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 June 30, 2002
                                       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 incorporation or organization)          (IRS Employer Identification Number)

       65 Grove Street                                       02472
    Watertown, Massachusetts                               (Zip Code)
 (Address of principal executive offices)

       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 checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act)

                                     Yes No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

    At June 30, 2002 the registrant had 17,551,779 shares of Common Stock, par
value $1 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 quarterly period ended June
30, 2002 to reflect the restatements of its consolidated financial statements
for the three months ended June 30, 2002 and the six months ended June 30, 2002.
These restatements were primarily the result of intercompany transactions,
including transactions between the Company and its French subsidiary that were
erroneously recorded at the subsidiary level. The Company's consolidated
financial statements as of and for the three and six months ended June 30, 2002
contained in this Amendment No. 1 to Form 10-Q reflect the effect of these
restatements. See Note 2 to Notes to Consolidated Financial Statements.

The Company has amended in their entirety Items 1 and 2 of Part I of this
quarterly report to reflect changes resulting from the restatement described
above, and to update the information contained therein to reflect developments
which have occurred subsequent to August 14, 2002, the date on which the Company
filed its quarterly report on Form 10-Q for the quarterly period ended June 30,
2002. In addition, Item 5 has been added to Part II of this Amendment No. 1 to
Form 10-Q. Items 3, 4 and 6 of Part II of this Amendment No. 1 to Form 10-Q are
not amended hereby and only reiterate the information previously disclosed under
those Items in the Company's quarterly report on Form 10-Q for the quarterly
period ended June 30, 2002, which was filed with the Securities and Exchange
Commission on August 14, 2002.


<PAGE>
<TABLE>
<CAPTION>


                              IONICS, INCORPORATED
                                   FORM 10-Q/A
                         FOR QUARTER ENDED JUNE 30, 2002




                                      INDEX

                                                                                                              PAGE
                                                                                                              ----
<S>             <C>                                                                                           <C>
PART I          FINANCIAL INFORMATION

                Item 1.     Financial Statements                                                               2

                            Consolidated Statements of Operations
                                Three Months and Six Months Ended June 30, 2002 and 2001                       2

                            Consolidated Balance Sheets
                                June 30, 2002 and December 31, 2001                                            3

                            Consolidated Statements of Cash Flows
                                Six Months Ended June 30, 2002 and 2001                                        4

                            Notes to Consolidated Financial Statements                                        5-13

                Item 2.     Management's Discussion and Analysis of Financial Condition and Results of
                            Operations                                                                       14-20

                Item 3.     Quantitative and Qualitative Disclosures about Market Risk                         20

PART II         OTHER INFORMATION

                Item 4.     Submission of Matters to a Vote of Security Holders                                21

                Item 5.     Other Information                                                                  21

                Item 6.     Exhibits and Reports on Form 8-K                                                 21-22

                SIGNATURES                                                                                     23

                CERTIFICATIONS                                                                                 24


</TABLE>


                                      -1-
<PAGE>
                PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>

Item 1.  Financial Statements

                              IONICS, INCORPORATED
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                (Amounts in thousands, except per share amounts)

                                                                  Three months ended              Six months ended
                                                                        June 30,                      June 30,
                                                               --------------------------    ----------------------------
                                                                  2002          2001            2002            2001
                                                               -----------   ------------    ------------    ------------
<S>                                                              <C>            <C>             <C>             <C>
Revenues:                                                      (as restated)                  (as restated)
     Equipment Business Group                                    $ 35,944       $ 41,708        $ 70,992        $ 81,336
     Ultrapure Water Group                                         25,440         30,818          50,185          71,666
     Consumer Water Group                                           8,726         30,189          19,279          59,429
     Instrument Business Group                                      6,810          6,443          13,354          14,231
     Affiliated companies                                           2,577          4,516           5,692           9,974
                                                               -----------   ------------    ------------    ------------
                                                                   79,497        113,674         159,502         236,636
                                                               -----------   ------------    ------------    ------------
Costs and expenses:
     Cost of sales of Equipment Business Group                     26,579         31,473          52,176          61,188
     Cost of sales of Ultrapure Water Group                        18,613         24,385          37,611          55,065
     Cost of sales of Consumer Water Group                          4,874         15,496          11,704          33,448
     Cost of sales of Instrument Business Group                     2,584          2,990           5,337           6,429
     Cost of sales to affiliated companies                          2,279          4,382           5,316           9,719
     Research and development                                       1,594          1,609           3,215           3,299
     Selling, general and administrative                           21,545         27,580          41,400          56,081
                                                               -----------   ------------    ------------    ------------
                                                                   78,068        107,915         156,759         225,229
                                                               -----------   ------------    ------------    ------------

Income from operations                                              1,429          5,759           2,743          11,407

Interest income                                                       868            746           1,861             971

Interest expense                                                     (376)        (1,448)           (936)         (3,052)

Equity income                                                         782            589           1,674           1,030
                                                               -----------   ------------    ------------    ------------

Income before income taxes and minority interest                    2,703          5,646           5,342          10,356

Provision for income taxes                                          1,297          1,920           2,173           3,521
                                                               -----------   ------------    ------------    ------------

Income before minority interest                                     1,406          3,726           3,169           6,835

Minority interest in (earnings) losses                               (161)           443            (425)            329
                                                               -----------   ------------    ------------    ------------

Net income                                                        $ 1,245        $ 4,169         $ 2,744         $ 7,164
                                                               ===========   ============    ============    ============

Basic earnings per share                                           $ 0.07         $ 0.24          $ 0.16          $ 0.43
                                                               ===========   ============    ============    ============

Diluted earnings per share                                         $ 0.07         $ 0.24          $ 0.15          $ 0.42
                                                               ===========   ============    ============    ============

Shares used in basic earnings per share calculations               17,547         17,100          17,528          16,746
                                                               ===========   ============    ============    ============

Shares used in diluted earnings per share calculations             17,707         17,183          17,742          16,886
                                                               ===========   ============    ============    ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      -2-
<PAGE>
<TABLE>
<CAPTION>
                              IONICS, INCORPORATED
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
           (Amounts in thousands, except share and par value amounts)

                                                                           June 30,         December 31,
                                                                             2002               2001
                                                                        ----------------   ----------------
ASSETS                                                                   (as restated)
<S>                                                                           <C>                <C>
Current assets:
     Cash and cash equivalents                                                $ 139,127          $ 178,283
     Short-term investments                                                           -                 21
     Notes receivable, current                                                    4,347              4,892
     Accounts receivable, net                                                   110,935            118,255
     Receivables from affiliated companies                                       24,320             17,199
     Inventories:
         Raw materials                                                           19,410             20,047
         Work in process                                                          9,563              7,547
         Finished goods                                                           7,095              5,219
                                                                        ----------------   ----------------
                                                                                 36,068             32,813
     Other current assets                                                        11,549             11,031
     Deferred income taxes                                                       15,787             16,297
                                                                        ----------------   ----------------
         Total current assets                                                   342,133            378,791

Notes receivable, long-term                                                      24,497             23,210
Investments in affiliated companies                                              22,757             23,798
Property, plant and equipment:
     Land                                                                         6,382              6,288
     Buildings                                                                   42,176             41,272
     Machinery and equipment                                                    261,683            243,964
     Other, including furniture, fixtures and vehicles                           30,587             29,938
                                                                        ----------------   ----------------
                                                                                340,828            321,462
     Less accumulated depreciation                                              168,240            154,430
                                                                        ----------------   ----------------
                                                                                172,588            167,032

Goodwill                                                                         19,215             19,037
Deferred income taxes, long-term                                                 12,643             12,643
Other assets                                                                      9,166              8,802
                                                                        ----------------   ----------------
         Total assets                                                         $ 602,999          $ 633,313
                                                                        ================   ================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Notes payable and current portion of long-term debt                        $ 9,575           $ 14,257
     Accounts payable                                                            26,005             34,640
     Customer deposits                                                            4,814              2,159
     Accrued commissions                                                          1,688              2,011
     Accrued expenses                                                            47,812             58,064
     Income taxes payable                                                        24,678             45,735
                                                                        ----------------   ----------------
         Total current liabilities                                              114,572            156,866

Long-term debt and notes payable                                                 11,149             10,126
Deferred income taxes                                                            37,810             34,199
Deferred revenue from affiliated companies                                        3,508              3,360
Other liabilities                                                                 3,514              5,409

Commitments and contingencies

Stockholders' equity:
     Common stock, par value $1, authorized shares: 55,000,000;
     issued:  17,551,779 in 2002 and  17,477,005 in 2001                         17,552             17,477
     Additional paid-in capital                                                 190,353            188,555
     Retained earnings                                                          245,061            242,317
     Accumulated other comprehensive loss                                       (20,520)           (24,996)
                                                                        ----------------   ----------------
         Total stockholders' equity                                             432,446            423,353
                                                                        ----------------   ----------------
         Total liabilities and stockholders' equity                           $ 602,999          $ 633,313
                                                                        ================   ================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      -3-
<PAGE>
<TABLE>
<CAPTION>
                              IONICS, INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Amounts in thousands)


