ARDEN HILLS, Minn.--(BUSINESS WIRE)--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, 2016.
Highlights:
- IntriCon’s value hearing health initiatives delivered year-over-year growth;
- The company made meaningful progress pursuing alternative distribution models and partnerships within the value hearing health market acquiring partial ownership of Hearing Help Express, with the option to acquire the remaining ownership; and,
- Sales to IntriCon’s largest medical customer are poised to rebound in the fourth quarter.
Financial Results
For the 2016 third quarter, the company
reported net sales of $16.0 million, compared to $17.3 million in the
prior-year period. IntriCon posted a net loss attributable to
shareholders of ($1,304,000), or ($0.19) per share, versus net income
attributable to shareholders of $628,000, or $0.10 per diluted share,
for the 2015 third quarter.
“Third-quarter results reflect the continued timing shift in orders from our largest medical customer,” said Mark S. Gorder, president and chief executive officer of IntriCon. “Despite this challenge, we were able to deliver year-over-year gains in hearing health and professional audio. And we anticipate medical revenues will begin to rebound in our fourth quarter.”
Gross profit margins were 22.9 percent compared to 26.7 percent in the prior-year third quarter. The decrease was primarily due to a less favorable sales mix and slightly lower revenue.
Operating expenses for the third-quarter were $4.7 million, compared to $3.9 million in the prior-year third quarter. The increase was largely due to the inclusion of PC Werth, acquired by IntriCon UK in November 2015. Sequentially, IntriCon decreased operating expenses $343,000, in response to temporarily lower revenue levels.
Business Update
Hearing health sales increased 7 percent
from the prior-year third quarter, primarily stemming from contributions
by PC Werth, acquired by IntriCon UK to build a hearing health platform
in England. During the quarter, IntriCon experienced gains in value
hearing aids, personal sound amplifier products (PSAP) and assisted
listening devices. The company remains intently focused on opportunities
in value hearing health versus the declining conventional channel.
“Within hearing health, there’s a groundswell building for fundamental change among regulators and consumers,” said Gorder. “As a company, we are steadfast in our commitment to overcome barriers to device access and spur development and innovation. This is why—despite lower revenue levels—we maintained our level of investment in mission critical ultra-low-power wireless and DSP technologies during the quarter. These technologies are required to support our emerging alternative channels and our goal of delivering superior outcomes-based, affordable hearing healthcare, by combining state-of-the-art devices and software technology at a much lower cost directly to consumers.”
The company is focused on driving growth and creating efficiencies in its current value-based hearing healthcare initiatives. Domestically, IntriCon continues its work with earVenture, a joint venture with the Academy of Doctors of Audiology (ADA). Over 450 ADA members have registered to join the earVenture program. earVenture is implementing sales and marketing efforts to convert those members into consistent customers, as well as soliciting non-registered ADA members to join.
In the United Kingdom, IntriCon has delivered initial devices to targeted National Health Service (NHS) clinics, with positive feedback. In addition, IntriCon currently working with the NHS for approval of a third device, the K940D, which will enhance IntriCon sales capabilities. The K940D, which is a traditional behind-the-ear device, is very appealing to the NHS because of its broad fitting range and advanced features. Approval of the K940D is anticipated in early 2017.
“With the ADA and NHS, our efforts have centered on educating the practitioner—an effort we believe will drive growth,” said Gorder. “Moreover, we made meaningful progress during the quarter pursuing alternative distribution models and partnerships within the value hearing health market. And as we announced today, we acquired partial ownership of Hearing Help Express, a direct-to-consumer hearing aid provider.”
Sales in IntriCon’s medical business decreased 17 percent in the 2016 third quarter, primarily driven by IntriCon’s largest customer, Medtronic. The lower sales to Medtronic were expected as they manage the transition of their recently FDA-approved MiniMed 630G system. IntriCon expects Medtronic sales to begin ramping up in the fourth quarter as they launch the MiniMed 630G system.
Long term, the company believes it’s well-positioned for growth with Medtronic. In addition to the MiniMed 630G system, IntriCon is also designed into the MiniMed 670G system which was also recently approved by the FDA, and is scheduled to be launched in the spring of 2017. “The MiniMed 670G is the world’s first hybrid closed loop insulin delivery system,” said Gorder, “and we are excited to be designed into and supporting such a revolutionary diabetes management system.”
Third-quarter 2016 professional audio communication sales rose by 13 percent from the prior-year period. IntriCon anticipates fourth quarter of 2016 revenue in this business to be flat with the prior-year comparable period.
As disclosed in the second quarter, given temporarily lower revenue levels, IntriCon has taken measured actions to reduce operating expenses. These reductions, while not impacting the company’s ability to execute strategic initiatives, should result in approximately $600,000 in annual savings—the majority of which will begin to be realized in the 2016 fourth quarter.
Looking Ahead
Concluded Gorder, “Although our third-quarter
performance reflects a customer product transition outside of our
control, this is not where we want it to be—or where we know we can be.
We remain confident in the long-term prospects of our medical business
and look forward to the expected fourth-quarter ramp of Medtronic’s
sales. Equally important, we remain encouraged by our technology
pipeline and the growing appetite for an alternative hearing health
channel. Based on information currently available, we anticipate
fourth-quarter net sales to increase approximately $1 million from the
2016 third quarter and near break-even from a profitability prospective,
with notably stronger results in the first quarter of 2017.”
