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 full year ended December 31, 2015.
Full-year Highlights:
- Company achieved full-year revenue of $69.7 million and gross margins of 27.2 percent, the highest since rebranding as IntriCon a decade ago;
- The company delivered sequential quarterly revenue and net income growth throughout 2015;
- IntriCon embarked on a joint venture (earVenture) with the Academy of Doctors of Audiology and completed its acquisition of PC Werth Limited—both significant initiatives in the value hearing health space to provide high-quality hearing aids at attractive prices to the global markets;
- IntriCon invested a record $5.2 million in research and development; and,
- The company launched JD Edwards EnterpriseOne platform, a $2.4 million investment in an integrated applications suite of comprehensive enterprise resource planning software, to further support its global manufacturing and distribution footprint.
Fourth-Quarter Highlights:
- Net sales increased 8 percent sequentially and 13 percent over the prior-year period;
- Gross margins of 29.2 percent represent the strongest quarter since the rebranding;
- The company continued to deliver profitability with net income attributable to shareholders of $810,000 and EPS of $0.13; and
- Net income attributable to shareholders excluding the impact of PC Werth was $1.2 million, or $0.19 per diluted share (see reconciliation in Non-GAAP Financial Measure below).
Fourth-Quarter Financial Results
For the 2015 fourth
quarter, the company reported net sales of $18.7 million, up from $16.5
million in the prior-year period. Gross profit margins grew to 29.2
percent from 27.1 percent in the prior-year fourth quarter. The gains
stemmed primarily from higher overall sales volume. IntriCon posted net
income attributable to shareholders of $810,000, or $0.13 per diluted
share, compared to net income attributable to shareholders of $360,000,
or $0.06 per diluted share, for the 2014 fourth quarter. Included in the
2015 fourth quarter results were $(143,000) of PC Werth-related
acquisition costs and a $(265,000) net loss from operations, which
totaled a combined $(408,000), or $(0.06) per diluted share.
“We are pleased to report record quarterly results from a net sales and gross margin standpoint, capping off the strongest year for the company for these metrics since rebranding as IntriCon a decade ago,” said Mark S. Gorder, president and chief executive officer. “Additionally, we continued to deliver profitability while focusing on our strategy of developing partnerships with key value hearing health and medical customers. We’re accomplishing this by concentrating resources on building the infrastructure required to secure high-potential growth opportunities, especially in the value hearing health market, as evidenced by our recent acquisition of the assets of PC Werth."
Full-Year 2015 Financial Results
For the 2015 full year,
IntriCon reported net sales of $69.7 million and net income attributable
to shareholders of $2.2 million, or $0.36 per diluted share. Net income
attributable to shareholders excluding the impact of PC Werth for 2015
would have been $2.6 million, or $0.42 per diluted share (see
reconciliation in Non-GAAP Financial Measure below). This compares to
2014 annual net sales of $68.3 million and net income attributable to
shareholders of $2.2 million, or $0.37 per diluted share.
Gross profit margins increased to 27.2 percent from 27.1 percent for the full year 2014. Again, the improvement was primarily driven by higher sales volume.
Business Update
Fourth-quarter hearing health sales remained
steady with the prior-year period. During the quarter, IntriCon
continued to experience anticipated decreases in conventional channel
sales which were offset by gains in targeted value hearing health
initiatives, including value hearing aids, personal sound amplifier
products (PSAP) and assistive listening devices.
As previously noted, the conventional channel has experienced a trend of continuing market consolidation. As a result, the six large manufacturers now control approximately 98 percent of the global market. However, during this time, market penetration has stagnated as end-consumer prices have risen dramatically.
In early January, the U.S. Food and Drug Administration (FDA) weighed in on low penetration rates with an announcement that highlighted statistics from the National Institute on Deafness and Other Communication Disorders that indicate 37.5 million U.S. adults aged 18 and older report some form of hearing loss. However, only 30 percent of adults over 70 and 16 percent of those aged 20 to 69 who could benefit from wearing hearing aids have ever used them. Based on these statistics, the FDA has reopened the public comment period on draft guidance related to the agency's premarket requirements for hearing aids and PSAPs; their intent is to consider ways in which regulation can support further penetration into the hearing market.
“We are aligned with the FDA's efforts to overcome barriers to device access and spur development and innovation in cost-effective technology,” said Gorder. “We believe these factors create the need for the outcomes-based hearing health model we have long discussed. Our value hearing health strategy focuses on this need as we continue to build the infrastructure to secure other notable partners who can help drive the company's outcomes-based, hearing health offering.
“Both earVenture and PC Werth Limited are testaments to the emerging value channels that we believe have significant growth potential. And they capitalize on IntriCon's established ability to deliver high-quality devices, while providing access points to directly penetrate the global marketplace. We anticipate these initiatives will drive robust hearing health growth for IntriCon in future quarters."