                                                                                           Six months ended
                                                                                               June 30,
                                                                                  -----------------------------------
                                                                                       2002               2001
                                                                                  ----------------   ----------------
<S>                                                                                       <C>                <C>
Operating activities:                                                              (as restated)
      Net income                                                                          $ 2,744            $ 7,164
      Adjustments to reconcile net income to net cash (used in)
      provided by operating activities:
         Depreciation and amortization                                                     11,240             16,167
         Amortization of goodwill                                                               -              1,509
         Provision for losses on accounts and notes receivable                                332              2,924
         Equity in earnings of affiliates                                                  (1,674)            (1,030)
         Changes in assets and liabilities:
            Notes receivable                                                               (1,884)            (4,467)
            Accounts receivable and receivables from
               affiliated companies                                                         2,930             (2,337)
            Inventories                                                                    (2,539)            (6,291)
            Other current assets                                                              329              2,876
            Investments in affiliated companies                                             1,984                 72
            Accounts payable and accrued expenses                                         (19,939)           (12,366)
            Income taxes                                                                  (19,652)             1,686
            Other                                                                            (371)               506
                                                                                  ----------------   ----------------
               Net cash (used in) provided by operating activities                        (26,500)             6,413
                                                                                  ----------------   ----------------
Investing activities:
      Additions to property, plant and equipment                                          (14,113)           (18,402)
      Disposals of property, plant and equipment                                              546              1,185
      Additional investments in affiliates                                                      -             (4,487)
      Acquisitions, net of cash acquired                                                     (635)                 -
      Sale of short-term investments                                                          184                452
                                                                                  ----------------   ----------------
               Net cash used in investing activities                                      (14,018)           (21,252)
                                                                                  ----------------   ----------------
Financing activities:
      Principal payments on current debt                                                  (53,374)           (54,222)
      Proceeds from borrowings of current debt                                             48,618             45,918
      Principal payments on long-term debt                                                   (480)              (847)
      Proceeds from borrowings of long-term debt                                            1,135                227
      Proceeds from issuance of common stock                                                   60             21,814
      Proceeds from issuance of stock under stock option plans                              1,654              3,095
                                                                                  ----------------   ----------------
               Net cash (used in) provided by financing activities                         (2,387)            15,985
                                                                                  ----------------   ----------------
Effect of exchange rate changes on cash                                                     3,749               (788)
                                                                                  ----------------   ----------------
Net change in cash and cash equivalents                                                   (39,156)               358
Cash and cash equivalents at beginning of period                                          178,283             25,497
                                                                                  ----------------   ----------------
Cash and cash equivalents at end of period                                              $ 139,127           $ 25,855
                                                                                  ================   ================
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

                                      -4-
<PAGE>

                              IONICS, INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.       Basis of Presentation

       The consolidated quarterly financial statements of Ionics, Incorporated
       (the "Company") are unaudited; however, in the opinion of the management
       of the Company, all adjustments have been made that are necessary for a
       fair statement of the consolidated financial position of the Company, the
       consolidated results of its operations and the consolidated cash flows
       for each period presented. The consolidated results of operations for the
       interim periods are not necessarily indicative of the results of
       operations to be expected for the full year or any future period.

       The accompanying financial statements have been prepared with the
       assumption that users of the interim financial information have either
       read or have access to the Company's financial statements for the year
       ended December 31, 2001. Accordingly, footnote disclosures that would
       substantially duplicate the disclosures contained in the Company's
       December 31, 2001 audited financial statements have been omitted from
       these financial statements. These financial statements have been prepared
       in accordance with the instructions to Form 10-Q and the rules and
       regulations of the Securities and Exchange Commission. Certain
       information and footnote disclosures normally included in financial
       statements prepared in accordance with generally accepted accounting
       principles have been condensed or omitted pursuant to such instructions,
       rules and regulations. These financial statements should be read in
       conjunction with the Company's 2001 Annual Report as filed on Form 10-K
       (the "2001 Form 10-K") with the Securities and Exchange Commission.

       Certain prior year amounts have been reclassified to conform to the
       current year presentations. As part of the Company's adoption of a matrix
       business organization effective January 1, 2002, results associated with
       the Company's trailer leasing and non-consumer bleach based chemical
       supply businesses are included in the Ultrapure Water Group (UWG)
       segment, rather than the Equipment Business Group (EBG) segment where
       they had historically been presented. Segment information for all periods
       has been presented to reflect these changes. See Note 6 below. In
       addition, the consolidated quarterly financial statements now reflect
       revenues and cost of sales derived from transactions with affiliated
       entities in which the Company maintains less than a majority equity
       interest as "affiliated companies" revenues and costs of sales (see Note
       5 of Notes to Consolidated Financial Statements of the 2001 Form 10-K).
       These amounts had previously been reflected within the reportable
       business segments. Shipping and handling costs are included in revenues
       and cost of sales. During the three months ended June 30, 2002, the
       Company recorded adjustments reflecting immaterial corrections to prior
       year periods which resulted in an increase in net income of approximately
       $140,000. Such adjustments were recorded in the financial statements for
       the three months ended June 30, 2002 as originally reported and as
       restated.

       In addition, Notes 3, 9 and 11 of the Notes to the Consolidated Financial
       Statements contained herein have been updated to reflect developments
       which have occurred subsequent to August 14, 2002, the date on which the
       Company filed its quarterly report on Form 10-Q for the quarterly period
       ended June 30, 2002.

2.     Restatement of Quarterly Financial Statements

       The Company's consolidated financial statements for the three months
       ended June 30, 2002 and the six months period ended June 30, 2002 have
       been restated primarily as a result of intercompany transactions,
       including transactions between the Company and its French subsidiary that
       were erroneously recorded at the subsidiary level. The restatement did
       not materially impact any items on the Company's consolidated balance
       sheet as of June 30, 2002. The following table presents a summary of the
       impact of the restatements on the Company's consolidated statements of
       operations for the three and six months ended June 30, 2002:



                                      -5-
<PAGE>
<TABLE>
<CAPTION>
                                                (Amounts in thousands, except per share amounts)
                                                        Three months ended June 30, 2002
                                                      --------------------------------------
                                                       As originally
                                                          reported           As restated
                                                      -----------------    -----------------

<S>                                                           <C>                  <C>
Revenues                                                      $ 79,321             $ 79,497
Costs and expenses                                              77,303               78,068
Income from operations                                           2,018                1,429
Income before income taxes
    and minority interest                                        3,292                2,703
Provision for income taxes                                       1,119                1,297
Minority interest in earnings                                       79                  161
Net income                                                       2,094                1,245
Basic earnings per share                                        $ 0.12               $ 0.07
Diluted earnings per share                                      $ 0.12               $ 0.07

                                                         Six months ended June 30, 2002
                                                      --------------------------------------
                                                       As originally
                                                          reported           As restated
                                                      -----------------    -----------------

Revenues                                                     $ 159,662            $ 159,502
Costs and expenses                                             155,639              156,759
Income from operations                                           4,023                2,743
Income before income taxes
    and minority interest                                        6,622                5,342
Provision for income taxes                                       2,251                2,173
Minority interest in earnings                                      340                  425
Net income                                                       4,031                2,744
Basic earnings per share                                        $ 0.23               $ 0.16
Diluted earnings per share                                      $ 0.23               $ 0.15

</TABLE>

       "Revenues" and the cost of sales of the Equipment Business Group
       component of "Costs and expenses" for the three and six months ended June
       30, 2002 as shown under the "As restated" columns in the consolidated
       financial statements and above have each been reduced by the amount of
       $200,000 from the corresponding numbers shown in (i) Note 8 to the
       Company's quarterly report on Form 10-Q for the quarterly period ended
       September 30,2002 and filed with the Securities and Exchange Commission
       on November 14, 2002, and (ii) the summary restated Consolidated
       Statements of Operations for such periods contained in the Company's
       November 5, 2002 third quarter results press release. These reductions
       resulted from a reclassification of an accounting entry relating to the
       Company's French subsidiary. This reclassification did not affect income
       from operations or net income.

3.       Commitments and Contingencies

       Trinidad Project. In the second quarter of 2002, construction was
       completed on the first four (out of five) phases of the Trinidad
       desalination facility owned by Desalination Company of Trinidad and
       Tobago Ltd. ("Desalcott"), in which the Company has a 40% equity
       interest, and the facility commenced water deliveries to its customer,
       the Water and Sewerage Authority of Trinidad and Tobago. In 2000, the
       Company acquired 200 ordinary shares of Desalcott for $10 million and
       loaned $10 million to Hafeez Karamath Engineering Services Ltd. ("HKES"),
       the founder of Desalcott and promoter of the Trinidad desalination
       project, to enable HKES to acquire an additional 200 ordinary shares of
       Desalcott. Prior to those investments, HKES owned 100 ordinary shares of
       Desalcott. As a result, the Company currently owns a 40% equity interest
       in Desalcott, and HKES currently owns a 60% equity interest in Desalcott.
       The Company records 100% of any net loss and 40% of any net income
       reported by Desalcott. In periods in which Desalcott has an accumulated
       loss (as opposed to retained earnings), the Company records 100% of any
       net income of Desalcott up to the amount of Desalcott's accumulated loss,
       and 40% of any net income thereafter.

                                      -6-
<PAGE>

       The Company's $10 million loan to HKES is included in long-term notes
       receivable on the Company's consolidated balance sheets. The loan bears
       interest at a rate equal to 2% above LIBOR, with interest payable
       starting October 25, 2002 and every six months thereafter and at
       maturity. Prior to maturity, however, accrued interest payments (as well
       as principal payments) are payable only to the extent dividends or other
       distributions are paid by Desalcott on the ordinary shares of Desalcott
       owned by HKES and pledged to the Company. Principal repayment is due in
       14 equal installments commencing on April 25, 2004 and continuing
       semiannually thereafter. The loan matures and is payable in full on April
       25, 2011. The loan is secured by a security interest in the shares of
       Desalcott owned by HKES and purchased with the borrowed funds, which is
       subordinate to the security interest in those shares in favor of the
       Trinidad bank that provided the construction financing for Desalcott. In
       addition, any dividends or other distributions paid by Desalcott to HKES
       must be applied to loan payments to the Company.

