IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of miniature and micro-miniature body-worn devices, today announced financial results for its third quarter ended September 30, 2012.
For the 2012 third quarter, the company reported net sales of $14.9 million, an increase of 7.4 percent from the prior-year period. IntriCon had net income of $217,000, or $0.04 per diluted share, compared to a net loss of $(489,000), or $(0.09) per diluted share, for the 2011 third quarter. Included in 2012 third-quarter results was a one-time gain of $822,000, or $0.14 per diluted share, from the previously disclosed sale of the company's 50-percent ownership interest in Global Coils, to its Switzerland-based joint venture partner, Audemars SA.
"There were encouraging developments across all of our businesses in the third quarter," said Mark S. Gorder, president and chief executive officer of IntriCon. "Professional audio posted record sales that were up 53.4 percent over the 2011 third quarter as strong demand continued for securities products domestically and headset products internationally.
"On the medical front, we increased sales over the prior-year period with our largest medical customer, Medtronic. And in hearing health, hi HealthInnovations, a UnitedHealth Group Company, expanded its innovative hearing aid program to more than 26 million people enrolled in its employer-sponsored and individual health benefit plans. Hearing health sales, though, declined 6.9 percent over the prior year, primarily due to an expected pause in orders from hi HealthInnovations and continued softness in the conventional hearing health market."
As a percentage of 2012 third-quarter sales, healthcare-related revenue (hearing health and medical combined) totaled 67.7 percent (30.6 percent hearing health and 37.1 percent medical), with professional audio communications at 32.3 percent. This compares to 2011 healthcare-related revenue of 77.3 percent (35.3 percent hearing health and 42.0 percent medical), with professional audio communications at 22.7 percent.
Gross profit margins were down slightly to 21.6 percent from 22.2 percent in the prior-year third quarter. The decline was primarily due to higher cost of goods sold, stemming from increased manufacturing infrastructure costs in Singapore and Indonesia.
"The infrastructure in Singapore and Indonesia has positioned IntriCon well for additional low-cost labor intensive opportunities," said Gorder. "As we transfer select labor-intensive programs to these locations, we believe we will be more cost competitive as a whole, and we expect to experience margin improvement."
IntriCon reduced its operating expenses in the third quarter, despite higher sales.
Nine-Month Results
For the 2012 nine-month period, IntriCon
reported net sales of $47.3 million and net income of $377,000, or $0.06
per diluted share. This is up from 2011 net sales of $41.6 million and a
net loss of $(1.1 million), or $(0.19) per diluted share. Hearing health
sales rose 17.4 percent over the prior-year nine months, with medical
and professional audio up 4.7 percent and 24.2 percent, respectively.
Included in 2012 nine-month results was the one-time gain of $822,000,
or $0.14 per diluted share, from the Global Coils sale.
As a percentage of 2012 nine-month sales, healthcare-related revenue (hearing health and medical combined) totaled 76.5 percent (38.8 percent hearing health and 37.7 percent medical), with professional audio communications at 23.5 percent. This compares to 2011 healthcare-related revenue of 78.5 percent (37.6 percent hearing health and 40.9 percent medical), with professional audio communications at 21.5 percent.
Gross profit margins for the 2012 nine months were 23.4 percent, up from 22.4 percent in the prior-year period, primarily due to volume increases, partially offset by increased manufacturing infrastructure in Singapore and Indonesia.
hi HealthInnovations
According to Gorder, "As previously
disclosed, we've satisfied hi HealthInnovations' initial product
ramp-up needs for 2012. In the near-term, we expect minimal new orders;
however, we continue to be optimistic about the long-term prospects of
this program.
"We are encouraged by hi HealthInnovations' progress building the necessary infrastructure to provide high-quality, affordable hearing healthcare to their customers. UnitedHealthcare recently announced that it is making hi HealthInnovations' high-tech, custom-programmed hearing aids available at a discounted price to more than 26 million people enrolled in its employer-sponsored and individual health benefit plans. We believe this will drive significant growth for IntriCon in 2013, specifically in the second half of the year."
