Table of Contents
The Company and its
subsidiaries, IntriCon, Inc. (formerly known as Resistance Technology, Inc.),
RTI Electronics, Inc. and IntriCon Tibbetts Corporation, referred to as the
borrowers, entered into a credit facility with LaSalle Bank, National
Association (now Bank of America), referred to as the lender, on May 22, 2007
replacing the prior credit facilities with M & I Business Credit (formerly
known as Diversified Business Credit, Inc.). The credit facility provides for:
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|
|
|
▪
|
a $10,000,000 revolving
credit facility, with a $200,000 subfacility for letters of credit. Under the
revolving credit facility, the availability of funds depends on a borrowing
base composed of stated percentages of our eligible trade receivables and
eligible inventory, less a reserve.
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|
|
|
▪
|
a $4,500,000 term loan,
which was used to fund the Tibbetts acquisition.
|
Loans under the new
credit facility are secured by a security interest in substantially all of the
assets of the borrowers including a pledge of the stock of the subsidiaries.
All of the borrowers are jointly and severally liable for all borrowings under
the new credit facility.
Proceeds from the new
facility were used to repay amounts owed under the prior credit facilities of
approximately $5.0 million and the $4.5 million purchase price to complete the
Tibbetts asset acquisition.
Loans under the new
credit facility bear interest, at the option of the Company, at:
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|
|
the London InterBank
Offered Rate (LIBOR) plus 1.90%, in the case of revolving line of credit
loans, or LIBOR plus 2.15%, in the case of the term loan, or
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|
|
the base rate, which is
the higher of (a) the rate publicly announced from time to time by the lender
as its prime rate and (b) the Federal Funds Rate plus 0.5%.
|
Interest is payable
monthly in arrears, except that interest on LIBOR based loans is payable at the
end of the one, two or three month interest periods applicable to LIBOR based
loans, or every three months in the case of LIBOR based loans with a six month
interest period.
Weighted average interest
on the domestic asset-based revolving credit facilities (including the prior
credit facility) was 5.51%, 7.82% and 8.17% for 2008, 2007 and 2006,
respectively.
The new credit facility
will expire and all outstanding loans will become due and payable on June 30,
2012. The term loan requires quarterly principal payments, commencing on
September 30, 2007, based on an increasing installment schedule, with any
balance due on June 30, 2012. In 2008 we used proceeds of $1,013,000 from the
equipment sale-leaseback described below to pay down the term loan.
The outstanding balance
of the revolving credit facility was $3,000,000 at December 31, 2008 and 2007,
respectively. The total remaining availability on the revolving credit facility
was approximately $4,349,000 and $4,443,000 at December 31, 2008 and 2007,
respectively.
The revolving facility
carries a non-use fee equal to 0.25% per year of the unused portion of the
revolving line of credit facility, payable quarterly in arrears.
The Company is subject to
various covenants under the credit facility, including financial covenants
relating to tangible net worth, funded debt to Earnings Before Interest, Taxes,
Depreciation and Amortization, fixed charge coverage ratio and capital
expenditures. Under the credit facility, except as otherwise permitted, the
borrowers may not, among other things, incur or permit to exist any
indebtedness; grant or permit to exist any liens or security interests on their
assets or pledge the stock of any subsidiary; make investments; be a party to
any merger or consolidation, or purchase of all or substantially all of the
assets or equity of any other entity; sell, transfer, convey or lease all or
any substantial part of its assets or capital securities; sell or assign, with or
without recourse, any receivables; issue any capital securities; make any
distribution or dividend (other than stock dividends), whether in cash or
otherwise, to any of its equityholders; purchase or redeem any of its equity
interests or any warrants, options or other rights in respect thereof; enter
into any transaction with any of its affiliates or with any director, officer
or employee of any borrower; be a party to any unconditional purchase
obligations; cancel any claim or debt owing to it; enter into any
agreement inconsistent with the provisions of the credit facility or other
agreements and documents entered into in connection with the credit facility;
engage in any line of business other than the businesses engaged in on the date
of the credit facility and businesses reasonably related thereto; or permit its
charter, bylaws or other organizational documents to be amended or modified in
any way which could reasonably be expected to materially adversely affect the
interests of the lender. Effective as of September 30, 2007, the credit
facility was amended to change the tangible net worth covenant. Effective as of
June 30, 2008, the credit facility was amended to correct an error in the
amortization table set forth in the loan agreement. Effective as of December
31, 2008, the credit facility was amended to change the fixed charge coverage
covenant to exclude payments made in connection with the June 2008 equipment
sale-leaseback described below. As of December 31, 2008, the Company was in
compliance with all financial covenants under the credit facility, as amended.
55
Table of Contents
Upon the occurrence and
during the continuance of an event of default (as defined in the credit
facility), the lender may, among other things: terminate its commitments to the
borrowers (including terminating or suspending its obligation to make loans and
advances); declare all outstanding loans, interest and fees to be immediately
due and payable; take possession of and sell any pledged assets and other
collateral; and exercise any and all rights and remedies available to it under
the Uniform Commercial Code or other applicable law. In the event of the
insolvency or bankruptcy of any borrower, all commitments of the lender will
automatically terminate and all outstanding loans, interest and fees will be
immediately due and payable. Events of default include, among other things:
failure to pay any amounts when due; material misrepresentation; default in the
performance of any covenant, condition or agreement to be performed that is not
cured within 20 days after notice from the lender; default in the payment of
other indebtedness or other obligation with an outstanding principal balance of
more than $50,000, or of any other term, condition or covenant contained in the
agreement under which such obligation is created, the effect of which is to
allow the other party to accelerate such payment or to terminate the
agreements; the insolvency or bankruptcy of any borrower; the entrance of any
judgment against any borrower in excess of $50,000, which is not fully covered
by insurance; the occurrence of a change in control (as defined in the credit
facility); certain collateral impairments; and a contribution failure with
respect to any employee benefit plan that gives rise to a lien under ERISA.
The prior credit facility
originally included a real estate loan with an original principal balance of
$1,500,000, which was associated with our Vadnais Heights manufacturing
facility. In June 2006, the Company completed a sale-leaseback of the Vadnais
Heights manufacturing facility. The transaction generated proceeds of
$2,650,000, of which $1,388,000 was used to repay the associated real estate
loan and the remainder to pay down our domestic revolver. The remaining gain on
the sale of $825,631 is being recognized over the initial 10-year lease term as
the renewal options in the lease are not assured and a penalty does not exist
if we do not exercise the renewal options.
In addition to its
domestic credit facilities, the Companys wholly-owned subsidiary, IntriCon,
PTE LTD., entered into an international senior secured credit agreement with
Oversea-Chinese Banking Corporation Ltd. that provides for a $1.8 million line
of credit through 2009. Borrowings bear interest at a rate of .75% to 2.5% over
the lenders prevailing prime lending rate. Weighted average interest on the
international credit facilities was 5.84%, 6.36% and 6.47% for 2008, 2007 and
2006, respectively. The outstanding balance was $605,000 and $1,071,000 at
December 31, 2008 and 2007, respectively. The total remaining availability on
the international senior secured credit agreement was approximately $1,203,000
and $740,000 at December 31, 2008 and 2007, respectively.
In June 2008, the Company
completed a sale-leaseback of machinery and equipment with Bank of America. The
transaction generated proceeds of $1,098,000, of which $1,013,000 was used to
pay down the domestic term loan. The capital lease agreement expires in June
2014, requires monthly payments of $15,800 and has a present value of future
minimum lease payments of $1,098,000 with an effective interest rate of 5.14%.
The transaction resulted in a gain of $62,000 which is being recognized over
the initial 6-year lease term.
The Company also has
entered into several other capital lease agreements to fund the acquisition of
machinery and equipment. The total principal amount of all capital leases
(including the equipment sale-leaseback described above) was $1,661,000 with
effective interest rates ranging from 5.1% to 8.0%. These agreements range from
3 to 6 years. The outstanding balance under these capital lease agreements at
December 31, 2008 and December 31, 2007 was $1,330,000 and $94,000,
respectively. The accumulated amortization on leased equipment was $257,000 and
$119,000 at December 31, 2008 and 2007, respectively. The amortization of
capital leases is included in depreciation expense for 2008, 2007 and 2006.
56
Table of Contents
8. OTHER ACCRUED LIABILITIES
Other accrued liabilities at December 31, 2008, and
2007 were as follows:
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|
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|
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|
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2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Salaries, wages and commissions
|
|
$
|
2,020,539
|
|
$
|
2,496,610
|
|
Taxes, including payroll withholdings and excluding
income taxes
|
|
|
80,202
|
|
|
101,617
|
|
Accrued severance benefits
|
|
|
61,639
|
|
|
100,000
|
|
Accrued professional fees
|
|
|
361,580
|
|
|
161,736
|
|
Current portion of note payable
|
|
|
259,360
|
|
|
256,360
|
|
Deferred revenue
|
|
|
|
|
|
113,618
|
|
Accrued Dynamic Hearing strategic alliance payments
|
|
|
475,000
|
|
|
|
|
Customers advance payments on contracts
|
|
|
|
|
|
190,062
|
|
Other
|
|
|
993,387
|
|
|
962,752
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,251,707
|
|
$
|
4,382,755
|
|
Accrued severance
benefits recorded at December 31, 2007 were paid in 2008. Severance benefits
accrued at December 31, 2008 will be paid in 2009.
