Significant Gains in Medical and Value
Hearing Health Drive Record Sales
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, 2017.
Highlights:
- Second-quarter net sales rose to a
record level $22.0 million, up 32.1 percent from the prior-year
second quarter;
- Sales to IntriCon’s largest medical
customer increased 63.9 percent from the 2016 second quarter and
were again at record levels;
- Driven by the company’s value hearing
healthcare initiatives, hearing health delivered 32.5 percent
year-over-year growth;
- Hearing Help Express (HHE) hearing aid
orders in the second quarter increased 75 percent over the 2017
first quarter;
- Gross margins for the second quarter
were 30 percent, up sharply from 23.1 percent in the prior-year
second quarter;
- IntriCon reported second-quarter
diluted net income per share of $0.08 versus a ($0.23) loss in the
2016 second quarter; and,
- The company completed phase one of the
integration of IntriCon digital hearing aids into HHE’s
portfolio.
Financial ResultsFor the 2017 second quarter, the company
reported net sales of $22.0 million, up 32.1 percent from $16.6
million in the prior-year period. The increase was primarily due to
year-over-year revenue gains from IntriCon’s largest medical
customer, as well as growing traction in value hearing health.
IntriCon posted net income attributable to shareholders of
$610,000, or $0.08 per diluted share, versus a net loss
attributable to shareholders of ($1.5) million, or ($0.23) per
diluted share, for the 2016 second quarter.
“Gains in medical and value hearing health are driving strong
top- and bottom-line performance—and we expect that to continue in
the third quarter,” said Mark S. Gorder, president and chief
executive officer of IntriCon. “In addition, we’re making
meaningful progress in creating and cultivating a new channel to
deliver superior, outcomes-based, affordable hearing healthcare
directly to consumers.”
Second-quarter gross profit margins were 30.0 percent, up
significantly from 23.1 percent in the prior-year second quarter.
The increase was primarily driven by greater volume and the
inclusion of the HHE direct-to-consumer business in 2017.
Operating expenses for the second quarter were $6.0 million,
compared to $4.7 million in the prior-year second quarter. The
increase was largely due to the inclusion of HHE in 2017.
Business UpdateSales in IntriCon’s medical business
increased 45.9 percent in the 2017 second quarter from the
year-earlier period. The gain was primarily driven by the expected
production ramp of Medtronic’s MiniMed 630G and 670G wireless
glucose monitoring systems.
The company remains well positioned with Medtronic, with 2017
second-half sales also expected to be at record levels. In June,
Medtronic announced the U.S. launch of the MiniMed 670G system, the
world’s first Hybrid Closed Loop system for people with type 1
diabetes. Medtronic began fulfilling orders from patients enrolled
in their Priority Access Program, which they anticipate will
continue into the fall of 2017. In parallel, Medtronic began taking
new orders from interested customers who want to be next in line to
receive the system after the Priority Access orders are filled.
Hearing health sales increased 32.5 percent from the prior-year
second quarter, primarily stemming from growing traction in the
company’s value hearing health initiatives, including 55 percent
growth from hi HealthInnovations and a $1.4 million contribution
from HHE, partially offset by declining conventional channel sales.
As previously announced, IntriCon acquired a 20 percent stake in
DeKalb, Ill.-based HHE, a direct-to-consumer mail order hearing aid
provider, in the fourth quarter of 2016. In January 2017, the
company announced that it exercised its option to acquire the
remaining 80 percent stake in HHE—the purchase is expected to close
during the fourth quarter.
Since taking its initial stake in HHE, IntriCon has made
substantial progress integrating and optimizing the organization.
In 2017, IntriCon:
- Completed the relocation of the
business, merging two locations into one;
- Hired Jim Houlihan as vice president of
direct-to-consumer hearing healthcare sales and president of
HHE;
- Enhanced HHE’s sales and marketing
capabilities, and increased advertising; and,
- Introduced IntriCon’s digital hearing
devices into the HHE portfolio, most recently adding the Apollo
6200, the Apollo 6310 and the Ranger 7610 digital hearing
aids.
