2011 2nd Quarter Report

To Our Stockholders:

I am pleased to report record sales of $4,587,000 in the second quarter of 2011. This represents a 26% increase over the first quarter of 2011 and an 8% increase over the second quarter of 2010. For the quarter, however, earnings fell 10% to $310,000 or $0.16 per share compared to $0.17 per share for the corresponding 2010 quarter. The fall in earnings is primarily attributable to the rising cost of petrochemicals and expenses related to the Company’s new business initiatives.

The growth in sales is welcome: Export and IKONICS Imaging are showing healthy growth while Domestic Chromaline has improved substantially from the first quarter. Micro-Machining continues its robust growth, but DTX has been hindered by the unavailability of the specialized inkjet printers needed for the process.

The printer bottleneck appears to be resolved, and I anticipate an increase in consumable sales in the second half of 2011 and accelerating thereafter as printers become available. The production printer now being manufactured by Colour Scan Technology is producing an excellent product using new state-of-the art print heads coupled with our fluids and films. DTX technology is now being recognized for its quality and labor savings as the new industry standard for mold texturing and related rapid prototyping. An Illinois Tool Works printer should be in the market by the fourth quarter, and we anticipate that it too will produce an outstanding product for the mold texturing industry. In most cases, the printers will be sold directly by the manufacturers, and IKONICS will benefit through the sales of consumable fluids and films.

On August 15, Karl Shaw, PhD and former President of Standex Engraving, joined IKONICS in his new position as Director of New Technologies. I am very pleased Karl came aboard. In addition to a deep background in the mold texturing industry, he has broad expertise in materials science and will assist our ongoing efforts to enter new, profitable markets.

In spite of the current economic uncertainties, I believe our new offerings, which improve efficiency and enhance quality for industrial customers world-wide, will be drivers of growth for IKONICS. We plan to continue our stock buy-back program in an effort to take advantage of any undervaluation we believe may exist in IKONICS shares.

For the Board of Directors,

WILLIAM C. ULLAND Chairman, President & CEO

 

IKONICS Corporation

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months and Six Months Ended June 30, 2011 and 2010

                                                           

                                                                  Three Months Ended                     Six Months Ended  

                                                                6/30/11              6/30/10              6/30/11              6/30/10

Net sales                                               $4,587,432         $4,248,055        $   8,240,531      $   7,932,632

 

Cost of goods sold                                   2,733,442          2,418,296         4,919,698             4,619,078

 

Gross profit                                              1,853,990          1,829,759          3,320,833             3,313,554

 

Operating expenses                                  1,405,183          1,326,973          2,848,735             2,688,066

 

Income from operations                                 448,807             502,786             472,098               625,488

 

Interest income                                                4,781                 3,886                9,343                  7,405

 

Income before income taxes                          453,588             506,672              481,441               632,893

 

Income tax expense                                    144,042             163,400              134,553               141,280

 

Net income                                             $  309,546         $   343,272        $   346,888        $     491,613

 

Earnings per common share-diluted                        $         0.16       $         0.17       $          0.17      $           0.25

 

Average shares outstanding-diluted                         1,987,662          1,974,158          1,984,040           1,970,587

 

 

Condensed Balance Sheets

As of June 30, 2011 and December 31, 2010

 

                                                                                         6/30/11          12/31/10        

                                                                                      (unaudited)

Assets 

Current assets                                                    $   8,398,279      $  7,811,830

Property, plant and equipment, net                             4,930,534         5,012,933

Intangible assets, net                                                  333,936            317,168

 $13,662,749       $13,141,931

Liabilities and Stockholders’ Equity                                                                                

Current liabilities                                                 $    878,808       $     777,984

Deferred income taxes                                                171,000              171,000

Long term debt                                                                   –                           –

Stockholders’ equity                                             12,612,941         12,192,947

$13,662,749       $13,141,931

 

 

CONDENSED STATEMENTS OF CASH FLOW

For the Six Months Ended June 30, 2011 and 2010

 

                                                                                                               6/30/11              6/30/10                     

Net cash provided by (used in) operating activities               $   (83,848)        $   662,122

 

Net cash used in investing activities                                               (170,311)            (932,518)

 

Net cash provided by financing activities                                  66,131                33,990

 

Net decrease in cash                                                         (188,028)             (236,406)

 

Cash at beginning of period                                               1,291,383            1,304,586

 

Cash at end of period                                                      $1,103,355         $  1,068,180

 

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