IntriCon Reports 2016 Third-Quarter Results

Nov 14, 2016


Hearing Health Revenues Rise

ARDEN HILLS, Minn.--(BUSINESS WIRE)-- IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of miniature and micro-miniature body-worn devices, today announced financial results for its third quarter ended September 30, 2016.


  • IntriCon's value hearing health initiatives delivered year-over-year growth;
  • The company made meaningful progress pursuing alternative distribution models and partnerships within the value hearing health market acquiring partial ownership of Hearing Help Express, with the option to acquire the remaining ownership; and,
  • Sales to IntriCon's largest medical customer are poised to rebound in the fourth quarter.

Financial Results
For the 2016 third quarter, the company reported net sales of $16.0 million, compared to $17.3 million in the prior-year period. IntriCon posted a net loss attributable to shareholders of ($1,304,000), or ($0.19) per share, versus net income attributable to shareholders of $628,000, or $0.10 per diluted share, for the 2015 third quarter.

"Third-quarter results reflect the continued timing shift in orders from our largest medical customer," said Mark S. Gorder, president and chief executive officer of IntriCon. "Despite this challenge, we were able to deliver year-over-year gains in hearing health and professional audio. And we anticipate medical revenues will begin to rebound in our fourth quarter."

Gross profit margins were 22.9 percent compared to 26.7 percent in the prior-year third quarter. The decrease was primarily due to a less favorable sales mix and slightly lower revenue.

Operating expenses for the third-quarter were $4.7 million, compared to $3.9 million in the prior-year third quarter. The increase was largely due to the inclusion of PC Werth, acquired by IntriCon UK in November 2015. Sequentially, IntriCon decreased operating expenses $343,000, in response to temporarily lower revenue levels.

Business Update
Hearing health sales increased 7 percent from the prior-year third quarter, primarily stemming from contributions by PC Werth, acquired by IntriCon UK to build a hearing health platform in England. During the quarter, IntriCon experienced gains in value hearing aids, personal sound amplifier products (PSAP) and assisted listening devices. The company remains intently focused on opportunities in value hearing health versus the declining conventional channel.

"Within hearing health, there's a groundswell building for fundamental change among regulators and consumers," said Gorder. "As a company, we are steadfast in our commitment to overcome barriers to device access and spur development and innovation. This is why—despite lower revenue levels—we maintained our level of investment in mission critical ultra-low-power wireless and DSP technologies during the quarter. These technologies are required to support our emerging alternative channels and our goal of delivering superior outcomes-based, affordable hearing healthcare, by combining state-of-the-art devices and software technology at a much lower cost directly to consumers."

The company is focused on driving growth and creating efficiencies in its current value-based hearing healthcare initiatives. Domestically, IntriCon continues its work with earVenture, a joint venture with the Academy of Doctors of Audiology (ADA). Over 450 ADA members have registered to join the earVenture program. earVenture is implementing sales and marketing efforts to convert those members into consistent customers, as well as soliciting non-registered ADA members to join.

In the United Kingdom, IntriCon has delivered initial devices to targeted National Health Service (NHS) clinics, with positive feedback. In addition, IntriCon currently working with the NHS for approval of a third device, the K940D, which will enhance IntriCon sales capabilities. The K940D, which is a traditional behind-the-ear device, is very appealing to the NHS because of its broad fitting range and advanced features. Approval of the K940D is anticipated in early 2017.

"With the ADA and NHS, our efforts have centered on educating the practitioner—an effort we believe will drive growth," said Gorder. "Moreover, we made meaningful progress during the quarter pursuing alternative distribution models and partnerships within the value hearing health market. And as we announced today, we acquired partial ownership of Hearing Help Express, a direct-to-consumer hearing aid provider."

Sales in IntriCon's medical business decreased 17 percent in the 2016 third quarter, primarily driven by IntriCon's largest customer, Medtronic. The lower sales to Medtronic were expected as they manage the transition of their recently FDA-approved MiniMed 630G system. IntriCon expects Medtronic sales to begin ramping up in the fourth quarter as they launch the MiniMed 630G system.

Long term, the company believes it's well-positioned for growth with Medtronic. In addition to the MiniMed 630G system, IntriCon is also designed into the MiniMed 670G system which was also recently approved by the FDA, and is scheduled to be launched in the spring of 2017. "The MiniMed 670G is the world's first hybrid closed loop insulin delivery system," said Gorder, "and we are excited to be designed into and supporting such a revolutionary diabetes management system."

Third-quarter 2016 professional audio communication sales rose by 13 percent from the prior-year period. IntriCon anticipates fourth quarter of 2016 revenue in this business to be flat with the prior-year comparable period.

As disclosed in the second quarter, given temporarily lower revenue levels, IntriCon has taken measured actions to reduce operating expenses. These reductions, while not impacting the company's ability to execute strategic initiatives, should result in approximately $600,000 in annual savings—the majority of which will begin to be realized in the 2016 fourth quarter.

