Posts Strongest Sales Quarter of the
Year;Company Achieves Profitability from Continuing
Operations
IntriCon Corporation (NASDAQ: IIN), a designer,
developer, manufacturer and distributor of miniature and
micro-miniature body-worn devices, today announced financial
results for its fourth quarter and year ended December 31,
2013.
Highlights:
- Net sales of $15.0 million represented
the strongest quarter of the year and an increase of 21.9 percent
sequentially over the 2013 third quarter;
- Gross margins of 25.5 percent were up
slightly over the prior year period and rose sequentially from 21.9
percent in the 2013 third quarter;
- Achieved profitability from continuing
operations for the quarter, compared to losses of $2.0 million and
$432,000 in the 2013 second and third quarters, respectively;
- Reduced bank debt $1.4 million from the
prior year and nearly $400,000 from September 30, 2013;
- Initiated ramp-up production for
Medtronic’s recently FDA approved MiniMed 530G insulin pump
system;
- Completed divestiture of discontinued
operations IntriCon Tibbetts and its associated security, certain
microphone and receiver businesses on January 27, 2014, marking the
final significant milestone in the company’s global restructuring
plan, and;
- Amended IntriCon’s credit facilities
with The PrivateBank and Trust Company on February 14, 2014.
Fourth-Quarter Financial ResultsFor the 2013 fourth
quarter, the company reported net sales of $15.0 million, versus
$15.8 million in the prior-year period. IntriCon had a net loss of
$1.4 million, or $0.25 per diluted share, compared to net income of
$332,000, or $0.06 per diluted share, for the 2012 fourth
quarter.
The company reported net income from continuing operations of
$135,000, or $0.02 per diluted share, in the 2013 fourth quarter
versus $488,000, or $0.08 per diluted share, in the prior-year
period. Results from discontinued operations in the 2013 fourth
quarter were a net loss of $1.6 million, or $0.27 per diluted
share, versus a net loss of $156,000, or $0.03 per diluted share,
in the prior-year period. Included in the 2013 fourth quarter loss
of $1.6 million from discontinued operations was $717,000, or $0.13
per diluted share, of one-time, non-cash charges related to
restructuring initiatives.
As part of IntriCon’s global strategic restructuring plan
announced in June 2013, the company completed its divestiture of
the security business and certain microphone and receiver
businesses of IntriCon Tibbetts Corporation, IntriCon’s wholly
owned subsidiary based in Camden, Maine, on January 27, 2014. The
company anticipates a loss on the sale of approximately $50,000 and
an additional loss of $125,000 from discontinued operations, both
of which will be reflected in the 2014 first quarter, at which
point no further discontinued operations charges are expected. The
sale marks the final significant milestone in IntriCon’s
restructuring plan.
“The conclusion of our global strategic restructuring plan
allows us to accelerate the company's future growth by focusing
resources on our highest potential growth opportunities: value
hearing health and medical biotelemetry, while driving significant
cost reductions,” said Mark S. Gorder, president and chief
executive officer of IntriCon. “In the fourth quarter, we continued
to make progress in reducing our cost structure and refocusing our
efforts, as demonstrated by the return to profitability from
continuing operations.
“For the second consecutive quarter we recorded sequential
growth in sales, gross profit margins and profitability from
continuing operations. We are encouraged with the strong rise in
our medical business, driven by a sharp ramp in Medtronic’s
recently approved 530G insulin pump system, a program we expect to
remain strong throughout 2014. Additionally, hi HealthInnovations
has worked through the majority of its existing hearing aid
inventory build, and we anticipate increased order activity in 2014
to meet their current sales demand.”
As a percentage of total fourth-quarter sales, medical stood at
56.7 percent, with hearing health and professional audio at 30.1
percent and 13.2 percent, respectively. This compares to 42.0
percent, 34.6 percent and 23.4 percent for medical, hearing health
and professional audio, respectively, a year earlier.
Gross profit margins increased to 25.5 percent from 25.2 percent
for the prior-year three month period, and rose sequentially from
21.9 percent in the 2013 third quarter. The increase was primarily
due to volume increases and cost reductions generated from the
global restructuring plan.