9. DOMESTIC AND FOREIGN INCOME
TAXES
Domestic and foreign income taxes (benefits) from
continuing operations were comprised as follows:
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|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
$
|
|
|
$
|
|
|
State
|
|
|
93,319
|
|
|
(11,978
|
)
|
|
21,654
|
|
Foreign
|
|
|
104,748
|
|
|
182,651
|
|
|
111,258
|
|
|
|
|
198,067
|
|
|
170,673
|
|
|
132,912
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
66,000
|
|
|
10,000
|
|
|
41,548
|
|
|
|
|
66,000
|
|
|
10,000
|
|
|
41,548
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
264,067
|
|
$
|
180,673
|
|
$
|
174,460
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
income taxes is as follows:
|
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|
|
|
|
|
|
|
|
|
Foreign
|
|
|
597,234
|
|
|
1,088,951
|
|
|
1,492,092
|
|
Domestic
|
|
|
704,434
|
|
|
958,960
|
|
|
(77,130
|
)
|
|
|
$
|
1,301,668
|
|
$
|
2,047,911
|
|
$
|
1,414,962
|
|
57
Table of Contents
The following is a
reconciliation of the statutory federal income tax rate to the effective tax
rate based on income (loss):
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|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
Tax provision at statutory rate
|
|
|
34.0
|
%
|
|
34.0
|
%
|
|
34.0
|
%
|
Change in valuation allowance
|
|
|
(29.1
|
)
|
|
(20.9
|
)
|
|
0.5
|
|
Impact of permanent items, including stock based
compensation expense
|
|
|
14.6
|
|
|
|
|
|
|
|
Effect of foreign tax rates
|
|
|
(2.4
|
)
|
|
(8.7
|
)
|
|
(25.1
|
)
|
State taxes net of federal benefit
|
|
|
3.2
|
|
|
1.4
|
|
|
1.5
|
|
Other
|
|
|
0.0
|
|
|
3.1
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic and foreign income tax rate
|
|
|
20.3
|
%
|
|
8.8
|
%
|
|
12.3
|
%
|
The tax effects of
temporary differences that give rise to significant portions of the deferred
tax assets and deferred tax liabilities at December 31, 2008, and 2007 are
presented below:
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Net operating
loss carry forwards United States
|
|
$
|
4,707,273
|
|
$
|
5,299,146
|
|
Post-retirement
benefit obligations
|
|
|
327,098
|
|
|
475,859
|
|
Goodwill
amortization
|
|
|
155,937
|
|
|
269,948
|
|
State income
taxes
|
|
|
|
|
|
483,594
|
|
Inventory
reserves
|
|
|
785,976
|
|
|
901,720
|
|
Guarantee
obligations and estimated future costs of service accruals
|
|
|
31,568
|
|
|
35,700
|
|
Compensated
absences, principally due to accrual for financial reporting purposes
|
|
|
225,424
|
|
|
225,041
|
|
Other
|
|
|
1,033,860
|
|
|
442,827
|
|
Total gross
deferred tax assets
|
|
|
7,267,135
|
|
|
8,133,835
|
|
Less: valuation
allowance
|
|
|
7,267,135
|
|
|
8,133,835
|
|
Net deferred tax
assets
|
|
$
|
|
|
$
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
Plant and
equipment, due to differences in depreciation and capitalized interest
|
|
|
(155,273
|
)
|
|
(89,273
|
)
|
Total gross
deferred tax liabilities
|
|
|
(155,273
|
)
|
|
(89,273
|
)
|
Net deferred tax
liabilities
|
|
$
|
(155,273
|
)
|
$
|
(89,273
|
)
|
Domestic and foreign deferred taxes were comprised as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
Federal
|
|
State
|
|
Foreign
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred asset
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Non-current deferred liability
|
|
|
|
|
|
|
|
|
(155,273
|
)
|
|
(155,273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
|
|
$
|
|
|
$
|
(155,273
|
)
|
$
|
(155,273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2007
|
|
Federal
|
|
State
|
|
Foreign
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred asset
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Non-current deferred liability
|
|
|
|
|
|
|
|
|
(89,273
|
)
|
|
(89,273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
|
|
$
|
|
|
$
|
(89,273
|
)
|
$
|
(89,273
|
)
|
The valuation allowance
is maintained against deferred tax assets which the Company has determined are
not likely to be realized. In addition, the Company has net operating loss
carryforwards for Federal tax purposes of approximately $13.6 million that
begin to expire in 2022. Subsequently recognized tax benefits, if any, relating
to the valuation allowance for deferred tax assets or realization of net
operating loss carryforwards will be reported in the consolidated statements of
operations. If substantial changes in the Companys ownership occur, there
could be an annual limitation on
the amount of the carryforwards that are available to be utilized. The Company
analyzes ownership changes on a consistent basis.
58
Table of Contents
At December 31,
2007, the Company had a valuation allowance against deferred tax assets to
reduce the total to an amount our management believed was appropriate. The
valuation allowance decreased in the current year primarily as a result of
taxable income generated during the year, which was also impacted by an
adjustment in the amount of $167,000 to decrease the valuation allowance to
their proper amounts.
The Company has not
recognized a deferred tax liability relating to cumulative undistributed
earnings of controlled foreign subsidiaries in Germany and Singapore that are
essentially permanent in duration. If some or all of the undistributed earnings
of the controlled foreign subsidiaries are remitted to the Company in the future,
income taxes, if any, after the application of foreign tax credits will be
provided at that time. Determination of the amount of unrecognized tax
liability related to undistributed earnings in foreign subsidiaries is not
currently practical.
In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The Company regularly assesses the likelihood that the deferred tax
assets will be recovered from future taxable income. The Company considers
projected future taxable income and ongoing tax planning strategies, then
records a valuation allowance to reduce the carrying value of the net deferred
taxes to an amount that is more likely than not to be realized. Based upon the
Companys assessment of all available evidence, including the previous three
years of United States based taxable income and loss after permanent items,
estimates of future profitability, and the Companys overall prospects of
future business, the Company determined that it is more likely than not that
the Company will not be able to realize a portion of the deferred tax assets in
the future. The Company will continue to assess the potential realization of
deferred tax assets on an annual basis, or an interim basis if circumstances
warrant. If the Companys actual results and updated projections vary
significantly from the projections used as a basis for this determination, the
Company may need to change the valuation allowance against the gross deferred
tax assets.
The following was the
income before income taxes for each jurisdiction in which the Company has
operations for the years ended December 31, 2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
2008
|
|
December
31,
2007
|
|
December
31,
2006
|
|
United States
|
|
$
|
704,434
|
|
$
|
958,960
|
|
$
|
(77,130
|
)
|
Singapore
|
|
|
283,455
|
|
|
930,718
|
|
|
1,346,807
|
|
Germany
|
|
|
313,779
|
|
|
158,233
|
|
|
145,285
|
|
Income before income taxes
|
|
$
|
1,301,668
|
|
$
|
2,047,911
|
|
$
|
1,414,962
|
|
The Company adopted the
provisions of FASB Interpretation 48, Accounting for Uncertainty in Income
Taxes, on January 1, 2007. Previously, the Company had accounted for tax
contingencies in accordance with Statement of Financial Accounting Standards 5,
Accounting for Contingencies. As required by FASB Interpretation 48, which
clarifies Statement 109, Accounting for Income Taxes, the Company recognizes
the financial statement benefit of a tax position only after determining that
the relevant tax authority would more likely than not sustain the position
following an audit. For tax positions meeting the more-likely-than-not
threshold, the amount recognized in the financial statements is the largest
benefit that has a greater than 50 percent likelihood of being realized upon
ultimate settlement with the relevant taxing authority. At the adoption date,
the Company applied Interpretation 48 to all tax positions for which the
statute of limitations remained open. As a result of the implementation of Interpretation
48, the Company did not record any adjustment to the liability for unrecognized
income tax benefits or retained earnings. The Company does not have any
unrecognized tax benefits as of December 31, 2008.
The Company is subject to
income taxes in the U.S. federal jurisdiction, and various states and foreign
jurisdictions. Tax regulations within each jurisdiction are subject to the
interpretation of the related tax laws and regulations and require significant
judgment to apply. With few exceptions, the Company is no longer subject to
U.S. federal, state and local, or non-U.S. income tax examinations by tax
authorities for the years starting before 2005. There are no other on-going or
pending IRS, state, or foreign examinations.