       In 2000, Desalcott entered into a "bridge loan" agreement with a Trinidad
       bank providing $60 million in construction financing. Effective November
       8, 2001, the loan agreement was amended to increase maximum borrowings to
       $79.9 million. The Company is obligated to lend up to $10 million to
       Desalcott as an additional source of funds for project completion costs
       once all bridge loan proceeds have been expended. However, the bridge
       loan of $79.9 million and the $20 million equity provided to Desalcott
       (together with the additional $10 million dollars the Company is
       obligated to lend to Desalcott) have not provided sufficient funds to pay
       all of Desalcott's obligations in completing construction and
       commissioning of the project prior to receipt of long-term financing.
       Included in Desalcott's obligations at June 30, 2002 and September 30,
       2002 was approximately $22.3 million and $24.2 million, respectively,
       payable to the Company's Trinidad subsidiary for equipment and services
       purchased in connection with the construction of the facility. The
       Company currently intends to convert $10 million of this amount into a
       loan to Desalcott to satisfy the Company's loan commitment described
       above. The terms of this loan are currently being negotiated with
       Desalcott. The Company currently anticipates that Desalcott will pay its
       remaining outstanding obligations to the Company's subsidiary partially
       out of cash flow from the sale of water and from the proceeds from new
       long-term debt financing. Desalcott has received proposals for new
       long-term debt financing, including a term sheet and a draft term loan
       agreement from the Trinidad bank which provided the bridge loan, which it
       anticipates completing around year-end. Such new long-term debt financing
       may not be completed on terms acceptable to Desalcott, or at all.
       Moreover, although the Trinidad bank that made the bridge loan to
       Desalcott has not required repayment of the bridge loan, which matured on
       September 1, 2002, pending completion of the long-term debt financing,
       there can be no assurance that the bank will not exercise its rights and
       foreclose on its collateral, in which event the Company's equity
       investment in, and receivable from, Desalcott as well as the loan
       receivable from HKES would be at risk.

       Kuwait Project. During 2001, the Company acquired a 25% equity interest
       in a Kuwaiti project company, Utilities Development Company W.L.L.
       ("UDC"), which was awarded a concession agreement by an agency of the
       Kuwaiti government for the construction, ownership and operation of a
       wastewater reuse facility in Kuwait. During the second quarter of 2002,
       UDC entered into agreements for the long-term financing of the project,
       and accordingly the Company commenced recognizing revenue in accordance
       with American Institute of Certified Public Accountants Statement of
       Position No. 81-1, "Accounting for Performance of Construction-Type and
       Certain Construction-Type Contracts." At June 30, 2002 and September 30,
       2002, the Company had invested a total of $1.6 million in UDC as equity
       contributions and subordinated debt. The Company is committed to make
       additional contributions of equity or subordinated debt to UDC of $15.9
       million over a two to three year period.

       Israel Projects. The Company entered into agreements with Kibbutz Ma'agan
       Micha'el, an Israeli cooperative society, and I.P.P.S. Infrastructure
       Enterprises Ltd., an Israeli corporation, for the establishment of Magan
       Desalination Ltd. ("MDL") as an Israeli project company in which the
       Company has a 49% equity interest. In August 2002, MDL entered into a
       concession contract with a state-sponsored water company for the
       construction, ownership and operation of a brackish water desalination
       facility in Israel. At June 30, 2002 and September 30, 2002, the Company
       had made a nominal equity investment in MDL, and had deferred costs of
       approximately $0.6 million and $0.7 million, respectively, relating to
       the design and development work on the project. The Company currently
       anticipates that it will invest approximately $1 million in MDL for its
       49% equity interest. MDL is currently seeking approximately $7.7 million
       of debt financing for the project. If MDL is unable to obtain such debt


                                      -7-
<PAGE>

       financing, the Company would expense all its deferred costs relating to
       the project but would incur no other liability, inasmuch as no
       performance bond has been issued for the project.

       In January 2002, the Company entered into agreements with Baran Group
       Ltd. and Dor Chemicals Ltd., both Israeli corporations, giving the
       Company the right to a one-third ownership interest in an Israeli project
       company, Carmel Desalination Ltd. ("CDL"). On October 28, 2002, CDL was
       awarded a concession agreement by the Israeli Water Desalination Agency
       (established by the Ministry of Finance and the Ministry of
       Infrastructure) for the construction, ownership and operation of a major
       seawater desalination facility in Israel. At September 30, 2002, the
       Company had not yet made any equity investment in CDL, and had deferred
       costs of approximately $0.3 million relating to the engineering design
       and development work on the project. No costs had been deferred at June
       30, 2002. If CDL obtains long-term project financing, the Company's total
       equity investment to be made in CDL would be approximately $8 million.
       The timing of such investment will depend upon the terms of the long-term
       financing agreement. Although the Company currently anticipates that CDL
       will obtain long-term financing for the project by the required date in
       April 2003, such financing may not be obtained. If CDL is unable to
       obtain such financing, the Company would expense all its deferred costs
       relating to the project and any investment the Company may have made in
       CDL (estimated to be approximately $0.8 million by the time of the
       closing of the long-term financing), and could incur its one-third
       proportionate share ($2.5 million) of liability under a $7.5 million
       performance bond issued on behalf of CDL.

       Aqua Cool Pure Bottled Water Operations Disposition. On December 31,
       2001, the Company completed the sale of its Aqua Cool Pure Bottled Water
       operations in the United States, United Kingdom and France to affiliates
       of Perrier-Vittel S.A., a subsidiary of Nestle S.A. ("Nestle"), for
       approximately $220 million, of which $10 million is being held in escrow
       pursuant to the terms of the divestiture agreement. The amount of the
       purchase price is subject to final adjustment based on the number of
       customers and working capital levels of the transferred businesses, in
       each case as determined in accordance with the divestiture agreement. The
       process for determining the number of customers and working capital
       levels, as well as any related purchase price adjustments, is under way.
       In addition, Nestle is seeking payment of certain amounts under the
       indemnification provisions of the divestiture agreement. While the
       ultimate amount of purchase price adjustments or indemnification
       payments, if any, cannot yet be determined with certainty, the Company
       currently believes that the reserves it has established for purchase
       price adjustments and the escrowed amount will be adequate in all
       material respects to cover the resolution of these issues. Accordingly,
       no additional provision for any liability that might result from any of
       these matters has been included in the accompanying financial statements
       for the current year.

       Litigation. The Company is involved in the normal course of its business
       in various litigation matters, some of which are in the pre-trial
       discovery stages. The Company believes that none of the pending matters
       will have an outcome material to its financial condition or results of
       operations.

4.       Earnings Per Share (EPS) Calculations
<TABLE>
<CAPTION>

                                                       (Amounts in thousands, except per share amounts)
                                                               For the three months ended June 30,
                                   ----------------------------------------------------------------------------------------------
                                                      2002                                             2001
                                   ----------------------------------------------   ---------------------------------------------
                                        Net                           Per Share         Net                          Per Share
                                      Income           Shares          Amount          Income          Shares          Amount
                                   --------------   -------------    ------------   -------------   -------------   -------------
<S>                                      <C>              <C>             <C>            <C>              <C>             <C>
Basic EPS
     Income available to
     common stockholders                 $ 1,245          17,547          $ 0.07         $ 4,169          17,100          $ 0.24

     Effect of dilutive
     stock options                             -             160               -               -              83               -
                                   --------------   -------------    ------------   -------------   -------------   -------------

Diluted EPS                              $ 1,245          17,707          $ 0.07         $ 4,169          17,183          $ 0.24
                                   ==============   =============    ============   =============   =============   =============



                                                              For the six months ended June 30,
                                   ----------------------------------------------------------------------------------------------
                                                       2002                                             2001
                                   ----------------------------------------------   ---------------------------------------------
                                        Net                           Per Share         Net                          Per Share
                                      Income           Shares          Amount          Income          Shares          Amount
                                   --------------   -------------    ------------   -------------   -------------   -------------
Basic EPS
     Income available to
     common stockholders                 $ 2,744          17,528          $ 0.16         $ 7,164          16,746          $ 0.43

     Effect of dilutive
     stock options                             -             214           (0.01)              -             140           (0.01)
                                   --------------   -------------    ------------   -------------   -------------   -------------

Diluted EPS                              $ 2,744          17,742          $ 0.15         $ 7,164          16,886          $ 0.42
                                   ==============   =============    ============   =============   =============   =============


</TABLE>
       The effect of dilutive stock options excludes those stock options for
       which the impact would have been antidilutive based on the exercise price
       of the options. The number of options that were antidilutive for the
       three months ended June 30, 2002 and 2001 was 1,409,767 and 1,555,834,
       respectively. The number of options that were antidilutive for the six
       months ended June 30, 2002 and 2001 was 635,250 and 1,541,234,
       respectively.

                                      -8-
<PAGE>


5.       Comprehensive Income

       The Company has adopted the Statement of Financial Accounting Standards
       ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes
       standards for the reporting and display of comprehensive income and its
       components. The table below sets forth the "comprehensive income" as
       defined by SFAS No. 130 for the three months and six months ended June
       30, 2002 and 2001, respectively.