Said Gorder, “From a financial perspective, we are seeing great
traction in our direct-to-consumer model. In the second quarter,
HHE increased hearing aid orders 75 percent over the 2017
first-quarter and we anticipate second-half revenue to be up 35
percent over the first half of 2017.”
In addition to HHE, IntriCon announced in April 2017 that it
entered into an agreement to acquire a 49 percent stake in
Soundperience, headquartered in Frankfurt, Germany. Soundperience
has designed the first psycho-acoustic way of analyzing peripheral
hearing and central hearing processing, branded as the Sentibo
Smart Brain System. The software is a sophisticated self-fitting
hearing aid and brain training software technology, that is being
used in the German market today, most notably through IntriCon’s
previously disclosed Signison joint venture with Soundperience
Sentibo is currently being integrated with IntriCon’s wireless
hearing aids, and the company anticipates an initial roll out in
Germany during the current quarter. In addition to its
international application, IntriCon also views this software
technology to be a critical component to its domestic value-based
hearing healthcare model. Sentibo, as well as the company’s other
proprietary fitting systems, are designed to improve both channel
productivity and the quality of first-time fittings, resulting in
lower prices, greater access and increased customer satisfaction.
Just recently, IntriCon began piloting a cloud-based version of the
Sentibo Smart Brain System in the United States.
Added Gorder, “We continue to be very encouraged by developments
on the public policy front. In December 2016, legislation was
introduced in the House and Senate to make hearing aids available
over the counter for those with mild to moderate hearing loss.”
The proposed legislation would require the U.S. Food and Drug
Administration (FDA) to write regulations ensuring that this new
category of over-the-counter hearing aids meets the same high
standards for safety, consumer labeling and manufacturing
protections as all medical devices, providing consumers the option
of an FDA-regulated device at lower cost.
Said Gorder, “Just recently, on July 12, the House of
Representatives passed by voice vote, H.R. 2430, the FDA
Reauthorization Act, which includes the Over-the-Counter Hearing
Aid Act. The legislation will next go before the full U.S. Senate
for consideration. While no timeline has yet been set for a floor
vote, the Senate is expected to act prior to the August recess.
“We believe that this legislation has the potential to remove
the significant barriers existing today that prevent innovative
hearing health solutions. We believe that it would invigorate
competition, spur innovation and facilitate the development of an
ecosystem of hearing healthcare that provides affordable and
accessible solutions to millions of unserved or underserved
Americans.”
Looking AheadConcluded Gorder, “We have never been better
positioned for growth. As our medical business thrives and delivers
strong performance, we’re also gaining critical momentum in our
value hearing healthcare business. And we continue to believe that
this effort will drive success for IntriCon and deliver value for
our shareholders. Based on information currently available, we
anticipate 2017 third-quarter net sales to range between $22.0
million and $23.0 million, compared to $15.6 million in the
prior-year period, and positive EPS. For the year, we anticipate
net sales to range between $86.0 million and $88.0 million,
compared to $68.0 million in 2016.”
Conference Call TodayAs previously announced, the company
will hold an investment community conference call today, Wednesday,
August 2, 2017, beginning at 4 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:
1-877-856-1958 and provide the conference ID number 2957816 to the
operator. To access the replay, dial 1-888-203-1112 and enter
passcode 2957816.
