IntriCon Corporation (NASDAQ: IIN), a designer,
developer, manufacturer and distributor of body-worn medical and
electronics devices, today announced financial results for its 2009
third quarter ended September 30, 2009.
For the third quarter, the company reported net sales of $14.2
million, versus net sales of $16.1 million for the 2008 third
quarter. IntriCon’s 2009 third-quarter net loss was $736,000, or
$0.14 per diluted share, compared with net income of $309,000, or
$0.06 per diluted share, for the year-ago period. Included in the
2009 third-quarter results were Datrix-related acquisition costs
and bank financing charges totaling $532,000, or $0.10 per diluted
share.
For the quarter, the company’s body-worn device segment (hearing
health, professional audio communications and medical) has a net
loss of $179,000, or $0.03 per diluted share, versus net income of
$426,000, or $0.08 per diluted share, for the fiscal 2008 third
quarter. IntriCon recorded a small, non-core electronics segment
net loss of $25,000, or $0.01 per diluted share, compared to a 2008
third-quarter non-core net loss of $117,000, or $0.02 per diluted
share. The costs and charges related to the Datrix transaction were
corporate charges not associated with either business segment.
“Sequentially, we’re making both top- and bottom-line progress,”
said Mark S. Gorder, president and chief executive officer of
IntriCon. “Revenues increased from the 2009 first and second
quarters and we’re narrowing our net loss, excluding transaction
costs, quarter-over-quarter. While we’re still seeing order delays
due to economic uncertainty and sluggish demand, we continue to
make internal adjustments to reduce costs, which we believe allows
us to align our business model with the current climate.
“We are very encouraged by the fact that our medical business
recorded its strongest quarter ever, growing 13.7 percent from the
year-ago period and 5.0 percent sequentially from the 2009 second
quarter. Medical revenues are primarily being driven by glucose
monitor sales—a device that we manufacture for a large medical
OEM.”
For the nine-month period, IntriCon reported net sales of $41.5
million and a net loss of $2.3 million, or $0.43 per diluted share.
Included in the nine-month results were Datrix-related acquisition
costs and bank financing charges of $546,000, or $0.10 per diluted
share. This compares to 2008 net sales of $50.2 million and net
income of $869,000, or $0.16 per diluted share. The 2009 nine-month
net loss from the body-worn device segment was $1.4 million, or
$0.26 per share, with a non-core net loss of $382,000, or $0.07 per
diluted share. For the nine months ended September 30, 2008, core
business net income was $1.1 million, or $0.20 per diluted share;
the non-core business net loss was $211,000, or $0.04 per diluted
share.
Gross margins in the 2009 third quarter were 20.5 percent,
compared to 24.5 percent in the year-ago quarter. The decline was
primarily due to lower sales levels. IntriCon continues to execute
gross margin improvement initiatives, such as implementing lean
Six-Sigma manufacturing principles in its manufacturing
facilities.
After adding back costs associated with the Datrix acquisition,
charges related to bank financing, non-cash charges for
depreciation, amortization and stock-based compensation expense,
the company generated $532,000 in pro-forma net income for the
quarter. IntriCon believes that this pro-forma information is
helpful in an analysis of its operating results by eliminating the
non-recurring and non-cash items noted in the table below. A
reconciliation of GAAP basis net loss to pro-forma net income
follows:
(in $000s) Q1 FY09 Q2
FY09 Q3 FY09 YTD
GAAP basis net loss $
(989 ) $ (598 ) $ (736 ) $ (2,323 ) Non-recurring
acquisition costs - 14 263 277 Non-recurring debt refinancing costs
- - 269 269 Depreciation and amortization 616 629 590 1,835
Stock-based compensation 37 135 146 318
Pro-forma net income (loss) $ (336 )
$ 180 $ 532
$ 376
As the table indicates, the company has generated progressively
improved results for each of the three quarters of 2009 despite the
difficulties posed by the current economic climate. For the nine
months ended September 30, 2009, IntriCon posted pro-forma net
income of $376,000.
On a year-to-date basis, IntriCon generated $1.3 million in
positive operating cash flow due largely to tight working capital
management.
