UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) February 19, 2019

 

INTRICON CORPORATION

 

(Exact name of registrant as specified in its charter)

 

   

Pennsylvania

 

1-5005

 

23-1069060 

(State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.)
         

1260 Red Fox Road, Arden Hills, MN 55112

(Address of principal executive offices)  (Zip Code)
 
Registrant’s telephone number, including area code  (651) 636-9770
 

N/A

(Former name or former address, if changed since last report)
           

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition.

 

The following information is being provided pursuant to Item 2.02. Such information, including Exhibit 99.1 attached hereto, should not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

On February 19, 2019, IntriCon Corporation (the “Company”) announced earnings for the quarter and year ended December 31, 2018. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.

 

Item 7.01Regulation FD Disclosure.

 

The following information is being provided pursuant to Item 7.01. Such information, including Exhibit 99.1 attached hereto, should not be deemed “filed” for purposes of Section 18 of the Exchange Act.

 

The information contained under Item 2.02 is incorporated herein by reference.

 

Item 9.01Financial Statements and Exhibits.

 

(d)Exhibits.

 

Exhibit No.

 

Description

99.1   Press Release dated February 19, 2019.

 

1 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  

  INTRICON CORPORATION
     
  By:

/s/ Scott Longval

  Name: Scott Longval
  Title: Chief Financial Officer

 

Date: February 19, 2019

 

S-1 

 

Exhibit Index

 

Exhibit No.

 

Description

99.1   Press Release dated February 19, 2019.

 

E-1 

 

INTRICON REPORTS FOURTH QUARTER AND FULL YEAR 2018 RESULTS

 

Medical and Value Hearing Health Performance Drive Record Quarterly Revenue;

Company Provides Guidance for 2019

 

ARDEN HILLS, Minn. — February 19, 2019 — 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, 2018.

 

Recent Highlights:

Record quarterly revenue of $30.8 million, a 41.1 percent increase over the prior-year fourth quarter;

 

Gross margin of 30.0 percent, consistent with the comparable prior-year period;

 

Net income per share of $0.09 versus $0.05 in the 2017 fourth quarter;

 

Grew revenue from its largest medical customer by 74.8 percent compared to fourth quarter 2017;

 

Increased indirect-to-end-consumer hearing healthcare revenue by 79.9 percent year over year;

 

Continued buildout of infrastructure to meet future demand;

 

Acquired source code from Soundperience for its Sentibo Smart Brain self-fitting software; and

 

Hired Doug Pletcher as vice president of medical biotelemetry business development.

 

“Our medical and indirect-to-end-consumer value hearing health businesses continued to drive strong top-line performance, leading to another quarter of record revenue,” said Mark S. Gorder, president and chief executive officer of IntriCon. “I’m pleased with the meaningful progress we made in 2018 towards advancing our key growth initiatives, bolstering our medical leadership team, and expanding our technology.

 

“I am confident that we are entering 2019 in our strongest position to date. We have the capital to pursue strategic initiatives and a well-developed infrastructure to support our efforts in medical and value hearing health. I believe that we are well positioned in the early stages of

 

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IntriCon Corporation 2019 Fourth-Quarter Results

February 19, 2019

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long-term, sustained growth within our core markets. The diabetes market is experiencing tremendous growth, with continuous glucose monitoring (CGM) a critical component to serving the needs of many diabetics. And as the value-hearing healthcare space emerges, we believe we are at the forefront of providing affordable and accessible solutions to unserved or underserved hearing-impaired Americans.”

 

Fourth Quarter 2018 Financial Results

 

For the 2018 fourth quarter, the company reported net revenue of $30.8 million, up 41.1 percent from $21.8 million in the comparable prior-year period. The increase was primarily due to year-over-year revenue gains from the company’s largest medical customer and growth in its value-based indirect-to-end-consumer hearing healthcare business.

 

Fourth-quarter gross margins were 30.0 percent, consistent with 30.0 percent in the prior-year fourth quarter. Gross margins in the quarter were constrained by costs related to additional infrastructure investments.

 

Operating expenses for the fourth quarter were $8.2 million, compared to $6.1 million in the comparable prior-year period. The increase stemmed from increased advertising investments at Hearing Help Express (HHE), and support costs related to key initiatives to drive overall business growth.

 

The company posted net income of $868,000, or $0.09 per diluted share, versus $396,000 or $0.05 per diluted share, for the 2017 fourth quarter.

 

Full Year 2018 Financial Results

 

For the full year ended December 31, 2018, the company reported revenue of $116.5 million, up 28.5 percent from $90.6 million in 2017.

