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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _____  to  _____

Commission File Number: 1-5005

INTRICON CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania

 

23-1069060

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

 

 

1260 Red Fox Road

 

 

Arden Hills, Minnesota

 

55112

(Address of principal executive offices)

 

(Zip Code)

(651) 636-9770

(Registrant’s telephone number, including area code)

N/A

______________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock, par value $1.00 per share

IIN

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes  ¨  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x  Yes  ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

Smaller reporting company

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.  

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).   ¨  Yes  x  No

The number of outstanding shares of the registrant’s common stock, $1.00 par value, on July 31, 2020 was 8,933,784.


1


INTRICON CORPORATION

I N D E X

Page

Numbers

PART I: FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Condensed Balance Sheets (Unaudited) as of June 30, 2020 and December 31, 2019

3

Consolidated Condensed Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019

4

Consolidated Condensed Statements of Comprehensive (Loss) Income (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019

5

Consolidated Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2020 and 2019

6

Consolidated Condensed Statements of Equity (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019

7

Notes to Consolidated Condensed Financial Statements (Unaudited)

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II: OTHER INFORMATION

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

39

Signatures

40

 


2


PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements

INTRICON CORPORATION

Consolidated Condensed Balance Sheets

(In Thousands, Except Per Share Amounts)

(unaudited)

June 30,

December 31,

2020

2019

Current assets:

Cash and cash equivalents

$

7,056 

$

8,523 

Restricted cash

629 

639 

Short-term investment securities

19,921 

23,451 

Accounts receivable, less allowance for doubtful accounts of $598 at June 30, 2020 and $325 at December 31, 2019

10,447 

8,993 

Inventories

21,034 

16,377 

Contract assets

8,111 

10,237 

Other current assets

1,587 

1,975 

Current assets of discontinued operations

-

80 

Total current assets

68,785 

70,275 

Machinery and equipment

44,646 

41,073 

Less: Accumulated depreciation

30,215 

27,522 

Net machinery and equipment

14,431 

13,551 

Goodwill

13,592 

9,551 

Intangible assets

11,779 

5,545 

Operating lease right-of-use assets, net

3,421 

4,372 

Investment in partnerships

695 

1,160 

Long-term investment securities

3,023 

8,629 

Other assets, net

326 

510 

Total assets

$

116,052 

$

113,593 

Current liabilities:

Current financing leases

$

53 

$

101 

Current operating leases

1,483 

1,729 

Accounts payable

9,469 

9,876 

Accrued salaries, wages and commissions

3,757 

2,274 

Other accrued liabilities

4,680 

2,869 

Liabilities of discontinued operations

-

77 

Total current liabilities

19,442 

16,926 

Noncurrent financing leases

5 

30 

Noncurrent operating leases

2,148 

2,937 

Other postretirement benefit obligations

360 

382 

Accrued pension liabilities

655 

655 

Deferred tax liabilities, net

1,124

-

Other long-term liabilities

3,888

2,171 

Total liabilities

27,622 

23,101 

Commitments and contingencies (Note 18)

 

 

Shareholders’ equity:

Common stock, $1.00 par value per share; 20,000 shares authorized; 8,934 and 8,781 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

8,934 

8,781 

Additional paid-in capital

88,772 

86,770 

Accumulated deficit

(8,546)

(4,286)

Accumulated other comprehensive loss

(484)

(520)

Total shareholders' equity

88,676 

90,745 

Non-controlling interest

(246)

(253)

Total equity

88,430 

90,492 

Total liabilities and equity

$

116,052 

$

113,593 

(See accompanying notes to the consolidated condensed financial statements)

 

 

3


INTRICON CORPORATION

Consolidated Condensed Statements of Operations

(In Thousands, Except Per Share Amounts)

Three Months Ended

Six Months Ended

(unaudited)

