Ikonics Corp. (IKNX, Financial) filed Quarterly Report for the period ended 2009-06-30.
Ikonics Corp develops manufactures and sells light sensitive liquid coatings and light sensitive films for commercial and industrial applications in the United States and abroad. The Company also markets ancillary chemicals and equipment to provide a full line of products and services to its customers. The Company\'s products serve the screen printing and decorative sand blasting markets. Ikonics Corp. has a market cap of $13.5 million; its shares were traded at around $6.8261 with a P/E ratio of 18.4 and P/S ratio of 0.9. Ikonics Corp. had an annual average earning growth of 18.2% over the past 5 years.
Cash and cash equivalents were $882,000 and $4,788,000 at June 30, 2009 and 2008, respectively. The Company generated $733,000 in cash from operating activities during the six months ended June 30, 2009, compared to generating $716,000 of cash from operating activities during the same period in 2008. Cash provided by operating activities is primarily the result of net income adjusted for non-cash depreciation, amortization, gain on sale of nonmarketable equity securities, deferred taxes, and certain changes in working capital components discussed in the following paragraph.
During the first six months of 2009, trade receivables decreased by $22,000. The decrease in receivables was driven by lower sales volumes. The Company believes that the quality of its receivables is high and that strong internal controls are in place to maintain proper collections. Inventory levels decreased $91,000 due to lower raw material levels as the Company is managing its inventory to match sales volumes. Deposits, prepaid expenses and other assets decreased $93,000 as a result of the Company prepaying for equipment at the end of 2008 which was received in 2009. Income tax refund receivable decreased $149,000 due to the Company receiving its 2008 income tax refund. Accounts payable decreased $32,000 due to of the timing of payments to and purchases from vendors and payments made to contractors associated with the new building. Accrued liabilities decreased $73,000, reflecting the timing of compensation payments.
During the first six months of 2009, investing activities used $629,000. The Company invested $600,000 in fully insured certificates on deposits. Purchases of property and equipment were $73,000, mainly for new equipment to support the Companys new business initiatives and research activities. Also during the first six months of 2009, the Company incurred $4,000 in patent application costs that the Company records as an asset and amortizes upon successful completion of the application process. The Company received proceeds of approximately $30,000 in the first six months of 2009 on the 2007 sale of its investment in the common and preferred stock of Apprise Technologies, Inc.
For the first six months of 2008, investing activities provided $2,695,000 to the Company. The Company sold $3,550,000 of short-term investments during 2008 at no gain or loss. These proceeds were partially offset by $830,000 of property and construction costs related the Companys new facility which was completed in 2008. The $830,000 also includes the final $95,000 payment on the Companys industrial digital inkjet machine. The Company incurred $33,000 in patent application costs during the first six months of 2008.
The Company used $124,000 in financing activities during the first six months of 2009 to repurchase 26,926 shares of its own stock. During the first six months of 2008 the Company received $146,000 from financing activities. The Company received $107,000 from the issuance of 35,872 shares of common stock upon the exercise of stock options during the first six months of 2008. The Company also realized $39,000 during the first six months of 2008 related to the excess tax benefits resulting from the exercise of stock options.
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Ikonics Corp develops manufactures and sells light sensitive liquid coatings and light sensitive films for commercial and industrial applications in the United States and abroad. The Company also markets ancillary chemicals and equipment to provide a full line of products and services to its customers. The Company\'s products serve the screen printing and decorative sand blasting markets. Ikonics Corp. has a market cap of $13.5 million; its shares were traded at around $6.8261 with a P/E ratio of 18.4 and P/S ratio of 0.9. Ikonics Corp. had an annual average earning growth of 18.2% over the past 5 years.
Highlight of Business Operations:
Income Taxes. During the first six months of 2009, the Company realized an income tax expense of $53,000, or an effective rate of 21.0%, compared to income tax expense of $189,000, or an effective rate of 29.0%, for the same period in 2008. The effective tax rate for the first six months of 2009 was significantly impacted by derecognizing a liability of $21,000 for unrecognized tax benefits in accordance with FIN 48 relating to a tax year where the statute of limitations expired during the first quarter and the benefits of the domestic manufacturing deduction, research and development tax credits, and state income taxes. The 2008 first six month effective tax rate was significantly impacted by derecognizing a liability of $44,000 for unrecognized tax benefits relating to a tax year where the statute of limitations expired during the first quarter, and the benefits of the domestic manufacturing deduction, tax exempt interest, and state income taxes. The Company expects that for the remainder of 2009, the Company will record income taxes at an effective tax rate of 35% to 36%.Cash and cash equivalents were $882,000 and $4,788,000 at June 30, 2009 and 2008, respectively. The Company generated $733,000 in cash from operating activities during the six months ended June 30, 2009, compared to generating $716,000 of cash from operating activities during the same period in 2008. Cash provided by operating activities is primarily the result of net income adjusted for non-cash depreciation, amortization, gain on sale of nonmarketable equity securities, deferred taxes, and certain changes in working capital components discussed in the following paragraph.
During the first six months of 2009, trade receivables decreased by $22,000. The decrease in receivables was driven by lower sales volumes. The Company believes that the quality of its receivables is high and that strong internal controls are in place to maintain proper collections. Inventory levels decreased $91,000 due to lower raw material levels as the Company is managing its inventory to match sales volumes. Deposits, prepaid expenses and other assets decreased $93,000 as a result of the Company prepaying for equipment at the end of 2008 which was received in 2009. Income tax refund receivable decreased $149,000 due to the Company receiving its 2008 income tax refund. Accounts payable decreased $32,000 due to of the timing of payments to and purchases from vendors and payments made to contractors associated with the new building. Accrued liabilities decreased $73,000, reflecting the timing of compensation payments.
During the first six months of 2009, investing activities used $629,000. The Company invested $600,000 in fully insured certificates on deposits. Purchases of property and equipment were $73,000, mainly for new equipment to support the Companys new business initiatives and research activities. Also during the first six months of 2009, the Company incurred $4,000 in patent application costs that the Company records as an asset and amortizes upon successful completion of the application process. The Company received proceeds of approximately $30,000 in the first six months of 2009 on the 2007 sale of its investment in the common and preferred stock of Apprise Technologies, Inc.
For the first six months of 2008, investing activities provided $2,695,000 to the Company. The Company sold $3,550,000 of short-term investments during 2008 at no gain or loss. These proceeds were partially offset by $830,000 of property and construction costs related the Companys new facility which was completed in 2008. The $830,000 also includes the final $95,000 payment on the Companys industrial digital inkjet machine. The Company incurred $33,000 in patent application costs during the first six months of 2008.
The Company used $124,000 in financing activities during the first six months of 2009 to repurchase 26,926 shares of its own stock. During the first six months of 2008 the Company received $146,000 from financing activities. The Company received $107,000 from the issuance of 35,872 shares of common stock upon the exercise of stock options during the first six months of 2008. The Company also realized $39,000 during the first six months of 2008 related to the excess tax benefits resulting from the exercise of stock options.
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