IntriCon Reports 2013 Third-Quarter Results

  IntriCon Reports 2013 Third-Quarter Results

  Hearing Health Up over Prior Year; Medical Business Rebounding with Large
   Customer FDA Approval; Company Anticipates Profitability from Continuing
                         Operations in Fourth Quarter

Business Wire

ARDEN HILLS, Minn. -- November 14, 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 third quarter ended September 30, 2013.

For the 2013 third quarter, the company reported net sales of $12.3 million,
versus $13.8 million in the prior-year period. IntriCon had a net loss of
$(825,000), or $(0.14) per diluted share, compared to net income of $217,000,
or $0.04 per diluted share, for the 2012 third quarter. Net loss from
continuing operations was $(432,000), or $(0.08) per diluted share, in the
2013 third quarter; results from discontinued operations include a net loss of
$(393,000), or $(0.07) per diluted share, for the 2013 third quarter.

As part of IntriCon’s global strategic restructuring plan announced in June
2013, the company’s Maine operations, which include IntriCon’s security,
certain microphone and receivers businesses, as well as certain Singapore
assets, are now held for sale and classified as discontinued operations.

As previously outlined, the restructuring program was designed to accelerate
the company’s future growth by focusing resources on the highest potential
growth areas and drive cost reductions in both continuing and discontinued
operations. The program resulted in approximately $400,000 of net cost savings
in the 2013 third quarter, and IntriCon expects to achieve $3.0 million in
annual cost savings by early 2014.

“With our restructuring plan in place, we’re seeing encouraging signs across
our business,” said Mark S. Gorder, president and chief executive officer of
IntriCon. “Sequentially, sales and gross profit margins are up, and we’re
starting to see a rebound in our medical business with Medtronic’s recent FDA
approval for its MiniMed 530G insulin pump system. We believe that we’ll be
able to achieve profitability from continuing operations in the 2013 fourth
quarter.”

As a percentage of total third-quarter sales, medical stood at 44.2 percent,
with hearing health and professional audio at 40.4 percent and 15.4 percent,
respectively. This compares to 40.0 percent, 33.0 percent and 27.0 percent for
medical, hearing health and professional audio, respectively, in 2012.

Gross profit margins decreased to 21.9 percent from 23.4 percent for the
prior-year three month period. The decrease was primarily due to lower overall
sales volume, partially offset by cost reductions from our global
restructuring plan. Sequentially, however, 2013 third-quarter margins rose
significantly from 16.2 percent in the 2013 second quarter; the gain was
chiefly driven by increased volume and restructuring benefits.

Operating expenses for the 2013 third quarter of $2.8 million decreased
$450,000 from the prior-year three-month period and declined $714,000
sequentially from the 2013 second quarter. The primary drivers were one-time
research and development tax credit refunds of $570,000 and the impact from
the restructuring program.

Nine-Month Results

For the 2013 nine months, IntriCon reported net sales of $37.9 million and a
net loss of $(4.7) million, or $(0.83) per diluted share. This compares to
2012 nine-month net sales of $44.1 million and net income of $377,000, or
$0.07 per diluted share. The 2013 nine-month net loss from continuing
operations was $(2.4) million, or $(0.43) per diluted share, with a
discontinued operations net loss of $(2.3) million, or $(0.41) per diluted
share. Included in the $(2.3) million net loss from discontinued operations
for the 2013 nine months was approximately $(1.0) million, or $(0.18) per
diluted share, of one-time, non-cash charges related to restructuring
initiatives.

As a percentage of total sales, medical stood at 46.0 percent, with hearing
health and professional audio at 40.1 percent and 13.9 percent, respectively,
for the nine-month period. This compares to 40.4 percent, 41.5 percent and
18.1 percent for medical, hearing health and professional audio, respectively,
in 2012.

Gross profit margins decreased to 22.0 percent from 25.6 percent for the
prior-year nine months. Again, the decrease was primarily due to lower overall
sales volume. With increased sales volumes anticipated and its restructuring
plan in place, the company expects continued sequential margin improvement in
the fourth quarter.

