IntriCon Corporation (NASDAQ: IIN), a designer,
developer, manufacturer and distributor of body-worn medical and
electronics devices, today announced financial results for its 2009
fourth quarter and full year ended December 31, 2009.
For the fourth quarter, the company reported net sales of $14.2
million, up 5.3 percent from net sales of $13.4 million for the
2008 fourth quarter. IntriCon’s 2009 fourth-quarter net loss was
$1.6 million, or $0.29 per diluted share, compared with net income
of $169,000, or $0.03 per diluted share, for the year-ago
period.
IntriCon reported 2009 fourth-quarter income from continuing
operations—which includes the company’s core body-worn device
business (hearing health, professional audio communications and
medical)—of $140,000, or $0.03 per diluted share. 2009
fourth-quarter results include a net loss of $1.7 million, or $0.32
per diluted share, from discontinued operations.
In December 2009, IntriCon approved and later announced plans to
divest its non-core electronics business, Anaheim, Calif.-based RTI
Electronics, Inc. As a result, RTI Electronics’ results are now
classified as discontinued operations. Included in the 2009
fourth-quarter discontinued operations loss was $56,000, or $.01
per diluted share, related to RTI Electronics’ operating results,
and a charge of $1.7 million (of which $1.4 million is non-cash),
or $.31 per diluted share, associated with the planned divestiture
and related impairment charge.
“Throughout 2009, we’ve delivered incremental revenue progress
and for the first time this year, our quarterly revenue was up over
the year-ago period,” said Mark S. Gorder, president and chief
executive officer of IntriCon. “Fourth-quarter revenues were the
highest of the year, and excluding our discontinued operations, we
have returned IntriCon to profitability for the quarter. While
economic uncertainty remains—and we continue to realign our
business with the current climate—we’re seeing initial signs that
customers are beginning to reengage.
“Once again, our medical business recorded its strongest revenue
quarter ever, growing 23.1 percent from the year-ago period and
10.5 percent sequentially from the 2009 third quarter. As we’ve
indicated previously, medical revenues are primarily being driven
by wireless glucose monitor sales—a device that we manufacture for
a large medical OEM.”
Gross margins in the 2009 fourth quarter were 25.2 percent,
compared to 27.0 percent in the year-ago quarter. Sequentially,
however, gross margins rose from 20.3 percent in the 2009 third
quarter, and were up significantly from the 2009 first-quarter
level of 18.4 percent. IntriCon continues to execute gross margin
improvement initiatives, such as implementing lean Six-Sigma
manufacturing principles in its manufacturing facilities.
For the year, IntriCon reported net sales of $51.7 million and a
loss of $3.9 million, or $0.73 per diluted share. 2009 results
include a loss of $2.1 million, or $0.39 per diluted share, from
discontinued operations and Datrix-related acquisition costs and
bank financing charges totaling $561,000, or $0.10 per diluted
share. This compares to 2008 net sales of $57.9 million and income
of $1.0 million, or $0.19 per diluted share. The 2009 loss from
continuing operations was $1.8 million, or $0.34 per share. The
2009 loss from discontinued operations includes a $438,000 loss, or
$.08 per diluted share, related to RTI Electronics’ operating
results; and, a charge of $1.7 million, or $.31 per diluted share,
(of which $1.4 million is non-cash) associated with the planned
divestiture.
After adding back costs associated with the Datrix acquisition,
non-cash charges for depreciation, amortization and stock-based
compensation expense, the company generated $914,000 in pro-forma
income from continuing operations for the 2009 fourth 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 income (loss) from continuing operations to
pro-forma net income (loss) from continuing operations follows:
(in $000s) Q109 Q209
Q309 Q409 2009 GAAP basis net income (loss)
from
continuing operations
$ (807) $ (423) $ (712) $ 140
$ (1,802) Non-recurring acquisition costs - 14 263 15
292 Non-recurring debt refinancing costs - - 269 - 269 Depreciation
and amortization 536 540 536 617 2,229 Stock-based compensation
137 135 146
142 560 Pro-forma net income (loss) from
continuing operations $ (134) $ 266 $
502 $ 914 $ 1,548
As the table indicates, the company generated progressively
improved results for each of the four quarters of 2009 despite
difficulties posed by the economy. For the year ended December 31,
2009, IntriCon posted pro-forma net income from continuing
operations of $1.5 million.
