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IntriCon Reports 2014 Second-Quarter Results

IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of miniature and micro-miniature body-worn devices, today announced financial results for its second quarter ended June 30, 2014.

Second Quarter Highlights:

  • Net sales of $17.5 million rose 53 percent from the 2013 second quarter;
  • Gross margins of 27.3 percent increased significantly from 16.2 percent in the prior-year period;
  • IntriCon achieved net income from continuing operations of $813,000, up sequentially from $787,000 in the 2014 first quarter and versus a net loss of $2.0 million in the prior-year period;
  • The company reduced bank debt by approximately $300,000 during the second quarter; and,
  • IntriCon’s medical business posted strong results, with revenue up 89 percent over the prior-year period.

Second-Quarter Financial Results
For the 2014 second quarter, the company reported net sales of $17.5 million, up from $11.5 million in the prior-year period. IntriCon had net income of $813,000, or $0.13 per diluted share, compared to a net loss of $(3.4) million, or $(0.60) per diluted share, for the 2013 second quarter. Included in 2013 second-quarter results was a net loss from discontinued operations of $(1.5) million, or $(0.26) per diluted share, of which approximately $(1.0) million, or $(0.18) per diluted share, related to one-time, non-cash charges stemming from restructuring initiatives.

“Building on our first-quarter momentum, we again delivered double-digit, top-line gains across all of our businesses and increased profitability in the second quarter,” said Mark S. Gorder, president and chief executive officer of IntriCon. “We remain focused on our strategy of driving business with our key medical and hearing health customers, and pursuing our highest potential growth opportunities in value hearing health and medical biotelemetry.

“The strength of Medtronic’s 530G insulin pump system fueled our medical business—which accounted for a large portion of our year-over-year sales increase. However, we also saw improvements in the value hearing health segment of our business, and professional audio sales nearly doubled from 2013.”

Gross profit margins grew to 27.3 percent from 16.2 percent for the prior-year second quarter and held steady sequentially compared with 27.6 percent in the 2014 first quarter. The year-over-year gains were primarily due to volume increases and cost reductions generated from the company’s previous disclosed global restructuring plan.

Six-Month Results
For the 2014 six-month period, IntriCon reported higher net sales of $34.8 million and net income of $1.3 million, or $0.22 per diluted share. This compares to 2013 six-month net sales of $25.6 million and a net loss of $(3.9) million, or $(0.69) per diluted share. The 2014 six-month period net income from continuing operations was $1.6 million, or $0.27 per diluted share, with a discontinued operations net loss of $(270,000), or $(0.05) per diluted share. The 2013 six-month results included a discontinued operations net loss of $(1.9) million, or $(0.34) per diluted share.

Gross profit margins increased to 27.4 percent from 22.0 percent for the prior-year six months. Again, the gain was primarily due to volume increases and cost reductions.

Business Update
Sales in IntriCon’s medical business rose 89 percent in the 2014 second quarter compared to the year-ago period. As previously disclosed, IntriCon’s largest customer, Medtronic, received FDA approval for their MiniMed 530G insulin pump in late 2013, and that business has been a large contributor to first-half sales gains. While IntriCon expects medical sales growth to remain strong overall in 2014 year over year, the company does not anticipate a sequential increase from the second quarter.

Hearing health sales grew during the quarter, rising 13 percent from the prior-year quarter, chiefly due to strong device sales in the value space, including personal sound amplifier products (PSAPs), partially offset by lower conventional channel sales.

Said Gorder, “Within the conventional hearing health channel, growth continues to be constrained by high device costs, distribution inefficiencies and retail consolidation. These factors, among others, have created a need for an outcomes-based hearing health model. To that end, we are focusing our efforts on significant opportunities we see in this area and pursuing the value hearing aid and PSAP channels.”

Professional audio sales rose 66 percent from the prior-year period. During the second quarter, IntriCon began delivery on a significant new contract with the Singapore government to provide technically advanced headsets worn in military applications. This contract will run through the end of 2014. IntriCon will continue to leverage its core technologies in professional audio to support existing customers, as well as pursue related hearing health and medical product opportunities.

Looking Ahead
Concluded Gorder, “We are well positioned to build on our positive momentum. Looking ahead to the second half of the year, we anticipate revenue growth of approximately 20 percent over the comparable 2013 period. And we remain steadfast in our focus going forward: aggressively pursuing opportunities in value hearing health and medical biotelemetry. As a company, we’ve developed the infrastructure that positions IntriCon to secure large opportunities in the marketplace.”

Conference Call Today
As previously announced, the company will hold an investment community conference call today, Wednesday, July 23, 2014, beginning at 4:00 p.m. CT. Mark Gorder, president and chief executive officer, and Scott Longval, chief financial officer, will review second-quarter performance and discuss the company’s strategies. To join the conference call, dial: 1-888-359-3624 and provide the conference ID number 9367998 to the operator.

A replay of the conference call will be available three hours after the call ends through 7:00 p.m. CT on Wednesday, August 6, 2014. To access the replay, dial 1-888-203-1112 and enter passcode: 9367998.