Business Update

Sales in IntriCon’s medical business were flat in the 2013 third quarter
compared to the year-ago period. However, sales increased 11.5 percent
sequentially from the 2013 second quarter. In late September, IntriCon’s
customer Medtronic received FDA approval for their MiniMed 530G insulin pump.
With the approval, IntriCon expects medical sales to strengthen in the fourth
quarter and into 2014 as Medtronic ramps its launch of the MiniMed 530G.

Within cardiac, IntriCon delivered initial orders of its wireless cardiac
diagnostic monitor (CDM) Sirona™ in the third quarter. Additionally, the
company continued expanding its CDM sales and marketing infrastructure to
further advance IntriCon’s cardiac program—and during the third quarter
secured another customer contract for the Sirona device.

Hearing health sales rose 9.3 percent over the prior-year quarter primarily
due to demand for the company’s personal sound amplifier products (PSAPs) and
growth in hi HealthInnovations sales. With high device costs and distribution
inconveniences persisting in the conventional hearing health channel, IntriCon
sees opportunities in alternative care models such as the insurance channel
and the PSAP market. To capitalize on these opportunities, the company is
concentrating its efforts in the value hearing aid (VHA) space and
aggressively pursuing larger customers. During the third quarter, IntriCon
hired an industry veteran to spearhead this initiative and began investing in
its related branding strategy.

Within its hi HealthInnovations business, the company saw a modest increase in
orders over the prior-year third quarter. As hi HealthInnovations further
builds out its infrastructure, IntriCon anticipates orders to slowly build in
the fourth quarter and into 2014.

Professional audio sales declined 49.4 percent from the prior-year period. The
decrease was due to several factors, including: conclusion of the company’s
Singapore Government contract in December 2012; the strategic decision to
rationalize select non-core professional audio communications product lines;
the U.S. Government sequestration; and disruption associated with the federal
government shutdown. As previously disclosed, the company has classified
portions of its professional audio communication business as discontinued.
IntriCon will continue to leverage its core technology in professional audio
to support existing customers, as well as pursue related hearing health and
medical product opportunities.

The company’s existing credit facility with The PrivateBank and Trust Company
expires on August 13, 2014, and all outstanding borrowings will become due and
payable. As a result, all of the borrowings under this facility have been
classified as current liabilities on IntriCon’s balance sheet. IntriCon is
currently working with The PrivateBank and Trust Company to enter into a
long-term agreement that will provide financial flexibility and strengthen the
company in both the short- and long-term. IntriCon expects to have this
long-term agreement in place during the first quarter of 2014.

Looking Ahead
Concluded Gorder, “I am very encouraged with the progress we have made over
the last quarter. As outlined in our strategic restructuring plan, we have
positioned the company to aggressively drive our two largest growth
opportunities: medical biotelemetry and value hearing health. We expect these
to continue to strengthen in the fourth quarter, and we’re optimistic that we
can achieve profitability from continuing operations by year end.”

Conference Call Today
As previously announced, the company will hold an investment community
conference call today, Thursday, Nov. 14, 2013, 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: 1-888-427-9411 and
provide the conference ID number 9768897 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 Wednesday, Nov. 20, 2013. To access the replay,
dial 1-888-203-1112 and enter passcode: 9768897.

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 data)
                                                            
                 Three Months Ended              Nine Months Ended
                   September       September       September       September
                   30,             30,             30,             30,
                   2013            2012            2013            2012
                   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
                                                                   
Sales, net         $  12,330      $  13,828      $  37,935      $  44,124 
Cost of sales        9,629         10,594        29,603        32,821 
Gross profit          2,701           3,234           8,332           11,303
                                                                   
Operating
expenses:
Sales and             801             734             2,424           2,363
marketing
General and           1,512           1,410           4,439           4,299
administrative
Research and          519             1,138           2,997           3,299
development
Restructuring        -             -             199           -      
charges
Total
operating            2,832         3,282         10,059        9,961  
expenses
Operating             (131   )        (48    )        (1,727 )        1,342
income (loss)
                                                                   