Full-Year Financial ResultsFor the 2013 year, IntriCon
reported net sales of $53.0 million and a net loss of $6.2 million,
or $1.08 per diluted share. This compares to 2012 net sales of
$60.0 million and net income of $709,000, or $0.12 per diluted
share. The 2013 net loss from continuing operations was $2.3
million, or $0.40 per diluted share, with a discontinued operations
net loss of $3.9 million, or $0.68 per diluted share. Included in
the $3.9 million net loss from discontinued operations for 2013 was
$1.7 million, or $0.30 per diluted share, of one-time, non-cash
charges related to restructuring initiatives.
As a percentage of total sales, medical stood at 49.0 percent,
with hearing health and professional audio at 37.3 percent and 13.7
percent, respectively, for the 12-month period. This compares to
40.8 percent, 39.7 percent and 19.5 percent for medical, hearing
health and professional audio, respectively, in 2012.
Gross profit margins decreased to 23.0 percent from 25.5 percent
for the prior-year. The decrease was primarily due to lower overall
sales volume.
Business UpdateSales in IntriCon’s medical business rose
28.0 percent in the 2013 fourth quarter compared to the year-ago
period, and 56.2 percent sequentially from the 2013 third quarter.
In September 2013, IntriCon’s largest customer, Medtronic, received
FDA approval for their MiniMed 530G insulin pump. With the
approval, IntriCon expects medical sales to remain strong in 2014
as Medtronic fulfills marketplace demand for the MiniMed 530G.
Hearing health sales decreased 17.3 percent from the prior-year
quarter chiefly stemming from declines in the conventional channel.
These were partially offset by modest growth in hi
HealthInnovations sales.
Within the conventional hearing health channel, high device
costs, distribution inconveniences and retail consolidation are
resulting in minimal sales growth. IntriCon believes these factors
have created opportunities in alternative care models such as the
value hearing aid channel and personal sound amplifier products
(PSAP) channel. To capitalize on these opportunities, the company
continues to concentrate its efforts in the value hearing health
space and is aggressively pursuing larger customers.
Professional audio sales declined 46.4 percent from the
prior-year period. The decrease was due to factors similar to the
2013 third quarter, including: conclusion of the company’s
Singapore Government contract in December 2012; the strategic
decision to rationalize select non-core professional audio
communications product lines; and U.S. Government disruption caused
by sequestration. As previously disclosed, IntriCon will continue
to leverage its core technology in professional audio to support
existing customers, as well as pursue related hearing health and
medical product opportunities.
Extension of Credit FacilitiesLast week, IntriCon amended
its credit facilities with The PrivateBank and Trust Company. Terms
of the agreement include: an $8.0 million revolving credit
facility, with a subfacility for letters of credit, to mature in
February 2018 and a term loan facility of $2.8 million, amortized
in quarterly principal installments of $250,000, also maturing in
February 2018. The $10.8 million in credit facilities includes
London Interbank Offered Rate (LIBOR) interest rate options at
varying rates based on funded debt to EBITDA levels.
Said Gorder, “The extended terms and increased borrowing
capacity of our amended credit facilities enhance IntriCon’s
financial flexibility and strengthen the company in both the short-
and long-term. This amendment reinforces The PrivateBank’s
commitment to our strategic plan and its belief in our ability to
execute our growth initiatives successfully.”
Looking AheadConcluded Gorder, “In response to the early
2013 results and market dynamics, we took swift action to reduce
our cost structure and sharpen our sales and marketing focus.
Together with an improved order outlook from two major customers,
we believe the table is set for stronger performance in 2014. The
business clearly has excellent momentum and we expect that to
continue as we aggressively work to drive growth in our two largest
growth opportunities: value hearing health and medical
biotelemetry.”
Conference Call TodayAs previously announced, the company
will hold an investment community conference call today, Wednesday,
Feb. 19, 2014, beginning at 4:00 p.m. CT. Mark Gorder, president
and chief executive officer, and Scott Longval, chief financial
officer, will review fourth-quarter performance and discuss the
company’s strategies. To join the conference call, dial:
1-888-417-8533 and provide the conference ID number 7992560 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 Wednesday, Feb. 26,
2014. To access the replay, dial 1-888-203-1112 and enter passcode:
7992560.