Sales in IntriCon’s medical business increased 40 percent in the 2015 fourth quarter compared to the year-ago period, primarily driven by IntriCon's largest customer, Medtronic. Furthermore, for the 2015 full year IntriCon experienced record Medtronic sales volumes. The gains stemmed from MiniLink REAL-Time Transmitter and related accessories sales, which are incorporated in Medtronic's MiniMed 530G insulin pump and continuous glucose monitoring system. IntriCon anticipates continued Medtronic revenue strength going forward.
Fourth-quarter 2015 professional audio communication sales were down 32 percent from the prior-year period. The anticipated decrease was due to the conclusion of the company's Singapore Government contract in 2014. IntriCon will continue to leverage its core technologies in professional audio communication to support existing customers, as well as seek related hearing health and medical product opportunities.
Looking Ahead
Concluded Gorder, “2015 was a very successful
year for IntriCon. We posted the strongest revenue and gross margins
since rebranding as IntriCon and made significant progress developing
our value hearing health infrastructure, securing new channel partners
and advancing our technology portfolio. With clear evidence of an
emerging value hearing health market opportunity and new partnerships
coming on board, coupled with our strong Medtronic business, we believe
we are poised for future growth. As we carry this positive momentum into
2016, we anticipate higher sales for the full year, with our
first-quarter revenue consistent with our 2015 fourth quarter—a
significant rise over 2015 first-quarter revenue.”
Conference Call Today
As previously announced, the company
will hold an investment community conference call today, Thursday,
February 18, 2016, beginning at 4 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: 1-877-876-9176 and
provide the conference ID number 1040523 to the operator.
A replay of the conference call will be available three hours after the call ends through 7 p.m. CT on Thursday, March 3, 2016. To access the replay, dial 1-888-203-1112 and enter passcode: 1040523.
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, 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.
Non-GAAP Financial Measure
The information above reporting
the Company’s net income attributable to shareholders excluding the
impact of PC Werth is a non-GAAP financial measure. A reconciliation of
net income attributable to shareholders, the most directly comparable
GAAP financial measure, to net income attributable to shareholders
excluding the impact of PC Werth is set forth below. The Company’s
management believes that this non-GAAP financial measure provides
meaningful supplemental information regarding the Company’s performance
by excluding the effect of this acquisition to allow a more meaningful
comparison of the Company’s organic results of operations for both
periods.
| (in thousands, except per share amounts) | Three Months Ended | Twelve Months Ended | ||||||
| December 31, 2015 | December 31, 2015 | |||||||
| Net income attributable to shareholders | $ | 810 | $ | 2,228 | ||||
| PC Werth acquisition costs and net loss from operations | 408 | 408 | ||||||
| Net income attributable to shareholders excluding the impact of PC Werth | 1,218 | 2,636 | ||||||
| Net income attributable to shareholders per diluted share | 0.13 | 0.36 | ||||||
| PC Werth acquisition costs and net loss from operations per diluted share | 0.06 | 0.06 | ||||||
| Net income attributable to shareholders per diluted share excluding the impact of PC Werth | 0.19 | 0.42 | ||||||
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, 2014. 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 31, | December 31, | December 31, | December 31, | |||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
| Sales, net | $ | 18,676 | $ | 16,481 | $ | 69,739 | $ | 68,303 | ||||||||||||
| Cost of sales | 13,221 | 12,018 | 50,736 | 49,819 | ||||||||||||||||
| Gross profit | 5,455 | 4,463 | 19,003 | 18,484 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales and marketing | 1,180 | 884 | 3,919 | 3,699 | ||||||||||||||||
| General and administrative | 1,954 | 1,575 | 7,104 | 6,462 | ||||||||||||||||
| Research and development | 1,350 | 1,302 | 5,214 | 4,832 | ||||||||||||||||