Business Update
As previously reported, the company acquired Datrix, a supplier
of patient monitoring devices, with worldwide distribution to
leading medical OEMs, on August 14, 2009.
Said Gorder, “Datrix gives us access to what we believe to be an
estimated $80 million cardiac diagnostic monitoring – or CDM –
market, with a particular emphasis on the emerging biotelemetry
space. Currently, we’re leveraging Datrix’s cardiac monitoring
capabilities and incorporating IntriCon’s ultra-low-power wireless
technology to develop and launch a new wireless cardiac monitoring
device. We are on track to unveil prototypes of our new device at
the 2009 American Heart Association Scientific Sessions this
November in Orlando.”
In the biotelemetry arena, IntriCon remains active with
strategic partner Advanced Medical Electronics (AME). The company
continues to work to develop devices that wirelessly transmit
critical diagnostic and therapeutic information. In collaboration
with AME, IntriCon has received approvals for grant funding for
eight development programs and is in the process of applying for
several more.
In hearing health, patients continue to delay hearing aid
purchases, resulting in lower sales levels. Throughout the year the
company has experienced sporadic buying patterns and expects this
trend to continue for the near future. IntriCon believes the
long-term fundamentals for this business are still strong due to
the aging population.
In professional audio communications, the company is seeing
initial signs that customers are beginning to re-stock inventories.
Additionally, IntriCon remains focused on expanding its security
products business by aggressively marketing its technical
capabilities. Third-quarter net sales for professional audio
communications rose 38 percent and 27 percent, respectively from
the 2009 first and second quarters. IntriCon believes this business
has stabilized and anticipates flat to modest sequential growth as
customers slowly start to replenish product.
Net sales for the company’s non-core electronics segment
declined 23.9 percent from the year-earlier third quarter and 30.3
percent from the prior-year nine months. The company has
aggressively reduced costs to properly align expenses with lower
revenue levels. In addition to continuing to reduce the cost
structure, IntriCon is exploring all strategic options for this
segment.
Concluded Gorder, “For the foreseeable future, we expect a
challenging selling environment, particularly in hearing health. We
remained focused on expanding our capabilities so that when we
emerge from the current economic downturn, IntriCon is poised to
capitalize with new and differentiated offerings.”
Conference Call Today
As previously announced, the company will hold an investment
community conference call today, Wednesday, October 28, 2009,
beginning at 4:00 p.m. CT. Mark Gorder, president and chief
executive officer, and Scott Longval, chief financial officer, will
review third-quarter performance and discuss the company’s
strategies. To join the conference call, dial: 1-877-941-0843
(international 1-480-629-9644) and provide the conference
identification number 4174661 to the operator.
A replay of the conference call will be available one hour after
the call ends through 11:59 p.m. CT on Wednesday, November 4, 2009.
To access the replay, dial 1-800-406-7325 (international
1-303-590-3030) and enter access code: 4174661.
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 MPETS product 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, ability to satisfy and maintain compliance with
the covenants under the company’s loan facility, 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, 2008. 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
September 30,
September 30,
2009
2008
Sales, net $ 14,215,103 $ 16,091,043 Costs of sales
11,302,977
12,148,438 Gross profit 2,912,126
3,942,605 Operating expenses: Selling expense 847,689
967,119 General and administrative expense (a) 1,349,309 1,702,938
Research and development expense
799,227
783,518 Total operating expenses
2,996,225 3,453,575
Operating (loss) income (84,099 ) 489,030 Interest
expense (386,098 ) (165,432 ) Equity in (loss) of partnerships
(18,788 ) 37,309 Other income (expense), net
(239,302 ) 29,709
(Loss) income before income taxes (728,287 ) 390,616
Income tax expense
7,960
81,847 Net (loss) income
$
(736,247 ) $
308,769 Earnings (loss) per share: Basic
$ (0.14 ) $ 0.06 Diluted $ (0.14 ) $ 0.06 Average shares
outstanding: Basic 5,412,100 5,314,760 Diluted 5,412,100 5,452,669
(a) General and administrative expense includes $146,429 and
$132,258 of non-cash stock option expense for the three-month
period ended September 30, 2009 and 2008, respectively.
