IntriCon Reports 2013 Second-Quarter Results

  IntriCon Reports 2013 Second-Quarter Results

 Global Restructuring Efforts Redirect Resources to Key Growth Opportunities,
          Drive Savings and Anticipated Profitability in Second-Half

Business Wire

ARDEN HILLS, Minn. -- August 8, 2013

IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and
distributor of miniature and micro-miniature body-worn devices, today
announced financial results for its second quarter ended June 30, 2013.

For the 2013 second quarter, the company reported net sales of $11.5 million,
versus $14.9 million in the prior-year period. IntriCon had a net loss of
$(3.4) million, or $(0.60) per diluted share, compared to a net loss of
$(82,000), or $(0.01) per diluted share, for the 2012 second quarter.

The company reported a second-quarter net loss from continuing operations of
$(2.0) million, or $(0.34) per diluted share. Second-quarter results from
discontinued operations include a net loss of $(1.5) million, or $(0.26) per
diluted share. Included in the $(1.5) million net loss from discontinued
operations was approximately $(1.0) million, or $(0.18) per diluted share, of
one-time, non-cash charges related to the restructuring initiatives.

In June 2013, IntriCon announced a global strategic restructuring plan
designed to accelerate the company’s future growth by focusing resources on
the highest-potential growth areas and reduce costs by approximately $3.0
million annually. As a result, IntriCon’s Maine operations, which include the
company’s security, certain microphone and receivers businesses, as well as
certain Singapore assets, are now held for sale and classified as discontinued
operations.

“Facing a shortfall in the second quarter, we moved quickly to implement our
global restructuring plan to better align our cost structure with current
lower revenue levels—and strategic focus,” said Mark S. Gorder, president and
chief executive officer of IntriCon. “We expect to see an immediate $2 million
in annual cost savings in the third quarter, and we anticipate we will achieve
an additional $1 million by the end of the year.

“We believe that these savings, combined with an anticipated rebound in
medical and hearing health sales in the second half of the year, will allow us
to achieve anticipated profitability from continuing operations in the 2013
fourth quarter.”

As a percentage of total second-quarter sales, hearing health stood at 43.4
percent, with medical and professional audio at 42.6 percent and 14.0 percent,
respectively. This compares to 41.5 percent, 41.4 percent and 17.1 percent for
hearing health, medical and professional audio, respectively, in 2012.

Gross profit margins decreased to 16.2 percent from 25.2 percent for the
prior-year three months. The decrease was primarily due to lower overall sales
volume.

Six-Month Results
For the 2013 six-month period, IntriCon reported net sales of $25.6 million
and a net loss of $(3.9) million, or $(0.69) per diluted share. This compares
to 2012 net sales of $30.3 million and net income of $161,000, or $0.03 per
diluted share. The six-month net loss from continuing operations was $(2.0)
million, or $(0.35) per diluted share, with a discontinued operations net loss
of $(1.9) million, or $(0.34) per diluted share.

As a percentage of total sales, hearing health stood at 39.9 percent, with
medical and professional audio at 46.9 percent and 13.2 percent, respectively,
for the six-month period. This compares to 45.5 percent, 40.5 percent and 14.0
percent for hearing health, medical and professional audio, respectively, in
2012.

Gross profit margins decreased to 22.0 percent from 26.6 percent for the
prior-year six months. Again, the decrease was primarily due to lower overall
sales volume. The company expects gross margins to strengthen in the second
half of the year.

After adding back costs associated with non-recurring global restructuring
expenses, non-cash charges for depreciation, amortization and stock-based
compensation expense, the company reported a $(275,000) adjusted loss from
continuing operations for the first half of the year. The table below
reconciles certain financial measures used in this press release that were not
calculated in accordance with generally accepted accounting principles, or
GAAP, with the most directly comparable financial measure calculated in
accordance with GAAP. IntriCon believes that this adjusted information is
helpful in an analysis of its operating results by eliminating the
non-recurring and non-cash items noted below.

