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 ResultsFor 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 HealthInnovationsAccording 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 UpdateIntriCon 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 AheadConcluded 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 TodayAs 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 CorporationHeadquartered 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 StatementsStatements 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
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