IntriCon Corporation (NASDAQ: IIN), a designer,
developer, manufacturer and distributor of miniature and
micro-miniature body-worn devices, today announced financial
results for its fourth quarter and year ended December 31,
2012.
For the 2012 fourth quarter, the company reported net sales of
$16.7 million, an increase of 15.1 percent from the prior-year
period. IntriCon had net income of $332,000, or $0.06 per diluted
share, compared to a net loss of $(352,000), or $(0.06) per diluted
share, for the 2011 fourth quarter.
“We are pleased to have delivered growth across all markets for
both the quarter and year – in fact our body-worn device segment
had a record year,” said Mark S. Gorder, president and chief
executive officer of IntriCon.
“Our medical business posted its strongest revenue quarter ever,
driven by increased activity from our largest customer, Medtronic,
among others. In hearing health, our non-conventional personal
sound amplifier products, drove modest quarterly growth despite
continued softness in the conventional hearing health market. And
in professional audio communications we delivered significant
gains, with sales increasing 44 percent over the 2011 fourth
quarter on strong demand for securities products domestically and
headset products internationally.”
As a percentage of 2012 fourth-quarter sales, healthcare-related
revenue (hearing health and medical combined) totaled 72.7 percent
(32.8 percent hearing health and 39.9 percent medical), with
professional audio communications at 27.3 percent. This compares to
2011 healthcare-related revenue of 78.2 percent (37.4 percent
hearing health and 40.8 percent medical), with professional audio
communications at 21.8 percent.
Gross profit margins increased to 23.5 percent from 23.1 percent
in the prior-year fourth quarter. The gain was primarily due to
higher sales volume, partially offset by an unfavorable product mix
within the professional audio communications market.
Said Gorder, “As part of our margin enhancement program, we
continued to transfer select, labor-intensive programs to our
Singapore and Indonesia facilities during the fourth quarter. In an
effort to drive further margin improvement and remain competitive
from a cost standpoint, we will continue that shift in 2013. We’re
also working to increase the percentage of proprietary IntriCon
technology in all of our products by investing in our core
technologies—this also will have a favorable effect on margins as
we move through the 2013 year.”
IntriCon reduced its operating expenses in the fourth quarter
2.8 percent, despite higher sales, reflecting the company’s ongoing
focus on expense management.
Full-Year ResultsFor the 2012 year, IntriCon reported net
sales of $63.9 million and net income of $709,000, or $0.12 per
diluted share. This is up from 2011 net sales of $56.1 million and
a net loss of $(1.4 million), or $(0.25) per diluted share. Hearing
health sales rose 13.2 percent over the prior year, with medical
and professional audio up 6.7 percent and 29.4 percent,
respectively. Included in 2012 full-year results was a one-time
gain of $822,000, or $0.14 per diluted share, from the previously
disclosed sale of the company’s 50-percent ownership interest in
Global Coils, to its Switzerland-based joint venture partner,
Audemars SA.
As a percentage of 2012 sales, healthcare-related revenue
totaled 75.5 percent (37.2 percent hearing health and 38.3 percent
medical), with professional audio communications at 24.5 percent.
This compares to 2011 healthcare-related revenue of 78.4 percent
(37.5 percent hearing health and 40.9 percent medical), with
professional audio communications at 21.6 percent.
Gross profit margins for 2012 were 23.4 percent, up from 22.6
percent in the prior year, primarily due to volume increases,
partially offset by an unfavorable product mix.
hi HealthInnovationsAs previously disclosed, IntriCon
satisfied hi HealthInnovations’ initial product ramp-up needs for
hearing aids early in 2012. As a result, minimal new orders were
received in the second half of 2012. The company remains optimistic
about the long-term prospects of this program.