59
Table of Contents
The Company recognizes
penalties and interest accrued related to unrecognized tax benefits in income
tax expense for all periods presented. During the tax years ended December 31,
2008, 2007, and 2006 the Company has no amounts accrued for the payment of
interest and penalties.
10.
EMPLOYEE BENEFIT PLANS
The Company has defined
contribution plans for most of its domestic employees. Under these plans,
eligible employees may contribute amounts through payroll deductions
supplemented by employer contributions for investment in various investments
specified in the plans. The Company contribution to these plans for 2008, 2007,
and 2006 was $419,000, $360,000, and $289,000, respectively.
The Company provides
post-retirement medical benefits to certain domestic full-time employees who
meet minimum age and service requirements. In 1999, a plan amendment was
instituted which limits the liability for post-retirement benefits beginning
January 1, 2000 for certain employees who retire after that date. This plan
amendment resulted in a $1.1 million unrecognized prior service cost reduction
which will be recognized as employees render the services necessary to earn the
post-retirement benefit. The Companys policy is to pay the cost of these
post-retirement benefits when required on a cash basis. The Company also has
provided certain foreign employees with retirement related benefits.
The following table
presents the amounts recognized in the Companys consolidated balance sheet at
December 31, 2008 and 2007 for post-retirement medical benefits:
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Change in Projected Benefit Obligation
|
|
|
|
|
|
|
|
Projected benefit obligation at January 1
|
|
$
|
1,001,532
|
|
$
|
1,243,744
|
|
Service cost (excluding administrative expenses)
|
|
|
|
|
|
629
|
|
Interest cost
|
|
|
55,292
|
|
|
69,225
|
|
Actuarial loss/(gain)
|
|
|
8,784
|
|
|
(132,066
|
)
|
Participant contributions
|
|
|
85,000
|
|
|
115,000
|
|
Benefits paid
|
|
|
(245,000
|
)
|
|
(295,000
|
)
|
|
|
|
|
|
|
|
|
Projected benefit obligation at December 31
|
|
|
905,608
|
|
|
1,001,532
|
|
|
|
|
|
|
|
|
|
Change in fair value of plan assets
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
160,000
|
|
|
180,000
|
|
Participant contributions
|
|
|
85,000
|
|
|
115,000
|
|
Benefits paid
|
|
|
(245,000
|
)
|
|
(295,000
|
)
|
|
|
|
|
|
|
|
|
Fair value of plan assets at December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(905,608
|
)
|
|
(1,001,532
|
)
|
|
|
|
|
|
|
|
|
Amount recognized in statement of financial position
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
145,000
|
|
|
185,000
|
|
Noncurrent liabilities
|
|
|
760,608
|
|
|
816,532
|
|
Net amount
|
|
$
|
905,608
|
|
$
|
1,001,532
|
|
|
|
|
|
|
|
|
|
Amount recognized in other comprehensive income
|
|
|
|
|
|
|
|
Unrecognized net actuarial gain
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
Accrued post-retirement
medical benefit costs are classified as other post-retirement benefit
obligations as of December 31, 2008 and 2007.
60
Table of Contents
Net periodic
post-retirement medical benefit costs for 2008, 2007 and 2006 included the
following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
Service cost
|
|
$
|
|
|
$
|
629
|
|
$
|
5,029
|
|
Interest cost
|
|
|
55,292
|
|
|
69,225
|
|
|
71,175
|
|
Amortization of unrecognized actuarial loss
|
|
|
|
|
|
|
|
|
(5,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic post-retirement medical benefit cost
|
|
$
|
55,292
|
|
$
|
69,854
|
|
$
|
70,296
|
|
For measurement purposes,
a 9.0% annual rate of increase in the per capita cost of covered benefits
(i.e., health care cost trend rate) was assumed for 2009; the rate was assumed
to decrease gradually to 5% by the year 2013 and remain at that level
thereafter. The health care cost trend rate assumption may have a significant
effect on the amounts reported. For example, increasing the assumed health care
cost trend rates by one percentage point in each year would increase the
accumulated post-retirement medical benefit obligation as of December 31, 2008
by $11,707 and the aggregate of the service and interest cost components of net
periodic post-retirement medical benefit cost for the year ended December 31,
2008 by $768. Employer contributions for 2009 are expected to be approximately
$145,000.
The assumptions used years ended December 31 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
Annual increase in cost of benefits
|
|
|
9.00
|
%
|
|
9.00
|
%
|
|
10.00
|
%
|
|
Discount rate used to determine year-end obligations
|
|
|
7.00
|
%
|
|
6.00
|
%
|
|
6.00
|
%
|
|
Discount rate used to determine year-end expense
|
|
|
6.00
|
%
|
|
6.00
|
%
|
|
6.00
|
%
|
The following employer benefit payments, which reflect
expected future service, are expected to be paid:
|
|
|
2009
|
|
$ 145,000
|
2010
|
|
$ 145,000
|
2011
|
|
$ 145,000
|
2012
|
|
$ 145,000
|
2013
|
|
$ 140,000
|
Years 2014 2018
|
|
$ 685,000
|
The Company provides
retirement related benefits to former executive employees and to certain
employees of foreign subsidiaries. The liabilities established for these
benefits at December 31, 2008 and 2007 are illustrated below.
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
90,656
|
|
$
|
90,656
|
|
Long term portion
|
|
|
578,388
|
|
|
624,517
|
|
|
|
|
|
|
|
|
|
Total liability at December 31
|
|
$
|
669,044
|
|
$
|
715,173
|
|
11. CURRENCY TRANSLATION
ADJUSTMENTS
All assets and
liabilities of foreign operations in which the functional currency is foreign
are translated into U.S. dollars at prevailing rates of exchange in effect at
the balance sheet date. Revenues and expenses are translated using average
rates of exchange for the year. The functional currency of the Companys German
operations is the European euro. As of January 1, 2006, the functional currency
of the Companys Singapore operations changed from the Singapore dollar to the
U.S. dollar. Adjustments resulting from the process of translating the
financial statements of foreign subsidiaries into U.S. dollars are reported as
a separate component of shareholders equity, net of tax, where appropriate.
Foreign currency transaction amounts included in the statements of operation
include a loss of $77,000 in 2008, a loss of $112,000 in 2007, and a loss of
$100,000 in 2006.
61
Table of Contents
12. COMMON
STOCK AND STOCK OPTIONS
The Company applies the
provisions of SFAS No. 123R Share-Based Payment (FAS 123(R)), which
establishes the accounting for stock-based awards.
The Company has a 1994
stock option plan, a 2001 stock option plan, a non-employee directors stock
option plan and a 2006 equity incentive plan. New grants may not be made under
the 1994, the 2001 and the non-employee directors stock option plans; however
certain option grants under these plans remain exercisable as of December 31,
2008. The aggregate number of shares of common stock for which awards could be
granted under the 2006 equity incentive plan as of the date of adoption was
698,500 shares. Additionally, as outstanding options under the 2001 stock
option plan and non-employee directors stock option plan expire, the shares of
the Companys common stock subject to the expired options will become available
for issuance under the 2006 equity incentive plan.
Under the various plans,
executives, employees and outside directors receive awards of options to
purchase common stock. Under the 2006 equity incentive plan, the Company may
also grant stock awards, stock appreciation rights, restricted stock units and
other equity-based awards, although no such awards, other than awards under the
director program and management purchase program described below, had been
granted as of December 31, 2008. Under all awards, the terms are fixed on the
grant date. Generally, the exercise price equals the market price of the
Companys stock on the date of the grant. Options under the plans generally
vest over three years, and have a maximum term of 10 years.
Additionally, the board
has established the non-employee directors stock fee election program, referred
to as the director program, as an award under the 2006 equity incentive plan.
The director program gives each non-employee director the right under the 2006
equity incentive plan to elect to have some or all of his quarterly director
fees paid in common shares rather than cash. There were 1,902 and 754 shares
issued in lieu of cash for director fees under the director program for the
years ended December 31, 2008 and 2007, respectively.
On July 23, 2008, the
Compensation Committee of the Board of Directors approved the non-employee
director and executive officer stock purchase program, referred to as the
management purchase program, as an award under the 2006 Plan. The purpose of
the management purchase program is to permit the Companys non-employee
directors and executive officers to purchase shares of the Companys Common
Stock directly from the Company. Pursuant to the management purchase program,
as amended, participants may elect to purchase shares of Common Stock from the
Company not exceeding an aggregate of $100,000 during any fiscal year.
Participants may make such election one time during each twenty business day
period following the public release of the Companys earnings announcement,
referred to as a window period, and only if such participant is not in
possession of material, non-public information concerning the Company and
subject to the discretion of the Board to prohibit any transactions in Common
Stock by directors and executive officers during a window period. There were
5,000 shares purchased under the management purchase program during the year
ended December 31, 2008.
