Ionics Inc. · PSE:ION
Ionics — Merger or Acquisition (January 2004)
38 slides from Ionics's merger presentation, Jan 15, 2004
Slide 1: Proposed acquisition of Ecolochem
Proposed acquisition of Ecolochem January 2004
Slide 2: Safe Harbor Statement Under Private Securities Litigation Reform Act of 1995
Safe Harbor Statement Under Private Securities Litigation Reform Act of 1995 Certain of the matters | will discuss today, and certain information in the slides that follow, will consist of forward-looking statements, including without limitation expectations concerning funding and total cost of the
Slide 3: Proxy Solicitation Statement
Proxy Solicitation Statement lonics has filed a proxy statement and other documents with the SEC regarding the issuance and resale of lonics common stock in connection with the proposed acquisition of the Ecolochem companies, which will be a topic of this presentation. Investors are encouraged to re
Slide 4: Table of Contents
Table of Contents 1. Executive Summary 2. Strategic Rationale 3. lonics Overview 4. Ecolochem Overview Qunrune @ Nitmsos 3
Slide 5: Transaction Summary / Sources and Uses
Transaction Summary / Sources and Uses ™ On November 19, 2003 lonics announced it would acquire Ecolochem, a privately-held provider of emergency, short- and long-term mobile water treatment services to power, petrochemical and other industrial customers m The acquisition values Ecolochem at $359mm,
Slide 6: Pro Forma Capitalization — 9/30/03
Pro Forma Capitalization — 9/30/03 (mm) lonics _Ecolochem" Adj. Cash 130 - 68) New Revolver i = i New Term Loan i = 176 Other lonics Debt 16 = eS) TOTAL DEBT 16 = 172 SHAREHOLDERS’ EQUITY 424 = 147 TOTAL CAPITALIZATION 439 = ang (P Acguisiton wil ie cot debt ad cach ree
Slide 7: Pro Forma Statistics — 9/30/03
Pro Forma Statistics — 9/30/03 LTM9/90/03 (sm) lonies Pro Forma”) Adjusted EBITDA ® 23.0 69.0 Interest Expense a7 i) Capex 25 428 Coverage Ratios Adjusted EBITDA/Interest Expense (x) nm a7 (Adjusted EBITDA — CapExinterest nm a3 Expense (x) Leverage Ratios Total Debt/Adjusted EBITDA (x) a4 27 FFO/Deb
Slide 8: Anticipated Income Statement Impact ($mm)
Anticipated Income Statement Impact ($mm) lonics 2004 Anticipated Forecast Following Acquisition Revenue $350 $460 Gross profit 105 147 EBIT 16 368 EPS - before restructuring $0.60 $0.74 charge EPS - before restructuring $0.60 $0.91 charge and transaction amortization EPS - reported $0.40 $0.59 Post
Slide 9: Table of Contents
Table of Contents 1. Executive Summary 2. Strategic Rationale 3. lonics Overview 4. Ecolochem Overview Qunrune @ Nitmsos 8
Slide 10: Introduction to Ionics
Introduction to lonics Core Business Core Competencies Competitive Position Qunrune @ tir 1 Supplier of water-treatment and water purification systems Analytics knowledge — Sensitivity to low contaminant levels — Realtime feedback m Process design expertise 1 Plant operating experience — Varied trea
Slide 11: Introduction to Ecolochem
Introduction to Ecolochem Mobile an emergency water treatment m Emergency service — Rapid response = Short-term contracts ™ Supplemental service = Planned usage — Medium-term contracts ™ Build-own-operate (BOO) = Long-term contracts Services Provided ™ Privately-held company in operation for over 30
Slide 12: A Compelling Strategic Combination
A Compelling Strategic Combination lonics Today Acquisition of Ecolochem = Leading integrated = Leading provider of emergency manufacturer of membranes and mobile water treatment and systems services ™ Leading operator of water @ Adds recurring service-based + | revenue stream desalination facilitie
Slide 13: Substantial Cash Flow Contribution
Substantial Cash Flow Contribution PF 2003 Revenue “ PF 2003 Adjusted EBITDA” Total: $432mm Total: $69mm Ecolochem 24% Ecolochern 55% lonies 76% lonies 45% (2) Year ended 93008
Slide 14: Diversified and Recurring Revenue Streams
Diversified and Recurring Revenue Streams PF 2003 Revenue by Segment PF 2003 Recurring Revenue“ Total: $432mm Total: $432mm Consumer Water 6% a Pant Operations Reouring 4 49% é Nor-Recurring to% Eauirment 37% Se | (2) Year ended 93008 Instruments
Slide 15: Technology Synergies
Technology Synergies lonics membrane technology... “
Slide 16: Complementary Geographies
Complementary Geographies eg © lonics Ecolochem {i Overlap Qunrune @ Nitmesos
Slide 17: Complementary Customer Base
Complementary Customer Base Ecolochem lonics Veellant mee CMD | @L Electronics ConocoPhillips SOUTHERN a ExonMobil Sunn @ Nitmsos 6
Slide 18: Cost Savings Not Reflected in Forecast
Cost Savings Not Reflected in Forecast = Membrane supply = EDI systems supply m RO systems supply m= Facilities rationalization - Overlap in California and Texas m= ©Overhead reduction m= = Insurance = Benefits plan Sunn @ Nitmsos "
Slide 19: Defined Integration Plan
Defined Integration Plan ™ Overall Coordination/Management Responsibilities = define leadership and support roles = Overall Management Structure = development of a final organization and management structure (including compensation and stock option arrangements) m Sales & Marketing = development of
Slide 20: Defined Integration Plan (continued)
Defined Integration Plan (continued) = ProjectEquipment/Engineering = develo Engineering organization structure to support restructured proposals organization with an eye towards expanded opportunities in Reverse Osmosis and EDI systems m= Finance and Accounting = definition of near-term reporting s