The reconciliation of GAAP basis loss from continuing operations to adjusted
loss from continuing operations for the six months ended June 30, 2013, is as
follows:

                                            
(in $000s)                                   
                                            
GAAP basis loss from continuing operations     $ (1,993 )
                                               
Non-recurring restructuring charges              199
Depreciation and amortization                    1,254
Non-cash stock-based compensation                265
                                            
Adjusted loss from continuing operations     $ (275   )
                                                        

Business Update
Sales in IntriCon’s medical business declined 20.9 percent from the prior-year
period and 31.4 percent from 2013 first quarter. As previously reported,
IntriCon had strong sales to Medtronic in the 2012 fourth quarter and 2013
first quarter, as Medtronic prepared for the launch of their MiniMed 530G
insulin pump. The second-quarter decrease primarily stemmed from a reduction
in sales to Medtronic as they await FDA approval of the MiniMed 530G. IntriCon
expects medical sales to strengthen in the second half of the year.

Within cardiac, IntriCon remains on track to deliver initial orders for its
wireless cardiac diagnostic monitor Sirona™ in the third quarter.
Additionally, the company has made progress expanding its CDM sales and
marketing infrastructure to further advance IntriCon’s cardiac program and
elevate its devices with market-demanded features.

Hearing health sales declined 19.5 percent over the prior-year quarter
primarily due to the reduction in hi HealthInnovations orders and the
continued softness in the conventional channel—which is consistent with
industry trends. As previously indicated, IntriCon satisfied hi
HealthInnovations’ initial product ramp-up needs in the first half of 2012.
While IntriCon continues to receive new orders from hi HealthInnovations, they
have been substantially lower than the original ramp in the first half of
2012. As hi HealthInnovations further builds out its infrastructure, IntriCon
continues to anticipate an order increase in the 2013 second half and remains
very optimistic about the long-term prospects of this market-changing program.

Additionally, challenges remain in the conventional channel due to high device
costs and inconveniences in the distribution channel. These dynamics are
creating opportunities for alternative care models such as the insurance
channel and the personal sound amplifier product (PSAP) market. To capitalize
on these opportunities, IntriCon has hired an industry veteran to help
spearhead the company’s efforts in the value hearing aid (VHA) market. The
company will be aggressively pursuing larger customers who can benefit from
our value proposition.

Professional audio sales declined 37.5 percent from the prior-year period. The
decrease was due the conclusion of the company’s Singapore Government contract
in December of 2012. With the company classifying portions of its professional
audio business as discontinued, new growth is not anticipated going forward.
However, IntriCon will leverage its core technology in professional audio to
support existing customers, as well as pursue related hearing health and
medical product opportunities.

Looking Ahead
Concluded Gorder, “We experienced significant challenges in the first half of
2013. However, as a company, we made the tough decisions necessary to better
deploy our resources and aggressively drive our two largest growth
opportunities: medical biotelemetry and value hearing health. We expect these
to strengthen throughout the remainder of the year, and we’re optimistic that
we can achieve profitability by year-end.”

Conference Call Today
As previously announced, the company will hold an investment community
conference call today, Thursday, Aug. 8, 2013, beginning at 4:00 p.m. CT. Mark
Gorder, president and chief executive officer, and Scott Longval, chief
financial officer, will review second-quarter performance and discuss the
company’s strategies. To join the conference call, dial: 1-888-503-8169 and
provide the conference ID number 1595266 to the operator.

A replay of the conference call will be available three hours after the call
ends through 11:59 p.m. CT on Thursday, August 15, 2013. To access the replay,
dial 1-888-203-1112 and enter passcode: 1595266.

About IntriCon Corporation
Headquartered 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 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 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, 2012. 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 Amounts)
                                                            
                       Three Months Ended            Six Months Ended
                       June 30,      June 30,        June 30,      June 30,
                       2013          2012            2013          2012
                       (Unaudited)   (Unaudited)     (Unaudited)   (Unaudited)
                                                                   
Sales, net             $  11,479     $  14,943       $  25,605     $  30,296
Cost of sales            9,617       11,174        19,974      22,227 
Gross profit              1,862         3,769           5,631         8,069
                                                                   
Operating
expenses:
Sales and                 731           754             1,623         1,629
marketing
General and               1,367         1,435           2,927         2,889
administrative
Research and              1,249         1,078           2,478         2,161
development
Restructuring            199         -             199         -      
charges
Total operating          3,546       3,267         7,227       6,679  
expenses
Operating income          (1,684 )      502             (1,596 )      1,390
(loss)
                                                                   