<TABLE>
<CAPTION>
                                                            (Amounts in thousands)
                                                Three months ended                 Six months ended
                                                   June 30,                             June 30,
                                      ---------------------------------      -------------------------------
                                          2002                2001               2002              2001
                                      --------------      -------------      --------------    -------------
<S>                                         <C>                <C>                 <C>              <C>
Net income                                  $ 1,245            $ 4,169             $ 2,744          $ 7,164
Other comprehensive income,
     net of tax:
     Translation adjustments                  7,056               (494)              4,476           (5,084)
                                      --------------      -------------      --------------    -------------
Comprehensive income                        $ 8,301            $ 3,675             $ 7,220          $ 2,080
                                      ==============      =============      ==============    =============

</TABLE>


6.       Segment Information

       The Company has four reportable "business group" segments corresponding
       to a "business group" structure. In 2002, the Company instituted a
       matrix-type organization. As part of the matrix organization, the
       Company's trailer leasing and non-consumer bleach based chemical supply
       businesses which were included in the Equipment Business Group in prior
       periods now are included in the Ultrapure Water Group. Segment
       information for all periods has been presented to reflect these changes.
       In addition, (i) the Company's Aqua Cool Pure Bottled Water business,
       which had been reported as part of the Consumer Water Group, was sold to
       affiliates of Nestle S.A. on December 31, 2001 and therefore does not
       appear in 2002 operations; and (ii) the Company's majority-owned
       Malaysian subsidiary, which had been reported as part of the Ultrapure
       Water Group, was divested in May 2002 and is reflected in 2002 operations
       through the divestiture date.

       The following table summarizes the Company's operations by the four
       business group segments and "Corporate." Corporate includes legal,
       research and development expenses not allocated to the business groups,
       certain corporate administrative and insurance costs, foreign exchange
       gains and losses on corporate assets, as well as the elimination of
       intersegment transfers.

                                      -9-
<PAGE>
<TABLE>
<CAPTION>
                                                            For the three months ended June 30, 2002
                                     -------------------------------------------------------------------------------------
                                      Equipment      Ultrapure    Consumer       Instrument
                                       Business        Water         Water        Business
                                        Group          Group         Group         Group        Corporate       Total
                                     -------------  ------------  ------------  -------------   -----------  -------------
(Amounts in thousands)
<S>                                      <C>           <C>            <C>            <C>               <C>       <C>
Revenue - unaffiliated                   $ 35,944      $ 25,440       $ 8,726        $ 6,810           $ -       $ 76,920
Revenue - affiliated                        2,575             -             2              -             -          2,577
Inter-segment transfers                     1,658           163             -            635        (2,456)             -
Gross profit - unaffiliated                 9,365         6,827         3,852          4,226             -         24,270
Gross profit - affiliated                     297             -             1              -             -            298
Equity income (loss)                          689             9           265              -          (181)           782
Income (loss) before interest, tax
     and minority interest                  2,578           642        (1,314)         1,237          (932)         2,211
Interest income                                 -             -             -              -             -            868
Interest expense                                -             -             -              -             -           (376)
Income before income taxes
     and minority interest                      -             -             -              -             -          2,703


                                                                For the three months ended June 30, 2001
                                     -------------------------------------------------------------------------------------
                                      Equipment      Ultrapure     Consumer      Instrument
                                       Business        Water         Water        Business
                                        Group          Group         Group         Group        Corporate       Total
                                     -------------  ------------  ------------  -------------   -----------  -------------
(Amounts in thousands)
Revenue - unaffiliated                   $ 41,708      $ 30,818      $ 30,189        $ 6,443           $ -      $ 109,158
Revenue - affiliated                        4,458             -            58              -             -          4,516
Inter-segment transfers                       590           788             -            316        (1,694)             -
Gross profit - unaffiliated                10,235         6,433        14,693          3,453             -         34,814
Gross profit - affiliated                     105             -            29              -             -            134
Equity income (loss)                          468            (4)          144              -           (19)           589
Income (loss) before interest, tax
     and minority interest                  3,465          (781)        3,679            557          (572)         6,348
Interest income                                 -             -             -              -             -            746
Interest expense                                -             -             -              -             -         (1,448)
Income before income taxes
     and minority interest                      -             -             -              -             -          5,646


                                                                 For the six months ended June 30, 2002
                                     -------------------------------------------------------------------------------------
                                      Equipment      Ultrapure     Consumer      Instrument
                                       Business        Water         Water        Business
                                        Group          Group         Group         Group        Corporate       Total
                                     -------------  ------------  ------------  -------------   -----------  -------------
(Amounts in thousands)
Revenue - unaffiliated                   $ 70,992      $ 50,185      $ 19,279       $ 13,354           $ -      $ 153,810
Revenue - affiliated                        5,690             -             2              -             -          5,692
Inter-segment transfers                     3,552           311             -          1,112        (4,975)             -
Gross profit - unaffiliated                18,816        12,574         7,575          8,017             -         46,982
Gross profit - affiliated                     375             -             1              -             -            376
Equity income (loss)                        1,345             7           503              -          (181)         1,674
Income (loss) before interest, tax
     and minority interest                  4,323          (716)       (2,747)         2,014         1,543          4,417
Interest income                                 -             -             -              -             -          1,861
Interest expense                                -             -             -              -             -           (936)
Income before income taxes
     and minority interest                      -             -             -              -             -          5,342
Identifiable assets                       296,077       136,134        68,776         28,719        50,536        580,242
Investment in affiliated companies         17,335             -         2,870              -         2,552         22,757
Goodwill                                   11,209         7,062           944              -             -         19,215


                                                                For the six months ended June 30, 2001
                                     -------------------------------------------------------------------------------------
                                      Equipment      Ultrapure     Consumer      Instrument
                                       Business        Water         Water        Business
                                        Group          Group         Group         Group        Corporate       Total
                                     -------------  ------------  ------------  -------------   -----------  -------------
(Amounts in thousands)
Revenue - unaffiliated                   $ 81,336      $ 71,666      $ 59,429       $ 14,231           $ -      $ 226,662
Revenue - affiliated                        9,811             -           163              -             -          9,974
Inter-segment transfers                     1,987         1,969             -            998        (4,954)             -
Gross profit - unaffiliated                20,148        16,601        25,981          7,802             -         70,532
Gross profit - affiliated                     173             -            82              -             -            255
Equity income (loss)                          839            50           246              -          (105)         1,030
Income (loss) before interest, tax
     and minority interest                  6,366         1,022         4,994          1,708        (1,653)        12,437
Interest income                                 -             -             -              -             -            971
Interest expense                                -             -             -              -             -         (3,052)
Income before income taxes
     and minority interest                      -             -             -              -             -         10,356
Investments in affiliated companies        17,599            38         3,161              -         2,733         23,531
Goodwill                                   11,245        16,594        20,033          1,830             -         49,702

</TABLE>

       Identifiable assets at June 30, 2001 did not differ materially from
       identifiable assets at December 31, 2001.

                                      -10-
<PAGE>

7.     Accounting Pronouncements

       In August 2001, the Financial Accounting Standards Board (FASB) issued
       Statement of Financial Accounting Standard (SFAS) No. 143, "Accounting
       for Obligations Associated with the Retirement of Long-Lived Assets."
       SFAS No. 143 provides the accounting requirements for retirement
       obligations associated with tangible long-lived assets. SFAS No. 143 is
       effective for financial statements for fiscal years beginning after June
       15, 2002. The Company has determined that SFAS No. 143 will not have a
       material impact on its financial position and results of operations.

       In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
       No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
       Corrections as of April 2002." SFAS No. 145 rescinds FASB Statement No.
       4, "Reporting Gains and Losses from Extinguishment of Debt," and an
       amendment of that statement. SFAS No. 145 amends FASB Statement No. 13,
       "Accounting for Leases," to eliminate an inconsistency between the
       required accounting for sale-leaseback transactions and the required
       accounting for certain lease modifications that have economic effects
       that are similar to sale-leaseback transactions. SFAS No. 145 also amends
       other existing authoritative pronouncements to make various technical
       corrections, clarify meanings, or describe their applicability under
       changed conditions. SFAS No. 145 is effective for financial statements
       for fiscal years beginning after May 15, 2002. The Company does not
       believe that SFAS No. 145 will have a material impact on the Company's
       financial position and results of operations.

       In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
       Associated with Exit or Disposal Activities." SFAS No. 146 requires
       companies to recognize costs associated with exit or disposal activities
       when they are incurred rather than at the date of a commitment to an exit
       or disposal plan and nullifies Emerging Issues Task Force (EITF) Issue
       No. 94-3, "Liability Recognition for Certain Employee Termination
       Benefits and Other Costs to Exit an Activity (including Certain Costs
       Incurred in a Restructuring)." SFAS No. 146 is to be applied
       prospectively to exit or disposal activities initiated after December 31,
       2002 and accordingly, the Company can only determine prospectively the
       impact, if any, SFAS No. 146 would have on the Company's financial
       position and results of operations.




                                      -11-
<PAGE>

8.       Goodwill and Intangible Assets

       In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
       Intangible Assets." This accounting standard addresses financial
       accounting and reporting for goodwill and other intangible assets and
       requires that goodwill amortization be discontinued and replaced with
       periodic tests of impairment. SFAS No. 142 is effective for fiscal years
       beginning after December 15, 2001, and is required to be applied at the
       beginning of the fiscal year. A two-step impairment test is used to first
       identify potential goodwill impairment and then measure the amount of
       goodwill impairment loss, if any. The first step of the goodwill
       impairment test, which must be completed within six months of the
       effective date of this standard, identifies any potential goodwill
       impairment. As of June 30, 2002, the Company completed the transitional
       goodwill impairment test and determined that no adjustment to goodwill
       was necessary.

       In accordance with SFAS No. 142, amortization of goodwill was
       discontinued as of January 1, 2002. All of the Company's intangible
       assets are subject to amortization. The Company did not record any
       reclassification of amounts of intangible assets into or out of the
       amounts previously reported as goodwill.

