IIN Intricon Corporation

IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of body-worn medical and electronics devices, today announced financial results for its 2008 second quarter ended June 30, 2008. For the second quarter, the company reported net sales of $17.5 million, a 3 percent increase from net sales of $16.9 million for the 2007 second quarter. IntriCon�s 2008 second-quarter net income was $410,000, or $0.07 per diluted share, compared with net income of $527,000, or $0.10 per diluted share, for the year-ago period. For the quarter, net income from the company�s core business (hearing health, professional audio and medical) was $447,000, or $0.08 per share, partially offset by a non-core business net loss of $37,000, or $0.01 per share. For the 2007 second quarter, net income from IntriCon�s core business was $425,000, or $0.08 per share; non-core business net income was $102,000, or $0.02 per share. �Second-quarter sales were driven by strong performance in medical, and in particular, professional audio,� said Mark S. Gorder, president and chief executive officer of IntriCon. �Net income for the quarter declined due in large part to a 33 percent increase in new research and development expense. New medical projects contributed to the rise. One of IntriCon�s strategic goals for 2008 is a continued emphasis on investing in R&D�not only to develop new products and technology, but to further enhance our current product portfolio. �By leveraging our proprietary technology, we�re designing smaller, more advanced body-worn devices. We believe that our commitment to enhancing the mobility and effectiveness of these devices, combined with IntriCon�s strategic expansion initiatives, will fuel long-term growth.� For the six-month period, IntriCon reported net sales of $34.1 million and net income of $560,000, or $0.10 per diluted share. This compares to 2007 net sales of $31.5 million and net income of $554,000, or $0.10 per diluted share for the six months ended June 30, 2007. For the six-month period, net income from the company�s core business was $654,000, or $0.12 per share, partially offset by a net loss in its non-core business of $94,000, or $0.02 per share. For the six months ended June 30, 2007, core business net income was $506,000, or $0.09 per share; non-core business net income was $48,000, or $0.01 per share. Business Update For the second quarter, net sales for IntriCon�s core businesses increased 8 percent over the prior year. Net sales for the company�s non-core electronics business decreased 21 percent from the year-earlier period. Company wide, year-to-date gross margins rose slightly to 23.7 percent from 23.5 percent a year ago. Said Gorder, �Recently, IntriCon has achieved a number of key milestones that we believe bode well for our performance going forward. On the hearing health front, we introduced EthosTM, our new high-performance adaptive digital signal processing (DSP) hearing aid amplifier. Ethos� advanced capabilities are ideally suited for the hearing health market. We believe the introduction of Ethos, equipped with advanced technologies that will greatly improve hearing performance for customers, solidifies our position as a leader of high-performance adaptive DSP hearing aid amplifiers.� In professional audio, IntriCon continues to work to enhance the mobility and effectiveness of body-worn devices. IntriCon recently demonstrated the effectiveness of its nanoLinkTM wireless application to key customers. Double-digit second-quarter sales gains in medical were driven by continuing projects with large OEM customers. IntriCon�s development efforts in the medical arena continue to focus on bio-telemetry, through its strategic partnership with Advanced Medical Electronics. Said Gorder, �During the quarter, we were recognized for our strong performance over the past year. In June, IntriCon was named to FORTUNE Small Business magazine�s 2008 list of the 100 fastest-growing small companies in America�ranking number 22. We also were added to the Russell Microcap� Index�which is widely used by investment managers and institutional investors for index funds and a benchmark for both passive and active investment strategies. We believe that both honors acknowledge our accomplishments as a company and enhance our visibility among both current and prospective investors.� According to Gorder, the company continues to make progress with its 2008 strategic priorities of leveraging its proprietary technology to: gain additional traction and market share in hearing health; further advance its professional audio product offering; and develop new bio-telemetry medical applications. �Across our core markets, the shift to smaller body-worn devices is clear. IntriCon has the capabilities to design, manufacture and bring these devices to market. Given today�s unpredictable economic conditions, we might experience quarter-to-quarter fluctuations. However, we believe that our long-term growth prospects are encouraging�and we remain committed to continuing to deliver sales growth and improving gross margins,� concluded Gorder. About IntriCon Corporation Headquartered in Arden Hills, Minn., IntriCon Corporation designs, develops and manufactures miniature and micro-miniature body-worn medical and electronics products. The company is focused on three key markets: medical, hearing health, and professional audio and communications. IntriCon has facilities in the United States, Asia and Europe. The company�s common stock trades under the symbol �IIN� on the NASDAQ Stock 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 such as �may�, �will�, �believe�, �expect�, �should�, �optimistic� or �continue� or the negative thereof or other variations thereon are �forward-looking statements� within the meaning of the Securities Exchange Act of 1934 as amended. These forward-looking statements include, without limitation, statements concerning prospects in the miniature body-worn device arena, future growth and expansion, future financial condition and performance, prospects and the positioning of IntriCon to compete in chosen markets and the Company�s planned investments in research and development. 