IntriCon Corporation (NASDAQ: IIN), a designer,
developer, manufacturer and distributor of body-worn medical and
electronics devices, today announced financial results for its 2008
fourth quarter and year ended December 31, 2008.
For the fourth quarter, the company reported net sales of $15.3
million, versus net sales of $19.0 million for the 2007 fourth
quarter. IntriCon�s 2008 fourth-quarter net income was $169,000, or
$0.03 per diluted share, compared with net income of $662,000, or
$0.12 per diluted share, for the year-ago period.
For the quarter, net income from the company�s core business
(hearing health, professional audio communications and medical) was
$235,000, or $0.04 per diluted share, partially offset by a
non-core business net loss of $66,000, or $0.01 per diluted share.
For the 2007 fourth quarter, net income from IntriCon�s core
business was $682,000, or $0.12 per diluted share; the company
posted a non-core business net loss of $20,000, or $0.00 per
diluted share for the 2007 fourth quarter. The 2008 fourth-quarter
results include non-cash FAS 123(R) stock-based compensation
expense of $126,000, or $0.02 per diluted share, compared to
$72,000, or $0.01 per diluted share, for the year-ago quarter.
�Despite economic challenges, our medical and professional audio
communications businesses posted increases for the year, and we
further enhanced our foundation for long-term success in core
markets with strong fundamentals,� said Mark S. Gorder, president
and chief executive officer of IntriCon. �Even more important,
IntriCon is profitable and we�re generating strong cash flow from
operations�we believe this gives us the financial flexibility to
weather the current conditions and emerge even stronger when an
economic rebound occurs. Moreover, our continued focus on R&D
will drive new projects and further improve margins.
�That said, the same factors that impacted our third quarter
persisted in the fourth quarter, resulting in difficult operating
conditions. Net sales declined from a year ago primarily due to:
the overall economic downturn; the completion of a one-time $3.6
million hearing health project in the 2007 third and fourth
quarters, which the customer took in-house; and the continuing
decline in our non-core electronics business.�
Company wide, 2008 fourth-quarter gross margins were 26.1
percent, an increase from year-ago fourth-quarter levels of 24.7
percent, and up sequentially from 24.5 percent in the 2008 third
quarter. Year over year, gross margins were 24.5 percent in 2008
versus 25.0 percent in 2007. During the course of 2008, IntriCon
made significant investments to introduce Six Sigma lean
manufacturing methods into its medical device manufacturing
operations�resulting in a notable fourth-quarter improvement in
gross margins.
For 2008, IntriCon reported net sales of $65.6 million and net
income of $1.0 million, or $0.19 per diluted share. This compares
to 2007 net sales of $69.0 million and net income of $1.9 million,
or $0.34 per diluted share.
Core business net income for 2008 was $1.3 million, or $0.24 per
diluted share, partially offset by a net loss in the non-core
business of $277,000, or $0.05 per diluted share. For the 12 months
ended December 31, 2007, core business net income was $1.7 million,
or $0.31 per diluted share; non-core business net income was
$155,000, or $0.03 per diluted share. The 2008 12-month results
include non-cash FAS 123(R) stock-based compensation expense of
$526,000, or $0.09 per diluted share, compared to $280,000, or
$0.05 per diluted share, for 2007.
Business Update
For the fourth quarter and full year, net sales for IntriCon�s
core businesses declined from the 2007 periods, primarily related
to the factors discussed above. Despite the net sales decline, the
company�s core markets are supported by strong fundamentals and
management is optimistic about long-term prospects.
Said Gorder, �The biggest factors impacting us in hearing health
are the industry-wide pause in spending by our manufacturer
customers and their end consumers, and the one-time project
referenced earlier. It�s important to note that of the 18.9
percent, or $5.5 million, year-over-year hearing health net sales
decrease, 9.2 percent, or $2.7 million, relates directly to this
project.
�While the hearing health market is by no means shrinking,
customers are delaying hearing aid purchases. We feel that this is
chiefly due to challenging economic conditions and the overall
pullback in consumer spending. Despite this, we are optimistic that
hearing health still holds tremendous opportunities for the
company, and hearing devices that use IntriCon�s proprietary
technology offer advanced technology and superior performance,
boding well for us when the economy regains strength.�
Though down in the fourth quarter of 2008 due in part to normal
seasonality, the company�s medical net sales increased 7.3 percent
for the year. According to Gorder, IntriCon expects to initiate
several new projects later in 2009 that will continue to drive
growth in the medical business.