 

Gross margins were 31.9 percent, up from 29.5 percent in 2017. The increase in margin was primarily due to the increased volume throughout 2018.

 

Operating expenses were $30.0 million, compared to $24.2 million in the prior year. The increase stemmed from increased advertising investments at HHE, and support costs related to key initiatives to drive overall business growth.

 

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IntriCon Corporation 2019 Fourth-Quarter Results

February 19, 2019

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Net income attributable to shareholders was $5.5 million, or $0.64 per diluted share, versus $2.1 million, or $0.28 per diluted share, in 2017.

 

Guidance for Full Year 2019

 

The company anticipates 2019 revenue to range between $128 million to $133 million. Gross margins for the 2019 full year are expected to be approximately 30.0 to 31.5 percent. In general, the company anticipates linear revenue growth and gross margin improvement through 2019, however this could be impacted by commercial product launch timing from its largest customer and mix shifts between product lines.

 

Business Update

 

Revenue in the company’s medical business increased 64.8 percent in the 2018 fourth quarter over the comparable prior-year period. The gain was primarily driven by the ongoing production of wireless CGM systems for the company’s largest customer. Revenue to this customer increased 74.8 percent in the fourth quarter over the comparable prior year period. The company remains very well positioned with this customer for 2019, providing key system components including CGM systems, sensor assembly and related accessories.

 

During the year, the company expanded its infrastructure to support anticipated growth from its current medical customers and other new business development efforts. Expansion efforts include a newly leased 37,000-square-foot medical manufacturing and clean room facility in Minnesota, an additional 10,000-square-foot medical assembly space in Singapore, 13 new molding presses and a high-speed printed circuit board assembly line. In addition to these investments, our current customers invested several million dollars in tooling and automation within our facilities. While the company has begun limited production on certain products, it is still working with current medical customers to complete required validation and qualification of several key production lines.

 

Recently, the company hired Doug Pletcher as Vice President of Medical Business Development. Pletcher has more than 25 years of executive management and business development experience in the medical device industry. In this new role, Pletcher is responsible for sales and marketing of new product platforms into the medical biotelemetry market.

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IntriCon Corporation 2019 Fourth-Quarter Results

February 19, 2019

Page 4

 

On the hearing health front, total revenue increased by 10.3 percent over the prior-year fourth quarter, led by the company’s value-based indirect-to-end-consumer business, which posted strong revenue growth of 79.9 percent. This gain was partially offset by a temporary decline in the direct-to-end-consumer channel and expected continued waning in the conventional sales channel.

 

The company continues to build its value hearing health technology portfolio, with wireless and self-fitting technologies. Last month, the company closed on its acquisition of the Sentibo Smart Brain self-fitting software source code from Soundperience, positioning the company to capitalize on the pending over-the-counter (OTC) hearing aid regulation. Sentibo Smart Brain self-fitting software is designed to improve both channel productivity and the quality of first-time fittings, resulting in lower prices, greater access and increased customer satisfaction.

 

Conference Call

 

The company will hold a conference call today, Tuesday, February 19, 2019, beginning at 4 p.m. CT. To join the conference call, dial: 1-855-719-5012 and provide the conference ID number 7881455 to the operator. To access the replay, dial 1-888-203-1112 and enter passcode 7881455.

 

About IntriCon Corporation

 

Headquartered 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 Statements

 

Statements 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,

 

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IntriCon Corporation 2019 Fourth-Quarter Results

February 19, 2019

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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, 2017. 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.

 

Investor Contact

 

Lynn Pieper Lewis or Leigh Salvo 

(415) 937-5404 

investorrelations@intricon.com

 

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IntriCon Corporation 2019 Fourth-Quarter Results

February 19, 2019

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INTRICON CORPORATION

MARKET REVENUE

(Unaudited)

 

   FOURTH QUARTER   YEAR TO DATE  
($ in 000's)  2018   2017   Growth   2018   2017   Growth 
                               
Medical  $20,158   $12,232    64.8%  $75,645   $53,452    41.5%
Diabetes   17,666    10,104    74.8%   65,197    43,365    50.3%
Other Medical   2,492    2,128    17.1%   10,448    10,087    3.6%
                               
Hearing Health   8,761    7,943    10.3%   33,578    31,019    8.2%
Value Based Direct-to-End-Consumer   1,525    1,904    -19.9%   6,858    6,492    5.6%
Value Based Indirect-to-End-Consumer   3,681    2,046    79.9%   11,949    7,908    51.1%
Legacy OEM   3,555    3,993    -11.0%   14,771    16,619    -11.1%
                               