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 Twelve Months Ended December 31, December
31, December 31, December 31, 2013 2012 2013 2012
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Sales, net $ 15,026 $ 15,831 $ 52,961 $ 59,955 Cost of sales
11,189 11,835 40,792
44,656 Gross profit 3,837 3,996 12,169 15,299
Operating expenses: Sales and marketing 884 961 3,308 3,324 General
and administrative 1,350 1,127 5,789 5,426 Research and development
1,184 1,182 4,181 4,481 Restructuring charges 30
- 229 - Total operating
expenses 3,448 3,270 13,507
13,231 Operating income (loss) 389 726 (1,338
) 2,068 Interest expense (132 ) (186 ) (600 ) (755 ) Equity
in loss of partnerships (78 ) (39 ) (262 ) (116 ) Gain on sale of
investment in partnership - - - 822 Other income (expense)
14 (4 ) 127 (96 ) Income (loss)
from continuing operations before income taxes and discontinued
operations 193 497 (2,073 ) 1,923 Income tax expense
58 9 217 164
Income (loss) before discontinued operations 135 488 (2,290 ) 1,759
Loss from discontinued operations, net of income taxes
(1,558 ) (156 ) (3,872 ) (1,050 ) Net
income (loss) $ (1,423 ) $ 332 $ (6,162 ) $ 709
Basic income (loss) per share: Continuing operations $ 0.02
$ 0.09 $ (0.40 ) $ 0.31 Discontinued operations (0.27 )
(0.03 ) (0.68 ) (0.19 ) Net income (loss) per
share: $ (0.25 ) $ 0.06 $ (1.08 ) $ 0.13
Diluted income (loss) per share: Continuing operations $ 0.02 $
0.08 $ (0.40 ) $ 0.30 Discontinued operations (0.27 )
(0.03 ) (0.68 ) (0.18 ) Net income (loss) per share:
$ (0.25 ) $ 0.06 $ (1.08 ) $ 0.12 Average
shares outstanding: Basic 5,710 5,678 5,699 5,669 Diluted 5,710
5,819 5,699 5,888
INTRICON CORPORATION
Consolidated Condensed Balance Sheets (In Thousands,
Except Per Share Amounts) December
31, December 31,
2013
2012
Current assets: Cash $ 217 $ 225 Restricted cash 568 563 Accounts
receivable, less allowance for doubtful accounts of $124 at
December 31, 2013 and $154 at December 31, 2012 5,433 6,877
Inventories 9,400 10,431 Other current assets 1,337 1,424 Current
assets of discontinued operations 382 1,040
Total current assets 17,337 20,560 Machinery and
equipment 33,971 33,577 Less: Accumulated depreciation
29,232 27,578 Net machinery and equipment
4,739 5,999 Goodwill 9,194 9,709 Investment in partnerships
569 773 Other assets, net 749 1,260 Other assets of discontinued
operations 132 831 Total assets $
32,720 $ 39,132 Current liabilities: Checks
written in excess of cash $ 279 $ 637 Current maturities of
long-term debt 2,210 2,945 Accounts payable 5,037 4,015 Accrued
salaries, wages and commissions 1,676 1,644 Deferred gain 110 110
Other accrued liabilities 1,893 2,143 Current liabilities of
discontinued operations 154 173 Total
current liabilities 11,359 11,667 Long-term debt, less
current maturities 6,271 7,222 Other postretirement benefit
obligations 531 590 Accrued pension liabilities 839 510 Deferred
gain 165 275 Other long-term liabilities 247
146 Total liabilities 19,412 20,410 Commitments and
contingencies Shareholders’ equity: Common stock, $1.00 par value
per share; 20,000 shares authorized; 5,727 and 5,687 shares issued
and outstanding at December 31, 2013 and December 31, 2012,
respectively 5,727 5,687 Additional paid-in capital 16,434 15,797
Accumulated deficit (8,522 ) (2,360 ) Accumulated other
comprehensive loss (331 ) (402 ) Total shareholders'
equity 13,308 18,722 Total liabilities
and shareholders’ equity $ 32,720 $ 39,132
At IntriCon:Scott Longval, CFO,
651-604-9526slongval@intricon.comorAt PadillaCRT:Matt Sullivan,
612-455-1709matt.sullivan@padillacrt.com
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