Stock option activity during the periods indicated is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-average
Exercise Price
|
|
Aggregate Intrinsic
Value
|
|
|
Outstanding at December 31, 2005
|
|
|
729,900
|
|
$
|
3.98
|
|
|
|
|
Options
forfeited
|
|
|
(51,500
|
)
|
|
1.96
|
|
|
|
|
Options granted
|
|
|
160,000
|
|
|
5.68
|
|
|
|
|
Options
exercised
|
|
|
(40,667
|
)
|
|
2.79
|
|
|
|
|
Outstanding at December 31, 2006
|
|
|
797,733
|
|
$
|
4.51
|
|
|
|
|
Options
forfeited
|
|
|
(2,000
|
)
|
|
4.60
|
|
|
|
|
Options granted
|
|
|
165,000
|
|
|
13.72
|
|
|
|
|
Options
exercised
|
|
|
(106,502
|
)
|
|
8.19
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
854,231
|
|
$
|
5.83
|
|
|
|
|
Options
forfeited
|
|
|
(45,131
|
)
|
|
9.82
|
|
|
|
|
Options granted
|
|
|
175,950
|
|
|
7.35
|
|
|
|
|
Options
exercised
|
|
|
(3,400
|
)
|
|
2.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
981,650
|
|
$
|
5.93
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2007
|
|
|
524,397
|
|
$
|
3.70
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2008
|
|
|
642,866
|
|
$
|
4.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for future grant at January 1, 2008
|
|
|
425,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for future grant at December 31,2008
|
|
|
261,894
|
|
|
|
|
|
|
|
62
Table of Contents
The number of shares
available for future grant at December 31, 2008, does not include a total of up
to 399,200 shares subject to options outstanding under the 2001 stock option
plan and non-employee directors stock option plan which will become available
for grant under the 2006 Equity Incentive Plan in the event of the expiration
of said options. Based on the stock price at December 31, 2008, the aggregate
intrinsic value of outstanding and exercisable options was $0.
The weighted-average
remaining contractual term of options exercisable at December 31, 2008, was 5.6
years. The total intrinsic value of options exercised during fiscal 2008, 2007,
and 2006, was $19,028, $475,090, and $111,874, respectively.
The weighted-average per
share fair value of options granted was $2.85, $5.13, and $2.77, in 2008, 2007,
and 2006, respectively, using the Black-Scholes option-pricing model.
For disclosure purposes,
the fair value of each stock option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
Dividend yield
|
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Expected volatility
|
|
|
42.3 - 53.5
|
%
|
|
43.0
|
%
|
|
57.5
|
%
|
Risk-free interest rate
|
|
|
1.4 - 2.8
|
%
|
|
3.5
|
%
|
|
4.6
|
%
|
Expected life (years)
|
|
|
4.0
|
|
|
4.0
|
|
|
4.0
|
|
The Black-Scholes
option-pricing model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In
addition, option-pricing models require the input of subjective assumptions,
including the expected stock price volatility. Because the Companys options
have characteristics different from those of traded options, in the opinion of
management, the existing models do not necessarily provide a reliable single
measure of the fair value of its options.
The Company calculates
expected volatility for stock options and awards using both historical
volatility as well as the average volatility of our peer competitors. The
reason historical volatility was not strictly used is the material changes in
the Companys operations as a result of the sales of business segments that
occurred in 2004 and 2005 (see Note 2). The expected term for stock options and
awards is calculated based on the Companys estimate of future exercise at the
time of grant.
The Company currently
estimates a nine percent forfeiture rate for stock options but will continue to
review this estimate in future periods.
The risk-free rates for
the expected terms of the stock options and awards and the employee stock
purchase plan is based on the U.S. Treasury yield curve in effect at the time
of grant.
The Company recorded
$525,972, $280,376 and $213,531 of non-cash stock option expense related to FAS
123(R) for the years ended December 31, 2008, 2007 and 2006, respectively. As
of December 31, 2008, there was $946,492 of total unrecognized compensation
costs related to non-vested awards that is expected to be recognized over a
weighted-average period of 2.0 years.
63
Table of Contents
At the 2007
annual meeting of shareholders, the shareholders approved the IntriCon
Corporation 2007 Employee Stock Purchase Plan (the Purchase Plan). A maximum
of 100,000 shares may be sold under the Purchase Plan. There were 34,213 shares
purchased under the plan for the year ended December 31, 2008. There were no
employee stock purchases under the plan as of December 31, 2007.
|
|
13.
|
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
|
The following is a tabulation
of unaudited quarterly results of operations (in thousands, except for per
share data).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, net
|
|
$
|
16,591
|
|
$
|
17,525
|
|
$
|
16,091
|
|
$
|
15,348
|
|
$
|
14,579
|
|
$
|
16,938
|
|
$
|
18,442
|
|
$
|
19,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
3,845
|
|
|
4,254
|
|
|
3,943
|
|
|
4,004
|
|
|
3,211
|
|
|
4,207
|
|
|
5,126
|
|
|
4,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
150
|
|
|
410
|
|
|
309
|
|
|
169
|
|
|
28
|
|
|
527
|
|
|
650
|
|
|
662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
$
|
.03
|
|
$
|
.08
|
|
$
|
.06
|
|
$
|
.03
|
|
$
|
.01
|
|
$
|
.10
|
|
$
|
.13
|
|
$
|
.13
|
|
Diluted income per share
|
|
$
|
.03
|
|
$
|
.07
|
|
$
|
.06
|
|
$
|
.03
|
|
$
|
.01
|
|
$
|
.10
|
|
$
|
.12
|
|
$
|
.12
|
|
|
|
|
|
a)
|
Per share amounts for the
quarters have each been calculated separately. Accordingly, quarterly amounts
may not add to the annual amounts because of differences in the average
common shares outstanding during each period. Additionally, in regard to
diluted per share amounts only, quarterly amounts may not add to the annual
amounts.
|
|
|
14.
|
INCOME PER SHARE
|
The following
table sets forth the computation of basic and diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
Income
Numerator
|
|
Shares
Denominator
|
|
Per
Share
Amount
|
|
Income
Numerator
|
|
Shares
Denominator
|
|
Per
Share
Amount
|
|
Loss
Numerator
|
|
Shares
Denominator
|
|
Per
Share
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
Income available to common shareholders
|
|
$
|
1,037,601
|
|
5,314,387
|
|
$
|
.20
|
|
$
|
1,867,238
|
|
5,209,567
|
|
$
|
.36
|
|
$
|
1,162,512
|
|
|
5,159,216
|
|
$
|
.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
225,069
|
|
|
|
|
|
|
|
310,213
|
|
|
|
|
|
|
|
|
160,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share
|
|
$
|
1,037,601
|
|
5,539,456
|
|
$
|
.19
|
|
$
|
1,867,238
|
|
5,519,780
|
|
$
|
.34
|
|
$
|
1,162,512
|
|
|
5,319,802
|
|
$
|
.22
|
|
The Company excluded stock
options of 231,950, 190,131, and 196,000, in 2008, 2007, and 2006,
respectively, from the computation of the diluted income per share as their
effect would be anti-dilutive. For additional disclosures regarding the stock
options, see Note 12.
|
|
15.
|
CONTINGENCIES AND COMMITMENTS
|
We are a defendant
along with a number of other parties in approximately 122 lawsuits as of
December 31, 2008, (approximately 122 lawsuits as of December 31, 2007)
alleging that plaintiffs have or may have contracted asbestos-related diseases
as a result of exposure to asbestos products or equipment containing asbestos
sold by one or more named defendants. Due to the noninformative nature of the
complaints, we do not know whether any of the complaints state valid claims
against us. Certain insurance carriers have informed us that the primary
policies for the period August 1, 1970-1973, have been exhausted and that the
carriers will no longer provide a defense under those policies. We
have requested that the carriers substantiate this situation. We believe we
have additional policies available for other years which have been ignored by
the carriers. Because settlement payments are applied to all years a litigant
was deemed to have been exposed to asbestos, we believe when settlement
payments are applied to these additional policies, we will have availability
under the years deemed exhausted. We do not believe that the asserted
exhaustion of the primary insurance coverage for this period will have a
material adverse effect on our financial condition, liquidity, or results of
operations. Management believes that the number of insurance carriers involved
in the defense of the suits and the significant number of policy years and
policy limits, to which these insurance carriers are insuring us, make the
ultimate disposition of these lawsuits not material to our consolidated
financial position or results of operations.
64
Table of Contents
The Companys
wholly owned French subsidiary, Selas SAS, filed for insolvency in France and
is being managed by a court appointed judiciary administrator. The Company may
be subject to additional litigation or liabilities as a result of the French
insolvency proceeding.
We are also
involved in other lawsuits arising in the normal course of business. While it
is not possible to predict with certainty the outcome of these matters,
management is of the opinion that the disposition of these lawsuits and claims
will not materially affect our consolidated financial position, liquidity or
results of operations.