Professional Audio Communications   1,886    1,662    13.5%   7,239    6,166    17.4%
                               
Total  $30,805   $21,837    41.1%  $116,462   $90,637    28.5%

 

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IntriCon Corporation 2019 Fourth-Quarter Results

February 19, 2019

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INTRICON CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three Months Ended   Twelve Months Ended 
   December 31,   December 31,   December 31,   December 31, 
   2018   2017   2018   2017 
       (as adjusted)       (as adjusted) 
                 
Revenue, net  $30,805   $21,837   $116,462   $90,637 
Cost of sales   21,568    15,290    79,299    63,890 
Gross profit   9,237    6,547    37,163    26,747 
                     
Operating expenses:                    
Sales and marketing   3,640    2,590    12,369    9,447 
General and administrative   3,575    2,378    13,009    10,339 
Research and development   978    1,146    4,671    4,458 
Total operating expenses   8,193    6,114    30,049    24,244 
Operating income   1,044    433    7,114    2,503 
                     
Interest (income) expense, net   139    (168)   (314)   (716)
Other expense   (189)   (39)   (769)   (367)
Income from continuing operations before income taxes and discontinued operations   994    226    6,031    1,420 
                     
Income tax expense (benefit)   126    (157)   484    8 
Income before discontinued operations   868    383    5,547    1,412 
Loss on sale of discontinued operations, net of income taxes   -    -    -    (164)
Loss from discontinued operations, net of income taxes   -    -    -    (128)
Net Income   868    383    5,547    1,120 
Less: Loss allocated to non-controlling interest   -    (13)   -    (938)
Net Income attributable to shareholders  $868   $396   $5,547   $2,058 
                     
                     
Basic income (loss) per share attributable to shareholders:                    
Continuing operations  $0.10   $0.06   $0.73   $0.34 
Discontinued operations   -    -    -    (0.04)
Net income per share:  $0.10   $0.06   $0.73   $0.30 
                     
Diluted income (loss) per share attributable to shareholders:                    
Continuing operations  $0.09   $0.05   $0.64   $0.32 
Discontinued operations   -    -    -    (0.04)
Net income per share:  $0.09   $0.05   $0.64   $0.28 
                     
Average shares outstanding:                    
Basic   8,647    6,883    7,599    6,852 
Diluted   9,439    7,646    8,630    7,307 

 

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IntriCon Corporation 2019 Fourth-Quarter Results

February 19, 2019

Page 8

 

INTRICON CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEET

(Unaudited)

 

   December 31,   December 31, 
   2018   2017 
       (as adjusted) 
           
Current assets:          
Cash, cash equivalents and restricted cash  $8,047   $1,017 
Available for sale securities   38,093    - 
Accounts receivable, less allowance for doubtful accounts of $807 at December 31, 2018 and $332 at December 31, 2017   11,479    9,052 
Inventories   18,981    13,708 
Contract assets   5,624    2,979 
Other current assets   2,320    1,544 
Total current assets   84,544    28,300 
           
  Machinery and equipment   37,161    40,124 
Less:  Accumulated depreciation   25,429    32,949 
Net machinery and equipment   11,732    7,175 
           
Goodwill   10,808    10,808 
Intangible assets   2,585    2,740 
Investment in partnerships   2,091    1,616 
Other assets, net   3,488    3,835 
Total assets  $115,248   $54,474 
           
Current liabilities:          
Current maturities of long-term debt  $-   $2,040 
Accounts payable   13,191    10,423 
Accrued salaries, wages and commissions   4,409    3,113 
Other accrued liabilities   4,014    3,739 
Total current liabilities   21,614    19,315 
           
Long-term debt, less current maturities   -    9,321 
Other postretirement benefit obligations   377    455 
Accrued pension liabilities   739    772 
Other long-term liabilities   544    3,172 
Total liabilities   23,274    33,035 
Commitments and contingencies          
Shareholders’ equity:          
Common stock, $1.00 par value per share; 20,000 shares authorized; 8,664 and 6,900 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively   8,664    6,900 
Additional paid-in capital   84,999    21,581 
Accumulated deficit   (509)   (6,056)
Accumulated other comprehensive loss   (927)   (733)
Total shareholders' equity   92,227    21,692 
Non-controlling interest   (253)   (253)
Total equity   91,974    21,439 
Total liabilities and equity  $115,248   $54,474 

 

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