IIN Intricon Corporation

Revenues Rise 38 Percent Over Prior Year; Year-Over-Year Gains In All Businesses

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, 2014.

Third-Quarter Highlights Compared to Year-Earlier Quarter:

• Net sales of $17.0 million reflects an increase of 38 percent;
• Gross margins of 26.3 percent rise significantly from 21.9 percent;
• IntriCon achieves net income of $558,000, up from a net loss of $(825,000);
• The company’s medical business posts strong results, with revenues rising 59 percent; and
• IntriCon reduces bank debt by more than $600,000 during the 2014 third quarter.

Financial ResultsFor the 2014 third quarter, the company reported net sales of $17.0 million, up from $12.3 million in the prior-year period. IntriCon had net income of $558,000, or $0.09 per diluted share, compared to a net loss of $(825,000), or $(0.14) per diluted share, for the 2013 third quarter. Included in 2013 third-quarter results was a net loss from discontinued operations of $(393,000), or $(0.07) per diluted share, stemming from restructuring initiatives.

“The IntriCon team delivered double-digit, top- and bottom-line gains for the third consecutive quarter. All of our businesses were strong, which led to higher year-over-year earnings,” said Mark S. Gorder, president and chief executive officer of IntriCon. “We are pleased with the company’s performance year to date and remain focused on our strategy of generating business with our key medical and hearing health customers, and concentrating on our highest potential opportunities in value hearing health and medical biotelemetry.

“Contributions from Medtronic’s 530G insulin pump system fueled our medical business and accounted for a large portion of our sales increase. In value hearing health, we saw gains from hi HealthInnovations with the introduction of a new behind-the-ear hearing aid. Also notable were our professional audio communication sales that nearly doubled from the same period in 2013.”

Gross profit margins grew to 26.3 percent from 21.9 percent in the prior-year third quarter. The gains stemmed primarily from volume increases and cost reductions achieved from the company’s previously disclosed global restructuring plan.

Nine-Month ResultsFor the 2014 nine-month period, IntriCon reported higher net sales of $51.8 million and net income of $1.9 million, or $0.31 per diluted share. This compares to 2013 nine-month net sales of $37.9 million and a net loss of $(4.7) million, or $(0.83) per diluted share. Net income from continuing operations for the 2014 nine-months was $2.2 million, or $0.36 per diluted share, with a discontinued operations net loss of $(270,000), or $(0.04) per diluted share. The 2013 nine-month results included a loss from continuing operations of $(2.4) million, or $(0.43) per diluted share, and a discontinued operations net loss of $(2.3) million, or $(0.41) per diluted share.

Gross profit margins increased to 27.1 percent from 22.0 percent for the prior-year, nine-month period. Again, the improvement was primarily due to volume increases and cost reductions.

Year to date, IntriCon has lowered its bank debt in 2014 by approximately $1.9 million, including a $600,000 reduction in the third quarter.

Business UpdateSales in IntriCon’s medical business rose 59 percent in the 2014 third 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 2014 sales gains. In addition, the company grew sales of its proprietary cardiac diagnostic monitoring products by 44 percent in the third quarter compared to the prior-year period as it continued to expand its customer base. IntriCon is receiving positive feedback from its customers about the treatment flexibility and economic benefits of remote patient monitoring.

Hearing health sales grew during the quarter, rising 11 percent from the prior-year quarter, chiefly due to strong device sales to hi HealthInnovations, partially offset by lower conventional channel sales.

Said Gorder, “As we’ve previously noted, within the conventional hearing health channel, industry 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 capitalize on this opportunity, we are concentrating our efforts on significant prospective partnerships and customers, and are aggressively pursuing the value hearing aid and personal sound amplifier products, or PSAP, channels.”

Third-quarter professional audio communication sales rose 48 percent from the prior-year. During the quarter, the company continued delivery on a significant 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 communication to support existing customers, as well as seek related hearing health and medical product opportunities.

Looking AheadConcluded Gorder, “The business has clearly shown positive momentum throughout 2014 and we plan to build on this foundation of growth in the future. We anticipate an annual 2014 year-over-year revenue increase between 28 and 30 percent. We are guided by our strategic goals: aggressively pursuing opportunities in value hearing health and medical biotelemetry, while driving profitability.”

Conference Call TodayAs previously announced, the company will hold an investment community conference call today, Wednesday, October 29, 2014, beginning at 4 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: 1-888-503-8169 and provide the conference ID number 9611505 to the operator.

