SEC Filing | Intricon Corporation

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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 September 30, 2020

¨ 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 October 31, 2020 was 8,943,370.

‎

INTRICON CORPORATION

I N D E X


		Page Numbers

PART I: FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Condensed Balance Sheets as of September 30, 2020 and December 31, 2019	3

	Consolidated Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	4

	Consolidated Condensed Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019	5

	Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	6

	Consolidated Condensed Statements of Equity for the Three and Nine Months Ended September 30, 2020 and 2019	7

	Notes to Consolidated Condensed Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	37

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults Upon Senior Securities	40

Item 4.	Mine Safety Disclosures	40

Item 5.	Other Information	40

Item 6.	Exhibits	41

Signatures		42

‎

PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements



INTRICON CORPORATION
Consolidated Condensed Balance Sheets
(In Thousands, Except Share Amounts)

(unaudited)		September 30,		December 31,
		2020		2019
Current assets:
Cash and cash equivalents	$	16,081	$	8,523
Restricted cash		647		639
Short-term investment securities		14,176		23,451
Accounts receivable, less provision for doubtful accounts of $365 at September 30, 2020 and $325 at December 31, 2019		9,192		8,993
Inventories		20,463		16,377
Contract assets		10,592		10,237
Other current assets		1,426		1,975
Current assets of discontinued operations		-		80
Total current assets		72,577		70,275

Machinery and equipment		45,083		41,073
Less: Accumulated depreciation		30,915		27,522
Net machinery and equipment		14,168		13,551

Goodwill		13,714		9,551
Intangible assets		11,282		5,545
Operating lease right-of-use assets, net		3,812		4,372
Investment in partnerships		623		1,160
Long-term investment securities		-		8,629
Other assets, net		289		510
Total assets	$	116,465	$	113,593

Current liabilities:
Current financing leases	$	34	$	101
Current operating leases		1,512		1,729
Accounts payable		8,340		9,876
Accrued salaries, wages and commissions		4,271		2,274
Other accrued liabilities		4,429		2,869
Liabilities of discontinued operations		-		77
Total current liabilities		18,586		16,926

Noncurrent financing leases		2		30
Noncurrent operating leases		2,475		2,937
Other postretirement benefit obligations		349		382
Accrued pension liabilities		667		655
Deferred tax liabilities, net		1,104		-
Other long-term liabilities		3,790		2,171
Total liabilities		26,973		23,101
Commitments and contingencies (Note 18)
Shareholders’ equity:
Common stock, $1.00 par value per share; 20,000 shares authorized; 8,943 and 8,781 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		8,943		8,781
Additional paid-in capital		88,908		86,770
Accumulated deficit		(7,902)		(4,286)
Accumulated other comprehensive loss		(474)		(520)
Total shareholders' equity		89,475		90,745
Non-controlling interest		17		(253)
Total equity		89,492		90,492
Total liabilities and equity	$	116,465	$	113,593

(See accompanying notes to the consolidated condensed financial statements)

‎



INTRICON CORPORATION
Consolidated Condensed Statements of Operations
(In Thousands, Except Per Share Amounts)

		Three Months Ended				Nine Months Ended
(unaudited)		September 30,		September 30,		September 30,		September 30,
		2020		2019		2020		2019

Revenue, net	$	27,367	$	26,893	$	72,472	$	85,800
Cost of goods sold		20,169		20,120		54,096		62,253
Gross profit		7,198		6,773		18,376		23,547

Operating expenses:
Sales and marketing		1,365		2,609		5,038		9,071
General and administrative		3,654		3,715		11,673		10,551
Research and development		1,458		840		3,868		2,902
Restructuring charges		-		-		1,171		-
Impairment loss		-		-		-		3,765
Other operating expenses		253		-		746		-
Total operating expenses		6,730		7,164		22,496		26,289
Operating income (loss)		468		(391)		(4,120)		(2,742)

Interest income, net		41		240		322		703
Other income (expense), net		192		(52)		293		(458)
Income (loss) from continuing operations before income taxes and discontinued operations		701		(203)		(3,505)		(2,497)
Income tax expense		47		87		94		334
Income (loss) from continuing operations before discontinued operations		654		(290)		(3,599)		(2,831)
Loss on disposal of discontinued operations (Note 5)		-		-		-		(1,116)
Loss from discontinued operations (Note 5)		-		-		-		(597)
Net income (loss)		654		(290)		(3,599)		(4,544)
Less: Income allocated to non-controlling interest		10		-		17		-
Net income (loss) attributable to Intricon shareholders	$	644	$	(290)	$	(3,616)	$	(4,544)

Basic income (loss) per share attributable to Intricon shareholders:
Continuing operations	$	0.07	$	(0.03)	$	(0.41)	$	(0.32)
Discontinued operations		-		-		-		(0.20)
Net income (loss) per share:	$	0.07	$	(0.03)	$	(0.41)	$	(0.52)

Diluted income (loss) per share attributable to Intricon shareholders:
Continuing operations	$	0.07	$	(0.03)	$	(0.41)	$	(0.32)
Discontinued operations		-		-		-		(0.20)
Net income (loss) per share:	$	0.07	$	(0.03)	$	(0.41)	$	(0.52)

Average shares outstanding:
Basic		8,936		8,764		8,877		8,738
Diluted		9,272		8,764		8,877		8,738
(See accompanying notes to the consolidated condensed financial statements)

‎



INTRICON CORPORATION
Consolidated Condensed Statements of Comprehensive Income (Loss)
(In Thousands)
		Three Months Ended				Nine Months Ended
(unaudited)		September 30,		September 30,		September 30,		September 30,
		2020		2019		2020		2019
Net income (loss)	$	654	$	(290)	$	(3,599)	$	(4,544)
Realized foreign currency translation loss from discontinued operations previously unrealized, net of taxes of $0		-		-		-		280
Unrealized foreign currency translation adjustment from continuing operations, net of taxes of $0		5		9		31		(10)
Investment in partnerships, net of taxes of $0		-		-		-		118
Pension and postretirement obligations, net of taxes of $0		5		5		15		15
Comprehensive income (loss)	$	664	$	(276)	$	(3,553)	$	(4,141)
(See accompanying notes to the consolidated condensed financial statements)

‎


INTRICON CORPORATION
Consolidated Condensed Statements of Cash Flows
(In Thousands)
		Nine Months Ended
(unaudited)		September 30,		September 30,
		2020		2019
Cash flows from operating activities:
Net loss	$	(3,599)	$	(4,544)
Loss from discontinued operations		-		1,713
Loss from continuing operations		(3,599)		(2,831)
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities:
Depreciation and amortization		3,311		2,448
Equity in loss of partnerships		90		206
Stock-based compensation		2,044		1,514
Change in fair value of contingent consideration		253		-
Provision for doubtful accounts		40		(501)
Loss on disposal of assets		174		-
Impairment loss		-		3,765
Changes in operating assets and liabilities:
Accounts receivable		1,223		3,394
Inventories		(2,139)		110
Contract assets		(355)		(2,889)
Other assets		593		(165)
Accounts payable		(