Said Gorder, �We spent much of 2008 laying the groundwork for
new medical projects in 2009. Our successes led to several new
projects that we anticipate will launch later this year with
leading medical OEMs. IntriCon�s position as a trusted design,
engineering and manufacturing partner�with patented proprietary
technology, particularly in the body-worn device space�is yielding
solid, ongoing relationships with leaders in the medical device
industry.�
IntriCon�s professional audio communication business serves
customers in need of high-performance portable communication
devices. These products are well suited for applications in the
fire, law enforcement, safety, aviation and military markets. In
addition, the company�s May 2007 acquisition of Tibbetts Industries
provides IntriCon access to homeland security agencies in this
market. Professional audio communication sales decreased
approximately 13.5 percent in the 2008 fourth quarter compared to
the year-ago quarter. This was primarily due to lower demand from
one particular customer. For the year, however, IntriCon�s
professional audio net sales grew 20.7 percent. This growth was in
part due to increases in the company�s security business with
existing customers.
Net sales for the company�s non-core electronics business
declined 8.7 percent from the year-earlier fourth quarter. For the
year, the electronics business decreased 17.9 percent from 2007.
IntriCon continued to mitigate the impact of this decline by
reducing this business� cost structure, positioning it to remain
cash flow positive.
Milestones
Earlier in 2008, IntriCon entered into a strategic alliance with
Australia-based Dynamic Hearing to develop new body-worn
applications and expand its hearing health and professional audio
product portfolio. During the fourth quarter, the design of a
high-performance digital signal processing (DSP) amplifier was
initiated for a hearing health customer; this is expected to be
introduced in the first half of 2009.
IntriCon�s recently released wireless nanoLink� product family
continues to be well received by the marketplace. Part of its
Bodynet� wireless portfolio, nanoLink enables wireless operation
and intra-device communication that�s ideally suited for both the
hearing health and medical markets. nanoLink� received regulatory
approval for use in 13 European countries and the company is
currently working on approval in the United States.
Said Gorder, �R&D is a top priority for IntriCon. Not only
do we make significant R&D investments�especially for a company
our size�we also participate in customer- and government-sponsored
projects. Our goal is clear: develop smaller, more advanced devices
that enable future applications in our core markets.�
Another key initiative for IntriCon is its bio-telemetry
initiative. Projects are under way with strategic partner Advanced
Medical Electronics. Through these efforts, the company is working
to develop devices that wirelessly transmit critical diagnostic and
therapeutic information. Examples of development projects include
a:
- Miniature wearable
electroencephalograph (EEG) transmitter that will digitize EEG
(brain wave) signals and transmit them in neuroscience research;
and
- Wearable electromyograph (EMG)
(muscle signals) and inertial limb tracking systems for
bio-mechanical research and clinical studies.
Growth Strategy
Said Gorder, �Over the course of 2008, we furthered our position
as the body-worn device company. Our commitment to R&D is
expected to drive new product development�now and in the future. We
have partnered with leaders in the body-worn device space, and we
continue to pursue our ambition of connecting people and devices in
the medical, hearing health and professional audio communications
markets.
�We anticipate challenging economic conditions will impact our
business in the 2009 first quarter. Additionally, we expect to see
normal seasonality during the period as the first quarter is
typically our weakest. However, our goals remain firm: to develop
new bio-telemetry medical applications; gain additional traction
and market share in hearing health; and further advance our
professional audio communications product offering. We carry these
into 2009 with an added emphasis on fiscal prudence while still
investing in growth initiatives.�
Conference Call Today
As previously announced, the company will hold an investment
community conference call today, Thursday, February 12, 2009,
beginning at 4:00 p.m. CT. Mark Gorder, president and chief
executive officer, and Scott Longval, chief financial officer, will
review fourth-quarter performance and discuss the company�s growth
strategies. To join the conference call, dial #: 1-800-240-5318
(international 1-303-262-2137). A replay of the conference call
will be available one hour after the call ends through 11:59 p.m.
CT on Thursday, February 19, 2009. To access the replay, dial
1-800-405-2236 (international 1-303-590-3000) and enter passcode:
11125063#.