Business Update
During the fourth quarter, IntriCon unveiled a prototype of its
new Cardiac Diagnostic Monitoring (CDM) device, called the Mobile
Patient ECG Telemetry System, or MPETS, at the American Heart
Association Scientific Sessions in Orlando, Fla. The device is a
next-generation wireless outpatient monitoring tool, which uses a
proven automatic arrhythmia detection algorithm.
Said Gorder, “We have leveraged Datrix’s cardiac monitoring
capabilities and IntriCon’s wireless abilities to develop a new
cardiac monitoring device that allows for more patient comfort and
the ability to identify asymptomatic cardiac events. Currently,
we’re focused on bringing the MPETS device to market. We are
working with the FDA to secure necessary approvals for the device
and anticipate it will be available for sale in mid-2010.”
In biotelemetry, IntriCon remains active with its strategic
partner Advanced Medical Electronics (AME). The companies are
working to develop devices that wirelessly transmit critical
diagnostic and therapeutic information. In collaboration with AME,
IntriCon has received approvals for grant funding for nine
development programs.
IntriCon’s hearing health business felt the challenging
economy’s impact throughout 2009. Said Gorder, “While we expect
sporadic buying patterns to continue into 2010, the long-term
fundamentals remain strong. The over-65 age demographic is the
fastest growing segment of the population in the United States,
Europe and Japan.”
IntriCon intends to launch several new hearing health products
in 2010, including devices based on patented proprietary technology
for the emerging open-in-the-canal (ITC) and open-in-the-ear (ITE)
segment of the market. These devices combine the comfort and
performance benefits of open-behind-the-ear (BTE) hearing aids with
the aesthetic appeal of ITE and ITC devices.
Similar to hearing health, professional audio communications
sales were sluggish in 2009 versus the prior-year due to the
economy. While sales overall were down slightly in the fourth
quarter from the 2009 third quarter, the company is seeing demand
for specific products increasing. Additionally, IntriCon is
beginning to leverage the same proprietary technology that it uses
in hearing health, including wireless and digital signal
processing, for potential professional audio communications
devices.
According to Gorder, the divestiture of RTI Electronics
clarifies IntriCon’s mission as a company and sharpens its focus on
the body-worn device market. Additionally, it allows IntriCon to
devote more resources and capital to its core body-worn device
business, and is expected to improve overall margins and
profitability. The divestiture is expected to be completed by
mid-2010.
Concluded Gorder, “In 2009, we focused on our capabilities—both
organically and through acquisition. In 2010, we will leverage
those capabilities to bring smaller, more advanced devices to
market. Our priorities are to: develop our core technologies across
multiple product platforms; launch new devices in the biotelemetry
arena—specifically in CDM; and, continue to run an efficient and
focused organization.”
Conference Call Today
As previously announced, the company will hold an investment
community conference call today, Tuesday, March 9, 2010, beginning
at 4:00 p.m. CT. Mark Gorder, president and chief executive
officer, and Scott Longval, chief financial officer, will review
fourth-quarter performance and discuss the company’s strategies. To
join the conference call, dial: 1-877-941-6010 (international
1-480-629-9772) and provide the conference identification number
4242155 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 Tuesday, March 16, 2010. To
access the replay, dial 1-800-406-7325 (international
1-303-590-3030) and enter access code: 4242155.
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 Global Market. For more information
about IntriCon, visit www.intricon.com.
Non-GAAP Financial Measures
In addition to disclosing financial measures prepared in
accordance with GAAP, the press release and the accompanying tables
contain a non-GAAP financial measure which the Company refers to as
“pro-forma net income (loss).” The presentation of this financial
information is not intended to be considered in isolation or as a
substitute for, or superior to, the financial information prepared
and presented in accordance with GAAP. A reconciliation of net
income (loss), the most directly comparable GAAP financial measure,
to pro-forma net income (loss) is contained in the press
release.
Pro-forma net income (loss). The Company defines pro-forma
income (loss) as GAAP net income (loss) from continuing operations
plus stock-based compensation expense, depreciation and
amortization, non-recurring acquisition costs and non-recurring
bank financing charges. The Company’s management believes that this
non-GAAP financial measure provides meaningful supplemental
information regarding the Company’s performance by excluding the
items mentioned above. The Company assesses operating performance
with these amounts included, but also excludes these amounts when
considering performance on a non-GAAP basis. The Company’s
rationale for such exclusions is as follows:
Stock-based compensation. The Company excludes non-cash
stock-based compensation expense because of varying available
valuation methodologies, subjective assumptions and the variety of
award types that companies can use. Stock-based compensation
expense is a recurring expense for the Company and is expected to
be in the future as the Company has a history of granting stock
options and other equity instruments as a means of incentivizing
and rewarding its employees.