June 30,

June 30,

June 30,

June 30,

2020

2019

2020

2019

Revenue, net

$

23,602 

$

29,336 

$

45,105 

$

58,906 

Cost of goods sold

16,996 

21,121 

33,927 

42,133 

Gross profit

6,606 

8,215 

11,178 

16,773 

Operating expenses:

Sales and marketing

1,680 

3,072 

3,673 

6,461 

General and administrative

4,603 

3,650 

8,019 

6,836 

Research and development

1,209 

1,097 

2,410 

2,062 

Restructuring charges

1,171 

-

1,171 

-

Impairment loss

-

3,765 

-

3,765 

Acquisition costs

493 

-

493 

-

Total operating expenses

9,156 

11,584 

15,766 

19,124 

Operating loss

(2,550)

(3,369)

(4,588)

(2,351)

Interest income, net

97 

248 

281 

463 

Other income (expense), net

208 

(272)

101 

(406)

Loss from continuing operations before income taxes and discontinued operations

(2,245)

(3,393)

(4,206)

(2,294)

Income tax expense

29 

116 

47 

247 

Loss from continuing operations before discontinued operations

(2,274)

(3,509)

(4,253)

(2,541)

Loss on disposal of discontinued operations (Note 5)

-

(1,116)

-

(1,116)

Loss from discontinued operations (Note 5)

-

(405)

-

(597)

Net loss

(2,274)

(5,030)

(4,253)

(4,254)

Less: Income allocated to non-controlling interest

7 

-

7 

-

Net loss attributable to IntriCon shareholders

$

(2,281)

$

(5,030)

$

(4,260)

$

(4,254)

Basic loss per share attributable to IntriCon shareholders:

Continuing operations

$

(0.26)

$

(0.40)

$

(0.48)

$

(0.29)

Discontinued operations

-

(0.17)

-

(0.20)

Net loss per share:

$

(0.26)

$

(0.57)

$

(0.48)

$

(0.49)

Diluted loss per share attributable to IntriCon shareholders:

Continuing operations

$

(0.26)

$

(0.40)

$

(0.48)

$

(0.29)

Discontinued operations

-

(0.17)

-

(0.20)

Net loss per share:

$

(0.26)

$

(0.57)

$

(0.48)

$

(0.49)

Average shares outstanding:

Basic

8,881

8,743

8,847

8,724

Diluted

8,881

8,743

8,847

8,724

(See accompanying notes to the consolidated condensed financial statements)

 


4


 

INTRICON CORPORATION

Consolidated Condensed Statements of Comprehensive (Loss) Income

(In Thousands)

Three Months Ended

Six Months Ended

(unaudited)

June 30,

June 30,

June 30,

June 30,

2020

2019

2020

2019

Net loss

$

(2,274)

$

(5,030)

$

(4,253)

$

(4,254)

Realized foreign currency translation loss from discontinued operations previously unrealized, net of taxes of $0

-

280

-

280

Unrealized foreign currency translation adjustment from continuing operations, net of taxes of $0

13

(26)

26

(19)

Investment in partnerships,
net of taxes of $0

-

-

-

118

Pension and postretirement obligations, net of taxes of $0

5

5

10

10

Comprehensive loss

$

(2,256)

$

(4,771)

$

(4,217)

$

(3,865)

(See accompanying notes to the consolidated condensed financial statements)

 


5


 

INTRICON CORPORATION

Consolidated Condensed Statements of Cash Flows

(In Thousands)

Six Months Ended

(unaudited)

June 30,

June 30,

2020

2019

Cash flows from operating activities:

Net loss

$

(4,253)

$

(4,254)

Loss from discontinued operations

-

1,713 

Loss from continuing operations

(4,253)

(2,541)

Adjustments to reconcile net loss from continuing operations to net cash
provided by operating activities:

Depreciation and amortization

2,053 

1,628 

Equity in loss of partnerships

71 

138 

Stock-based compensation

1,712 

866 

Change in allowance for doubtful accounts

273 

(499)

Loss on disposal of assets