2006 Annual Report
LETTER TO SHAREHOLDERS,
I am pleased to report sales and earnings for the year 2006. Net sales increased by 7% to $14,889,000 and earnings by 24% to $1,124,000 or $0.55 per diluted share. We remain financially very sound, with a strong balance sheet.
In addition to a positive financial year we have laid the foundation for future growth.
At the end of 2006 we acquired the image mate™ brand of screen print products from Franklin International. The products and distributor base complement our domestic and export screen print products, with a number of opportunities for cross fertilization and a dual brand marketing strategy. For 2006, Franklin’s image mate estimated sales were $600,000.
During 2006, we spent considerable effort bringing our abrasive etching technology to the industrial ceramics and electronic wafer markets. This effort is based on proprietary products (including our DuPont licensed RapidMask™ film), designed to meet specific industrial needs. Although this is a longer sales cycle than we are accustomed to and 2006 has been a learning year, we believe we now have significant business opportunities in sight. I anticipate this effort will be a contributor to future growth.
Also, during the year we increased our investment in Imaging Technology International, recognized leaders in industrial digital inkjet technology. We have made the development of inkjettable fluids and fluid receptive substrates a priority for our R&D effort and capital expenditures. We have established a digital inkjet lab in Duluth and have made progress toward the commercialization of an advanced digital technology.
Finally, in the second half of 2006, we improved the production process for IKONMetal™, and the product is being sold to both the signage and award/trophy markets. Our IKONBraille™ product has encountered similar production issues; but I believe we are well on our way to solving them.
I anticipate that 2007 will be another successful year for IKONICS, with our core businesses continuing to grow and our new initiatives bringing increased revenues and profits while diversifying our customer base. I do, however, expect that compliance costs associated with Sarbanes Oxley Rule 404 will be a drag on earnings.
For the Board of the Directors,
William C. Ulland Chairman, President and CEO