       The following tables reflect the adjustments to selected consolidated
       financial information to present pro forma amounts which exclude
       amortization of goodwill:

<TABLE>
<CAPTION>
                                                                  (Amounts in thousands, except per share amounts)
                                                                Three months ended                Six months ended
                                                                    June 30,                        June 30,
                                                            ----------------------------    -----------------------------
                                                                2002           2001             2002            2001
                                                            -------------  -------------    -------------   -------------
<S>                                                              <C>            <C>              <C>             <C>
Net income                                                       $ 1,245        $ 4,169          $ 2,744         $ 7,164
Goodwill amortization, net of tax                                      -            651                -           1,185
                                                            ----------------------------    -----------------------------
Adjusted net income                                              $ 1,245        $ 4,820          $ 2,744         $ 8,349
                                                            ============================    =============================

Reported basic earnings per share                                 $ 0.07         $ 0.24           $ 0.16          $ 0.43
Goodwill amortization, net of tax                                      -           0.04                -            0.07
                                                            ----------------------------    -----------------------------
Adjusted basic earnings per share                                 $ 0.07         $ 0.28           $ 0.16          $ 0.50
                                                            ============================    =============================

Reported diluted earnings per share                               $ 0.07         $ 0.24           $ 0.15          $ 0.42
Goodwill amortization, net of tax                                      -           0.04                -            0.07
                                                            ----------------------------    -----------------------------
Adjusted diluted earnings per share                               $ 0.07         $ 0.28           $ 0.15          $ 0.49
                                                            ============================    =============================

                                                            (Amounts in thousands, except per share amounts)
                                                                  For the years ended December 31,
                                                            ---------------------------------------------
                                                                2001           2000             1999
                                                            -------------  -------------    -------------

Net income (loss)                                               $ 44,701       $ (1,870)        $ 19,361
Goodwill amortization, net of tax                                  2,188          2,228            1,774
                                                            -------------  -------------    -------------
Adjusted net income                                             $ 46,889          $ 358         $ 21,135
                                                            =============  =============    =============

Reported basic earnings (loss) per share                          $ 2.61        $ (0.12)          $ 1.20
Goodwill amortization, net of tax                                   0.13           0.14             0.11
                                                            -------------  ------------------------------
Adjusted basic earnings per share                                 $ 2.74         $ 0.02           $ 1.31
                                                            =============  =============    =============

Reported diluted earnings (loss) per share                        $ 2.59        $ (0.12)          $ 1.18
Goodwill amortization, net of tax                                   0.13           0.14             0.11
                                                            -------------  ------------------------------
Adjusted diluted earnings per share                               $ 2.72         $ 0.02           $ 1.29
                                                            =============  =============    =============
</TABLE>

       There was no change in the carrying value of goodwill during the quarter
       ended June 30, 2002, other than the impact of foreign currency
       translation adjustment. As a result of the foreign currency translation
       adjustment, the Equipment Business Group's goodwill balance increased
       $170,000 and the Ultrapure Water Group's goodwill balance increased by
       $8,000 from the respective balances at December 31, 2001.

                                      -12-
<PAGE>

       The Company's net intangible assets included in other assets in the
       Consolidated Balance Sheets consist principally of patents and
       trademarks. At June 30, 2002 and December 31, 2001, the net carrying
       value of these intangible assets was approximately $0.6 million.
       Intangible assets are amortized over a period ranging up to 20 years. All
       intangible assets are amortized on a straight-line basis. Amortization
       expense for intangible assets is estimated to be approximately $0.1
       million for each of the next five years.

9.     Acquisition

       In June 2002, the Company's Australian subsidiary acquired the business
       and assets of Rudd Brothers, an Australian wholesale and retail
       distributor of chemical and cleaning products, for approximately $0.6
       million in cash. This acquisition has been accounted for under the
       purchase method of accounting and, accordingly, the purchase price has
       been allocated to the assets acquired based on their estimated fair
       values at the date of acquisition. The assets acquired consist primarily
       of property, plant and equipment, inventory, certain intangibles and
       goodwill. The results of operations of Rudd Brothers have been included
       in the Company's statements of operations from the date of acquisition.
       Pro forma results of operations have not been presented, as the effect of
       this acquisition on the Company's consolidated results of operations was
       not material.

10.    Divestiture

       In May 2002, the Company completed its planned divestiture of its 55%
       equity interest in a Malaysian affiliate, which had previously been
       treated as "held for sale" and included in "Other current assets."
       Included in the Company's first half results were revenues of $4.2
       million and a $0.4 million pre-tax loss resulting from Malaysian
       operations. For the second quarter of 2002, revenues totaled $1.6 million
       and pre-tax profit amounted to $0.2 million, including a gain of
       approximately $0.7 million on the sale of the Company's equity interest
       in the Malaysian affiliate, which is included in "Selling, general and
       administrative" expenses.

11.      Subsequent Event

       In July 2002, the Company acquired the business and assets of the EnChem
       division of Microbar Incorporated. The purchase price was $0.4 million in
       cash plus additional contingent payments to be made over a five-year
       period based on the profitability of the acquired business. This
       acquisition has been accounted for under the purchase method of
       accounting and, accordingly, the purchase price has been allocated to the
       assets acquired based on their estimated fair values at the date of
       acquisition. The assets acquired consist primarily of patents and other
       intellectual property, inventory and equipment, and are used for
       wastewater treatment in the semiconductor industry. The results of
       operations of the EnChem division have been included in the Company's
       statements of operations from the date of acquisition. Pro forma results
       of operations have not been presented, as the effect of this acquisition
       on the Company's consolidated results of operations was not material.




                                      -13-
<PAGE>



Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial
statements and the related notes thereto included elsewhere in this Amendment
No. 1 to Form 10-Q and the audited consolidated financial statements and notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in our Annual Report on Form 10-K for the year
ended December 31, 2001, which has been filed with the Securities and Exchange
Commission. The analysis of results of operations compares the three and six
month periods ended June 30, 2002 with the comparable periods of the prior
fiscal year.

Restatement of Quarterly Financial Statements and Reclassifications

The Company's consolidated financial statements for the three months ended June
30, 2002 and the six months ended June 30, 2002, have been restated primarily as
a result of intercompany transactions, including transactions between the
Company and its French subsidiary that were erroneously recorded at the
subsidiary level. See Note 2 to Notes to Consolidated Financial Statements. The
following discussion of the financial condition and results of operations of the
Company has been amended in its entirety to reflect changes resulting from this
restatement, and to update the information contained therein to reflect
developments which have occurred subsequent to August 14, 2002, the date on
which the Company filed its quarterly report on Form 10-Q for the quarterly
period ended June 30, 2002. In particular, information provided under "Financial
Condition" with respect to the Company's commitments and contingencies, credit
facilities and future capital requirements has been updated. In addition, the
consolidated financial statements and information provided under "Results of
Operations" now reflect revenues and costs of sales derived from transactions
with affiliated entities in which the Company maintains less than a majority
interest as "affiliated companies" revenues and costs of sales. These amounts
had previously been reflected within the four business segments.

As part of the Company's adoption of a matrix business organization structure
effective January 1, 2002, results associated with the Company's trailer leasing
and non-consumer bleach based chemical supply businesses are included in the
Ultrapure Water Group ("UWG") segment, rather than the Equipment Business Group
("EBG") segment where they had historically been presented. Segment information
for all periods have been presented to reflect these changes. Aggregate second
quarter 2002 revenues and gross margin for these businesses were $6.1 million
and $1.6 million, respectively, compared to revenues and gross margin of $5.6
million and $1.5 million, respectively, for the second quarter of 2001.
Aggregate revenues and gross margin for the first six months of 2002 for these
businesses were $13.4 million and $3.7 million, respectively, compared to
revenues and gross margin of $12.6 million and $3.5 million, respectively for
the first six months of 2001.

Results of Operations

Comparison of the Three and Six Month Periods Ended June 30, 2002 with the Three
--------------------------------------------------------------------------------
and Six Month Periods Ended June 30, 2001
-----------------------------------------

The Company reported consolidated revenues of $79.5 million and net income of
$1.2 million for the second quarter of 2002, compared to $113.7 million and $4.2
million, respectively, during the second quarter of 2001. Revenues and net
income during the six months ended June 30, 2002 were $159.5 million and $2.7
million, respectively, compared to revenues and net income of $236.6 million and
$7.2 million, respectively, for the six months ended June 30, 2001. Results for
2001 include the operations of the Aqua Cool Pure Bottled Water business and the
Company's 55% ownership interest in its Malaysian subsidiary which were divested
on December 31, 2001 and May 2002, respectively.

Revenues. Total Company revenues for the second quarter of 2002 decreased 30.1%
to $79.5 million from $113.7 million for the second quarter of 2001. Excluding
the second quarter 2001 Aqua Cool Pure Bottled Water revenues of $19.2 million,
second quarter 2002 revenues decreased $15.0 million, or 15.9%, from the
comparable period of 2001. Revenues for the first six months of 2002 totaled
$159.5 million, compared to $236.6 million for the comparable six month period
of 2001. Total revenue declined $41.0 million, or 20.5%, in the first half of
2002 compared to the same period of 2001, excluding the first half of 2001 Aqua
Cool Pure Bottled Water revenues.



                                      -14-
<PAGE>

EBG revenues during the second quarter of 2002 of $35.9 million decreased by
$5.8 million, or 13.8%, compared to revenues of $41.7 million during the second
quarter of 2001. For the six-month period ended June 30, 2002, EBG revenues of
$71.0 million decreased $10.3 million, or 12.7%, compared to the comparable
period in the prior year. The revenue decreases over the year-earlier periods
reflect lower revenue levels from domestic capital equipment sales.

UWG revenues during the second quarter of 2002 of $25.4 million decreased by
$5.4 million, or 17.5%, compared to revenues of $30.8 million in the second
quarter of 2001. During the six-month period ended June 30, 2002, revenues of
$50.2 million decreased $21.5 million, or 30.0%, compared to revenues of $71.7
million for the six months ended June 30, 2001. In both periods ended June 30,
2002, revenue levels were affected by continued softness in the microelectronics
industry, particularly with respect to domestic capital equipment sales.