About IntriCon Corporation
Headquartered in Arden Hills, Minn., IntriCon Corporation designs, develops and manufactures miniature and micro-miniature body-worn devices. These advanced products help medical, healthcare and professional communications companies meet the rising demand for smaller, more intelligent and better connected devices. IntriCon has facilities in the United States, Asia and Europe. The company’s common stock trades under the symbol “IIN” on the NASDAQ Global Market. For more information about IntriCon, visit www.intricon.com.

Forward-Looking Statements
Statements made in this release and in IntriCon’s other public filings and releases that are not historical facts or that include forward-looking terminology are “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be affected by known and unknown risks, uncertainties and other factors that are beyond IntriCon’s control, and may cause IntriCon’s actual results, performance or achievements to differ materially from the results, performance and achievements expressed or implied in the forward-looking statements. These risks, uncertainties and other factors are detailed from time to time in the company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2013. The company disclaims any intent or obligation to publicly update or revise any forward-looking statements, regardless of whether new information becomes available, future developments occur or otherwise.

 
INTRICON CORPORATION
Consolidated Condensed Statements of Operations
(In Thousands, Except Per Share Amounts)
 
    Three Months Ended     Six Months Ended
June 30,     June 30, June 30,     June 30,
2014 2013 2014 2013

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 
Sales, net $ 17,507 $ 11,479 $ 34,817 $ 25,605
Cost of sales   12,735     9,617     25,272     19,974  
Gross profit 4,772 1,862 9,545 5,631

 

Operating expenses:
Sales and marketing 891 731 1,898 1,623
General and administrative 1,616 1,367 3,240 2,927
Research and development 1,148 1,249 2,316 2,478
Restructuring charges   -     199     83     199  
Total operating expenses   3,655     3,546     7,537     7,227  
Operating income (loss) 1,117 (1,684 ) 2,008 (1,596 )
 
Interest expense (125 ) (154 ) (263 ) (307 )
Equity in loss of partnerships (73 ) (77 ) (108 ) (135 )
Other income (expense)   (49 )   (7 )   46     83  
Income (loss) from continuing operations before income taxes and discontinued operations 870 (1,922 ) 1,683 (1,955 )
 
Income tax expense   57     48     83     38  
Income (loss) before discontinued operations 813 (1,970 ) 1,600 (1,993 )
Loss on sale of discontinued operations - - (120 ) -
Loss from discontinued operations, net of income taxes   -     (1,473 )   (150 )   (1,921 )
Net income (loss) $ 813   $ (3,443 ) $ 1,330   $ (3,914 )
 
Basic income (loss) per share:
Continuing operations $ 0.14 $ (0.34 ) $ 0.28 $ (0.35 )
Discontinued operations   -     (0.26 )   (0.05 )   (0.34 )
Net income (loss) per share: $ 0.14   $ (0.60 ) $ 0.23   $ (0.69 )
 
Diluted income (loss) per share:
Continuing operations $ 0.13 $ (0.34 ) $ 0.27 $ (0.35 )
Discontinued operations   -     (0.26 )   (0.05 )   (0.34 )
Net income (loss) per share: $ 0.13   $ (0.60 ) $ 0.22   $ (0.69 )
 
Average shares outstanding:
Basic 5,780 5,694 5,754 5,691
Diluted 6,081 5,694 5,973 5,691
 
 
INTRICON CORPORATION
Consolidated Condensed Balance Sheets
(In Thousands, Except Per Share Amounts)
 
    June 30,     December 31,

2014

2013

(Unaudited)  
Current assets:
Cash $ 161 $ 217
Restricted cash 698 568
Accounts receivable, less allowance for doubtful accounts of $122 at June 30, 2014 and $124 at December 31, 2013 7,316 5,433
Inventories 10,373 9,400
Other current assets 1,197 1,337
Current assets of discontinued operations   -     382  
Total current assets 19,745 17,337
 
Machinery and equipment 34,484 33,971
Less: Accumulated depreciation   30,110     29,232  
Net machinery and equipment 4,374 4,739
 
Goodwill 9,194 9,194
Investment in partnerships 484 569
Other assets, net 588 749
Other assets of discontinued operations   -     132  
Total assets $ 34,385   $ 32,720  
 
Current liabilities:
Checks written in excess of cash $ 417 $ 279
Current maturities of long-term debt 2,581 2,210
Accounts payable 6,050 5,037
Accrued salaries, wages and commissions 2,142 1,676
Deferred gain 110 110
Other accrued liabilities 1,799 1,893
Liabilities of discontinued operations   -     154  
Total current liabilities 13,099 11,359
 
Long-term debt, less current maturities 4,645 6,271
Other postretirement benefit obligations 506 531
Accrued pension liabilities 789 839
Deferred gain 110 165
Other long-term liabilities   251     247  
Total liabilities 19,400 19,412
Commitments and contingencies
Shareholders’ equity:
Common stock, $1.00 par value per share; 20,000 shares authorized; 5,813 and 5,727 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively 5,813 5,727
Additional paid-in capital 16,668 16,434
Accumulated deficit (7,192 ) (8,522 )
Accumulated other comprehensive loss   (304 )   (331 )
Total shareholders' equity   14,985     13,308  
Total liabilities and shareholders’ equity $ 34,385   $ 32,720  
 

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