IntriCon Reports 2013 Fourth-Quarter Results

  IntriCon Reports 2013 Fourth-Quarter Results

                  Posts Strongest Sales Quarter of the Year;
          Company Achieves Profitability from Continuing Operations

Business Wire

ARDEN HILLS, Minn. -- February 19, 2014

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,
2013.

Highlights:

  *Net sales of $15.0 million represented the strongest quarter of the year
    and an increase of 21.9 percent sequentially over the 2013 third quarter;
  *Gross margins of 25.5 percent were up slightly over the prior year period
    and rose sequentially from 21.9 percent in the 2013 third quarter;
  *Achieved profitability from continuing operations for the quarter,
    compared to losses of $2.0 million and $432,000 in the 2013 second and
    third quarters, respectively;
  *Reduced bank debt $1.4 million from the prior year and nearly $400,000
    from September 30, 2013;
  *Initiated ramp-up production for Medtronic’s recently FDA approved MiniMed
    530G insulin pump system;
  *Completed divestiture of discontinued operations IntriCon Tibbetts and its
    associated security, certain microphone and receiver businesses on January
    27, 2014, marking the final significant milestone in the company’s global
    restructuring plan, and;
  *Amended IntriCon’s credit facilities with The PrivateBank and Trust
    Company on February 14, 2014.

Fourth-Quarter Financial Results
For the 2013 fourth quarter, the company reported net sales of $15.0 million,
versus $15.8 million in the prior-year period. IntriCon had a net loss of $1.4
million, or $0.25 per diluted share, compared to net income of $332,000, or
$0.06 per diluted share, for the 2012 fourth quarter.

The company reported net income from continuing operations of $135,000, or
$0.02 per diluted share, in the 2013 fourth quarter versus $488,000, or $0.08
per diluted share, in the prior-year period. Results from discontinued
operations in the 2013 fourth quarter were a net loss of $1.6 million, or
$0.27 per diluted share, versus a net loss of $156,000, or $0.03 per diluted
share, in the prior-year period. Included in the 2013 fourth quarter loss of
$1.6 million from discontinued operations was $717,000, or $0.13 per diluted
share, of one-time, non-cash charges related to restructuring initiatives.

As part of IntriCon’s global strategic restructuring plan announced in June
2013, the company completed its divestiture of the security business and
certain microphone and receiver businesses of IntriCon Tibbetts Corporation,
IntriCon’s wholly owned subsidiary based in Camden, Maine, on January 27,
2014. The company anticipates a loss on the sale of approximately $50,000 and
an additional loss of $125,000 from discontinued operations, both of which
will be reflected in the 2014 first quarter, at which point no further
discontinued operations charges are expected. The sale marks the final
significant milestone in IntriCon’s restructuring plan.

“The conclusion of our global strategic restructuring plan allows us to
accelerate the company's future growth by focusing resources on our highest
potential growth opportunities: value hearing health and medical biotelemetry,
while driving significant cost reductions,” said Mark S. Gorder, president and
chief executive officer of IntriCon. “In the fourth quarter, we continued to
make progress in reducing our cost structure and refocusing our efforts, as
demonstrated by the return to profitability from continuing operations.

“For the second consecutive quarter we recorded sequential growth in sales,
gross profit margins and profitability from continuing operations. We are
encouraged with the strong rise in our medical business, driven by a sharp
ramp in Medtronic’s recently approved 530G insulin pump system, a program we
expect to remain strong throughout 2014. Additionally, hi HealthInnovations
has worked through the majority of its existing hearing aid inventory build,
and we anticipate increased order activity in 2014 to meet their current sales
demand.”

As a percentage of total fourth-quarter sales, medical stood at 56.7 percent,
with hearing health and professional audio at 30.1 percent and 13.2 percent,
respectively. This compares to 42.0 percent, 34.6 percent and 23.4 percent for
medical, hearing health and professional audio, respectively, a year earlier.

Gross profit margins increased to 25.5 percent from 25.2 percent for the
prior-year three month period, and rose sequentially from 21.9 percent in the
2013 third quarter. The increase was primarily due to volume increases and
cost reductions generated from the global restructuring plan.