Depreciation and Amortization Expense. Depreciation and
amortization are non-cash charges that are impacted by the
Company’s accounting methods and book value of assets. By excluding
these non-cash charges, the Company’s management, together with its
investors, are provided with supplemental metrics to evaluate cash
earnings, distinguishing performance’s impact on earnings from
performance’s impact on cash. Management believes that the review
of these supplemental metrics in conjunction with other GAAP
metrics, such as capital expenditures, is useful for management and
investors in understanding the Company’s business. Depreciation is
a recurring expense for the Company and is expected to continue to
be in the future as it continues to make further investments in
infrastructure through the acquisition of property, plant and
equipment.
Non-recurring Acquisition Costs and Non-recurring Debt Financing
Charges. The Company excludes non-recurring acquisition costs and
non-recurring debt financing charges that are the result of other,
one-time events as one means of measuring operating performance.
Included in these expenses are items such as lawyer’s fees,
investment banker’s fees, and other professional service fees
associated with the Company’s acquisition of Datrix on August 13,
2009. Also included are lawyer’s fees, financing fees and early
termination fees associated with the Company’s August 13, 2009 debt
financing. These events are non-recurring and arise outside the
ordinary course of continuing operations. The Company does not
expect these one-time costs to regularly recur in the future, and
therefore, by providing this information, the Company believes that
its management and investors may more fully understand the
financial results of what the Company considers to be organic
continuing operations.
There are a number of limitations related to the use of non-GAAP
pro-forma net income / (loss). First, these non-GAAP financial
measures exclude stock-based compensation and depreciation expenses
that are recurring. Both stock-based expenses and depreciation have
been, and will continue to be for the foreseeable future, a
significant recurring expense with an impact upon our company
notwithstanding the lack of immediate impact upon cash. Second,
stock-based awards are an important part of our employees’
compensation and impact their performance. Third, there is no
assurance the components of the costs that we exclude in our
calculation of non-GAAP pro-forma net income / (loss) do not differ
from the components that our peer companies exclude when they
report their results of operations. Our management compensates for
these limitations by providing specific information regarding the
GAAP amounts excluded from these non-GAAP financial measures and
evaluating these non-GAAP financial measures together with their
most directly comparable financial measures calculated in
accordance with GAAP.
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, planned disposition of RTIE
and expected charges, 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 Three Months Ended
December 31,
December 31,
2009
2008
Sales, net $ 14,152,335 $ 13,433,506 Costs of sales
10,580,928 9,808,337
Gross profit 3,571,407 3,625,169 Operating expenses: Selling
expense 938,602 830,078 General and administrative expense (a)
1,429,549 1,445,481 Research and development expense
878,536 809,017
Total operating expenses
3,246,687
3,084,576 Operating income
324,720 540,593 Interest expense (210,539 ) (150,653 )
Equity in earnings (loss) of partnerships 77,229 (62,527 ) Other
expense, net
(55,892 )
(26,056 ) Income before income taxes
135,518 301,357
Income tax benefit (expense)
4,250 (66,605
) Income before discontinued operations 139,768
234,752 Loss from discontinued operations
(1,736,849 ) (65,694
) Net (loss) income
$
(1,597,081 ) $
169,058 Basic Earnings (loss) per share:
Continuing operations $ .03 $ .04 Discontinued operations
$ (.32 ) $
(.01 ) Net income (loss)
$
(.29 ) $ .03
Diluted Earnings (loss) per share: Continuing
operations $ .03 $ .04 Discontinued operations
$
(.32 ) $ (.01
) Net income (loss)
$ (.29
) $ .03
Average shares outstanding: Basic 5,464,490 5,328,676 Diluted
5,464,490 5,347,467
(a) General and administrative
expense includes $142,000 and $125,000 of non-cash stock option
expense for the three-month period ended December 31, 2009 and
2008, respectively.