Consumer Water Group ("CWG") revenues during the second quarter of 2002 of $8.7
million decreased by $21.5 million, or 71.1%, compared to revenues of $30.2
million in the second quarter of 2001. Excluding second quarter 2001 revenues of
$19.2 million associated with the Aqua Cool Pure Bottled Water business,
revenues in the second quarter of 2002 decreased by $2.3 million, or 20.7%,
compared to the year-earlier period. For the six months ended June 30, 2002,
revenues of $19.3 million decreased $40.1 million, or 67.6%, compared to
revenues of $59.4 million for the year-earlier period. Adjusted to exclude 2001
revenues of $36.1 million associated with the Aqua Cool Pure Bottled Water
business, revenues decreased by $4.1 million, or 17.4%. Revenues were affected
by a lower demand for automobile windshield wash solution and consumer bleach
products of the Company's Elite Consumer Products business, and by lower demand
for the Company's home water treatment equipment.

Instrument Business Group ("IBG") revenues of $6.8 million for the second
quarter of 2002 increased $0.4 million, or 5.7%, compared to $6.4 million for
the second quarter of 2001. For the six months ended June 30, 2002, revenues of
$13.4 million decreased $0.9 million, or 6.2%, compared to revenues of $14.2
million for the six months ended June 30, 2001. IBG revenues were also affected
by continued softness in the microelectronics industry, which is an important
customer for the group's instrument products.

Revenues from affiliated companies consist of revenues generated from entities
in which the Company has a less than majority equity interest. These revenues
amounted to $2.6 million for the second quarter of 2002 compared to $4.5 million
for the second quarter of 2001. Revenues from affiliated companies amounted to
$5.7 million for the six months ended June 30, 2002 compared to $10.0 million
for the six months ended June 30, 2001. The decrease in revenues from affiliated
companies from 2001 levels revenues primarily resulted from lower equipment
sales to Desalcott as a result of the substantial completion of the construction
phase of the Trinidad desalination facility.

Cost of sales. The Company's cost of sales as a percentage of revenue for the
second quarter was 69.1% in 2002 and 69.3% in 2001, and resulting gross margin
was 30.9% in the second quarter of 2002 compared to 30.7% in the second quarter
of 2001. For the first half of 2002, cost of sales as a percentage of revenue
was 70.3% as compared to 70.1% in the first half of 2001. For the three and six
months ended June 30, 2002, cost of sales as a percentage of revenue decreased
in the EBG, UWG, and IBG business groups and increased in the CWG segment,
compared to the comparable periods in 2001.

EBG's cost of sales as a percentage of revenue decreased to 73.9% in the second
quarter and 73.5% in the first half of 2002, as compared to 75.5% and 75.2% in
the same respective periods in 2001, reflecting a change in product mix from
lower margin capital equipment revenue to more profitable water supply and other
products. UWG's cost of sales as a percentage of revenue decreased to 73.2% and
74.9% for the second quarter and first half of 2002, respectively, as compared
to 79.1% and 76.8% for the second quarter and first half of 2001, respectively.
The decrease in cost of sales as a percentage of revenue was primarily
attributable to reduced losses in the Company's Malaysian and Australian
subsidiaries, both of which incurred significant charges in 2001 due primarily
to losses on under-performing contracts. The Company's interest in the Malaysian
subsidiary was divested in May 2002. Cost of sales as a percentage of revenue
for CWG increased to 55.9% and 60.7% in the second quarter and first half of
2002, respectively, from 51.3% and 56.3% in the second quarter and first half of
2001, respectively. The increase in cost of sales as a percentage of revenue was
primarily attributable to the exclusion of the Aqua Cool Pure Bottled Water
business, which was divested on December 31, 2001, as well as a gain recognized
on the sale of certain bottled water assets in the second quarter of 2001. IBG's
cost of sales as a percentage of revenue decreased to 37.9% and 40.0% in the
second quarter and first half of 2002, respectively, as compared to 46.4% and
45.2% in the second quarter and first half of 2001, respectively. The decrease
in cost of sales as a percentage of revenue primarily reflected a higher
proportion of more profitable after-market service revenue as compared to lower
margin capital equipment revenue. Cost of sales to affiliated companies as a


                                      -15-
<PAGE>

percentage of revenue decreased to 88.4% for the second quarter of 2002 compared
to 97.0% for the second quarter of 2001. Cost of sales to affiliated companies
as a percentage of revenue decreased to 93.4% for the first six months of 2002
compared to 97.4% for the first six months of 2001. These decreases were
primarily due to lower revenues from sales to Desalcott. For accounting
purposes, because the Company is deemed to have provided all of the equity
funding for Desalcott, profit is being deferred and amortized over the balance
of the term of the Trinidad concession agreement, which has resulted in lower
margins on sales to Desalcott.

Operating expenses. Research and development expenses of $1.6 million in the
second quarter of 2002 were unchanged from the second quarter of 2001, while
these expenses decreased 2.5% to $3.2 million in the first six months of 2002
from $3.3 million in the first six months of 2001. Selling, general and
administrative expenses in the second quarter of 2002 decreased 21.9% to $21.5
million from $27.6 million in the second quarter of 2001. Selling, general and
administrative expenses in the first six months of 2002 decreased 26.2% to $41.4
million in the first six months of 2002 from $56.1 million in the first six
months of 2001. These operating expenses increased as a percentage of revenue
during the second quarter of 2002 to 29.0% from 25.7% in the second quarter of
2001. For the six month period, operating expenses as a percentage of revenue
increased to 27.9% in 2002 from 25.1% in 2001. The increases as a percentage of
revenue were primarily a result of lower revenue levels during 2002 compared to
2001. Factors impacting operating expenses during the quarter ended June 30,
2002 included a gain of approximately $0.7 million resulting from the Company's
divestiture of its 55% equity interest in its Malaysian subsidiary, offset by
net foreign exchange losses and certain restructuring charges in the CWG segment
following the Company's divestiture of the Aqua Cool Pure Bottled Water business
on December 31, 2001.

Interest income (expense). For the six months ended June 30, 2002, interest
income increased to $1.9 million compared to $1.0 million for the first six
months of 2001. The increase in interest income reflected investment of the
proceeds from the sale of the Aqua Cool Pure Bottled Water business. Interest
expense of $0.4 million and $0.9 million for the second quarter and first half
of 2002, respectively, decreased from $1.4 million and $3.1 million from the
respective periods in 2001. The decreases in interest expense were primarily
attributable to lower short-term borrowings during the 2002 periods, which
resulted primarily from the application of the proceeds from the sale of the
Aqua Cool Pure Bottled Water business on December 31, 2001.

Equity income. For the first six months of 2002, equity income increased to $1.7
million compared to $1.0 million in the first six months of 2001. This increase
was primarily the result of the Company's equity earnings in its 40% ownership
interest of Desalcott and in two projects located in Mexico in which the Company
has a 20% equity ownership interest. The Company records 100% of any net loss
and 40% of any net income reported by Desalcott. In periods in which Desalcott
has an accumulated loss (as opposed to retained earnings), the Company records
100% of any net income of Desalcott up to the amount of Desalcott's accumulated
loss, and 40% of any net income thereafter.

Taxes. The Company's effective tax rate was 40.7% for the first six months of
2002 compared to 34.0% for the first six months of 2001. The increase in the
overall tax rate was primarily attributable to an increase in forecasted losses
incurred by the Company's French subsidiary for which the Company may not be
able to realize future tax benefits.

Financial Condition

At June 30, 2002, the Company had $139.1 million in cash and cash equivalents
and $227.6 million of working capital. Working capital increased $5.6 million
during the first six months of 2002 while the Company's current ratio of 3.0 at
June 30, 2002 increased from 2.4 at December 31, 2001. Accounts payable and
accrued expenses decreased $19.9 million during the first half of 2002,
reflecting lower revenue levels during the first six months of 2002 compared to
2001. Income taxes payable decreased $19.7 million during the first half of
2002, primarily reflecting tax payments made on the gain from the sale of the
Company's Aqua Cool Pure Bottled Water business.

Net cash used by operating activities amounted to $26.5 million, reflecting cash
used for payments of accounts payable, accrued expenses and current income
taxes, offset by depreciation and amortization charges of $11.2 million. Net
cash used by investing activities amounted to $14.0 million during the first six
months of 2002, reflecting additions to property, plant and equipment, primarily
relating to investments made in the Company's UWG segment for a build, own and
operate facility in the power industry. Net cash used by financing activities
totaled $2.4 million during the first six months of 2002, primarily reflecting
pay-down of the Company's short-term borrowings.

                                      -16-
<PAGE>

From time to time, the Company enters into joint ventures with respect to
specific projects, including the projects in Trinidad, Kuwait and Israel
described below. Each joint venture arrangement is independently negotiated
based on the specific facts and circumstances of the project, the purpose of the
joint venture company related to the project, as well as the rights and
obligations of the other joint venture partners. Generally, the Company has
structured its project joint ventures so that the Company's obligation to
provide funding to the underlying project or to the joint venture entity is
limited to its proportional capital contribution, which can take the form of
equity or subordinated debt. Except in situations that are negotiated with a
specific joint venture entity, the Company has no other commitment to provide
for the joint venture's working capital or other cash needs. In addition, the
joint venture entity typically obtains third-party debt financing for a
substantial portion of the project's total capital requirements. In these
situations, the Company is typically not responsible for the repayment of the
indebtedness incurred by the joint venture entity. In connection with certain
joint venture projects, the Company may also enter into contracts for the supply
and installation of the Company's equipment during the construction of the
project, for the operation and maintenance of the facility once it begins
operation, or both. These commercial arrangements do not require the Company to
commit to any funding for working capital or any other requirements of the joint
venture company. As a result, the Company's exposure with respect to its joint
ventures is typically limited to its debt and equity investments in the joint
venture entity, the fulfillment of any contractual obligations it has to the
joint venture entity and the accounts receivable owing to the Company from the
joint venture entity.

