2009 Annual Report
Letter to Shareholders
2009 was a turbulent year for IKONICS. The recession negatively impacted our sales, particularly in the awards and recognition market. The write off of our investment in Imaging Technology International (iTi) resulted in our first loss in 8 years, yet we generated $1.4 million in cash from operations during the year and finished 2009 with a cash and short term investment balance of $2.1 million. We continue to have no long term debt and in late 2008 completed a $4.4 million facility expansion funded totally from cash.
Sales for 2009 were $15,122,000, a 4.6% decrease from 2008. Income from operations declined by 10.4% for the year to $870,000. Reported income for the year, after the $919,000 write off of our investment in iTi, was a loss of $307,000, or $0.16 per share, compared to a profit of $814,000, or $0.40 per share, for 2008.
Our new businesses are contributing to growth. A Digital Texturing printer was placed at a beta site in the fourth quarter of 2009. It is successfully operating, and we are receiving orders for fluid and substrate consumables. We have found two alternate printer manufacturers to replace iTi, and we do not anticipate a significant disruption to this business due to an inability to obtain printers. However, the condition of the automotive industry, the primary market for digital texturing, remains a concern.
Our abrasive machining technology of advanced materials is growing, and we continue to discover new opportunities and markets. We expect growth in this market in 2010.
During the year, we initiated a joint research program with a major company to develop a unique protective film for one of their products. This project is ahead of schedule and significant sales may occur in the second half of this year.
Sales of our Chromaline Screen Print Products to the domestic market ran ahead of last year in spite of a difficult market, and we expect that trend to continue, driven by new products and an increased sales effort. Our Export business was particularly hurt by the recession causing weak sales to Europe. We are optimistic that a recovery in Europe and continued growth in Asia will put those sales back on the growth track.
Sales to the awards and recognition market may have bottomed out in the summer, but a robust recovery is not foreseen. We continue to control costs and the segment is profitable for us.
I am confident that we are emerging from this difficult period stronger, smarter and with a brighter future.
For the Board of Directors,
William C. Ulland Chairman, President & CEO March 23, 2010