Total rent
expense for 2008, 2007, and 2006 under leases pertaining primarily to
engineering, manufacturing, sales and administrative facilities, with an
initial term of one year or more, aggregated $1,583,000, $1,440,000, and
$1,082,000, respectively. Remaining rentals payable under such leases,
including equipment leases are as follows: 2009 - $1,588,000; 2010 -
$1,126,000; 2011 - $954,000; 2012 - $477,000; 2013 - $406,000 and thereafter -
$1,056,000, which includes two leased facilities in Minnesota that expire in
2011 and 2016 respectively, one leased facility in California that expires in
2009, two leased facilities in Maine that expire in 2012 and 2017 respectively,
one leased facility in Singapore that expires in 2010 and one leased facility
in Germany that expires in 2012. Certain leases contain renewal options as
defined in the lease agreements.
On October 5,
2007, the Company entered into employment agreements with its executive
officers. The agreements call for payments ranging from three months to two
years base salary and unpaid bonus, if any, to the executives should there be a
change of control as defined in the agreement and the executives are not
retained for a period of at least one year following such change of control.
Under the agreements, all stock options granted to the executives would vest immediately
and be exercisable in accordance with the terms of such stock options. The
Company also agreed that if it enters into an agreement to sell substantially
all of its assets, it will obligate the buyer to fulfill its obligations
pursuant to the agreements. The agreements terminate, except to the extent that
any obligation remains unpaid, upon the earlier of termination of the
executives employment prior to a change of control or asset sale for any
reason or the termination of the executive after a change of control for any
reason other than by involuntary termination as defined in the agreements.
On July 20,
2008, the Company entered into a strategic alliance agreement with Dynamic
Hearing Pty Ltd (Dynamic Hearing). Effective October 1, 2008, Dynamic Hearing
granted a license to the Company to use certain of Dynamic Hearings
technology. The initial term of the agreement is five years from the date of
execution and may be extended upon agreement of the parties within two months
of the expiration of the initial term; however, either party may terminate the
agreement after the second year of the term upon three months notice. The
Company agreed to pay Dynamic Hearing: (i) an annual fee for access to the
technology licensed pursuant to the agreement and (ii) an additional second
component fee to maintain exclusive rights granted to the Company with respect
to hearing health products. Additionally, IntriCon agreed to make royalty
payments on products that incorporate Dynamic Hearings technology, and Dynamic
Hearing has also agreed to provide the Company with engineering and other
services in connection with the licensed technology. The Company has recorded
$1,000,000 payable to Dynamic Hearing for the first two years of exclusive
license fees described above. The Company has $331,000 and $691,000 of
short-term and long-term assets, respectively, remaining at December 31, 2008
which will be amortized through September 2010 as it pertains to exclusive
rights and engineering and other services. The technology access fee will be
amortized through September 2013, the life of the agreement.
65
Table of Contents
|
|
16.
|
RELATED-PARTY TRANSACTIONS
|
One of the
Companys subsidiaries leases office and factory space from a partnership
consisting of three present or former officers of the subsidiary, including
Mark Gorder, a member of the Companys Board of Directors and the President and
Chief Executive Officer of the Company. The subsidiary is required to pay all
real estate taxes and operating expenses. In the opinion of management, the
terms of the lease agreement are comparable to those which could be obtained
from unaffiliated third parties. The total base rent expense, real estate taxes
and other charges incurred under the lease was approximately $477,000 in 2008
and $481,000 for each of 2007 and 2006. Annual lease commitments, which include
base rent expense, real estate taxes and other charges approximate $475,000
through October 2011.
The Company
uses the law firm of Blank Rome LLP for legal services. A partner of that firm is
the son-in-law of the Chairman of our Board of Directors. We paid that firm
approximately $235,000, $466,000, and $282,000 for legal services and costs in
2008, 2007, and 2006, respectively. The Chairman of our Board of Directors is
considered independent under applicable Nasdaq and SEC rules because (i) no
payments were made to the Chairman or the partner directly in exchange for the
services provided by the law firm and (ii) the amounts paid to the law firm did
not exceed the thresholds contained in the Nasdaq standards. Furthermore, the
aforementioned partner does not provide any legal services to the Company and
is not involved in billing matters.
|
|
17.
|
STATEMENTS OF CASH FLOWS
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
ended December 31,
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
Interest
received
|
|
$
|
30,692
|
|
$
|
78,896
|
|
$
|
33,674
|
|
Interest
paid
|
|
|
599,856
|
|
|
741,930
|
|
|
380,159
|
|
Income taxes
paid
|
|
|
222,224
|
|
|
194,502
|
|
|
205,565
|
|
Deferred
gain recorded on sale of manufacturing facility
|
|
|
|
|
|
|
|
|
1,045,799
|
|
Acquisition
of assets of Amecon, Inc:
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
172,962
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
53,522
|
|
Equipment
purchased through capital lease obligation
|
|
|
1,277,823
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
12,233
|
|
|
6,120
|
|
|
|
|
License
agreement financed through licensor
|
|
|
1,000,000
|
|
|
|
|
|
|
|
The 2006
adjustments to the assets of Amecon, Inc., which were acquired in October 2005,
was due to the final adjustment to the working capital requirement pursuant to
the asset purchase agreement.
|
|
18.
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
Derivative
financial instruments in the form of interest rate swaps are used by the
Company in managing its interest rate exposure. The Company does not hold or
issue derivative financial instruments for trading purposes. When entered into,
the Company formally designates the derivative financial instrument as a hedge
of a specific underlying exposure if such criteria are met, and documents both
the risk management objectives and strategies for undertaking the hedge. The
Company formally assesses, both at inception and at least quarterly thereafter,
whether the derivative financial instruments that are used in hedging
transactions are effective at offsetting changes in either the fair value or
cash flows of the related underlying exposure. Because of the high correlation
between the derivative financial instrument and the underlying exposure being
hedged, fluctuations in the value of the derivative financial instruments are
generally offset by changes in the fair values or cash flows of the underlying
exposures being hedged. Any ineffective portion of a derivative financial
instruments change in fair value would be immediately recognized in earnings.
The swaps are
designated as cash flow hedges with the changes in fair value recorded in
accumulated other comprehensive loss and as a derivative hedge asset or
liability, as applicable. The swaps settle periodically in arrears with the
related amounts for the current settlement period payable to, or receivable
from, the counter-parties included in accrued liabilities or accounts
receivable and recognized in earnings as an adjustment to interest expense from
the underlying debt to which the swap is designated. Approximately $40,000 and
$2,000 of additional expense were recorded to interest expense as a result of
said adjustments for the years ended December 31, 2008 and 2007, respectively.
During 2008 and 2007, ineffectiveness from such hedges was $0.
66
Table of Contents
At December
31, 2008 and 2007, the Company had a United States Dollar (USD) denominated
interest rate swap outstanding which effectively fixed the interest rate on
floating rate debt, exclusive of lender spreads, at 5.36% for a notional
principal amount of $2,000,000 through September 2010. The derivative net loss
on this contract recorded in accumulated other comprehensive loss at December
31, 2008 and 2007 was $136,248 and $79,215, respectively. The accumulated other
comprehensive loss at December 31, 2008 is expected to be reclassified into
earnings over the next 21 months, the life of the agreement.
|
|
19.
|
INVESTMENT IN EQUITY INSTRUMENTS
|
On December
27, 2006, the Company joined the Hearing Instrument Manufacturers Patent
Partnership (HIMPP). Members of the partnership include the largest six hearing
aid manufacturers as well as several other smaller manufacturers. The purchase
price of $1,800,000 included a 9% equity interest in K/S HIMPP as well as a
license agreement that will grant the Company access to over 45 US registered
patents. The Company accounted for the K/S HIMPP investment using the equity
method of accounting for common stock, as the equity interest is deemed to be
more than minor as defined in AICPA Statement of Position 78-9 Accounting
for Investments in Real Estate Ventures. The investment required a $260,000
payment made at the time of closing. The unpaid balance of $1,020,000 at
December 31, 2008 will be paid in three annual installments of $260,000 in 2009
through 2011, with a final installment of $240,000 in 2012. The unpaid balance
is unsecured and bears interest at an annual rate of 4%, which is payable
annually with each installment. The investment in the partnership exceeded
underlying net assets by approximately $1,475,000. Based on the final
assessment of the partnership, the Company has determined that approximately
$345,000 of the excess of the investment over the underlying partnership net
assets relates to underlying patents. The remaining $1,130,000 of the excess of
the investment over the underlying partnership net assets has been assigned to
the non-exclusive patent license agreement. The Company has recorded a $144,900
and $332,500 decrease in the carrying amount of the investment, reflecting
amortization of the patents, patent license agreement and the Companys portion
of the partnerships operating results for the years ended December 31, 2008
and 2007, respectively. Total amortization expense remaining is $1,180,000. The
difference of $207,000 in the carrying value of the investment at December 31,
2008 is the Companys remaining investment in partnership net assets.