Interest              (161   )        (210   )        (468   )        (569   )
expense
Equity in
(loss) of             (49    )        (39    )        (184   )        (77    )
partnerships
Gain on sale
of investment         -               822             -               822
in partnership
Other income         30            (35    )       113           (92    )
(expense)
                                                                             
Income (loss)
from
continuing
operations            (311   )        490             (2,266 )        1,426
before income
taxes and
discontinued
operations
                                                                   
Income tax           121           64            159           155    
expense
Income (loss)
before                (432   )        426             (2,425 )        1,271
discontinued
operations
                                                                   
Loss from
discontinued
operations,          (393   )       (209   )       (2,314 )       (894   )
net of income
taxes
                                                                             
Net income         $  (825   )     $  217         $  (4,739 )     $  377    
(loss)
                                                                   
Basic income
(loss) per
share:
Continuing         $  (0.08  )     $  0.08         $  (0.43  )     $  0.22
operations
Discontinued         (0.07  )       (0.04  )       (0.41  )       (0.16  )
operations
Net income
(loss) per         $  (0.14  )     $  0.04        $  (0.83  )     $  0.07   
share:
                                                                   
Diluted income
(loss) per
share:
Continuing         $  (0.08  )     $  0.07         $  (0.43  )     $  0.22
operations
Discontinued         (0.07  )       (0.04  )       (0.41  )       (0.15  )
operations
Net income
(loss) per         $  (0.14  )     $  0.04        $  (0.83  )     $  0.06   
share:
                                                                   
Average shares
outstanding:
Basic                 5,702           5,674           5,694           5,666
Diluted               5,702           5,854           5,694           5,910
                                                                             


INTRICON CORPORATION
Consolidated Condensed Balance Sheets
(In Thousands, Except Per Share Amounts)
                                                             
                                                September 30,     December 31,
                                                2013              2012
                                                (Unaudited)       
Current assets:
Cash                                            $  196            $  225
Restricted cash                                    564               563
Accounts receivable, less allowance for
doubtful accounts of $108 at September 30,         5,728             6,877
2013 and $114 at December 31, 2012
Inventories                                        9,458             10,431
Other current assets                               1,565             1,424
Current assets of discontinued operations         947             1,040   
Total current assets                               18,458            20,560
                                                                  
Machinery and equipment                            33,627            33,577
Less: Accumulated depreciation                    28,840          27,578  
Net machinery and equipment                        4,787             5,999
                                                                  
Goodwill                                           9,194             9,709
Investment in partnerships                         617               773
Other assets, net                                  880               1,260
Other assets of discontinued operations           312             831     
Total assets                                    $  34,248        $  39,132  
                                                                  
Current liabilities:
Checks written in excess of cash                $  -              $  637
Current maturities of long-term debt               8,815             2,945
Accounts payable                                   4,928             4,015
Accrued salaries, wages and commissions            1,929             1,644
Deferred gain                                      110               110
Other accrued liabilities                          2,171             2,143
Liabilities of discontinued operations            285             173     
Total current liabilities                          18,238            11,667
                                                                  
Long-term debt, less current maturities            40                7,222
Other postretirement benefit obligations           570               590
Accrued pension liabilities                        510               510
Deferred gain                                      193               275
Other long-term liabilities                       160             146     
Total liabilities                                  19,711            20,410
Commitments and contingencies
Shareholders’ equity:
Common stock, $1.00 par value per share;
20,000 shares authorized; 5,707 and 5,687
shares issued and outstanding at September         5,707             5,687
30, 2013 and December 31, 2012,
respectively
Additional paid-in capital                         16,257            15,797
Accumulated deficit                                (7,099  )         (2,360  )
Accumulated other comprehensive loss              (328    )        (402    )
Total shareholders' equity                        14,537          18,722  
Total liabilities and shareholders’ equity      $  34,248        $  39,132  
                                                                             

Contact:

At IntriCon:
Scott Longval, CFO, 651-604-9526
slongval@intricon.com
or
At PadillaCRT:
Matt Sullivan, 612-455-1709
matt.sullivan@padillacrt.com
 
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