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, new products, strategic alliances, future
growth and expansion, market fundamentals, 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 current economic crisis, 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, risks related to the company�s strategic
alliances and joint venture, possible non-performance of developing
the nanoLink product group and other 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
December 31, � � December 31,
2008
2007
� Sales, net $ 15,347,506 $ 19,024,522 � Costs of sales �
11,343,452 � �
14,323,158 � � Gross
profit 4,004,054 4,701,364 � Operating expenses: Selling expense
1,010,378 1,134,157 General and administrative expense (a)
1,705,334 1,683,158 Research and development expense �
809,017 � �
945,359 � Total operating
expenses 3,524,729 3,762,674 � Operating income 479,325 938,690 �
Interest expense (155,079 ) (206,488 ) Interest income 10,846
13,476 Equity in earnings of partnerships (62,527 ) (2,500 ) Other
(expense) income, net �
(36,902 ) �
(120,896 ) � Income before income taxes
235,663 622,282 � Income tax expense �
66,605 � �
(40,143 ) � Net income
$
169,058 �
$ 662,425 � �
Earnings per share: Basic $ 0.03 $ 0.13 Diluted $ 0.03 $ 0.12 �
Average shares outstanding: Basic 5,328,676 5,246,681 Diluted
5,347,467 5,664,500 � (a) General and administrative expense
includes $125,593 and $72,189 of non-cash stock option expense
related to FAS 123(R) for the three-month period ended December 31,
2008 and 2007, respectively. �
IntriCon Corporation
Consolidated Condensed Statements of Operations
(Unaudited) � � �
Twelve Months Ended December 31, �
� December 31,
2008
2007
� Sales, net $ 65,555,056 $ 68,983,380 � Costs of sales �
49,509,290 � �
51,738,573 � � Gross
profit 16,045,766 17,244,807 � Operating expenses: Selling expense
3,958,758 4,034,135 General and administrative expense (a)
6,795,607 6,858,582 Research and development expense �
3,247,767 � �
3,088,770 � Total operating
expenses 14,002,132 13,981,487 � Operating income 2,043,634
3,263,320 � Interest expense (702,217 ) (978,145 ) Interest income
19,889 84,524 Equity in earnings of partnerships (3,652 ) (157,500
) Other (expense) income, net �
(55,986 )
�
(164,288 ) � Income before income taxes
1,301,668 2,047,911 � Income tax expense �
264,067 � �
180,673 � � Net income
$
1,037,601 �
$ 1,867,238 � �
Earnings per share: Basic $ 0.20 $ 0.36 Diluted $ 0.19 $ 0.34 �
Average shares outstanding: Basic 5,314,387 5,209,567 Diluted
5,539,456 5,519,780 � (a) General and administrative expense
includes $525,972 and $280,376 of non-cash stock option expense
related to FAS 123(R) for the twelve-month period ended December
31, 2008 and 2007, respectively. �
IntriCon Corporation
Consolidated Condensed Balance Sheets � �
Assets � �
December 31,
� �
December 31,
2008
2007
(unaudited) Current assets: � Cash $ 249,396 $ 381,247 � Restricted
cash 385,916 398,514 � Accounts receivable, less allowance for
doubtful accounts of $389,000 at December 31, 2008 and $259,000 at
December 31, 2007 9,524,743 8,408,149 � Inventories 8,852,028
9,835,060 � Refundable income taxes 27,645 28,297 � Note receivable
from sale of discontinued operations, less allowance of $0 at
December 31, 2008 and $225,000 at December 31, 2007 225,000 75,000
� Other current assets �
758,193 �
775,206 � Total current assets 20,022,921 19,901,473 �
Machinery and equipment 38,016,681 36,959,184 Less: accumulated
depreciation �
30,103,771 �
28,500,318
Net property, plant and equipment 7,912,910 8,458,866 � Goodwill
8,266,438 8,238,020 � Investment in partnerships 1,386,774
1,590,426 � Other assets, net �
1,872,774 �
1,543,127 � Total Assets
$
39,461,817 $ 39,731,912 �
IntriCon Corporation Consolidated Condensed Balance
Sheets � �
Liabilities and Shareholders� Equity � �
December 31,
� �
December 31,
2008
2007
(unaudited) Current liabilities: Checks written in excess of cash $
95,082 $ 266,027 Current maturities of long-term debt 1,503,762
1,476,665 Accounts payable 3,149,671 3,965,914 Income taxes payable
39,997 74,549 Deferred gain 120,478 110,084 Short term partnership
payable 260,000 260,000 Other accrued liabilities �
4,251,707 � �
4,382,755 � � Total current
liabilities 9,420,697 10,535,994 � Long term debt, less current
maturities 6,187,923 6,963,410 Other post-retirement benefit
obligations 760,608 816,532 Other accrued liabilities 525,000 --
Long term partnership payable 760,000 1,020,000 Note payable, net
of current portion (Amecon) -- 259,360 Deferred income taxes
155,273 89,273 Accrued pension liability 578,388 624,517 Deferred
gain �
761,456 � �
825,631 � � Total
liabilities 19,149,345 21,134,717 � Shareholders� equity: � Common
shares, $1 par; 20,000,000 and 10,000,000 shares authorized;
5,858,006 and 5,813,491 shares issued; 5,342,252 and 5,297,737
outstanding at December 31, 2008 and 2007, respectively 5,858,006
5,813,491 Additional paid-in capital 14,121,772 13,391,449 Retained
earnings 1,915,334 877,733 Accumulated other comprehensive loss
(317,562 ) (220,400 ) Less: 515,754 common shares held in treasury,
at cost �
(1,265,078 ) �
(1,265,078 ) �
Total shareholders� equity
�
20,312,472 � �
18,597,195 � �
Total Liabilities and
Shareholders� Equity
$ 39,461,817 �
$
39,731,912 �
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