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, the United Kingdom 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,
including estimates of future results, 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, 2016. 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, 2017 2016 2017 2016
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Sales, net $ 21,961 $ 16,628 $ 42,049 $ 34,692 Cost of sales
15,380 12,795 29,792
25,761 Gross profit 6,581 3,833 12,257 8,931
Operating expenses: Sales and marketing 2,204 1,160 4,515 2,316
General and administrative 2,705 2,083 5,263 4,349 Research and
development 1,112 1,321 2,265 2,486 Restructuring charges -
132 - 132 Total
operating expenses 6,021 4,696
12,043 9,283 Operating income (loss) 560 (863
) 214 (352 ) Interest expense (189 ) (126 ) (371 ) (252 )
Other income (expense) (47 ) (221 ) 9
(291 ) Income (loss) from continuing operations before
income taxes and discontinued operations 324 (1,210 ) (148 ) (895 )
Income tax expense 54 52
118 86 Income (loss) before discontinued
operations 270 (1,262 ) (266 ) (981 ) Loss on sale of discontinued
operations, net of income taxes - - (164 ) - Loss from discontinued
operations, net of income taxes (15 ) (265 )
(128 ) (565 ) Net Income (loss) 255
(1,527 ) (558 ) (1,546 ) Less: Loss
allocated to non-controlling interest (355 ) (37 )
(740 ) (71 ) Net Income (loss) attributable to
shareholders $ 610 $ (1,490 ) $ 182 $ (1,475 )
Basic income (loss) per share attributable to shareholders:
Continuing operations $ 0.09 $ (0.19 ) $ 0.07 $ (0.15 )
Discontinued operations (0.00 ) (0.04 ) (0.04
) (0.09 ) Net income (loss) per share: $ 0.09 $ (0.23
) $ 0.03 $ (0.24 ) Diluted income (loss) per share
attributable to shareholders: Continuing operations $ 0.09 $ (0.19
) $ 0.07 $ (0.15 ) Discontinued operations (0.00 )
(0.04 ) (0.04 ) (0.09 ) Net income (loss) per share:
$ 0.08 $ (0.23 ) $ 0.03 $ (0.24 ) Average
shares outstanding: Basic 6,845 6,370 6,828 6,078 Diluted 7,187
6,370 7,142 6,078
INTRICON CORPORATION
Consolidated Condensed Balance Sheets (In Thousands,
Except Per Share Amounts)
June 30,
December 31,
2017
2016
(unaudited)
Current assets: Cash $ 363 $ 667 Restricted cash 632 595
Accounts receivable, less allowance for doubtful accounts of $190
at June 30, 2017 and $170 at December 31, 2016 8,208 7,289
Inventories 13,976 12,343 Other current assets 1,074 957 Current
assets of discontinued operations - 123
Total current assets 24,253 21,974 Machinery and equipment
40,522 40,152 Less: Accumulated depreciation 34,165
33,546 Net machinery and equipment 6,357 6,606
Goodwill 10,555 10,555 Intangible Assets 2,817 2,920 Investment in
partnerships 226 146 Other assets, net 1,751
1,557 Total assets (a) $ 45,959 $ 43,758
Current liabilities: Current maturities of long-term debt $
2,389 $ 2,346 Accounts payable 8,825 6,722 Accrued salaries, wages
and commissions 2,868 2,413 Other accrued liabilities 1,961 1,914
Liabilities of discontinued operations - 123
Total current liabilities 16,043 13,518 Long-term
debt, less current maturities 8,823 9,284 Other postretirement
benefit obligations 479 501 Accrued pension liabilities 744 737
Other long-term liabilities 714 707
Total liabilities (a) 26,803 24,747 Commitments and contingencies
Shareholders’ equity: Common stock, $1.00 par value per share;
20,000 shares authorized; 6,849 and 6,820 shares issued and
outstanding at June 30, 2017 and December 31, 2016, respectively
6,849 6,820 Additional paid-in capital 21,908 21,383 Accumulated
deficit (8,451 ) (8,633 ) Accumulated other comprehensive loss
(864 ) (1,014 ) Total shareholders' equity 19,442
18,556 Non-controlling interest (286 ) 455
Total equity 19,156 19,011 Total
liabilities and equity $ 45,959 $ 43,758 (a)
Assets of Hearing Help Express (HHE), a consolidated variable
interest entity, that can only be used to settle obligations of HHE
were $5,471 at June 30, 2017 and $5,159 at December 31, 2016,
respectively. Liabilities of HHE, for which creditors do not have
recourse to the general credit of IntriCon, were $5,023 at June 30,
2017 and $3,833 at December 31, 2016, respectively.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170802006224/en/
At IntriCon:Scott Longval, CFO,
651-604-9526slongval@intricon.comorAt Padilla:Matt Sullivan,
612-455-1709matt.sullivan@padillaco.com
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