A replay of the conference call will be available three hours after the call ends through 7 p.m. CT on Wednesday, November 12, 2014. To access the replay, dial 1-888-203-1112 and enter passcode: 9611505.

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, 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 Nine Months Ended September 30, September 30, September 30, September 30, 2014 2013 2014 2013

(Unaudited)

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  Sales, net $ 17,005 $ 12,330 $ 51,822 $ 37,935 Cost of sales   12,529     9,629     37,801     29,603   Gross profit 4,476 2,701 14,021 8,332 Operating expenses: Sales and marketing 917 801 2,815 2,424 General and administrative 1,647 1,512 4,887 4,439 Research and development 1,214 519 3,530 2,997 Restructuring charges   -     -     83     199   Total operating expenses   3,778     2,832     11,315     10,059   Operating income (loss) 698 (131 ) 2,706 (1,727 )   Interest expense (99 ) (161 ) (362 ) (468 ) Equity in loss of partnerships (49 ) (49 ) (157 ) (184 ) Other income (expense)   76     30     122     113   Income (loss) from continuing operations before income taxes and discontinued operations 626 (311 ) 2,309 (2,266 )   Income tax expense   68     121     151     159   Income (loss) before discontinued operations 558 (432 ) 2,158 (2,425 ) Loss on sale of discontinued operations - - (120 ) - Loss from discontinued operations, net of income taxes   -     (393 )   (150 )   (2,314 )   Net income (loss) $ 558   $ (825 ) $ 1,888   $ (4,739 )   Basic income (loss) per share: Continuing operations $ 0.10 $ (0.08 ) $ 0.37 $ (0.43 ) Discontinued operations   -     (0.07 )   (0.05 )   (0.41 ) Net income (loss) per share: $ 0.10   $ (0.14 ) $ 0.33   $ (0.83 ) Diluted income (loss) per share: Continuing operations $ 0.09 $ (0.08 ) $ 0.36 $ (0.43 ) Discontinued operations   -     (0.07 )   (0.04 )   (0.41 ) Net income (loss) per share: $ 0.09   $ (0.14 ) $ 0.31   $ (0.83 ) Average shares outstanding: Basic 5,820 5,702 5,777 5,694 Diluted 6,148 5,702 6,037 5,694     INTRICON CORPORATION Consolidated Condensed Balance Sheets (In Thousands, Except Per Share Amounts)         September 30, December 31,

2014

2013

(Unaudited)   Current assets: Cash $ 408 $ 217 Restricted cash 665 568 Accounts receivable, less allowance for doubtful accounts of $118 at September 30, 2014 and $124 at December 31, 2013 7,103 5,433 Inventories 10,106 9,400 Other current assets 1,270 1,337 Current assets of discontinued operations   -     382   Total current assets 19,552 17,337   Machinery and equipment 34,789 33,971 Less: Accumulated depreciation   30,568     29,232   Net machinery and equipment 4,221 4,739   Goodwill 9,194 9,194 Investment in partnerships 436 569 Other assets, net 550 749 Other assets of discontinued operations   -     132   Total assets $ 33,953   $ 32,720     Current liabilities: Checks written in excess of cash $ - $ 279 Current maturities of long-term debt 2,014 2,210 Accounts payable 5,456 5,037 Accrued salaries, wages and commissions 2,662 1,676 Deferred gain 110 110 Other accrued liabilities 2,057 1,893 Liabilities of discontinued operations   -     154   Total current liabilities 12,299 11,359   Long-term debt, less current maturities 4,571 6,271 Other postretirement benefit obligations 493 531 Accrued pension liabilities 736 839 Deferred gain 83 165 Other long-term liabilities   143     247   Total liabilities 18,325 19,412 Commitments and contingencies Shareholders’ equity: Common stock, $1.00 par value per share; 20,000 shares authorized; 5,825 and 5,727 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively 5,825 5,727 Additional paid-in capital 16,813 16,434 Accumulated deficit (6,634 ) (8,522 ) Accumulated other comprehensive loss   (376 )   (331 ) Total shareholders' equity   15,628     13,308   Total liabilities and shareholders’ equity $ 33,953   $ 32,720    

At IntriCon:Scott Longval, CFO, 651-604-9526slongval@intricon.comorAt PadillaCRT:Matt Sullivan, 612-455-1709matt.sullivan@padillacrt.com