IntriCon Corporation Consolidated Condensed
Statements of Operations Twelve Months Ended
December 31,
December 31,
2009
2008
Sales, net $ 51,675,653 $ 57,908,096 Costs of sales
40,624,599 43,250,704
Gross profit 11,051,054 14,657,392 Operating expenses:
Selling expense 2,961,720 3,262,441 General and administrative
expense (a) 5,374,126 5,849,735 Research and development expense
3,344,939 3,247,767
Total operating expenses
11,680,785
12,359,943 Operating
(loss) income (629,731 ) 2,297,449 Interest expense (836,592
) (678,567 ) Equity in earnings of partnerships (149,596 ) (3,652 )
Other expense, net
(219,883 )
(36,097 ) (Loss) income before
income taxes (1,835,802 ) 1,579,133
Income tax benefit (expense)
33,819 (264,762
) Income (loss) before discontinued operations
(1,801,983 ) 1,314,371 Loss from discontinued operations
(2,118,538 ) (276,770
) Net (loss) income
$
(3,920,521 ) $
1,037,601 Basic Earnings (loss) per
share: Continuing operations $ (.34 ) $ .25 Discontinued operations
$ (.39 ) $
(.05 ) Net income (loss)
$
(.73 ) $ .20
Diluted Earnings (loss) per share: Continuing
operations $ (.34 ) $ .24 Discontinued operations
$
(.39 ) $ (.05
) Net income (loss)
$ (.73
) $ .19
Average shares outstanding: Basic 5,394,125 5,314,987 Diluted
5,394,125 5,539,546 (a) General and administrative expense
includes $560,000 and $525,000 of non-cash stock option expense for
year ended December 31, 2009 and 2008, respectively.
IntriCon Corporation Consolidated Condensed Balance
Sheets
Assets
December 31,
December 31,
2009
2008
Current assets: Cash $ 385,055 $ 249,396
Restricted cash 405,745 385,916 Accounts receivable, less
allowance for doubtful accounts of $226,000 in 2009 and $332,000 in
2008 7,083,694 8,611,636 Inventories 8,220,996 8,012,988
Refundable income taxes 63,676 27,645 Note receivable
from sale of discontinued operations -- 225,000 Other
current assets 815,742 610,531 Current assets of
discontinued operations
1,139,813
1,899,809 Total current assets 18,114,721
20,022,921 Machinery and equipment 35,516,164 34,360,449
Less: accumulated depreciation
28,725,359
26,992,023 Net property, plant and equipment
6,790,805 7,368,426 Goodwill 9,716,841 7,581,107
Investment in partnerships 1,237,178 1,386,774 Long-term
assets of discontinued operations 141,877 1,256,141 Other
assets, net
1,361,355
1,846,448 Total assets
$
37,362,777 $ 39,461,817
IntriCon Corporation Consolidated Condensed
Balance Sheets Liabilities and Shareholders’
Equity
December 31,
December 31,
2009
2008
Current liabilities: Checks written in excess of cash $ 101,416 $
199,189 Current maturities of long-term debt 1,708,839 1,503,762
Accounts payable 3,637,329 2,797,616 Income taxes payable -- 42,552
Deferred gain 110,084 120,478 Short term partnership payable
260,000 260,000 Other accrued liabilities 2,866,584 3,733,132
Liabilities of discontinued operations
926,409
763,968 Total current
liabilities 9,610,661 9,420,697 Long-term debt, less current
maturities 7,729,797 6,187,923 Other post-retirement benefit
obligations 756,000 760,608 Long-term Dynamic Hearing license
agreement payable -- 525,000 Long-term partnership payable 500,000
760,000 Deferred income taxes 128,753 155,273 Accrued pension
liability 543,194 578,388 Deferred gain
605,463
761,456 Total liabilities
19,873,868 19,149,345 Shareholders’ equity: Common
shares, $1 par; 20,000,000 shares authorized; 5,985,862 and
5,858,006 shares issued; 5,470,108 and 5,342,252 outstanding at
December 31, 2009 and 2008, respectively 5,985,862 5,858,006
Additional paid-in capital 14,986,840 14,121,772 Retained earnings
(deficit) (2,005,187 ) 1,915,334 Accumulated other comprehensive
loss (213,528 ) (317,562 ) Less: 515,754 common shares held in
treasury, at cost
(1,265,078 )
(1,265,078 ) Total
shareholders’ equity
17,488,909
20,312,472 Total Liabilities and
Shareholders' Equity
$ 37,362,777
$ 39,461,817
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