| Restructuring charges | - | - | - | 83 | ||||||||||||||||
| Total operating expenses | 4,484 | 3,761 | 16,237 | 15,076 | ||||||||||||||||
| Operating income | 971 | 702 | 2,766 | 3,408 | ||||||||||||||||
| Interest expense | (82 | ) | (99 | ) | (369 | ) | (461 | ) | ||||||||||||
| Other income (expense) | (278 | ) | 34 | (261 | ) | (1 | ) | |||||||||||||
| Income from continuing operations before income taxes and discontinued operations | 611 | 637 | 2,136 | 2,946 | ||||||||||||||||
| Income tax (benefit) expense | (88 | ) | 277 | 19 | 428 | |||||||||||||||
| Income before discontinued operations | 699 | 360 | 2,117 | 2,518 | ||||||||||||||||
| Loss on sale of discontinued operations | - | - | - | (120 | ) | |||||||||||||||
| Loss from discontinued operations, net of income taxes | - | - | - | (150 | ) | |||||||||||||||
| Net Income | 699 | 360 | 2,117 | 2,248 | ||||||||||||||||
| Less: Loss allocated to non-controlling interest | (111 | ) | - | (111 | ) | - | ||||||||||||||
| Net Income attributable to shareholders | $ | 810 | $ | 360 | $ | 2,228 | $ | 2,248 | ||||||||||||
| Basic income per share attributable to shareholders: | ||||||||||||||||||||
| Continuing operations | $ | 0.14 | $ | 0.06 | $ | 0.38 | $ | 0.43 | ||||||||||||
| Discontinued operations | - | - | - | (0.05 | ) | |||||||||||||||
| Net income per share: | $ | 0.14 | $ | 0.06 | $ | 0.38 | $ | 0.39 | ||||||||||||
| Diluted income per share attributable to shareholders: | ||||||||||||||||||||
| Continuing operations | $ | 0.13 | $ | 0.06 | $ | 0.36 | $ | 0.42 | ||||||||||||
| Discontinued operations | - | - | - | (0.04 | ) | |||||||||||||||
| Net income per share: | $ | 0.13 | $ | 0.06 | $ | 0.36 | $ | 0.37 | ||||||||||||
| Average shares outstanding: | ||||||||||||||||||||
| Basic | 5,977 | 5,831 | 5,907 | 5,791 | ||||||||||||||||
| Diluted | 6,291 | 6,122 | 6,241 | 6,038 | ||||||||||||||||
| INTRICON CORPORATION | ||||||||||
| Consolidated Condensed Balance Sheets | ||||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||||
| December 31, | December 31, | |||||||||
2015 | 2014 | |||||||||
| Current assets: | ||||||||||
| Cash | $ | 369 | $ | 328 | ||||||
| Restricted cash | 610 | 640 | ||||||||
| Accounts receivable, less allowance for doubtful accounts of $135 at December 31, 2015 and $120 at December 31, 2014 | 8,578 | 7,673 | ||||||||
| Inventories | 14,472 | 9,983 | ||||||||
| Other current assets | 860 | 1,013 | ||||||||
| Total current assets | 24,889 | 19,637 | ||||||||
| Machinery and equipment | 38,653 | 35,104 | ||||||||
| Less: Accumulated depreciation | 31,911 | 30,859 | ||||||||
| Net machinery and equipment | 6,742 | 4,245 | ||||||||
| Goodwill | 9,551 | 9,194 | ||||||||
| Investment in partnerships | 224 | 387 | ||||||||
| Other assets, net | 480 | 498 | ||||||||
| Total assets | $ | 41,886 | $ | 33,961 | ||||||
| Current liabilities: | ||||||||||
| Current maturities of long-term debt | $ | 1,908 | $ | 1,886 | ||||||
| Accounts payable | 7,785 | 5,954 | ||||||||
| Accrued salaries, wages and commissions | 2,559 | 2,519 | ||||||||
| Deferred gain | 55 | 110 | ||||||||
| Other accrued liabilities | 1,279 | 1,364 | ||||||||
| Total current liabilities | 13,586 | 11,833 | ||||||||
| Long-term debt, less current maturities | 7,929 | 4,627 | ||||||||
| Other postretirement benefit obligations | 542 | 485 | ||||||||
| Accrued pension liabilities | 812 | 741 | ||||||||
| Deferred gain | - | 55 | ||||||||
| Other long-term liabilities | 120 | 113 | ||||||||
| Total liabilities | 22,989 | 17,854 | ||||||||
| Commitments and contingencies | ||||||||||
| Shareholders’ equity: | ||||||||||
| Common stock, $1.00 par value per share; 20,000 shares authorized; 5,981 and 5,844 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively | 5,981 | 5,844 | ||||||||
| Additional paid-in capital | 17,721 | 16,939 | ||||||||
| Accumulated deficit | (4,046 | ) | (6,274 | ) | ||||||
| Accumulated other comprehensive loss | (721 | ) | (402 | ) | ||||||
| Total shareholders' equity | 18,935 | 16,107 | ||||||||
| Non-controlling interest | (38 | ) | - | |||||||
| Total equity | 18,897 | 16,107 | ||||||||
| Total liabilities and equity | $ | 41,886 | $ | 33,961 | ||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160218006354/en/
Contacts:
Scott Longval, CFO, 651-604-9526
slongval@intricon.com
or
At
PadillaCRT:
Matt Sullivan, 612-455-1709
matt.sullivan@padillacrt.com