The Companys
subsidiary, IntriCon Tibbetts Corporation, owns a 50% interest in a joint
venture with a Swiss company to market, design, manufacture, and sell audio
coils to the hearing health industry. The Company has recorded a total decrease
of approximately $59,000 in the carrying amount of the investment for the year
ended December 31, 2008, consisting of an approximately $141,000 increase for
the Companys portion of the joint ventures operating results for the year
ended December 31, 2008 offset by a decrease of $200,000 for dividends received
from the joint venture during the year ended December 31, 2008. The Company
recorded a $175,000 increase in the carrying amount of the investment, reflecting
the Companys portion of the joint ventures operating results for the period
ended December 31, 2007. The carrying amount of the investment was $64,000 and
$123,000 at December 31, 2008 and 2007, respectively.
67
Table of Contents
Condensed financial information
of the joint venture at and for the years ended December 31, 2008 and 2007 are
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Balance Sheet:
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
642
|
|
$
|
1,013
|
|
Non-current assets
|
|
|
196
|
|
|
273
|
|
Total assets
|
|
$
|
838
|
|
$
|
1,286
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
312
|
|
|
889
|
|
Non-current liabilities
|
|
|
|
|
|
353
|
|
Stockholders equity
|
|
|
526
|
|
|
44
|
|
Total liabilities and stockholders equity
|
|
$
|
838
|
|
$
|
1,286
|
|
|
|
|
|
|
|
|
|
Income Statement:
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
2,750
|
|
$
|
2,820
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
282
|
|
$
|
400
|
|
The following
tables set forth, for the periods indicated, net revenue by market:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2008
|
|
Years Ended
December 31,
2007
|
|
December 31,
2006
|
|
Body-Worn
Device Segment
|
|
|
|
|
|
|
|
|
|
|
Hearing
Health
|
|
$
|
23,768,000
|
|
$
|
29,297,000
|
|
$
|
24,956,000
|
|
Medical
|
|
|
20,133,000
|
|
|
18,765,000
|
|
|
8,439,000
|
|
Professional
Audio Communications
|
|
|
14,007,000
|
|
|
11,606,000
|
|
|
8,041,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic
Products Segment
|
|
|
|
|
|
|
|
|
|
|
Electronics
|
|
|
7,647,000
|
|
|
9,315,000
|
|
|
10,290,000
|
|
Total
Revenue
|
|
$
|
65,555,000
|
|
$
|
68,983,000
|
|
$
|
51,726,000
|
|
68
Table of Contents
ITEM 9.
Changes
in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
ITEM 9A(T).
Controls and
Procedures
Evaluation of
Disclosure Controls and Procedures.
As of the end of the period covered by this
report (the Evaluation Date), the Company carried out an evaluation, under
the supervision and with the participation of management, including the Chief
Executive Officer (principal executive officer) and the Chief Financial Officer
(principal financial officer), of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) of the Exchange Act). Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the Evaluation Date,
our disclosure controls and procedures were effective to ensure that
information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in applicable rules
and forms, and (ii) accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, to allow
timely decisions regarding required disclosure.
Managements
Annual Report on Internal Control Over Financial Reporting.
The report of management required under this
Item 9A is contained in Item 8 of this Annual Report on Form 10-K
under the caption Managements Report on Internal Control Over Financial
Reporting.
Changes in
Internal Controls over Financial Reporting.
There were no changes in our internal
control over financial reporting (as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter
covered by this report that would have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial
reporting.
A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. Because
of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.
ITEM 9B.
Other Information
In December
2008, the Compensation Committee of the Board of Directors made determinations
with respect to the bonuses and stock options to be awarded to the executive
officers for services in 2008 and salaries to be paid in 2009. For further
information, see Exhibit 10.13 which is incorporated herein by reference.
In February
2009, the Compensation Committee of the Board of Directors adopted the 2009
Annual Incentive Plan for Executives and Key Employees for Fiscal Year 2009.
For further information, see Exhibit 10.13 which is incorporated herein by
reference.
The disclosure
of the foregoing information is voluntary and shall not be deemed an admission
that such information is material or required to be disclosed on a Current
Report on Form 8-K.
69
Table of Contents
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
The
information called for by Item 10 is incorporated by reference from the
Companys definitive proxy statement relating to its 2009 annual meeting of
shareholders, including but not necessarily limited to the sections of the 2009
proxy statement entitled Proposal 1 Election of Directors and Section
16(a) Beneficial Ownership Reporting Compliance.
The
information concerning executive officers contained in Item 4A hereof is
incorporated by reference into this Item 10.
Code of Ethics
The Company
has adopted a code of ethics that applies to its directors, officers and
employees, including its principal executive officer, principal financial and
accounting officer, controller and persons performing similar functions. Copies
of the Companys code of ethics are available without charge upon written
request directed to Cari Sather, Director of Human Resources, IntriCon
Corporation, 1260 Red Fox Road, Arden Hills, MN 55112. The Company intends to
satisfy the disclosure requirement under Item 10 of Form 8-K regarding any
future amendments to a provision of its code of ethics by posting such information
on the Companys website: www.intricon.com.
ITEM 11.
Executive Compensation
The
information called for by Item 11 is incorporated by reference from the
Companys definitive proxy statement relating to its 2009 annual meeting of
shareholders, including but not necessarily limited to the sections of the 2009
proxy statement entitled Director Compensation for 2008, and Executive
Compensation.
ITEM 12.
Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters
The information
called for by Item 12 is incorporated by reference from the Companys
definitive proxy statement relating to its 2009 annual meeting of shareholders,
including but not necessarily limited to the section of the 2009 proxy
statement entitled Share Ownership of Certain Beneficial Owners, Directors and
Certain Officers.
Equity Compensation
Plan Information
The following
table details information regarding the Companys existing equity compensation
plans as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
(a)
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
|
|
(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
|
|
Equity compensation plans approved by
security holders
|
|
|
799,150
|
|
$
|
6.68
|
|
|
261,894
|
(1)
|
Equity compensation plans not approved by
security holders(2)
|
|
|
182,500
|
|
$
|
3.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
981,650
|
|
$
|
5.93
|
|
|
261,894
|
|
70
Table of Contents
(1) The amount
shown in column (c) represents shares issuable under the Companys 2006 Equity
Incentive Plan (the 2006 Plan). Under the terms of the 2006 Plan, as
outstanding options under the Companys 2001 Stock Option Plan and Non-Employee
Directors Stock Option Plan expire, the shares of common stock subject to the
expired options will become available for issuance under the 2006 Plan. As of
December 31, 2008, 399,200 shares of common stock were subject to outstanding
options under the 2001 Stock Option Plan and Non-Employee Directors Stock
Option Plan. Accordingly, if any of these options expire, the shares of common
stock subject to expired options also will be available for issuance under the
2006 Plan.
(2) Represents
shares issuable under the Non-Employee Directors Stock Option Plan, the
(Non-Employee Directors Plan), pursuant to which directors who are not
employees of the Company or any of its subsidiaries were eligible to receive
options. The exercise price of the option was the fair market value of the
stock on the date of grant. Options become exercisable in equal one-third
annual installments beginning one year from the date of grant, except that the
vesting schedule for discretionary grants is determined by the Compensation
Committee. As a result of the approval of the 2006 Plan by the shareholders at
the 2006 annual meeting of shareholders, no further grants will be made
pursuant to the Non-Employee Directors Plan.
ITEM 13.
Certain Relationships and
Related Transactions, and Director Independence
The
information called for by Item 13 is incorporated by reference from the
Companys definitive proxy statement relating to its 2009 annual meeting of
shareholders, including but not necessarily limited to the sections of the 2009
proxy statement entitled Certain Relationships and Related Party Transactions
and Independence of the Board of Directors.
ITEM 14.
Principal Accountant Fees
and Services
The
information called for by Item 14 is incorporated by reference from the
Companys definitive proxy statement relating to its 2009 annual meeting of
shareholders, including but not necessarily limited to the sections of the 2009
proxy statement entitled Independent Registered Public Accounting Fee
Information.
PART IV
ITEM 15.
Exhibits, Financial Statement Schedules
|
|
(a)
|
The
following documents are filed as a part of this report:
|
|
|
1)
|
Financial
Statements
The consolidated financial statements
of the Registrant are set forth in Item 8 of Part II of this report.
|
|
|
|
Consolidated Statements of
Operations for the years ended December 31, 2008, 2007 and 2006.
|
|
|
|
Consolidated Balance
Sheets at December 31, 2008 and 2007.
|
|
|
|
Consolidated Statements of
Cash Flows for the years ended December 31, 2008, 2007 and 2006.
|
|
|
|
Consolidated Statements of
Shareholders Equity and Comprehensive Income for the years ended December
31, 2008, 2007 and 2006.
|
|
|
|
Notes to Consolidated
Financial Statements.
|
|
|
2)
|
Financial
Statement Schedules
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM ON
SUPPLEMENTARY INFORMATION
To the
Shareholders, Audit Committee and Board of Directors
IntriCon Corporation and Subsidiaries
Minneapolis, Minnesota
Our audits
were made for the purpose of forming an opinion on the basic 2008, 2007, and
2006 consolidated financial statements of IntriCon Corporation and Subsidiaries
taken as a whole. The consolidated supplemental schedule II is presented for
purposes of complying the Securities Exchange Commissions rules and is not a
part of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in our audits of the 2008, 2007
and 2006 basic consolidated financial statements and, in our opinion, is fairly
stated in all materials respects in relation to the basic consolidated
financial statements taken as a whole.
