UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: ________ to: __________
Commission File Number: 1-7211
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
IONICS SECTION 401(k) STOCK SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
Ionics, Incorporated
65 Grove Street
Watertown, MA 02472
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REQUIRED INFORMATION
A. Financial Statements and Schedule:
Page
Independent Auditors' Report 4
Financial Statements: 5
Statements of Net Assets Available for Benefits at December 31, 2003 and 2002 5
Statement of Changes in Net Assets Available for Benefits for the year ended December 31,
2003 6
Notes to Financial Statements 7
Supplemental Schedules: 11
Schedule of Assets Held for Investment Purposes at December 31, 2003 11
B. Exhibits 12
23.1 Consent of Independent Registered Public Accounting Firm 13
Page -2-
SIGNATURES
Ionics Section 401(k) Stock Savings Plan. Pursuant to the requirements of the
Securities Exchange Act of 1934, the trustee (or other persons who administer
the employee benefit plan) has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
IONICS SECTION 401(k)
STOCK SAVINGS PLAN
Date: June 28, 2004 By: /s/Daniel M. Kuzmak
-------------------
Daniel M. Kuzmak, Member
Plan Administrative Committee
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INDEPENDENT AUDITORS' REPORT
Administrators
Ionics Section 401(k) Stock Savings Plan
Watertown, Massachusetts
We have audited the accompanying statements of net assets available for benefits
of the Ionics Section 401(k) Stock Savings Plan (the Plan) as of December 31,
2003 and 2002, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2003. These financial statements are
the responsibility of the plan administrator. Our responsibility is to express
an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 net assets available for benefits of the Plan as of
December 31, 2003 and 2002 and the changes in its net assets available for
benefits for the year ended December 31, 2003, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ BELANGER & COMPANY, P.C.
----------------------------
BELANGER & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Chelmsford, Massachusetts
June 2, 2004
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IONICS SECTION 401(k) STOCK SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
------------
2003 2002
---- ----
Assets:
Investments (see Note C) $31,120,078 $23,312,269
Receivables:
Employer contribution 42,535 51,917
Participant contributions 226,780 221,992
Total receivables 269,315 273,909
Total assets 31,389,393 23,586,178
Liabilities 0 0
Net assets available for benefits $31,389,393 $23,586,178
=========== ===========
See accompanying notes to the financial statements.
Page -5-
IONICS SECTION 401(k) STOCK SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended
December 31, 2003
Additions:
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments (see Note C) $ 7,138,609
Interest 132,259
Dividends 113,452
------------
7,384,320
------------
Contributions:
Participant 2,972,015
Employer 599,852
-------------
3,571,867
-------------
Total additions 10,956,187
Deductions:
Withdrawals by and distributions to participants (3,152,972)
--------------
Net increase 7,803,215
Net assets available for benefits:
Beginning of year 23,586,178
--------------
End of year $ 31,389,393
==============
See accompanying notes to the financial statements.
Page -6-
IONICS SECTION 401(k) STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
A. Description of Plan
The following description of the Ionics, Incorporated and domestic subsidiaries
("Company") 401(k) Plan (Plan) provides only general information. Participations
should refer to the Plan agreement for a more complete description of the Plan's
provisions.
1. General. The Plan is a defined contribution plan covering all
permanent employees of the Company working at least 20 hours per week.
Employees become eligible to participate effective as of the first day
of the month coincident with or next following the employee's date of
hire.
2. Contributions. Each year, participants may contribute up to 12 percent
of pre-tax annual compensation, as defined in the Plan. Participants
may also contribute amounts representing distributions from other
qualified benefit or defined contribution plans. Participants direct
the investment of their contributions into various investment options
offered by the Plan. During 2003, the investment options were changed
with some funds being replaced and other funds added, bringing mutual
funds offered from seven to eleven. Company stock is also offered as
an option. The Company contributes 50% of the first 6 percent of base
compensation that a participant contributes to the Company stock
portion of the Plan. The matching Company contribution is invested
directly in Ionics, Incorporated common stock. Contributions are
subject to certain limitations.
3. Participant Accounts. Each participant's account is credited with the
participant's contribution and allocations of (a) the Company's
contribution and (b) Plan earnings. Allocations are based on total
investment earnings and average participant investment balances, as
defined. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account.
4. Vesting. Participants are vested immediately in their contributions
plus actual earnings thereon. Vesting in the Company's contribution
portion of their accounts is based on years of continuous service
ranging from 33 1/3% after two years to 100% after four years.
5. Participant Loans. Participants may borrow from their fund accounts a
minimum of $1,000, up to a maximum of $50,000 or 50 percent of their
account balance, whichever is less. The loans are secured by the
balance in the participant's account and bear interest rates that are
commensurate with local prevailing rates as determined by the Plan
administrator.
6. Payment of Benefits. On termination of service due to death,
disability, or retirement, a participant may elect to receive a
lump-sum amount equal to the value of the participant's vested
interest in his or her account, or annual installments over the life
expectancy of the Participant (or the joint life expectancy of the
Participant and spouse or beneficiary).
7. Plan Expenses. The Plan provides that the Company shall pay all
expenses of the Plan and its administration.
