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