Business Update
IntriCon recently introduced its new
Audion6?, a six-channel hearing aid amplifier, and the Lumen? 1000
wireless hearing system at the 57th annual International
Congress of Hearing Aid Acousticians in Germany. Audion6 is a
feature-rich amplifier designed to fit a wide array of applications. In
addition to multiple compression channels, the amplifier has a complete
set of proven adaptive features which greatly improve the user
experience.
Lumen 1000 is a next-generation, wireless hearing system within IntriCon's existing Lumen product family. Lumen 1000 incorporates the company's intuitive Physiolink? wireless technology to allow clear communication. With flexStrem?, voiceStream?, linkStream?, and callStream? accessories, the device can wirelessly stream music, television, audio or a companion's voice--making it significantly more versatile and effective than traditional hearing devices. IntriCon also believes this technology and functionality holds great potential in the non-traditional hearing health market.
Within its medical business, year over year sales were down slightly in the third quarter. Said Gorder, "We experienced a temporary slowdown in medical growth in the third quarter. This was primarily due to order timing and customer inventory management. We're already seeing medical sales rebound, and we expect them to strengthen in the fourth quarter to levels consistent with the first half of the year.
"The shift to small and lightweight, advanced body-worn medical devices continues. Our core technology and product offerings have the proven ability to connect patients and caregivers in non-traditional ways, which positions us to help our customers and their patients. Furthermore, we intend to focus more capital and resources in sales and marketing to expand our reach to other large medical device and healthcare companies that we are not doing business with today. "
On the cardiac front, IntriCon is delivering demo units of its two FDA-approved wireless cardiac diagnostic monitoring devices--Centauri? and Sirona?-- to targeted customers. The company continues to anticipate these products will generate initial revenue in the fourth quarter and ramp-up in 2013.
Third-quarter professional audio communications sales were very strong, up more than 50 percent from the prior-year period. The company continues delivery on its significant contract with the Singapore government, providing technically advanced headsets to be worn in difficult listening environments. This contract will run through the end of 2012. In addition, IntriCon has seen steady growth in its securities business.
Looking Ahead
Concluded Gorder, "We remain steadfast in our
goals for 2012: developing new core technologies while enhancing
existing ones; securing additional market-changing relationships with
leaders in the healthcare industry; expanding and driving efficiencies
at our international manufacturing facilities; increasing our sales and
marketing resources; and driving profitability."
Conference Call Today
As previously announced, the company
will hold an investment community conference call today, Wednesday,
November 7, 2012, beginning at 4:00 p.m. CT. Mark Gorder, president and
chief executive officer, and Scott Longval, chief financial officer,
will review third-quarter performance and discuss the company's
strategies. To join the conference call, dial: 1-888-549-7880
(international 1-480-629-9643) and provide the conference identification
number 4571342 to the operator.
A replay of the conference call will be available one hour after the call ends through 11:59 p.m. CT on Tuesday, November 13, 2012. To access the replay, dial 1-800-406-7325 (international 1-303-590-3030) and enter access code: 4571342.
