges.
Prior to the evaluation of the Company's disclosure controls and procedures made
in connection with the filing of its Annual Report on Form 10-K for the year
ended December 31, 2002, the Company made changes in its internal controls and
took other actions designed to enhance the Company's internal controls, which
consisted of the following:
o the hiring of new personnel including, two new segment controllers in April
and July of 2002, three new divisional controllers in May and September of
2002, a corporate director of accounting in July 2002, and a new
consolidation accountant in September 2002, to enhance the quality of its
accounting capabilities;
o the replacement of the senior operating executive at the Company's French
subsidiary and the reassignment of much of the operational responsibility
for that subsidiary to the Company's Italian subsidiary;
o the implementation of a new financial consolidation software package (which
became operational in September 2002);
o the implementation of a centralized bid and proposal review and approval
process at the beginning of 2002;
o the expansion of the internal audit function through the use of outside
resources beginning in March 2002;
o the formalization of certain accounting and information technology policies
and procedures at various times throughout the year;
o the hiring of a Director of Project Management in October 2002 to oversee
project-related procedures and to train project managers at locations to
enable them to better comply with Company goals, policies and procedures;
o the institution of procedures requiring written quarterly certifications
and representations from the head of each business group and the local
controller of each business location;
o the formation of a disclosure committee to oversee the effectiveness of the
Company's disclosure controls and procedures;
o in furtherance of the centralized bid and proposal review and approval
process, the establishment of formal, systematic procedures for reviewing
all major commercial projects being undertaken by the Company, including
monthly participation by senior management;
o the finalization of a project database to facilitate the tracking and
analysis of project performance throughout the Company in December 2002;
o the hiring of a senior financial manager into a newly created position as
European Controller in December 2002, who is responsible for providing
financial oversight and control for the Equipment Business Group's European
operations; and
o the conduct of a conference, and other educational activities, for the
Company's segment and divisional controllers and corporate accounting
staff, which included programs regarding, among other topics, inter-company
transactions, key policies under U.S. generally accepted accounting
principles (e.g., SAB 101, SOP 81-1), the Sarbanes-Oxley Act of 2002,
internal controls, U.S. regulation of international transactions, and key
responsibilities of the local controllers.
In connection with the audit of its financial statements for 2002, the Company
was advised by its independent auditors that certain of its internal controls
had deficiencies and material control weaknesses. Throughout 2003 (including
both during the period in which the audit was being conducted and after it had
been completed but prior to the evaluation referred to below), the Company had
been addressing the issues cited by its independent auditors. As discussed
above, during this period, the Company's disclosure committee was functioning,
the procedures requiring written quarterly certifications and representations
from the head of each business group and the local controller of each business
location had been instituted, and the Company had implemented the review
procedures for major commercial projects, conducted numerous educational
activities for its segment and divisional controllers and corporate accounting
staff, and continued updating its accounting policies and procedures. In
connection with the preparation of the financial statements for the first
quarter of 2003 (but prior to the evaluation referred to below), the Company's
senior management conducted detailed and intensive reviews of those financial
statements and related disclosures.
With the goal of further improving the quality and timeliness of the information
available to management, the Company is continuing to implement measures
designed to address the deficiencies and weaknesses cited by its independent
auditors as follows:
o to evaluate and strengthen its financial and accounting staff and their
knowledge and understanding of key policies under U.S. generally accepted
accounting principles and of their responsibilities;
o to improve monitoring controls to assure the prevention or detection of
material accounting errors on a timely basis;
o to reduce the time necessary to collect and report financial and operating
data by improving the timing and accuracy of forecasting and emphasizing
more frequent reviews of the Company's balance sheets and reconciliation of
intercompany balances; and
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o to continue to update its accounting policies and procedures.
In May 2003, the Company carried out an evaluation, under the supervision and
with the participation of the Company's management, including the Company's
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
Company's "disclosure controls and procedures." The SEC defines "disclosure
controls and procedures" as a company's controls and other procedures that are
designed to ensure that information required to be disclosed by the company in
the reports it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Based on their evaluation of the Company's
disclosure controls and procedures, the Company's then Chief Executive Officer
(principal executive officer) and Chief Financial Officer (principal financial
officer) concluded that the Company's disclosure controls and procedures were
substantially effective for these purposes as of the date of the evaluation.
This conclusion reflected the certifying officers' determination, based on their
evaluation as of the evaluation date, that these procedures were effective in
recording, processing, summarizing and reporting the substantive information
necessary for the Company to meet its reporting obligations on a timely basis
but that the process could function more efficiently. The certifying officers
believed that the efficiency of the process would benefit from the actions
described above that were implemented prior to their evaluation. In addition,
the certifying officers believe that implementation of additional measures
designed to address the deficiencies and material control weaknesses cited by
the Company's independent auditors as described in the preceding paragraph will
further improve the efficiency of this process.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect the Company's internal controls between
the date of the above-referenced evaluation of such controls and May 15, 2003
(the date of the filing of the Company's Quarterly Report on Form 10-Q for the
quarterly periods ended March 31, 2003).
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ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit No. Description
----------- -----------
31.0 Rule 13a-14(a)/15d-14(a) Certifications
31.1 Rule 13a-14(a) Certification of Chief Executive Officer.
31.2 Rule 13a-14(a) Certification of Chief Financial Officer.
32.0 Section 1350 Certifications
32.1 Section 1350 Certification of Chief Executive Officer.
32.2 Section 1350 Certification of Chief Financial Officer.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
IONICS, INCORPORATED
(Registrant)
Date: October 2, 2003 By: /s/ Stephen Korn
----------------
Stephen Korn
Vice President and
General Counsel
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EXHIBIT INDEX
Exhibit No. Description
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31.0 Rule 13a-14(a)/15d-14(a) Certifications
31.1 Rule 13a-14(a) Certification of Chief Executive Officer.
31.2 Rule 13a-14(a) Certification of Chief Financial Officer.
32.0 Section 1350 Certifications
32.1 Section 1350 Certification of Chief Executive Officer.
32.2 Section 1350 Certification of Chief Financial Officer.
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EXHIBIT 31.1
CERTIFICATIONS
I, Douglas R. Brown, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q, as amended, of Ionics,
Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) [Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release 34-47986];
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information;
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: October 2, 2003 /s/ Douglas R. Brown
--------------------
Douglas R. Brown
Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATIONS
I, Daniel M, Kuzmak, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q, as amended, of Ionics,
Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) [Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release 34-47986];
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information;
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: October 2, 2003 /s/ Daniel M. Kuzmak
--------------------
Daniel M. Kuzmak
Vice President, Finance and
Chief Financial Officer
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ionics, Incorporated (the
"Company") on Form 10-Q, as amended, for the period ending March 31, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Douglas R. Brown, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Douglas R. Brown
--------------------
Douglas R. Brown
Chief Executive Officer
October 2, 2003
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ionics, Incorporated (the
"Company") on Form 10-Q, as amended, for the period ending March 31, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Daniel M. Kuzmak, Vice President, Finance and Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Daniel M. Kuzmak
--------------------
Daniel M. Kuzmak
Vice President, Finance and
Chief Financial Officer
October 2, 2003