Looking Ahead
Concluded Gorder, "Although our third-quarter performance reflects a customer product transition outside of our control, this is not where we want it to be—or where we know we can be. We remain confident in the long-term prospects of our medical business and look forward to the expected fourth-quarter ramp of Medtronic's sales. Equally important, we remain encouraged by our technology pipeline and the growing appetite for an alternative hearing health channel. Based on information currently available, we anticipate fourth-quarter net sales to increase approximately $1 million from the 2016 third quarter and near break-even from a profitability prospective, with notably stronger results in the first quarter of 2017."

Conference Call Today
As previously announced, the company will hold an investment community conference call today, Monday, November 14, 2016, beginning at 4 p.m. CT. Mark Gorder, president and chief executive officer, and Scott Longval, chief financial officer, will review third-quarter performance and discuss the company's strategies. To join the conference call, dial: 1-888-715-1401 and provide the conference ID number 5036157 to the operator. To access the replay, dial 1-888-203-1112 and enter passcode 5036157.

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

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 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, 2015. 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.

Consolidated Condensed Statements of Operations
(In Thousands, Except Per Share Amounts)
      Three Months Ended     Nine Months Ended
      September 30,     September 30,     September 30,     September 30,
      2016     2015     2016     2015








Sales, net     $ 16,012       $ 17,341       $ 51,246       $ 51,063  
Cost of sales       12,347         12,706         38,597         37,515  
Gross profit       3,665         4,635         12,649         13,548  
Operating expenses:                        
Sales and marketing       1,082         854         3,478         2,739  
General and administrative       2,250         1,708         6,649         5,150  
Research and development       1,323         1,344         4,297         3,864  
Restructuring charges       -         -         132         -  
Total operating expenses       4,655         3,906         14,556         11,753  
Operating income (loss)       (990 )       729         (1,907 )       1,795  
Interest expense       (135 )       (95 )       (387 )       (287 )
Other income (expense)       (181 )       (131 )       (472 )       17  
Income (loss) before income taxes       (1,306 )       503         (2,766 )       1,525  
Income tax expense (benefit)       33         (125 )       119         107  
Net income (loss)       (1,339 )       628         (2,885 )       1,418  
Less: Loss allocated to non-controlling interest       (35 )       -         (106 )       -  
Net income (loss) attributable to IntriCon shareholders     $ (1,304 )     $ 628       $ (2,779 )     $ 1,418  
Net income (loss) per share attributable to IntriCon shareholders:                        
Basic     $ (0.19 )     $ 0.11       $ (0.44 )     $ 0.24  
Diluted       (0.19 )       0.10         (0.44 )       0.23  
Average shares outstanding:                        
Basic       6,796         5,943         6,287         5,873  
Diluted       6,796         6,271         6,287         6,214  


Consolidated Condensed Balance Sheets
(In Thousands, Except Per Share Amounts)
      September 30,     December 31,




Current assets:            
Cash     $ 604       $ 369  
Restricted cash       633         610  
Accounts receivable, less allowance for doubtful accounts of $67 at September 30, 2016 and $135 at December 31, 2015       6,324         8,578  
Inventories       13,329         14,472  
Other current assets       638         860  
Total current assets       21,528         24,889  
Machinery and equipment       39,959         38,653  
Less: Accumulated depreciation       33,103         31,911  
Net machinery and equipment       6,856         6,742  
Goodwill       9,551         9,551  
Investment in partnerships       212         224  
Other assets, net       1,161         480  
Total assets     $ 39,308       $ 41,886  
Current liabilities:            
Current maturities of long-term debt     $ 2,002       $ 1,908  
Accounts payable       5,966         7,785  
Accrued salaries, wages and commissions       2,207         2,559  
Deferred gain       -         55  
Other accrued liabilities       725         1,279  
Total current liabilities       10,900         13,586  
Long-term debt, less current maturities       6,862         7,929  
Other postretirement benefit obligations       508         542  
Accrued pension liabilities       790         812  
Other long-term liabilities       127         120  
Total liabilities       19,187         22,989  
Shareholders' equity:            
Common stock, $1.00 par value per share; 20,000 shares authorized; 6,801 and 5,981 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively       6,801         5,981  
Additional paid-in capital       21,168         17,721  
Accumulated deficit       (6,825 )       (4,046 )
Accumulated other comprehensive loss       (879 )       (721 )
Total shareholders' equity       20,265         18,935  
Non-controlling interest       (144 )       (38 )
Total equity       20,121         18,897  
Total liabilities and equity     $ 39,308       $ 41,886  


At IntriCon:
Scott Longval, 651-604-9526
At PadillaCRT:
Matt Sullivan, 612-455-1709

Source: IntriCon Corporation



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