Page -7-
B. Summary of Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and changes therein, and disclosure of contingent assets
and liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Investment of the Plan in Ionics, Incorporated Common Stock is stated
at the last sales price on December 31 as reported on the New York
Stock Exchange. Shares of mutual funds are valued at the Net Asset
Value of shares held by the Plan at year-end.
Purchase and sales of securities are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date.
C. Investments
The following presents investments that represent 5 percent or more of
the Plan's net assets.
December 31,
---------------------------
2003 2002
------------ ----------
Ionics, Incorporated common stock, 529,914 and
493,893 shares, respectively $ 16,877,691 * $ 11,260,760*
Puritan Fund, 118,828 shares N/A 1,876,296
Contrafund, 99,891 shares N/A 3,866,793
Ionics Stable Value Fund 1,972,930 1,786,105
Mainstay Balanced Fund, 126,880 shares 3,102,227 N/A
Federated Capital Appreciation, 194,913 shares 4,652,571 N/A
Oppenheimer Global Fund, 29,837 shares 1,536,590 N/A
*Nonparticipant-directed
During 2003, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
appreciated in value by $7,138,609 as follows:
Mutual funds $2,086,394
Ionics, Incorporated common stock 5,052,215
-------------
$7,138,609
=============
D. Nonparticipant-Directed Investments
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed
investments is as follows:
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December 31,
--------------------------------------
2003 2002
----------------- -----------------
Net assets:
Common stock $ 16,877,761 $ 11,260,76
================= =================
Year Ended
12/31/03
-----------------
Changes in net assets:
Contributions $ 1,421,69
Net appreciation 5,052,21
Benefits paid to participants (856,904)
-----------------
$ 5,617,00
===============
E. Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
to terminate the Plan subject to the provisions of ERISA. In the event
of Plan termination, participants will become 100 percent vested in
their accounts.
F. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits
per the financial statements at December 31, 2003 and 2002 to Form
5500:
2003 2002
----------------- ------------------
Net assets available for benefits per the financial
statements $ 31,389,393 $ 23,586,178
Amounts allocated to withdrawing participants (378,916) (4,115)
----------------- ------------------
Net assets available for benefits per the Form 5500 $ 31,010,477 $ 23,582,063
================= ==================
The following is a reconciliation of benefits paid to participants per
the financial statements for the year ended December 31, 2003 to Form
5500:
Distributions to participants per the financial
statements $ 3,152,972
Add: Amounts allocated to withdrawing
participants at December 31, 2003 378,916
Less: Amounts allocated to withdrawing
participants at December 31, 2002 (4,115)
-----------------
Benefits paid to participants per Form 5500 $ 3,527,773
=================
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for
payment prior to December 31st, but not yet paid as of that date.
Page -9-
G. Tax Status
The Plan was amended and restated effective on January 1, 2002 and
further amended on November 18, 2002 and December 23, 2002. The
Internal Revenue Service has determined and informed the Company by a
letter dated April 20, 2004, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC). Management believes that the Plan is currently being
operated in compliance with the requirements of the IRC.
Page -10-
Attachment to Form 5500
Schedule H, Line 4 I
EIN: 04-2068530
Plan Number 003
Schedule I
IONICS SECTION 401(k) STOCK SAVINGS PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 2003
Face Amount Current
Description of Investment Shares or Rate Cost Value
------------------------------ ---------------- -------------- ---------------
Ionics, Incorporated
Common Stock 529,914 $ 14,025,036 $ 16,877,761
Fidelity Advisor:
Dividend Growth 18,748 194,828 210,546
Diversified International 5,505 79,295 86,486
Mainstay Institutional:
Indexed Bond 45,819 497,662 502,176
S&P 500 Index Fund 32,833 866,716 841,171
Balanced Fund 126,880 2,861,694 3,102,227
Money Market 215,123 215,123
AIM Mid Cap Core Equity Fund 3,423 85,081 92,137
PIMCO Total Return Fund 5,555 59,846 59,489
Federated Capital Appreciation 194,913 4,188,967 4,652,571
Strong Advisor Small Cap Value 8,053 196,780 221,693
Oppenheimr Global Fund 29,837 1,262,564 1,536,589
Ionics Stable Value Fund 1,972,930 1,972,930
Participant Loans
(rate of interest 5.50% to 11.00%) 0 749,179
-------------- ---------------
$ 26,506,522 $ 31,120,078
============== ===============
See accompanying notes to the financial statements.
Page -11-
Exhibit Index
Exhibit No. Description
----------- -----------
23.1 Consent of Belanger & Company, P.C.
Page -12-
Exhibit 23.1
BELANGER & COMPANY, P.C.
A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS
6 Courthouse Lane
Chelmsford, Massachusetts 01924
(978)458-3700
Fax (978) 458-1574
Exhibit No. 23.1 to Annual Report on Form11-K
of Ionics, Incorporated 401(k) Stock Savings Plan
for the year ended December 31, 2003
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
the Ionics Section 401(k) Stock Savings Plan on Form S-8 (Registration Nos.
33-2092 and 333-109103) of our report dated June 2, 2004 on our audits of the
financial statements of the Ionics Section 401(k) Stock Savings Plan as of
December 31, 2003 and 2002, which report is included in this Annual Report on
Form 11-K of the Plan.
/S/BELANGER & COMPANY, P.C.
---------------------------
BELANGER & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Chelmsford, Massachusetts
June 28, 2004