Slide 21: Transaction Rationale Summary
Transaction Rationale Summary Reinforces strategic focus on water services with recurring revenue Sales and operating synergies — End markets — Geographies — Technology mExpected to be accretive to shareholders Qunrune @ Nitmsos 20
Slide 22: Table of Contents
Table of Contents 1. Executive Summary 2. Strategic Rationale 3. lonics Overview 4. Ecolochem Overview Qunrune @ Nitmsos a
Slide 23: Ionics Today — A Leading Water Treatment Systems Provider
lonics Today — A Leading Water Treatment Systems Provider Leading integrated manufacturer of membranes and systems Leading operator of water desalination facilities Diverse portfolio of build-own-operate (BOO) facilities Leading provider of zero liquid discharge technology Leading provider of ultrap
Slide 24: Ionics History — Building the Core Competencies
lonics History — Building the Core Competencies 2002 statupotthe 1948 1998 largest Seauater Founded in Frsttpe: revere osmesis Massachusats with rmambranetraer for <tsainaton plata the invartion ofthe fslear pptoaions the Wactem ‘on erehange Hemizohersin membrane wedte “nad ezalnate water 2001 vante
Slide 25: Technology Leadership — “The Ionics Toolbox”
Technology Leadership — “The lonics Toolbox” runtiaton Pre employed Applntant eatodiahss Reversal (COR) Wiser Desig, Wastewater Reuse, Mate Remo, hey Deine! [Becrodsiniation EO) _Utrapure Wstr for Samineuctor Chip Manufaaur, Hard Ceo ives, Power Generation averse Osmesi (RO) Seawater Destin, Brackis
Slide 26: Business Strategy
Business Strategy Implement restructuring plan - reduce corporate redundancy and streamline the organization Grow lonics’ recurring revenue base by focusing on plant operations - _ Investin BOO projects which have a minimum 10% return on equity Maintain size of Equipment segment at current levels an
Slide 27: Diversified Operations
Diversified Operations 2002 Revenue by End-Market 2002 Revenue by Geography candle Eat + ease Latin america 8a canbbean tf iroelecmnics 8 Mawes Muni fuses 4 oe bia ot Europe vt usa 0% ductal at Qunrune @ tir 26
Slide 28: Table of Contents
Table of Contents 1. Executive Summary 2. Strategic Rationale 3. lonics Overview 4. Ecolochem Overview Qunrune @ Nitmsos a
Slide 29: Ecolochem Today
Ecolochem Today = Strong, sustained reputation for providing timely, high-quality water treatment services and customer support for over 30 years = Leading market share in the emergency mobile water treatment industry = Ecolochem competes for mobile share primarily on the basis of: — True 24-hour se
Slide 30: Ecolochem History
Ecolochem History 1970 1976 924 1992 2000 Eoolochem’s St. Lous, MO regional Emergency reverse European service center Baytown, Tk sence oemter predecessor service certer opened osmoce senbe opened in Peterborough, UK opened replacing Houston, 1 sepioes U.S Mary ‘ith demineralized Introduced "apliy,
Slide 31: Service Leadership
Service Leadership = Ecolochem has provided its services for 32 years in North America and over 10 years in Europe to a diversified customer base 2 Management estimates that over 50% of current customers have remained with Ecolochem for over 10 years Industries serviced include: nuclear and fossil f
Slide 32: Service Leadership
Service Leadership = Ecolochem has provided its services for 32 years in North America and over 10 years in Europe to a diversified customer base 2 Management estimates that over 50% of current customers have remained with Ecolochem for over 10 years Industries serviced include: nuclear and fossil f
Slide 33: Years of Consistent Revenue Growth
30 Years of Consistent Revenue Growth Ecolochem Historical Revenue ($mm) | Recession | |_——___________, sito [,__Raseseian = $100 380
Slide 34: Ecolochem Financial Breakdown
Ecolochem Financial Breakdown FY 2003 Revenue = $108.9mm FY 2003 Revenue by End-Market FY 2003 Revenue by Geography International 1% Refinery Paina Petrochem 18% aN us 25% FY 2003 ended 9/9003 (?) Otherdind-marhets inatides Fond Automotive, Phamtaceutoale an Mats & Afing
Slide 35: Water Treatment Services Offering
Water Treatment Services Offering FY 2003 Revenue by Business Segment Supplemental 14% Emergency 20% Extended Term 54%
Slide 36: Ecolochem — Extended Term Outsourcing
Ecolochem — Extended Term Outsourcing 4% of Revenue m@ Extended Term Outsourcing includes Ecolochem’s D customer-facility BOO and long-term mobile service contract business @ The Technology used is identical to that used in mobile services, but is installed at a customer’s facility @ The service ter
Slide 37: Ecolochem — Emergency Services
Ecolochem — Emergency Services 4% of Revenue Emergency services for customers that have y a temporary need for treated water — Acustomer experiences a period of high demand for treated water - Aproblem exists with a customer’s own water treatment equipment = The raw water supply deteriorates Custome
Slide 38: Pro Forma Adjusted EBITDA Reconciliation
Pro Forma Adjusted EBITDA Reconciliation Ionics (FYE December 31) LTM ($mm) 9/30/2003 Reported EBT (32.8 ) Equity Income 1.8 Net Interest Expense (2.3 ) Reported EBIT (33.3 ) Goodwill Impairment 12.7 Non Recurring Items (1) 13.7 EBIT excluding Goodwill Impairment and Non Recurring Items (6.9 ) EBIT