Full-Year Financial Results
For the 2013 year, IntriCon reported net sales of $53.0 million and a net loss
of $6.2 million, or $1.08 per diluted share. This compares to 2012 net sales
of $60.0 million and net income of $709,000, or $0.12 per diluted share. The
2013 net loss from continuing operations was $2.3 million, or $0.40 per
diluted share, with a discontinued operations net loss of $3.9 million, or
$0.68 per diluted share. Included in the $3.9 million net loss from
discontinued operations for 2013 was $1.7 million, or $0.30 per diluted share,
of one-time, non-cash charges related to restructuring initiatives.

As a percentage of total sales, medical stood at 49.0 percent, with hearing
health and professional audio at 37.3 percent and 13.7 percent, respectively,
for the 12-month period. This compares to 40.8 percent, 39.7 percent and 19.5
percent for medical, hearing health and professional audio, respectively, in
2012.

Gross profit margins decreased to 23.0 percent from 25.5 percent for the
prior-year. The decrease was primarily due to lower overall sales volume.

Business Update
Sales in IntriCon’s medical business rose 28.0 percent in the 2013 fourth
quarter compared to the year-ago period, and 56.2 percent sequentially from
the 2013 third quarter. In September 2013, IntriCon’s largest customer,
Medtronic, received FDA approval for their MiniMed 530G insulin pump. With the
approval, IntriCon expects medical sales to remain strong in 2014 as Medtronic
fulfills marketplace demand for the MiniMed 530G.

Hearing health sales decreased 17.3 percent from the prior-year quarter
chiefly stemming from declines in the conventional channel. These were
partially offset by modest growth in hi HealthInnovations sales.

Within the conventional hearing health channel, high device costs,
distribution inconveniences and retail consolidation are resulting in minimal
sales growth. IntriCon believes these factors have created opportunities in
alternative care models such as the value hearing aid channel and personal
sound amplifier products (PSAP) channel. To capitalize on these opportunities,
the company continues to concentrate its efforts in the value hearing health
space and is aggressively pursuing larger customers.

Professional audio sales declined 46.4 percent from the prior-year period. The
decrease was due to factors similar to the 2013 third quarter, 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; and U.S. Government disruption caused by
sequestration. As previously disclosed, 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.

Extension of Credit Facilities
Last week, IntriCon amended its credit facilities with The PrivateBank and
Trust Company. Terms of the agreement include: an $8.0 million revolving
credit facility, with a subfacility for letters of credit, to mature in
February 2018 and a term loan facility of $2.8 million, amortized in quarterly
principal installments of $250,000, also maturing in February 2018. The $10.8
million in credit facilities includes London Interbank Offered Rate (LIBOR)
interest rate options at varying rates based on funded debt to EBITDA levels.

Said Gorder, “The extended terms and increased borrowing capacity of our
amended credit facilities enhance IntriCon’s financial flexibility and
strengthen the company in both the short- and long-term. This amendment
reinforces The PrivateBank’s commitment to our strategic plan and its belief
in our ability to execute our growth initiatives successfully.”

Looking Ahead
Concluded Gorder, “In response to the early 2013 results and market dynamics,
we took swift action to reduce our cost structure and sharpen our sales and
marketing focus. Together with an improved order outlook from two major
customers, we believe the table is set for stronger performance in 2014. The
business clearly has excellent momentum and we expect that to continue as we
aggressively work to drive growth in our two largest growth opportunities:
value hearing health and medical biotelemetry.”

Conference Call Today
As previously announced, the company will hold an investment community
conference call today, Wednesday, Feb. 19, 2014, 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: 1-888-417-8533 and
provide the conference ID number 7992560 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, Feb. 26, 2014. To access the replay,
dial 1-888-203-1112 and enter passcode: 7992560.

