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, 2013.
For the 2013 second quarter, the company reported net sales of
$11.5 million, versus $14.9 million in the prior-year period.
IntriCon had a net loss of $(3.4) million, or $(0.60) per diluted
share, compared to a net loss of $(82,000), or $(0.01) per diluted
share, for the 2012 second quarter.
The company reported a second-quarter net loss from continuing
operations of $(2.0) million, or $(0.34) per diluted share.
Second-quarter results from discontinued operations include a net
loss of $(1.5) million, or $(0.26) per diluted share. Included in
the $(1.5) million net loss from discontinued operations was
approximately $(1.0) million, or $(0.18) per diluted share, of
one-time, non-cash charges related to the restructuring
initiatives.
In June 2013, IntriCon announced a global strategic
restructuring plan designed to accelerate the company’s future
growth by focusing resources on the highest-potential growth areas
and reduce costs by approximately $3.0 million annually. As a
result, IntriCon’s Maine operations, which include the company’s
security, certain microphone and receivers businesses, as well as
certain Singapore assets, are now held for sale and classified as
discontinued operations.
“Facing a shortfall in the second quarter, we moved quickly to
implement our global restructuring plan to better align our cost
structure with current lower revenue levels—and strategic focus,”
said Mark S. Gorder, president and chief executive officer of
IntriCon. “We expect to see an immediate $2 million in annual cost
savings in the third quarter, and we anticipate we will achieve an
additional $1 million by the end of the year.
“We believe that these savings, combined with an anticipated
rebound in medical and hearing health sales in the second half of
the year, will allow us to achieve anticipated profitability from
continuing operations in the 2013 fourth quarter.”
As a percentage of total second-quarter sales, hearing health
stood at 43.4 percent, with medical and professional audio at 42.6
percent and 14.0 percent, respectively. This compares to 41.5
percent, 41.4 percent and 17.1 percent for hearing health, medical
and professional audio, respectively, in 2012.
Gross profit margins decreased to 16.2 percent from 25.2 percent
for the prior-year three months. The decrease was primarily due to
lower overall sales volume.
Six-Month ResultsFor the 2013 six-month period, IntriCon
reported net sales of $25.6 million and a net loss of $(3.9)
million, or $(0.69) per diluted share. This compares to 2012 net
sales of $30.3 million and net income of $161,000, or $0.03 per
diluted share. The six-month net loss from continuing operations
was $(2.0) million, or $(0.35) per diluted share, with a
discontinued operations net loss of $(1.9) million, or $(0.34) per
diluted share.
As a percentage of total sales, hearing health stood at 39.9
percent, with medical and professional audio at 46.9 percent and
13.2 percent, respectively, for the six-month period. This compares
to 45.5 percent, 40.5 percent and 14.0 percent for hearing health,
medical and professional audio, respectively, in 2012.
Gross profit margins decreased to 22.0 percent from 26.6 percent
for the prior-year six months. Again, the decrease was primarily
due to lower overall sales volume. The company expects gross
margins to strengthen in the second half of the year.
After adding back costs associated with non-recurring global
restructuring expenses, non-cash charges for depreciation,
amortization and stock-based compensation expense, the company
reported a $(275,000) adjusted loss from continuing operations for
the first half of the year. The table below reconciles certain
financial measures used in this press release that were not
calculated in accordance with generally accepted accounting
principles, or GAAP, with the most directly comparable financial
measure calculated in accordance with GAAP. IntriCon believes that
this adjusted information is helpful in an analysis of its
operating results by eliminating the non-recurring and non-cash
items noted below.
The reconciliation of GAAP basis loss from continuing operations
to adjusted loss from continuing operations for the six months
ended June 30, 2013, is as follows:
(in $000s)
GAAP basis loss from continuing operations $ (1,993 )
Non-recurring restructuring charges 199 Depreciation and
amortization 1,254 Non-cash stock-based compensation 265
Adjusted loss from continuing operations
$ (275 )
Business UpdateSales in IntriCon’s medical business
declined 20.9 percent from the prior-year period and 31.4 percent
from 2013 first quarter. As previously reported, IntriCon had
strong sales to Medtronic in the 2012 fourth quarter and 2013 first
quarter, as Medtronic prepared for the launch of their MiniMed 530G
insulin pump. The second-quarter decrease primarily stemmed from a
reduction in sales to Medtronic as they await FDA approval of the
MiniMed 530G. IntriCon expects medical sales to strengthen in the
second half of the year.
Within cardiac, IntriCon remains on track to deliver initial
orders for its wireless cardiac diagnostic monitor Sirona™ in the
third quarter. Additionally, the company has made progress
expanding its CDM sales and marketing infrastructure to further
advance IntriCon’s cardiac program and elevate its devices with
market-demanded features.
Hearing health sales declined 19.5 percent over the prior-year
quarter primarily due to the reduction in hi HealthInnovations
orders and the continued softness in the conventional channel—which
is consistent with industry trends. As previously indicated,
IntriCon satisfied hi HealthInnovations’ initial product ramp-up
needs in the first half of 2012. While IntriCon continues to
receive new orders from hi HealthInnovations, they have been
substantially lower than the original ramp in the first half of
2012. As hi HealthInnovations further builds out its
infrastructure, IntriCon continues to anticipate an order increase
in the 2013 second half and remains very optimistic about the
long-term prospects of this market-changing program.