Said Gorder, “hi HealthInnovations continues to make progress
building the infrastructure to provide high-quality, affordable
hearing health care to a broad range of customers. During the year,
UnitedHealthcare expanded its hi HealthInnovation' program to more
than 26 million people enrolled in its employer-sponsored and
individual health benefit plans. We expect that this will open up
additional opportunities for IntriCon and that new orders will be
received in the second half of 2013.”
Business UpdateWithin IntriCon’s medical business,
year-over-year sales rose 12.6 percent in the fourth quarter. The
growth, as previously stated, was primarily due to increased
activity from various large medical customers, most notably
Medtronic. Near term, the company expects medical sales going
forward to continue to strengthen.
On the cardiac front, IntriCon continues to deliver demo units
of its two FDA-approved wireless cardiac diagnostic monitoring
(CDM) devices—Centauri™ and Sirona™— to targeted customers to
compile feedback. Additionally, the company is expanding its CDM
sales and marketing infrastructure, to further advance its cardiac
program and elevate its devices with market-demanded features.
Said Gorder, “Our technology connects patients and caregivers in
non-traditional ways. We help shift the point of care from
traditional settings such as hospitals, to non-traditional settings
like the home. We accomplish this with devices that are more
advanced, smaller and lightweight. In 2013, we will focus more
capital and resources in sales and marketing to expand our reach to
other large medical device manufacturers and healthcare
companies.”
Within hearing health, IntriCon continues to experience softness
in the conventional market. Said Gorder, “The 13.2 percent growth
we experienced during the year came primarily from our hi
HealthInnovations work, and non-conventional personal sound
amplifier products. And in 2013, while we don’t anticipate hi
HealthInnovations to ramp until the second half of the year, there
are several growth opportunities that give us optimism for the
longer term to strengthen our position as a supplier to the value
hearing health market.
“First, we continue to develop new technology to improve the
user experience. Our Audion6™, a six-channel hearing aid amplifier,
is a notable example. Audion6 is a feature-rich amplifier that fits
a wide array of applications and has a complete set of proven
adaptive features.
“Second, hearing health technology is evolving beyond
traditional hearing aid applications. Devices can now wirelessly
stream music, television, audio or a companion’s voice—making them
significantly more versatile and effective than traditional hearing
devices. In addition, this technology and functionality holds great
potential in the non-conventional personal sound amplifier
market.”
Fourth-quarter professional audio communications sales remained
very strong, up more than 44 percent from the prior-year period.
The company completed delivery on its significant contract with the
Singapore government during the quarter, providing technically
advanced headsets to be worn in difficult listening environments.
Professional audio sales going forward are expected to moderate to
more historical levels.
Heightened Focus on MarketingSaid Gorder, “Over the past
five years we have invested heavily in our technology portfolio and
global manufacturing infrastructure. Better understanding customer
and market needs, and evolving our technology portfolio to meet
those needs, as well as developing new products and product
platforms, is the next step in our strategic plan.
“To that end, we will be increasing investments in marketing and
sales in 2013 to advance us down that path. That process has
already begun and we expect to add additional staff and resources
throughout the year to build customer relationships, market
knowledge and sales.”
Looking AheadConcluded Gorder, “As a business, our
primary goals are to build revenue, improve margins and grow our
bottom line. We plan to do so by: placing a heightened focus on
marketing; raising the percentage of proprietary IntriCon
technology we incorporate in our products; and leveraging our
low-cost manufacturing footprint.
“Consistent with historical revenue cycles we anticipate a more
moderate 2013 first quarter in comparison to our 2012 fourth
quarter. That being said, we are optimistic about our opportunities
in 2013 and our ability to execute and deliver growth.”
Conference Call TodayAs previously announced, the company
will hold an investment community conference call today, Wednesday,
February 13, 2013, 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: 1-877-941-6009 (international 1-480-629-9818) and provide the
conference identification number 4596685 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, February 19, 2013.
To access the replay, dial 1-800-406-7325 (international
1-303-590-3030) and enter access code: 4596685.