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              Twelve Months Ended
                   December        December        December        December
                   31,             31,             31,             31,
                   2013            2012            2013            2012
                   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
                                                                      
Sales, net         $  15,026       $  15,831       $  52,961       $  59,955
Cost of sales        11,189        11,835        40,792        44,656 
Gross profit          3,837           3,996           12,169          15,299
                                                                      
Operating
expenses:
Sales and             884             961             3,308           3,324
marketing
General and           1,350           1,127           5,789           5,426
administrative
Research and          1,184           1,182           4,181           4,481
development
Restructuring        30            -             229           -      
charges
Total
operating            3,448         3,270         13,507        13,231 
expenses
Operating             389             726             (1,338 )        2,068
income (loss)
                                                                      
Interest              (132   )        (186   )        (600   )        (755   )
expense
Equity in loss
of                    (78    )        (39    )        (262   )        (116   )
partnerships
Gain on sale
of investment         -               -               -               822
in partnership
Other income         14            (4     )       127           (96    )
(expense)
Income (loss)
from
continuing
operations            193             497             (2,073 )        1,923
before income
taxes and
discontinued
operations
                                                                      
Income tax           58            9             217           164    
expense
Income (loss)
before                135             488             (2,290 )        1,759
discontinued
operations
                                                                      
Loss from
discontinued
operations,          (1,558 )       (156   )       (3,872 )       (1,050 )
net of income
taxes
Net income         $  (1,423 )     $  332         $  (6,162 )     $  709    
(loss)
                                                                      
Basic income
(loss) per
share:
Continuing         $  0.02         $  0.09         $  (0.40  )     $  0.31
operations
Discontinued         (0.27  )       (0.03  )       (0.68  )       (0.19  )
operations
Net income
(loss) per         $  (0.25  )     $  0.06        $  (1.08  )     $  0.13   
share:
                                                                      
Diluted income
(loss) per
share:
Continuing         $  0.02         $  0.08         $  (0.40  )     $  0.30
operations
Discontinued         (0.27  )       (0.03  )       (0.68  )       (0.18  )
operations
Net income
(loss) per         $  (0.25  )     $  0.06        $  (1.08  )     $  0.12   
share:
                                                                      
Average shares
outstanding:
Basic                 5,710           5,678           5,699           5,669
Diluted               5,710           5,819           5,699           5,888
                                                                             


INTRICON CORPORATION
Consolidated Condensed Balance Sheets
(In Thousands, Except Per Share Amounts)
                                                             
                                                 December 31,     December 31,
                                                 2013             2012
Current assets:
Cash                                             $  217           $  225
Restricted cash                                     568              563
Accounts receivable, less allowance for
doubtful accounts of $124 at December 31,           5,433            6,877
2013 and $154 at December 31, 2012
Inventories                                         9,400            10,431
Other current assets                                1,337            1,424
Current assets of discontinued operations          382            1,040   
Total current assets                                17,337           20,560
                                                                     
Machinery and equipment                             33,971           33,577
Less: Accumulated depreciation                     29,232         27,578  
Net machinery and equipment                         4,739            5,999
                                                                     
Goodwill                                            9,194            9,709
Investment in partnerships                          569              773
Other assets, net                                   749              1,260
Other assets of discontinued operations            132            831     
Total assets                                     $  32,720       $  39,132  
                                                                     
Current liabilities:
Checks written in excess of cash                 $  279           $  637
Current maturities of long-term debt                2,210            2,945
Accounts payable                                    5,037            4,015
Accrued salaries, wages and commissions             1,676            1,644
Deferred gain                                       110              110
Other accrued liabilities                           1,893            2,143
Current liabilities of discontinued                154            173     
operations
Total current liabilities                           11,359           11,667
                                                                     
Long-term debt, less current maturities             6,271            7,222
Other postretirement benefit obligations            531              590
Accrued pension liabilities                         839              510
Deferred gain                                       165              275
Other long-term liabilities                        247            146     
Total liabilities                                   19,412           20,410
Commitments and contingencies
Shareholders’ equity:
Common stock, $1.00 par value per share;
20,000 shares authorized; 5,727 and 5,687           5,727            5,687
shares issued and outstanding at December
31, 2013 and December 31, 2012, respectively
Additional paid-in capital                          16,434           15,797
Accumulated deficit                                 (8,522  )        (2,360  )
Accumulated other comprehensive loss               (331    )       (402    )
Total shareholders' equity                         13,308         18,722  
Total liabilities and shareholders’ equity       $  32,720       $  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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