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, 2011. 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 data) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
Sales, net | $ | 14,904 | $ | 13,873 | $ | 47,268 | $ | 41,584 | ||||||||||||
Cost of sales | 11,679 | 10,789 | 36,209 | 32,261 | ||||||||||||||||
Gross profit | 3,225 | 3,084 | 11,059 | 9,323 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales and marketing | 734 | 734 | 2,363 | 2,422 | ||||||||||||||||
General and administrative | 1,504 | 1,486 | 4,744 | 4,382 | ||||||||||||||||
Research and development | 1,243 | 1,326 | 3,513 | 3,600 | ||||||||||||||||
Total operating expenses | 3,481 | 3,546 | 10,620 | 10,404 | ||||||||||||||||
Operating income (loss) | (256 | ) | (462 | ) | 439 | (1,081 | ) | |||||||||||||
Interest expense | (210 | ) | (144 | ) | (588 | ) | (431 | ) | ||||||||||||
Equity in income (loss) of partnerships | (39 | ) | (12 | ) | (77 | ) | 317 | |||||||||||||
Gain on sale of investment in partnership | 822 | -- | 822 | -- | ||||||||||||||||
Other (loss) expense | (36 | ) | 69 | (64 | ) | 32 | ||||||||||||||
Income (loss) before income taxes | 281 | (549 | ) | 532 | (1,163 | ) | ||||||||||||||
Income tax expense (benefit) | 64 | (60 | ) | 155 | (90 | ) | ||||||||||||||
Net income (loss) | $ | 217 | $ | (489 | ) | $ | 377 | $ | (1,073 | ) | ||||||||||
Net income (loss) per share: | ||||||||||||||||||||
Basic | $ | 0.04 | $ | (0.09 | ) | $ | 0.07 | $ | (0.19 | ) | ||||||||||
Diluted | $ | 0.04 | $ | (0.09 | ) | $ | 0.06 | $ | (0.19 | ) | ||||||||||
Average shares outstanding: | ||||||||||||||||||||
Basic | 5,674 | 5,600 | 5,666 | 5,576 | ||||||||||||||||
Diluted | 5,854 | 5,600 | 5,910 | 5,576 | ||||||||||||||||
IntriCon Corporation | ||||||||||
Consolidated Condensed Balance Sheets | ||||||||||
(in thousands, except per share data) | ||||||||||
September 30, | ||||||||||
2012 | December 31, | |||||||||
(Unaudited) | 2011 | |||||||||
Current assets: | ||||||||||
Cash | $ | 244 | $ | 119 | ||||||
Restricted cash | 553 | 540 | ||||||||
Accounts receivable, less allowance for doubtful accounts | 8,295 | 8,545 | ||||||||
Inventories | 11,976 | 11,720 | ||||||||
Refundable income taxes | -- | 82 | ||||||||
Other current assets | 1,074 | 652 | ||||||||
Total current assets | 22,142 | 21,658 | ||||||||
Machinery and equipment | 40,547 | 39,170 | ||||||||
Less: Accumulated depreciation | 33,563 | 32,164 | ||||||||
Net machinery and equipment | 6,984 | 7,006 | ||||||||
Goodwill | 9,709 | 9,709 | ||||||||
Investment in partnerships | 812 | 1,283 | ||||||||
Other assets, net | 1,268 | 1,074 | ||||||||
Total assets | $ | 40,915 | $ | 40,730 | ||||||
Current liabilities: | ||||||||||
Checks written in excess of cash | $ | 637 | $ | 396 | ||||||
Current maturities of long-term debt | 3,225 | 2,883 | ||||||||
Accounts payable | 4,813 | 6,298 | ||||||||
Accrued salaries, wages and commissions | 2,134 | 1,617 | ||||||||
Deferred gain | 110 | 110 | ||||||||
Partnership payable | 240 | 240 | ||||||||
Other accrued liabilities | 2,422 | 1,907 | ||||||||
Total current liabilities | 13,581 | 13,451 | ||||||||
Long-term debt, less current maturities | 7,530 | 8,217 | ||||||||
Other postretirement benefit obligations | 670 | 685 | ||||||||
Accrued pension liabilities | 415 | 431 | ||||||||
Deferred gain | 312 | 385 | ||||||||
Other long-term liabilities | 139 | 115 | ||||||||
Total liabilities | 22,647 | 23,284 | ||||||||
Commitments and contingencies | ||||||||||
Shareholders' equity: | ||||||||||
Common stock, $1.00 par value per share; 20,000 shares authorized; 5,680 and 5,646 shares issued outstanding at September 30, 2012 and December 31, 2011, respectively | 5,680 | 5,646 | ||||||||
Additional paid-in capital | 15,669 | 15,259 | ||||||||
Accumulated deficit | (2,692 | ) | (3,069 | ) | ||||||
Accumulated other comprehensive loss | (389 | ) | (390 | ) | ||||||
Total shareholders' equity | 18,268 | 17,446 | ||||||||
Total liabilities and shareholders' equity | $ | 40,915 | $ | 40,730 |
At IntriCon:
Scott Longval, CFO, 651-604-9526
slongval@intricon.com
or
At
Padilla Speer Beardsley:
Matt Sullivan, 612-455-1700
msullivan@padillaspeer.com