About IntriCon CorporationHeadquartered in Arden Hills,
Minn., IntriCon Corporation designs, develops and manufactures
miniature and micro-miniature body-worn devices. These advanced
products help medical, healthcare and professional communications
companies meet the rising demand for smaller, more intelligent and
better connected devices. 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.
Forward-Looking StatementsStatements made in this release
and in IntriCon’s other public filings and releases that are not
historical facts or that include forward-looking terminology are
“forward-looking statements” within the meaning of the Securities
Exchange Act of 1934, as amended. 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 other factors are 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, 2011. 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 (in thousands, except per share
data) (Unaudited) Three Months
Ended Twelve Months Ended December 31,
December 31, December 31, December 31, 2012 2011 2012
2011 Sales, net $ 16,665 $ 14,474 $ 63,933 $ 56,058 Cost of sales
12,748 11,131
48,957 43,392
Gross profit 3,917 3,343 14,976 12,666 Operating expenses:
Sales and marketing 961 763 3,324 3,185 General and administrative
1,215 1,415 5,958 5,797 Research and development
1,181 1,276
4,694 4,876 Total
operating expenses
3,357
3,454 13,976
13,858 Operating income (loss) 560 (111 ) 1,000
(1,192 ) Interest expense (166 ) (178 ) (755 ) (609 ) Equity
in income (loss) of partnerships (39 ) (143 ) (116 ) 174 Gain on
sale of investment in partnership -- -- 822 -- Other income
(expense), net
(14 )
10 (78 )
42 Income (loss) from before income
taxes 341 (422 ) 873 (1,585 ) Income tax expense (benefit)
9 (70 )
164 (160
) Net income (loss)
$
332 $ (352
) $ 709
$ (1,425 ) Net income
(loss) per share: Basic $ 0.06 $ (0.06 ) $ 0.13 $ (0.25 ) Diluted $
0.06 $ (0.06 ) $ 0.12 $ (0.25 ) Average shares
outstanding: Basic 5,678 5,623 5,669 5,599 Diluted 5,819 5,623
5,888 5,599
IntriCon Corporation
Consolidated Condensed Balance Sheets (in thousands,
except per share data) At December 31,
2012 2011 Current assets: Cash
$
226 $ 119 Restricted cash
563 540 Accounts
receivable, less allowance for doubtful accounts of $154 and $223
at December 31, 2012 and 2011, respectively
7,171 8,545
Inventories
11,117 11,720 Refundable income taxes
--
82 Other current assets
1,483
652 Total current assets
20,560
21,658 Machinery and equipment
40,796 39,170 Less:
Accumulated depreciation
34,012
32,164 Net machinery and equipment
6,784 7,006 Goodwill
9,709 9,709 Investment in
partnerships
773 1,283 Other assets, net
1,306 1,074
Total assets
$ 39,132
$ 40,730 Current
liabilities: Checks written in excess of cash
$ 637 $
396 Current maturities of long-term debt
2,945 2,883
Accounts payable
4,045 6,298 Accrued salaries, wages and
commissions
1,786 1,617 Deferred gain
110 110
Partnership payable
-- 240 Income taxes payable
96 --
Other accrued liabilities
2,048
1,907 Total current liabilities
11,667 13,451 Long-term debt, less current maturities
7,222 8,217 Other postretirement benefit obligations
590 685 Accrued pension liabilities
510 431 Deferred
gain
275 385 Other long-term liabilities
146 115 Total
liabilities
20,410 23,284 Commitments and contingencies
Shareholders’ equity: Common stock, $1.00 par value per
share; 20,000 shares authorized; 5,687 and 5,646 shares issued and
outstanding at December 31, 2012 and 2011, respectively.
5,687
5,646
Additional paid-in capital
15,797 15,259 Accumulated deficit
(2,360 ) (3,069 ) Accumulated other comprehensive
loss
(402 )
(390 ) Total shareholders' equity
18,722 17,446
Total liabilities and shareholders’ equity
$
39,132 $
40,730
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