VIRCHOW, KRAUSE & COMPANY, LLP
Minneapolis, Minnesota
March 3, 2009
71
Table of Contents
Schedule II - Valuation and Qualifying
Accounts
INTRICON CORPORATION AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts
December 31, 2008, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
beginning
of Year
|
|
Addition
charged to
costs and
expense
|
|
Less
deductions
|
|
Balance
at end
of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
258,873
|
|
$
|
131,090
|
|
$
|
956
|
(a)
|
$
|
389,007
|
|
Allowance for note receivable
|
|
$
|
225,000
|
|
$
|
|
|
$
|
225,000
|
|
$
|
|
|
Deferred tax asset valuation allowance
|
|
$
|
8,133,835
|
|
$
|
|
|
$
|
866,700
|
|
$
|
7,267,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
245,543
|
|
$
|
91,236
|
|
$
|
77,906
|
(a)
|
$
|
258,873
|
|
Allowance for note receivable
|
|
$
|
225,000
|
|
$
|
|
|
$
|
|
|
$
|
225,000
|
|
Deferred tax asset valuation allowance
|
|
$
|
8,562,449
|
|
$
|
|
|
$
|
428,614
|
|
$
|
8,133,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
370,195
|
|
$
|
19,036
|
|
$
|
143,688
|
(a)
|
$
|
245,543
|
|
Allowance for note receivable
|
|
$
|
296,077
|
|
$
|
|
|
$
|
71,077
|
|
$
|
225,000
|
|
Deferred tax asset valuation allowance
|
|
$
|
8,593,829
|
|
$
|
|
|
$
|
31,380
|
|
$
|
8,562,449
|
|
|
|
|
|
a)
|
Uncollectible
accounts written off.
|
|
b)
|
Continuing
operations net operating loss utilized to offset tax impact of operating
income from discontinued operations.
|
|
|
|
|
All other
schedules are omitted because they are not applicable, or because the
required information is included in the consolidated financial statements or
notes thereto.
|
|
|
|
3)
|
|
Exhibits
|
|
|
2.1
|
Asset and
Share Purchase Agreement dated as of October 11, 2002 among the Company,
Selas S.A.S., Andritz A.G. and Andritz Acquisition S.A.S. Schedules and
attachments are listed under section 1.2 of the agreement and will be
provided to the Commission upon request. (Incorporated by reference from the
Companys current report on Form 8-K filed with the Commission on December
17, 2002.)
|
72
Table of Contents
|
|
2.2
|
Stock
purchase Agreement dated July 21, 2003 between the Company and Ventra Ohio
Corp, and VTA USA, INC. Schedules and attachments are listed beginning on
page 38 of the agreement and will be provided to the Commission upon request.
(Incorporated by reference from the Companys current report on Form 8-K/A
filed with the Commission on July 23, 2003.)
|
|
|
2.3
|
Agreement of
Sales between the Company and BET Investments, Inc. dated December 31, 2002,
as amended. (Incorporated by reference from the Companys current report on
Form 8-K filed with the Commission on June 29, 2004.)
|
|
|
2.4
|
Asset
purchase agreement dated March 31, 2005 among the Company and Selas Heat
Technology, LLP (Schedules and exhibits are omitted pursuant to Regulation
S-K, Item 601(b)(2); IntriCon Corporation agrees to furnish a copy of such
schedules and/or exhibits to the Securities and Exchange Commission upon
request) (Incorporated by reference from the Companys quarterly report on
Form 10-Q for the quarter ended March 31, 2005.)
|
|
|
2.5
|
Asset
Purchase Agreement by and among IntriCon Corporation, TI Acquisition
Corporation, Tibbetts Industries, Inc. and certain shareholders of Tibbetts
Industries, Inc. dated April 19, 2007. (Incorporated by reference from the
Companys current report on Form 8-K filed with the Commission on April 23,
2007.)
|
|
|
3.1
|
The
Companys Amended and Restated Articles of Incorporation, as amended.
(Incorporated by reference from the Companys current report on Form 8-K
filed with the Commission on April 24, 2008.)
|
|
|
3.2
|
The
Companys Amended and Restated By-Laws. (Incorporated by reference from the
Companys annual report on Form 8-K filed with the Commission October 12,
2007.)
|
|
|
+ 10.1.1
|
Amended and
Restated 1994 Stock Option Plan. (Incorporated by reference from the
Companys annual report on Form 10-K for the year ended December 31, 1997.)
|
|
|
+ 10.1.2
|
Form of
Stock Option Agreements granted under the Amended and Restated 1994 Stock
Option Plan. (Incorporated by reference from the Companys annual report on
Form 10-K for the year ended December 31, 1995.)
|
|
|
+ 10.2.1
|
2001 Stock
Option Plan. (Incorporated by reference from the Companys annual report on
Form 10-K for the year ended December 31, 2000.)
|
|
|
10.2.2
|
Form of
Stock Option Agreement issued to executive officers pursuant to the 2001
Stock Option Plan. (Incorporated by reference from the Companys current
report on Form 8-K filed with the Commission on April 26, 2005.)
|
|
|
+ 10.3
|
Supplemental
Retirement Plan (amended and restated effective January 1, 1995).
(Incorporated by reference from the Companys annual report on Form 10-K for
the year ended December 31, 1995.).
|
|
|
10.4
|
Amended and
Restated Office/Warehouse Lease, between Resistance Technology, Inc. and
Arden Partners I. L.L.P. (of which Mark S. Gorder is one of the principal
owners) dated November 1, 1996. (Incorporated by reference from the Companys
annual report on Form 10-K for the year ended December 31, 1996.)
|
|
|
+ 10.5.1
|
Amended and
Restated Non-Employee Directors Stock Option Plan. (Incorporated by
reference from the Companys annual report on Form 10-K for the year ended
December 31, 2001.)
|
73
Table of Contents
|
|
10.5.2
|
Form of
Non-employee director Option Agreement for options issued pursuant to the
Amended and Restated Non-Employee Directors Stock Option Plan. (Incorporated
by reference from the Companys current report on Form 8-K filed with the
Commission on October 3, 2005.)
|
|
|
+ 10.6
|
Retirement
Agreement, Consulting Agreement and General Release, dated August 30, 2000,
between the Company and Stephen F. Ryan. (Incorporated by reference from the
Companys quarterly report on Form 10-Q for the quarter ended September 30,
2000.)
|
|
|
10.7
|
Separation
Agreement dated November 30, 2001 between the Company and Robert W. Ross.
(Incorporated by reference from the Companys annual report on Form 10-K for
the year ended December 31, 2001.)
|
|
|
10.8
|
Settlement
agreement dated September 12, 2003 between the Company and Andritz AG,
Andritz Acquisition S.A.A. (Incorporated by reference from the Companys
quarterly report on Form 10-Q for the quarter ended September 30, 2003.)
|
|
|
+ 10.9
|
Termination
agreement following change of control or asset sale between the Company and
Mark S. Gorder dated December 14, 2004. (Incorporated by reference from the
Companys current report on Form 8-K filed with the Commission on December
20, 2004.)
|
|
|
+ 10.10.1*
|
Summary
sheet for director fees.
|
|
|
+ 10.10.2*
|
Summary
sheet for executive officer compensation.
|
|
|
10.11.1
|
Credit and
Security Agreement dated August 31, 2005 by Resistance Technology, Inc. and
RTI Electronics, Inc. and Diversified Business Credit, Inc. (Incorporated by
reference from the Companys quarterly report on Form 10-Q for the quarter
ended September 30, 2005.)
|
|
|
10.11.2
|
Security
Agreement dated August 31, 2005 between IntriCon Corporation and Diversified
Business Credit, Inc. (Incorporated by reference from the Companys quarterly
report on Form 10-Q for the quarter ended September 30, 2005.)
|
|
|
10.11.3
|
First
Amendment to Credit and Security Agreement between Resistance Technology,
Inc., RTI Electronics, Inc. and M&I Business Credit f/k/a Diversified
Business Credit, Inc. dated June 30, 2006. (Incorporated by reference from
the Companys quarterly report on Form 10-Q for the quarter ended September
30, 2006.)
|
|
|
10.11.4
|
Guaranty by
Corporation dated August 31, 2005 between IntriCon Corporation and
Diversified Business Credit, Inc. (Incorporated by reference from the
Companys quarterly report on Form 10-Q for the quarter ended September 30,
2005.)
|
|
|
10.11.5
|
Term Loan
Supplement (Real Estate) to Credit Agreement dated August 31, 2005, by
Resistance Technology, Inc. and RTI Electronics, Inc. for the benefit of
Diversified Business Credit, Inc. (Incorporated by reference from the
Companys quarterly report on Form 10-Q for the quarter ended September 30,
2005.)
|
|
|
10.11.6
|
Term Loan
Supplement (Equipment) to Credit Agreement dated August 31, 2005, by
Resistance Technology, Inc. and RTI Electronics, Inc. for the benefit of
Diversified Business Credit, Inc. (Incorporated by reference from the
Companys quarterly report on Form 10-Q for the quarter ended September 30,
2005.)
|
|
|
10.11.7
|
Mortgage,
Security Agreement, Fixture Financing Statement and Assignment of Leases and
Rents by Resistance Technology, Inc. to Diversified Business Credit, Inc.