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 factors include, without limitation, risks related to the Tibbetts acquisition, including unanticipated liabilities and expenses, the risk that IntriCon may not be able to achieve its long-term strategy, weakening demand for products of the company due to general economic conditions, possible non-performance of developing technological products, the volume and timing of orders received by the company, changes in the mix of products sold, competitive pricing pressures, the cost and availability of electronic components and commodities for the company�s products, ability to create and market products in a timely manner, competition by competitors with more resources than the company, foreign currency risks arising from the company�s foreign operations, the costs and risks associated with research and development investments and other risks 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, 2007. 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 (Unaudited) � � Three Months Ended June 30, � June 30, 2008 2007 Sales, net $ 17,525,127 $ 16,937,697 � Costs of sales � 13,270,711 � � 12,731,182 � � Gross profit 4,254,416 4,206,515 � Operating expenses: Selling expense 985,035 962,872 General and administrative expense (a) 1,734,956 1,613,217 Research and development expense � 867,459 � � 650,777 � Total operating expenses 3,587,450 3,226,866 � Operating income 666,966 979,649 � Interest expense (186,081 ) (333,129 ) Interest income 1,287 12,047 Equity in earnings of partnerships (590 ) (60,000 ) Other (expense) income, net � (42,839 ) � 35,788 � Income before income taxes 438,743 634,355 Income tax expense � 28,785 � � 107,511 � � Net income $ 409,958 � $ 526,844 � � Earnings per share: Basic $ .08 $ .10 Diluted $ .07 $ .10 � Average shares outstanding: Basic 5,309,904 5,200,137 Diluted 5,574,222 5,455,743 � (a) General and administrative expense includes $139,770 and $68,626 of non-cash stock option expense related to FAS 123(R) for the three-month period ended June 30, 2008 and 2007, respectively. IntriCon Corporation Consolidated Condensed Statements of Operations (Unaudited) � � Six Months Ended June 30, � June 30, 2008 2007 Sales, net $ 34,116,507 $ 31,516,964 � Costs of sales 26,017,400 24,099,192 � Gross profit 8,099,107 7,417,772 � Operating expenses: Selling expense 1,981,261 1,805,638 General and administrative expense (a) 3,387,335 3,033,481 Research and development expense 1,655,232 1,383,458 Total operating expenses 7,023,828 6,222,577 � Operating income 1,075,279 1,195,195 � Interest expense (381,706) (486,406) Interest income 8,547 50,783 Equity in earnings of partnerships 21,566 (80,000) Other (expense) income, net (48,297) 10,051 Income before income taxes 675,389 689,623 Income tax expense 115,615 135,271 � Net income $ 559,774 $ 554,352 � Earnings per share: Basic $ .11 $ .11 Diluted $ .10 $ .10 � Average shares outstanding: Basic 5,315,382 5,198,542 Diluted 5,592,558 5,410,192 � (a) General and administrative expense includes $268,121 and $141,699 of non-cash stock option expense related to FAS 123(R) for the six-month period ended June 30, 2008 and 2007, respectively. IntriCon Corporation Consolidated Condensed Balance Sheets (Unaudited) � Assets � � June 30, 2008 December 31, 2007 (unaudited) Current assets � Cash $ 1,576,826 $ 1,651,145 Restricted cash 76,838 72,231 Accounts receivable, less allowance for doubtful accounts of $266,000 at 2008 and $259,000 at 2007 $418,000 in 2002 (all cash equivalents are restricted) 9,223,730 8,408,149 Inventories 9,099,536 9,835,060 Refundable income taxes 45,894 28,297 Note receivable from sale of discontinued operations, less allowance of $225,000 at 2008 and 2007 -- 75,000 Other current assets 962,070 775,206 � Total current assets 20,984,894 20,845,088 � Property, plant and equipment Machinery and equipment 37,187,054 36,959,184 Less: accumulated depreciation 29,155,612 28,500,318 Net property, plant and equipment 8,031,442 8,458,866 � Goodwill 8,266,438 8,238,020 � Investment in partnerships 1,611,992 1,590,426 � Other assets, net 1,529,719 1,543,127 Total assets $ 40,424,485 $ 40,675,527 IntriCon Corporation Consolidated Condensed Balance Sheets (Unaudited) � Liabilities and Shareholders� Equity � June 30, 2008 � December 31, 2007 (unaudited) Current liabilities Checks written in excess of cash $ 706,476 $ 1,209,642 Current maturities of long-term debt 1,628,865 1,476,665 Accounts payable 3,287,636 3,965,914 Income taxes payable 31,076 74,549 Deferred gain on building sale 110,084 110,084 Short term partnership payable 260,000 260,000 Other accrued liabilities � 4,189,164 � � 4,382,755 � � Total current liabilities 10,213,301 11,479,609 Long term debt, less current maturities 7,058,420 6,963,410 Other post-retirement benefit obligations 729,913 816,532 Long term partnership payable 1,020,000 1,020,000 Note payable, net of current portion (Amecon) 259,360 259,360 Deferred income taxes 92,273 89,273 Accrued pension liability 643,346 624,517 Deferred gain on building sale 770,589 825,631 Other accrued liabilities � 49,894 � � -- � Total non-current liabilities 10,623,795 10,598,723 � Total liabilities 20,837,096 22,078,332 � Commitments and contingencies Shareholders� equity Common shares, $1 par; 10,000,000 shares authorized;5,830,131 and 5,813,491 shares issued; 5,314,377 and 5,297,737 outstanding 5,830,131 5,813,491 Additional paid-in capital 13,785,113 13,391,449 Retained earnings 1,437,507 877,733 Accumulated other comprehensive loss (200,284 ) (220,400 ) Less: 515,754 common shares held in treasury, at cost � (1,265,078 ) � (1,265,078 ) Total shareholders� equity � 19,587,389 � � 18,597,195 � Total liabilities and shareholders� equity $ 40,424,485 � $ 40,675,527 