exhibit10-1.htm


    
      

    


    


    January
28, 2009

    


    


    


    TO
OUR SHAREHOLDERS, EMPLOYEES, AND OTHER STAKEHOLDERS:

    


    We
recognize that these are challenging economic times, and we believe that ICO
will not only survive the times, but emerge as a stronger
and better company.   In the midst of turmoil, we believe
opportunities will arise, and we intend to be in a position to take advantage
of those opportunities.

    


    During
the first quarter of fiscal year 2009, we altered our focus from offense: growth
and expansion, to defense: protecting both our cash flow and the value of our
Company.  We believe that is the correct strategy for these
times.

    


    In fiscal
year 2008, while our revenues grew, our volumes and our operating income did
not.  We are disappointed in the latter two measurements
as we believe our platform can deliver all three.

    


    We know
that fiscal year 2009 will be challenging.  The global credit crisis
that the world has witnessed, commencing in the later part of the 2008 calendar
year, is unprecedented.  In addition, currency movements during this period
have been dramatic, as have been the price fluctuations in commodity resins
including our most common base materials.  We believe, however, that there
are always niches in the polymer space that offer opportunity.  Our job is
to seize those opportunities.

    


    We
continue to focus on that which has contributed to ICO’s success:

    


    Serving
Customers:  Our focus remains primarily on providing quality
services and products to our customers, with emphasis on added-value products
that help our customers achieve their goals.  We aim to offer unique,
leading edge products to our customers, and we are capable of serving customers
who appreciate a global platform.

    


    Developing People: 
“People are our most important asset” is not just a phrase at
ICO.  Attracting, developing and motivating the right people for ICO
is our most significant challenge.  We know that in order to grow our
business we need talented, dedicated people in all facets of our business. 
We are investing in training our people and helping them grow.  Our
compensation plans deliver fair and reasonable
rewards for performance and good execution.

    


    Partnering With
Suppliers:  We buy from producers of high quality resins or
additives throughout the world, and we work to maintain and enhance the
relationships with those suppliers.  They are our partners and an important
key to our success.

    


    Investing Effectively: 
We continue to invest in equipment that improves our productivity and increases
productive capacity in existing markets, and we aim to invest in new markets
with attractive growth characteristics.  In fiscal year 2009, we will
continue to seek such opportunities.  Importantly, we strive to allocate
capital within our business to the highest return opportunities with
quantifiable risk.  In the long run, this is how we will create value
for our shareholders.

    


    During
fiscal year 2008, we continued to expand our business in Malaysia, and we sought
to expand our presence in Brazil.  We are optimistic
about both of these markets.

    


    We
elected to close the small facility we recently opened in Dubai.  We
concluded that this specific market had too many obstacles to provide a
reasonable return on our capital and resources. This decision does not mean that
we have given up on the Middle East.  It does,
however, mean that we need to approach the market in a different
manner.  We believe we have a strategy to do so.

    


    Finally,
investment in our business includes substantial investment in working capital,
including inventory and accounts receivable, less account payables.  We
believe that we have made improvements in the effectiveness of our management of
working capital, and aim to continue to do so in fiscal year 2009 and
onward.

    


    Continuing Commitment to Sound
Corporate Governance and Growth of Shareholder Value:  We pride ourselves
on having a strong corporate governance environment.  Furthermore, our
executives are appropriately motivated through effective compensation plans,
which are well aligned with shareholders.

    


    During
fiscal year 2008 we finished repurchasing our preferred shares, and commenced a
share repurchase plan for our common shares.  As of the date of this
letter, we have purchased 578,081 common shares, for an average price of $5.19
per share, or an aggregate investment
of $3.0 million.  In addition, during fiscal year 2008, our
shareholders’ equity grew from $91.0 million to $107.8 million.

    


    On
September 30, 2008, our net debt to total capital was 29% and that percentage
has continued to decline as of the date of this letter. 
We believe in maintaining a strong balance sheet for a company of our size, and
will continue to aim to do so.

    


    Achieving Operating Results: 
We will continue to control our costs, and we recognize that an increase
in volumes processed is the most assured means to achieve operating leverage
that produces attractive profitability.  In fiscal year 2008, we earned
just under 15% on equity.  While that rate is down from the previous year,
we believe it may have been among the highest returns in our industry during
that time frame, and it was achieved without substantial financial
leverage.

    


    Confidence:  While we are
keenly aware of the challenging economic environment, we enter fiscal year 2009
with confidence in our team and our position in the market.  Resin
prices will rise and fall, products will change, but over the course of the
coming years, we, working with good customers, will strive to grow our business
by helping our customers succeed at making better products.

    


    In
closing, we extend our sincere appreciation to our customers, suppliers, and
employees for all their efforts in fiscal year 2008.  We look forward to
continuing to work together to meet the challenges presented in fiscal year
2009.

    


    

      
        
          	 
      	
                  /s/ A. John Knapp,
      Jr.

                
	 
      	
                  A.
      John Knapp, Jr.

                
	 
      	
                  President
      and Chief Executive
Officer