Conference Call Today
As previously announced, the company
will hold an investment community conference call today, Monday,
November 14, 2016, beginning at 4 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: 1-888-715-1401 and
provide the conference ID number 5036157 to the operator. To access the
replay, dial 1-888-203-1112 and enter passcode 5036157.
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, the United
Kingdom 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, 2015. 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 | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||||||||||||||
| - | ||||||||||||||||||||
| Sales, net | $ | 16,012 | $ | 17,341 | $ | 51,246 | $ | 51,063 | ||||||||||||
| Cost of sales | 12,347 | 12,706 | 38,597 | 37,515 | ||||||||||||||||
| Gross profit | 3,665 | 4,635 | 12,649 | 13,548 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales and marketing | 1,082 | 854 | 3,478 | 2,739 | ||||||||||||||||
| General and administrative | 2,250 | 1,708 | 6,649 | 5,150 | ||||||||||||||||
| Research and development | 1,323 | 1,344 | 4,297 | 3,864 | ||||||||||||||||
| Restructuring charges | - | - | 132 | - | ||||||||||||||||
| Total operating expenses | 4,655 | 3,906 | 14,556 | 11,753 | ||||||||||||||||
| Operating income (loss) | (990 | ) | 729 | (1,907 | ) | 1,795 | ||||||||||||||
| Interest expense | (135 | ) | (95 | ) | (387 | ) | (287 | ) | ||||||||||||
| Other income (expense) | (181 | ) | (131 | ) | (472 | ) | 17 | |||||||||||||
| Income (loss) before income taxes | (1,306 | ) | 503 | (2,766 | ) | 1,525 | ||||||||||||||
| Income tax expense (benefit) | 33 | (125 | ) | 119 | 107 | |||||||||||||||
| Net income (loss) | (1,339 | ) | 628 | (2,885 | ) | 1,418 | ||||||||||||||
| Less: Loss allocated to non-controlling interest | (35 | ) | - | (106 | ) | - | ||||||||||||||
| Net income (loss) attributable to IntriCon shareholders | $ | (1,304 | ) | $ | 628 | $ | (2,779 | ) | $ | 1,418 | ||||||||||
| Net income (loss) per share attributable to IntriCon shareholders: | ||||||||||||||||||||
| Basic | $ | (0.19 | ) | $ | 0.11 | $ | (0.44 | ) | $ | 0.24 | ||||||||||
| Diluted | (0.19 | ) | 0.10 | (0.44 | ) | 0.23 | ||||||||||||||
| Average shares outstanding: | ||||||||||||||||||||
| Basic | 6,796 | 5,943 | 6,287 | 5,873 | ||||||||||||||||
| Diluted | 6,796 | 6,271 | 6,287 | 6,214 | ||||||||||||||||
|
INTRICON CORPORATION |
||||||||||
| Consolidated Condensed Balance Sheets | ||||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||||
| September 30, | December 31, | |||||||||
|
2016 |
2015 |
|||||||||
| (Unaudited) | ||||||||||
| Current assets: | ||||||||||
| Cash | $ | 604 | $ | 369 | ||||||
| Restricted cash | 633 | 610 | ||||||||
| Accounts receivable, less allowance for doubtful accounts of $67 at September 30, 2016 and $135 at December 31, 2015 | 6,324 | 8,578 | ||||||||
| Inventories | 13,329 | 14,472 | ||||||||
| Other current assets | 638 | 860 | ||||||||
| Total current assets | 21,528 | 24,889 | ||||||||
| Machinery and equipment | 39,959 | 38,653 | ||||||||
| Less: Accumulated depreciation | 33,103 | 31,911 | ||||||||
| Net machinery and equipment | 6,856 | 6,742 | ||||||||
| Goodwill | 9,551 | 9,551 | ||||||||
| Investment in partnerships | 212 | 224 | ||||||||
| Other assets, net | 1,161 | 480 | ||||||||
| Total assets | $ | 39,308 | $ | 41,886 | ||||||
| Current liabilities: | ||||||||||
| Current maturities of long-term debt | $ | 2,002 | $ | 1,908 | ||||||
| Accounts payable | 5,966 | 7,785 | ||||||||
| Accrued salaries, wages and commissions | 2,207 | 2,559 | ||||||||
| Deferred gain | - | 55 | ||||||||
| Other accrued liabilities | 725 | 1,279 | ||||||||
| Total current liabilities | 10,900 | 13,586 | ||||||||
| Long-term debt, less current maturities | 6,862 | 7,929 | ||||||||
| Other postretirement benefit obligations | 508 | 542 | ||||||||
| Accrued pension liabilities | 790 | 812 | ||||||||
| Other long-term liabilities | 127 | 120 | ||||||||
| Total liabilities | 19,187 | 22,989 | ||||||||
| Shareholders’ equity: | ||||||||||
| Common stock, $1.00 par value per share; 20,000 shares authorized; 6,801 and 5,981 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 6,801 | 5,981 | ||||||||
| Additional paid-in capital | 21,168 | 17,721 | ||||||||
| Accumulated deficit | (6,825 | ) | (4,046 | ) | ||||||
| Accumulated other comprehensive loss | (879 | ) | (721 | ) | ||||||
| Total shareholders' equity | 20,265 | 18,935 | ||||||||
| Non-controlling interest | (144 | ) | (38 | ) | ||||||
| Total equity | 20,121 | 18,897 | ||||||||
| Total liabilities and equity | $ | 39,308 | $ | 41,886 | ||||||