IntriCon Corporation
Consolidated Condensed Statements of Operations
(Unaudited) Nine Months Ended
September 30,
September 30,
2009
2008
Sales, net $ 41,521,521 $ 50,207,550 Costs of sales
33,383,151
38,165,838 Gross profit 8,138,370
12,041,712 Operating expenses: Selling expense 2,477,809
2,948,380 General and administrative expense (a) 4,505,420
5,090,273 Research and development expense
2,466,403 2,438,750
Total operating expenses
9,449,632
10,477,403 Operating (loss)
income (1,311,262 ) 1,564,309 Interest expense (635,474 )
(547,138 ) Equity in (loss) earnings of partnerships (219,825 )
58,875 Other expense, net
(170,993
) (10,041 )
(Loss) income before income taxes (2,337,554 ) 1,066,005 Income tax
(benefit) expense
(14,114 )
197,462 Net (loss) income
$
(2,323,440 ) $
868,543 Earnings (loss) per share: Basic
$ (0.43 ) $ 0.16 Diluted $ (0.43 ) $ 0.16 Average shares
outstanding: Basic 5,369,767 5,309,418 Diluted 5,369,767 5,549,926
(a) General and administrative expense includes $418,167 and
$400,379 of non-cash stock option expense for the nine-month period
ended September 30, 2009 and 2008, respectively.
IntriCon Corporation Consolidated Condensed
Balance Sheets Assets
September 30,
December 31,
2009
2008
(unaudited) Current assets: Cash $ 1,282,200 $ 249,396
Restricted cash 410,527 385,916 Accounts receivable,
less allowance for doubtful accounts of $268,000 at September 30,
2009 and $389,000 at December 31, 2008 7,866,353 9,524,743
Inventories 9,368,195 8,852,028 Refundable income taxes
85,031 27,645 Note receivable from sale of discontinued
operations -- 225,000 Other current assets
1,164,661 758,193 Total
current assets 20,176,967 20,022,921 Machinery and equipment
38,730 099 38,016,681 Less: accumulated depreciation
31,538,685 30,103,771 Net
property, plant and equipment 7,191,414 7,912,910 Goodwill
10,504,939 8,266,438 Investment in partnerships 1,166,949
1,386,774 Other assets, net
1,498,395
1,872,774 Total Assets
$
40,538,664 $ 39,461,817
IntriCon Corporation
Consolidated Condensed Balance Sheets Liabilities
and Shareholders’ Equity
September 30,
December 31,
2009
2008
(unaudited) Current liabilities: Checks written in excess of cash $
517,387 $ 95,082 Current maturities of long-term debt 1,624,288
1,503,762 Accounts payable 4,410,584 3,149,671 Income taxes payable
-- 39,997 Deferred gain 110,084 120,478 Short term partnership
payable 260,000 260,000 Other accrued liabilities
3,364,833 4,251,707
Total current liabilities 10,287,176 9,420,697
Long-term debt, less current maturities 8,458,156 6,187,923 Other
post-retirement benefit obligations 669,849 760,608 Long-term
Dynamic Hearing license agreement payable 75,000 525,000 Long-term
partnership payable 760,000 760,000 Deferred income taxes 129,273
155,273 Accrued pension liability 562,228 578,388 Deferred gain
632,984 761,456
Total liabilities 21,574,666 19,149,345
Shareholders’ equity: Common shares, $1 par; 20,000,000
shares authorized; 5,979,428 and 5,858,006 shares issued; 5,463,674
and 5,342,252 outstanding at September 30, 2009 and December 31,
2008, respectively 5,979,428 5,858,006 Additional paid-in capital
14,830,332 14,121,772 Retained earnings (deficit) (408,107 )
1,915,334 Accumulated other comprehensive loss (172,577 ) (317,562
) Less: 515,754 common shares held in treasury, at cost
(1,265,078 )
(1,265,078 ) Total shareholders’
equity
18,963,998
20,312,472 Total Liabilities and
Shareholders' Equity
$ 40,538,664
$ 39,461,817
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