(Incorporated by reference from the Companys quarterly report on Form 10-Q
for the quarter ended September 30, 2005.)
|
74
Table of Contents
|
|
10.12
|
Promissory
note from Selas Heat Technology, LLP dated March 31, 2005. (Incorporated by
reference from the Companys quarterly report on Form 10-Q for the quarter
ended March 31, 2005.)
|
|
|
10.13.1
|
Employment
agreement between the Company and William J. Kullback dated April 25, 2005.
(Incorporated by reference from the Companys current report on Form 8-K
filed with the Commission on April 26, 2005.)
|
|
|
10.13.2
|
Termination
agreement following change of control or asset sale between the Company and
William J. Kullback dated April 25, 2005. (Incorporated by reference from the
Companys current report on Form 8-K filed with the Commission on April 26,
2005.)
|
|
|
+ 10.14.1
|
2006 Equity
Incentive Plan. (Incorporated by reference from the Companys quarterly
report on Form 10-Q for the quarter ended March 31, 2006.)
|
|
|
+ 10.14.2
|
Form of
Stock Option Agreement issued to executive officers pursuant to the 2006
Equity Incentive Plan. (Incorporated by reference from the Companys
quarterly report on Form 10-Q for the quarter ended March 31, 2006.)
|
|
|
+ 10.14.3
|
Form of
Stock Option Agreement issued to directors pursuant to the 2006 Equity
Incentive Plan. (Incorporated by reference from the Companys quarterly
report on Form 10-Q for the quarter ended March 31, 2006.)
|
|
|
+ 10.14.4
|
Non-Employee
Directors Stock Fee Election Program. (Incorporated by reference from the
Companys annual report on Form 10-K for the year ended December 31, 2006.)
|
|
|
+10.14.5
|
Non-Employee
Director and Executive Officer Stock Purchase Program, as amended.
(Incorporated by reference from the Companys quarterly report on Form 10-Q
filed with the Commission on November 14, 2008.)
|
|
|
+ 10.15
|
Deferred
Compensation Plan. (Incorporated by reference from the Companys current
report on Form 8-K filed with the Commission on May 17, 2006.)
|
|
|
10.16
|
Purchase
Agreement between Resistance Technology, Inc. and MDSC Partners, LLP dated
May 5, 2006. (Incorporated by reference from the Companys current report on
Form 8-K filed with the Commission on June 21, 2006.)
|
|
|
10.17
|
Land and
Building Lease Agreement between Resistance Technology, Inc. and MDSC
Partners, LLP dated June 15, 2006. (Incorporated by reference from the
Companys current report on Form 8-K filed with the Commission on June 21,
2006.)
|
|
|
10.18
|
Agreement by
and between K/S HIMPP and IntriCon Corporation dated December 1, 2006 and the
schedules thereto. (Incorporated by reference from the Companys annual
report on Form 10-K for the year ended December 31, 2006.)
|
|
|
+ 10.19
|
Employment
Agreement with Mark S. Gorder. (Incorporated by reference from the Companys
annual report on Form 8-K filed with the Commission October 12, 2007.)
|
|
|
+ 10.20
|
Form of
Employment Agreement with executive officers. (Incorporated by reference from
the Companys annual report on Form 8-K filed with the Commission October 12,
2007.)
|
|
|
10.21.1
|
Loan and
Security Agreement dated as of May 22, 2007, by and among IntriCon,
Resistance Technology, Inc., RTI Electronics, Inc. and IntriCon Tibbetts
Corporation and LaSalle Bank National Association. (Incorporated by reference
from the Companys current report on Form 8-K filed with the Commission on
May 25, 2007.)
|
75
Table of Contents
|
|
10.21.2
|
First
Amendment to Loan and Security Agreement dated as of September 30, 2007, by
and among IntriCon, Resistance Technology, Inc., RTI Electronics, Inc. and
IntriCon Tibbetts Corporation and LaSalle Bank National Association.
(Incorporated by reference from the Companys current report on Form 8-K
filed with the Commission October 12, 2007.)
|
|
|
10.21.3
|
Second
Amendment to Loan and Security Agreement dated as of June 30, 2008, by and
among IntriCon, Resistance Technology, Inc., RTI Electronics, Inc., IntriCon
Tibbetts Corporation and LaSalle Bank National Association. (Incorporated by
reference from the Companys current report on Form 8-K filed with the
Commission July 7, 2008.)
|
|
|
10.21.4*
|
Third
Amendment to Loan and Security Agreement dated as of December 31, 2008, by
and among IntriCon, IntriCon, Inc., RTI Electronics, Inc., IntriCon Tibbetts
Corporation and LaSalle Bank National Association.
|
|
|
10.21.5
|
Trademark
Security Agreement dated as of May 22, 2007, by IntriCon in favor of LaSalle
Bank National Association. (Incorporated by reference from the Companys
current report on Form 8-K filed with the Commission on May 25, 2007.)
|
|
|
10.21.6
|
Trademark
Security Agreement dated as of May 22, 2007, by Resistance Technology, Inc.
in favor of LaSalle Bank National Association. (Incorporated by reference
from the Companys current report on Form 8-K filed with the Commission on
May 25, 2007.)
|
|
|
10.22*
|
Strategic
Alliance Agreement among IntriCon Corporation and Dynamic Hearing Pty Ltd
effective as of October 1, 2008.
|
|
|
21*
|
List of
significant subsidiaries of the Company.
|
|
|
23.1*
|
Consent of
Independent Registered Public Accounting Firm (Virchow, Krause & Company,
LLP).
|
|
|
31.1*
|
Certification
of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
31.2*
|
Certification
of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
32.1*
|
Certification
of principal executive officer pursuant to U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
32.2*
|
Certification
of principal financial officer pursuant to U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
*
|
Filed
herewith.
|
+
|
Denotes
management contract, compensatory plan or arrangement.
|
76
Table of Contents
SIGNATURES
Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
|
|
|
|
INTRICON CORPORATION
(Registrant)
|
|
|
By:
|
/s/ Scott
Longval
|
|
|
|
Scott Longval
|
|
|
Chief Financial Officer,
|
|
|
Treasurer and Secretary
|
Dated: March
3, 2009
Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
|
|
/s/ Mark S.
Gorder
|
|
|
|
Mark S.
Gorder
|
President
and Chief Executive
|
Officer and
Director (principal executive officer)
|
March 3,
2009
|
|
/s/
Scott
Longval
|
|
|
|
Scott
Longval
|
Chief
Financial Officer
|
Treasurer
and Secretary
|
(principal
accounting and financial officer)
|
March 3,
2009
|
|
/s/Nicholas
A. Giordano
|
|
|
|
Nicholas A.
Giordano
|
Director
|
March 3,
2009
|
|
/s/Robert N.
Masucci
|
|
|
|
Robert N.
Masucci
|
Director
|
March 3,
2009
|
|
/s/ Michael
J. McKenna
|
|
|
|
Michael J.
McKenna
|
Director
|
March 3,
2009
|
|
/s/ Philip
N. Seamon
|
|
|
|
Philip N.
Seamon
|
Director
|
March 3,
2009
|
77
Table of Contents
EXHIBIT
INDEX
|
|
EXHIBITS:
|
|
|
10.10.1
|
Summary sheet for director fees.
|
|
|
10.10.2
|
Summary sheet for executive officer compensation.
|
|
|
10.21.4
|
Third Amendment to Loan and Security Agreement dated as of December
31, 2008, by and among IntriCon, IntriCon, Inc., RTI Electronics, Inc.,
IntriCon Tibbetts Corporation and LaSalle Bank National Association.
|
|
|
10.22
|
Strategic Alliance Agreement among IntriCon Corporation and Dynamic
Hearing Pty Ltd effective as of October 1, 2008.
|
|
|
21
|
List of significant subsidiaries of the Company.
|
|
|
23.1
|
Consent of Independent Registered Public Accounting Firm (Virchow,
Krause and Company, LLP).
|
|
|
31.1
|
Certification of principal executive officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification of principal financial officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification of principal executive officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of
2002.
|
|
|
32.2
|
Certification of principal financial officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of
2002.
|
78
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