Additionally, challenges remain in the conventional channel due
to high device costs and inconveniences in the distribution
channel. These dynamics are creating opportunities for alternative
care models such as the insurance channel and the personal sound
amplifier product (PSAP) market. To capitalize on these
opportunities, IntriCon has hired an industry veteran to help
spearhead the company’s efforts in the value hearing aid (VHA)
market. The company will be aggressively pursuing larger customers
who can benefit from our value proposition.
Professional audio sales declined 37.5 percent from the
prior-year period. The decrease was due the conclusion of the
company’s Singapore Government contract in December of 2012. With
the company classifying portions of its professional audio business
as discontinued, new growth is not anticipated going forward.
However, IntriCon will leverage its core technology in professional
audio to support existing customers, as well as pursue related
hearing health and medical product opportunities.
Looking AheadConcluded Gorder, “We experienced
significant challenges in the first half of 2013. However, as a
company, we made the tough decisions necessary to better deploy our
resources and aggressively drive our two largest growth
opportunities: medical biotelemetry and value hearing health. We
expect these to strengthen throughout the remainder of the year,
and we’re optimistic that we can achieve profitability by
year-end.”
Conference Call TodayAs previously announced, the company
will hold an investment community conference call today, Thursday,
Aug. 8, 2013, 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:
1-888-503-8169 and provide the conference ID number 1595266 to the
operator.
A replay of the conference call will be available three hours
after the call ends through 11:59 p.m. CT on Thursday, August 15,
2013. To access the replay, dial 1-888-203-1112 and enter passcode:
1595266.
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, 2012. 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, 2013 2012 2013 2012
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Sales, net $ 11,479 $ 14,943 $ 25,605 $ 30,296 Cost of sales
9,617 11,174 19,974
22,227 Gross profit 1,862 3,769 5,631 8,069
Operating expenses: Sales and marketing 731 754 1,623 1,629 General
and administrative 1,367 1,435 2,927 2,889 Research and development
1,249 1,078 2,478 2,161 Restructuring charges 199
- 199 - Total operating
expenses 3,546 3,267 7,227
6,679 Operating income (loss) (1,684 ) 502
(1,596 ) 1,390 Interest expense (154 ) (180 ) (307 ) (359 )
Equity in (loss) of partnerships (77 ) (13 ) (135 ) (37 ) Other
income (expense) (7 ) (9 ) 83
(57 ) Income (loss) from continuing operations before income taxes
and discontinued operations (1,922 ) 300 (1,955 ) 937 Income
tax expense 48 57 38
91 Income (loss) before discontinued operations
(1,970 ) 243 (1,993 ) 846 Loss from discontinued operations,
net of income taxes (1,473 ) (325 ) (1,921 )
(685 ) Net income (loss) $ (3,443 ) $ (82 ) $ (3,914
) $ 161 Basic income (loss) per share:
Continuing operations $ (0.34 ) $ 0.04 $ (0.35 ) $ 0.15
Discontinued operations (0.26 ) (0.05 ) (0.34
)
(0.12 ) Net income (loss) per share: $ (0.60 ) $ (0.01 ) $ (0.69 )
$ 0.03 Diluted income (loss) per share: Continuing
operations $ (0.34 ) $ 0.04 $ (0.35 ) $ 0.14 Discontinued
operations (0.26 ) (0.05 ) (0.34 )
(0.11 ) Net income (loss) per share: $ (0.60 ) $ (0.01 ) $ (0.69 )
$ 0.03 Average shares outstanding: Basic 5,694 5,670
5,691 5,662 Diluted 5,694 5,670 5,691 5,939
INTRICON CORPORATION
Consolidated Condensed Balance Sheets (In Thousands,
Except Per Share Amounts) June 30,
December 31,
2013
2012
(Unaudited) Current assets: Cash $ 108 $ 225 Restricted cash 551
563 Accounts receivable, less allowance for doubtful accounts of
$106 at June 30, 2013 and $114 at December 31, 2012 6,244 6,877
Inventories 10,139 10,431 Other current assets 1,159 1,424 Current
assets of discontinued operations 1,022 1,040
Total current assets 19,223 20,560 Machinery and equipment
33,426 33,577 Less: Accumulated depreciation 28,321
27,578 Net machinery and equipment 5,105 5,999
Goodwill 9,194 9,709 Investment in partnerships 666 773 Other
assets, net 997 1,260 Other assets of discontinued operations
314 831 Total assets $ 35,499 $
39,132 Current liabilities: Checks written in excess of cash
$ 444 $ 637 Current maturities of long-term debt 2,449 2,945
Accounts payable 4,447 4,015 Accrued salaries, wages and
commissions 1,614 1,644 Deferred gain 110 110 Other accrued
liabilities 2,279 2,143 Liabilities of discontinued operations
235 173 Total current liabilities
11,578 11,667 Long-term debt, less current maturities 7,264 7,222
Other postretirement benefit obligations 582 590 Accrued pension
liabilities 499 510 Deferred gain 220 275 Other long-term
liabilities 201 146 Total liabilities
20,344 20,410 Commitments and contingencies Shareholders’ equity:
Common stock, $1.00 par value per share; 20,000 shares authorized;
5,702 and 5,687 shares issued and outstanding at June 30, 2013 and
December 31, 2012, respectively 5,702 5,687 Additional paid-in
capital 16,104 15,797 Accumulated deficit (6,274 ) (2,360 )
Accumulated other comprehensive loss (377 ) (402 )
Total shareholders' equity 15,155 18,722
Total liabilities and shareholders’ equity $ 35,499 $
39,132
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