Interest expense          (154   )      (180   )        (307   )      (359   )
Equity in (loss)          (77    )      (13    )        (135   )      (37    )
of partnerships
Other income             (7     )     (9     )       83          (57    )
(expense)
Income (loss) from
continuing
operations before         (1,922 )      300             (1,955 )      937
income taxes and
discontinued
operations
                                                                   
Income tax expense       48          57            38          91     
Income (loss)
before                    (1,970 )      243             (1,993 )      846
discontinued
operations
                                                                   
Loss from
discontinued             (1,473 )     (325   )       (1,921 )     (685   )
operations, net of
income taxes
                                                                             
Net income (loss)      $  (3,443 )   $  (82    )     $  (3,914 )   $  161    
                                                                   
                                                                   
Basic income
(loss) per share:
Continuing             $  (0.34  )   $  0.04         $  (0.35  )   $  0.15
operations
Discontinued             (0.26  )     (0.05  )       (0.34  )     (0.12  )
operations
Net income (loss)      $  (0.60  )   $  (0.01  )     $  (0.69  )   $  0.03   
per share:
                                                                   
Diluted income
(loss) per share:
Continuing             $  (0.34  )   $  0.04         $  (0.35  )   $  0.14
operations
Discontinued             (0.26  )     (0.05  )       (0.34  )     (0.11  )
operations
Net income (loss)      $  (0.60  )   $  (0.01  )     $  (0.69  )   $  0.03   
per share:
                                                                   
Average shares
outstanding:
Basic                     5,694         5,670           5,691         5,662
Diluted                   5,694         5,670           5,691         5,939
                                                                             


INTRICON CORPORATION
Consolidated Condensed Balance Sheets
(In Thousands, Except Per Share Amounts)
                                                             
                                                  June 30,        December 31,
                                                  2013            2012
                                                  (Unaudited)
Current assets:
Cash                                              $  108          $  225
Restricted cash                                      551             563
Accounts receivable, less allowance for
doubtful accounts of $106 at June 30, 2013           6,244           6,877
and $114 at December 31, 2012
Inventories                                          10,139          10,431
Other current assets                                 1,159           1,424
Current assets of discontinued operations           1,022         1,040   
Total current assets                                 19,223          20,560
Machinery and equipment                              33,426          33,577
Less: Accumulated depreciation                      28,321        27,578  
Net machinery and equipment                          5,105           5,999
Goodwill                                             9,194           9,709
Investment in partnerships                           666             773
Other assets, net                                    997             1,260
Other assets of discontinued operations             314           831     
Total assets                                      $  35,499      $  39,132  
Current liabilities:
Checks written in excess of cash                  $  444          $  637
Current maturities of long-term debt                 2,449           2,945
Accounts payable                                     4,447           4,015
Accrued salaries, wages and commissions              1,614           1,644
Deferred gain                                        110             110
Other accrued liabilities                            2,279           2,143
Liabilities of discontinued operations              235           173     
Total current liabilities                            11,578          11,667
Long-term debt, less current maturities              7,264           7,222
Other postretirement benefit obligations             582             590
Accrued pension liabilities                          499             510
Deferred gain                                        220             275
Other long-term liabilities                         201           146     
Total liabilities                                    20,344          20,410
Commitments and contingencies
Shareholders’ equity:
Common stock, $1.00 par value per share;
20,000 shares authorized; 5,702 and 5,687            5,702           5,687
shares issued and outstanding at June 30,
2013 and December 31, 2012, respectively
Additional paid-in capital                           16,104          15,797
Accumulated deficit                                  (6,274 )        (2,360  )
Accumulated other comprehensive loss                (377   )       (402    )
Total shareholders' equity                          15,155        18,722  
Total liabilities and shareholders’ equity        $  35,499      $  39,132  
                                                                             

Contact:

At IntriCon:
Scott Longval, CFO, 651-604-9526
slongval@intricon.com
or
At Padilla Speer Beardsley:
Matt Sullivan, 612-455-1700
msullivan@padillaspeer.com