In the second quarter of 2002, construction was completed on the first four (out
of five) phases of the Trinidad desalination facility owned by Desalination
Company of Trinidad and Tobago Ltd. ("Desalcott"), in which the Company has a
40% equity interest, and the facility commenced water deliveries to its
customer, the Water and Sewerage Authority of Trinidad and Tobago. In 2000, the
Company acquired 200 ordinary shares of Desalcott for $10 million and loaned $10
million to Hafeez Karamath Engineering Services Ltd. ("HKES"), the founder of
Desalcott and promoter of the Trinidad desalination project, to enable HKES to
acquire an additional 200 ordinary shares of Desalcott. Prior to those
investments, HKES owned 100 ordinary shares of Desalcott. As a result, the
Company currently owns a 40% equity interest in Desalcott, and HKES currently
owns a 60% equity interest in Desalcott. The Company records 100% of any net
loss and 40% of any net income reported by Desalcott. In periods in which
Desalcott has an accumulated loss (as opposed to retained earnings), the Company
records 100% of any net income of Desalcott up to the amount of Desalcott's
accumulated loss, and 40% of any net income thereafter.

The Company's $10 million loan to HKES is included in long-term notes receivable
on the Company's consolidated balance sheets. The loan bears interest at a rate
equal to 2% above LIBOR, with interest payable starting October 25, 2002 and
every six months thereafter and at maturity. Prior to maturity, however, accrued
interest payments (as well as principal payments) are payable only to the extent
dividends or other distributions are paid by Desalcott on the ordinary shares of
Desalcott owned by HKES and pledged to the Company. Principal repayment is due
in 14 equal installments commencing on April 25, 2004 and continuing
semiannually thereafter. The loan matures and is payable in full on April 25,
2011. The loan is secured by a security interest in the shares of Desalcott
owned by HKES and purchased with the borrowed funds, which is subordinate to the
security interest in those shares in favor of the Trinidad bank that provided
the construction financing for Desalcott. In addition, any dividends or other
distributions paid by Desalcott to HKES must be applied to loan payments to the
Company.

In 2000, Desalcott entered into a "bridge loan" agreement with a Trinidad bank
providing $60 million in construction financing. Effective November 8, 2001, the
loan agreement was amended to increase maximum borrowings to $79.9 million. The
Company is obligated to lend up to $10 million to Desalcott as an additional
source of funds for project completion costs once all bridge loan proceeds have
been expended. However, the bridge loan of $79.9 million and the $20 million
equity provided to Desalcott (together with the additional $10 million dollars
the Company is obligated to lend to Desalcott) have not provided sufficient
funds to pay all of Desalcott's obligations in completing construction and
commissioning of the project prior to receipt of long-term financing. Included
in Desalcott's obligations at June 30, 2002 and September 30, 2002 was
approximately $22.3 million and $24.2 million, respectively, payable to the
Company's Trinidad subsidiary for equipment and services purchased in connection
with the construction of the facility. The Company currently intends to convert
$10 million of this amount into a loan to Desalcott to satisfy the Company's
loan commitment described above. The terms of this loan are currently being
negotiated with Desalcott. The Company currently anticipates that Desalcott will
pay its remaining outstanding obligations to the Company's subsidiary partially
out of cash flow from the sale of water and from the proceeds from new long-term
debt financing. Desalcott has received proposals for new long-term debt
financing, including a term sheet and a draft term loan agreement from the
Trinidad bank which provided the bridge loan, which it anticipates completing


                                      -17-
<PAGE>

around year-end. Such new long-term debt financing may not be completed on terms
acceptable to Desalcott, or at all. Moreover, although the Trinidad bank that
made the bridge loan to Desalcott has not required repayment of the bridge loan,
which matured on September 1, 2002, pending completion of the long-term debt
financing, there can be no assurance that the bank will not exercise its rights
and foreclose on its collateral, in which event the Company's equity investment
in, and receivable from, Desalcott as well as the loan receivable from HKES
would be at risk.

During 2001, the Company acquired a 25% equity interest in a Kuwaiti project
company, Utilities Development Company W.L.L. ("UDC"), which was awarded a
concession agreement by an agency of the Kuwaiti government for the
construction, ownership and operation of a wastewater reuse facility in Kuwait.
During the second quarter of 2002, UDC entered into agreements for the long-term
financing of the project, and accordingly the Company commenced recognizing
revenue in accordance with American Institute of Certified Public Accountants
Statement of Position No. 81-1, "Accounting for Performance of Construction-Type
and Certain Construction-Type Contracts." At June 30, 2002 and September 30,
2002, the Company had invested a total of $1.6 million in UDC as equity
contributions and subordinated debt. The Company is committed to make additional
contributions of equity or subordinated debt to UDC of $15.9 million over a two
to three year period.

The Company entered into agreements with Kibbutz Ma'agan Micha'el, an Israeli
cooperative society, and I.P.P.S. Infrastructure Enterprises Ltd., an Israeli
corporation, for the establishment of Magan Desalination Ltd. ("MDL") as an
Israeli project company in which the Company has a 49% equity interest. In
August 2002, MDL entered into a concession contract with a state-sponsored water
company for the construction, ownership and operation of a brackish water
desalination facility in Israel. At June 30, 2002 and September 30, 2002, the
Company had made a nominal equity investment in MDL, and had deferred costs of
approximately $0.6 million and $0.7 million, respectively, relating to the
design and development work on the project. The Company currently anticipates
that it will invest approximately $1 million in MDL for its 49% equity interest.
MDL is currently seeking approximately $7.7 million of debt financing for the
project. If MDL is unable to obtain such debt financing, the Company would
expense all its deferred costs relating to the project but would incur no other
liability, inasmuch as no performance bond has been issued for the project.

In January 2002, the Company entered into agreements with Baran Group Ltd. and
Dor Chemicals Ltd., both Israeli corporations, giving the Company the right to a
one-third ownership interest in an Israeli project company, Carmel Desalination
Ltd. ("CDL"). On October 28, 2002, CDL was awarded a concession agreement by the
Israeli Water Desalination Agency (established by the Ministry of Finance and
the Ministry of Infrastructure) for the construction, ownership and operation of
a major seawater desalination facility in Israel. At September 30, 2002, the
Company had not yet made any equity investment in CDL, and had deferred costs of
approximately $0.3 million relating to the engineering design and development
work on the project. No costs had been deferred at June 30, 2002. If CDL obtains
long-term project financing, the Company's total equity investment to be made in
CDL would be approximately $8 million. The timing of such investment will depend
upon the terms of the long-term financing agreement. Although the Company
currently anticipates that CDL will obtain long-term financing for the project
by the required date in April 2003, such financing may not be obtained. If CDL
is unable to obtain such financing, the Company would expense all its deferred
costs relating to the project and any investment the Company may have made in
CDL (estimated to be approximately $0.8 million by the time of the closing of
the long-term financing), and could incur its one-third proportionate share
($2.5 million) of liability under a $7.5 million performance bond issued on
behalf of CDL.

On December 31, 2001, the Company completed the sale of its Aqua Cool Pure
Bottled Water operations in the United States, United Kingdom and France to
affiliates of Perrier-Vittel S.A., a subsidiary of Nestle S.A. ("Nestle"), for
approximately $220 million, of which $10 million is being held in escrow
pursuant to the terms of the divestiture agreement. The amount of the purchase
price is subject to final adjustment based on the number of customers and
working capital levels of the transferred businesses, in each case as determined
in accordance with the divestiture agreement. The process for determining the
number of customers and working capital levels, as well as any related purchase
price adjustments, is under way. In addition, Nestle is seeking payment of
certain amounts under the indemnification provisions of the divestiture
agreement. While the ultimate amount of purchase price adjustments or
indemnification payments, if any, cannot yet be determined with certainty, the
Company currently believes that the reserves it has established for purchase
price adjustments and the escrowed amount will be adequate in all material
respects to cover the resolution of these issues. Accordingly, no additional
provision for any liability that might result from any of these matters has been
included in the accompanying financial statements for the current year.

                                      -18-
<PAGE>

The Company has an unsecured domestic revolving credit facility with Fleet
National Bank which expires in March 2003. Under this credit facility, the
Company may borrow up to $30 million. The Company also maintains other domestic
and international unsecured credit facilities under which the Company may borrow
up to an aggregate of $6.0 million. At June 30, 2002, the Company's total
borrowings outstanding under all of its existing credit facilities were $8.6
million.

In the normal course of business, the Company issues letters of credit to
customers, vendors and lending institutions as guarantees for payment,
performance or both under various commercial contracts into which it enters. Bid
bonds are also sometimes issued by the Company as security for the Company's
commitment to proceed with a project if it is the successful bidder. Performance
bonds are typically issued for the benefit of the Company's customers as
financial security for the completion or performance by the Company of its
contractual obligations under certain commercial contracts. These instruments
are not reflected on the Company's balance sheet as a liability because they
will not result in a liability to the Company unless the Company fails to
perform the contractual obligations which are secured by the corresponding
instrument. In the past, the Company has not incurred any significant liability
or expense as a result of the use of these instruments.

The Company believes that its future capital requirements will depend on a
number of factors, including the amount of cash generated from operations and
its capital commitments to new "own and operate" projects, either directly or
through joint venture entities, that the Company may be successful in obtaining.
The Company believes that its existing cash and cash equivalents, cash generated
from operations, lines of credit and foreign exchange facilities will be
sufficient to fund its capital expenditures and working capital requirements at
least through the end of 2003, based on its current business plans and
projections.

Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 143, "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets." SFAS No. 143 provides the
accounting requirements for retirement obligations associated with tangible
long-lived assets. SFAS No. 143 is effective for financial statements for fiscal
years beginning after June 15, 2002. The Company has determined that SFAS No.
143 will not have a material impact on its financial position and results of
operations.

In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of
April 2002." SFAS No. 145 rescinds FASB Statement No. 4, "Reporting Gains and
Losses from Extinguishment of Debt," and an amendment of that statement. SFAS
No. 145 amends FASB Statement No. 13, "Accounting for Leases," to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. SFAS No. 145 also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. SFAS No. 145 is effective for financial statements for fiscal years
beginning after May 15, 2002. The Company does not believe that SFAS No. 145
will have a material impact on the Company's financial position and results of
operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS No. 146 is to be
applied prospectively to exit or disposal activities initiated after December
31, 2002 and accordingly, the Company will prospectively determine the impact,
if any, SFAS No. 146 will have on the Company's financial position and results
of operations.



                                      -19-
<PAGE>



Forward-Looking Information

Safe Harbor Statement under Private Securities Litigation Reform Act of 1995
----------------------------------------------------------------------------

Certain statements contained in this report, including, without limitation,
statements regarding expectations as to the Company's future results of
operations, statements in the "Notes to the Consolidated Financial Statements"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" constitute forward-looking statements. Such statements are based on
management's current views and assumptions and are neither promises or
guarantees but involve risks, uncertainties and other factors that could cause
actual results to differ materially from management's current expectations as
described in such forward-looking statements. Among these factors are the
matters described under "Risks and Uncertainties" contained in the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section of the Company's Annual Report on Form 10-K for the year ended December
31, 2001, as well as overall economic and business conditions; competitive
factors, such as acceptance of new products and pricing pressures and
competition from companies larger than the Company; risk of nonpayment of
accounts receivable, including those from affiliated companies; risks associated
with foreign operations; risks associated with joint venture entities, including
their respective abilities to arrange for necessary long-term project financing;
risks involved in litigation; regulations and laws affecting business in each of
the Company's markets; market risk factors, as described below under
"Quantitative And Qualitative Disclosures About Market Risk"; fluctuations in
the Company's quarterly results; and other risks and uncertainties described
from time to time in the Company's filings with the Securities and Exchange
Commission. Readers should not place undue reliance on any such forward looking
statements, which speak only as of the date they are made, and the Company
disclaims any obligation to update, supplement or modify such statements in the
event the facts, circumstances or assumptions underlying the statements change,
or otherwise.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Derivative Instruments
----------------------

In 2001, the Company's Italian subsidiary entered into a series of U.S.
dollar/euro options contracts with the intent of offsetting the foreign exchange
risk associated with forecasted cash flows related to an ongoing project. These
options contracts were not entered into for trading purposes. In accordance with
the restrictions set forth in SFAS No. 133, the contracts do not qualify for
hedge accounting treatment. The fair market value of the contracts were recorded
as a liability of $1.2 million in the other current liabilities section of the
Consolidated Balance Sheet at December 31, 2001. End-of-period changes in the
market value of the contracts were reflected in the selling, general and
administrative expenses in the Consolidated Statement of Operations. In
addition, the Company periodically enters into foreign exchange contracts to
hedge certain operational and balance sheet exposures against changes in foreign
currency exchange rates. The Company had no foreign exchange contracts
outstanding at June 30, 2002 and 2001.

Market Risk
-----------

The Company's primary market risk exposures are in the areas of interest rate
risk and foreign currency exchange rate risk. The Company's investment portfolio
of cash equivalents is subject to interest rate fluctuations, but the Company
believes this risk is not material due to the short-term nature of these
investments. At June 30, 2002, the Company had $9.6 million of short-term debt
and $11.1 million of long-term debt outstanding. The major portion of this debt
has variable interest rates and, therefore is subject to interest rate risk.
However, a hypothetical increase of 10% in these interest rates for a one-year
period would result in additional interest expense that would not be material in
the aggregate. The Company's net foreign currency exchange gain was
approximately $1.5 million for the six months ended June 30, 2002, compared to
$0.3 million for the six months ended June 30, 2001. The Company's exposure to
foreign currency exchange rate fluctuations is moderated by the fact that the
operations of its international subsidiaries are primarily conducted in their
respective local currencies. Also, in certain situations, the Company will
consider entering into forward exchange contracts to mitigate the impact of
foreign currency exchange fluctuations.


                                      -20-
<PAGE>



                           PART II - OTHER INFORMATION

Item 4.       Submission of Matters to a Vote of Security Holders

a)     The Annual Meeting of the Stockholders was held on May 8, 2002. Douglas
       R. Brown, Kathleen F. Feldstein, Arthur L. Goldstein and Carl S. Sloane
       were reelected as Class I Directors for a three-year term. Continuing as
       Class II Directors until the 2003 Annual Meeting are Arnaud de Vitry
       d'Avaucourt, William E. Katz, Daniel I. C. Wang and Mark S. Wrighton.
       Continuing as Class III Directors until the 2004 Annual Meeting are
       Stephen L. Brown, William K. Reilly, John J. Shields and Allen S. Wyett.
       The numbers of votes cast for the election of the Class I Directors were
       as follows:

                                          For            Withheld
                                          ---            --------
              Douglas R. Brown         12,185,123        2,246,851
              Kathleen F. Feldstein    12,184,070        2,247,905
              Arthur L. Goldstein      12,178,072        2,253,903
              Carl S. Sloane           12,183,827        2,248,148

b)     The other matters submitted for stockholder approval were (i) approval of
       an amendment to the Company's 1997 Stock Incentive Plan to increase the
       number of shares available for issue under such Plan by 800,000 shares,
       and (ii) the ratification of the selection of PricewaterhouseCoopers LLP
       as the Company's auditors for 2002. The following were cast in connection
       with these matters:

i)       Approval of Amendment to 1997 Stock Incentive Plan

              Votes for:                    8,844,428
              Votes against:                5,498,404
              Abstentions:                     89,192

ii) Ratification of the selection of PricewaterhouseCoopers LLP as auditors for
    2002.

              Votes for:                   14,071,166
              Votes against:                  318,749
              Abstentions:                     42,059

Item 5.       Other Information

Amounts shown on the Consolidated Statements of Operations in Part I for
"Revenues" and "Cost of sales of Equipment Business Group" for the three and six
months ended June 30, 2002 each reflect a reduction of $200,000 from the
corresponding numbers shown in (i) Note 8 to the Company's quarterly report on
Form 10-Q for the quarterly period ended September 30, 2002 and filed with the
Securities and Exchange Commission on November 14, 2002, and (ii) the summary
restated Consolidated Statements of Operations for such periods contained in the
Company's November 5, 2002 third quarter results press release. These reductions
resulted from a reclassification of an accounting entry relating to the
Company's French subsidiary. This reclassification did not affect income from
operations or net income. Giving effect to this reclassification to the nine
months ended September 30, 2002, Equipment Business Group revenues decreased
from $112.6 million to $112.4 million and cost of sales of Equipment Business
Group decreased from $83.9 million to $83.7 million. This reclassification does
not effect any changes to the Company's financial statements as of and for the
three months ended September 30, 2002.

Item 6.       Exhibits and Reports on Form 8-K

a) Exhibits

       None

b) Reports on Form 8-K

       One report on Form 8-K was filed by the Company with the Securities and
       Exchange Commission during the three-month period ended June 30, 2002.
       This report, filed on June 24, 2002, reported under Item 5 the signing of
       certain contracts in connection with a wastewater treatment project in
       Kuwait.



                                      -21-
<PAGE>



                                   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 thereunto duly authorized.

                                       IONICS, INCORPORATED


Date:  December 4, 2002        By: /s/Arthur L. Goldstein
                                   -----------------------------------------
                                   Arthur L. Goldstein
                                   Chairman and Chief Executive Officer
                                   (duly authorized officer)



Date:  December 4, 2002        By: /s/Daniel M. Kuzmak
                                   -----------------------------------------
                                   Daniel M. Kuzmak
                                   Vice President and Chief Financial Officer
                                   (principal financial officer)




                                      -22-
<PAGE>



                                 CERTIFICATIONS

I, Arthur L. Goldstein, certify that:

1. I have reviewed this Amendment No. 1 to quarterly report on Form 10-Q of
   Ionics, Incorporated;
2. Based on my knowledge, this Amendment No. 1 to
   quarterly report on Form 10-Q 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 Amendment No. 1 to quarterly report on Form 10-Q;
3. Based on my knowledge, the financial statements, and other financial
   information included in this Amendment No. 1 to quarterly report on Form
   10-Q, 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 Amendment No. 1 to quarterly report on Form 10-Q.

Date:   December 4, 2002

        /s/Arthur L. Goldstein
        ----------------------
        Arthur L. Goldstein
        Chairman and Chief Executive Officer

I, Daniel M. Kuzmak, certify that:

1. I have reviewed this Amendment No. 1 to quarterly report on Form 10-Q of
   Ionics, Incorporated;
2. Based on my knowledge, this Amendment No. 1 to
   quarterly report on Form 10-Q 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 Amendment No. 1 to quarterly report on Form 10-Q;
3. Based on my knowledge, the financial statements, and other financial
   information included in this Amendment No. 1 to quarterly report on Form
   10-Q, 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 Amendment No. 1 to quarterly report on Form 10-Q.

Date:   December 4, 2002

        /s/Daniel M. Kuzmak
        -------------------
        Daniel M. Kuzmak
        Vice President and Chief Financial Officer