UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 14, 2014
| INTRICON CORPORATION |
| (Exact name of registrant as specified in its charter) |
| Pennsylvania | 1-5005 | 23-1069060 |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 1260 Red Fox Road, Arden Hills, MN 55112 | ||
| (Address of principal executive offices) (Zip Code) | ||
| Registrant’s telephone number, including area code (651) 636-9770 | ||
| N/A | ||
| (Former name or former address, if changed since last report) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Amendment of Loan and Security Agreement.
On February 14, 2014, IntriCon Corporation (the “Company”) and its domestic subsidiaries entered into a Sixth Amendment to the Loan and Security Agreement and Waiver with The PrivateBank and Trust Company. The amendment, among other things:
| · | extended the term loan and revolving loan maturity date to February 28, 2018, keeping the existing term loan amortization schedule in place; |
| · | increased the eligible accounts receivable borrowing capacity under the revolving line of credit facility. Under the revolving credit facility as amended, the availability of funds depends on a borrowing base composed of stated percentages of the Company’s eligible accounts receivable and inventory, less a reserve; |
| · | amended the applicable base rate margin, applicable LIBOR rate margin, applicable LOC fee and applicable non-use fee based on the then applicable leverage ratio; |
| · | amended the funded debt to EBITDA and fixed charge coverage covenants; |
| · | revised the definition of net income to exclude losses from discontinued operations; |
| · | approved the application of net proceeds from the IntriCon Tibbetts asset sale against amounts outstanding under the revolving credit facility; and |
| · | waived certain financial covenant defaults as of December 31, 2013. |
The foregoing description of the amendment does not purport to be complete and is qualified in its entirety by reference to such document, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
A copy of the press release of the Company issued in connection with the amendment is furnished as Exhibit 99.1.
Item 2.02 Results of Operations and Financial Condition.
The following information is being provided pursuant to Item 2.02. Such information, including Exhibit 99.2 attached hereto, should not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
On February 19, 2014, IntriCon Corporation (the “Company”) announced earnings for the quarter and year ended December 31, 2013. A copy of the press release is furnished as Exhibit 99.2 and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
The following information is being provided pursuant to Item 7.01. Such information, including Exhibit 99.2 attached hereto, should not be deemed “filed” for purposes of Section 18 of the Exchange Act.
The information contained under Item 2.02 is incorporated herein by reference.
| 2 |
Item 9.01. Financial Statements and Exhibits.
| (d) Exhibits | ||
| 10.1 | Sixth Amendment to Loan and Security Agreement and Waiver among the Company, IntriCon, Inc., IntriCon Tibbetts Corporation, IntriCon Datrix Corporation and The PrivateBank and Trust Company, dated as of February 14, 2014. | |
| 99.1 | Press Release dated February 14, 2014 concerning amendment of credit facilities. | |
| 99.2 | Press Release dated February 19, 2014 concerning earnings. | |
| 3 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INTRICON CORPORATION | ||||
| By: | /s/ Scott Longval | |||
| Name: | Scott Longval | |||
| Title: | Chief Financial Officer | |||
Date: February 19, 2014
| 4 |
Exhibit Index
| 10.1 | Sixth Amendment to Loan and Security Agreement and Waiver among the Company, IntriCon, Inc., IntriCon Tibbetts Corporation, IntriCon Datrix Corporation and The PrivateBank and Trust Company, dated as of February 14, 2014. | |
| 99.1 | Press Release dated February 14, 2014 concerning amendment of credit facilities. | |
| 99.2 | Press Release dated February 19, 2014 concerning earnings. |
| 5 |
Exhibit 10.1
SIXTH AMENDMENT TO Loan
AND SECURITY AGREEMENT
AND WAIVER
THIS SIXTH AMENDMENT TO Loan AND SECURITY AGREEMENT AND WAIVER (this “Amendment”) is made and entered into as of February 14, 2014, by and among INTRICON CORPORATION, a Pennsylvania corporation, INTRICON, INC. (formerly known as Resistance Technology, Inc.), a Minnesota corporation, INTRICON TIBBETTS CORPORATION (formerly known as TI Acquisition Corporation), a Maine corporation, and INTRICON DATRIX CORPORATION (formerly known as Jon Barron, Inc.) (d/b/a Datrix), a California corporation (each, a “Borrower”; collectively, the “Borrowers”), and THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation (the “Bank”).
RECITALS:
A. The Borrowers and the Bank are parties to a certain Loan and Security Agreement dated as of August 13, 2009, as amended by a First Amendment dated as of March 12, 2010, as further amended by a Second Amendment dated as of August 12, 2011, as further amended by a Third Amendment dated as of March 1, 2012, as further amended by a Fourth Amendment dated as of August 6, 2012 and as further amended by a Fifth Amendment dated December 21, 2012 (as so amended, the “Loan Agreement”). All capitalized terms not otherwise defined herein shall have the meanings given to them in the Loan Agreement.
B. The Borrowers have requested that the Bank (i) waive the Existing Defaults (defined below) and (ii) amend certain provisions of the Loan Agreement, and the Bank has agreed to grant such waiver and so amend the Loan Agreement, in each case upon the terms and subject to the conditions set forth in this Amendment.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the nature, receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Waiver.
(a) Description of Existing Defaults. Pursuant to Section 10.2 of the Loan Agreement, the Borrowers are required to maintain a Leverage Ratio as of December 31, 2013 of not greater than 3.00 to 1.00 for the period of twelve (12) consecutive calendar months then-ended. The Borrowers have informed the Bank that their actual Leverage Ratio as of December 31, 2013 for the period of twelve (12) consecutive calendar months then-ended was 29.21 to 1.00. Such non-compliance constitutes an Event of Default under Section 11.3 of the Loan Agreement (the “Leverage Default”). Pursuant to Section 10.3 of the Loan Agreement, the Borrowers are required to maintain a Fixed Charge Coverage Ratio as of December 31, 2013 of not less than 1.15 to 1.00 for the period of twelve (12) consecutive calendar months then-ended. The Borrowers have informed the Bank that their actual Fixed Charge Coverage Ratio as of December 31, 2013 for the period of twelve (12) consecutive calendar months then-ended was (0.27) to 1.00. Such non-compliance constitutes an Event of Default under Section 11.3 of the Loan Agreement (the “FCC Default”; and together with the Leverage Default, collectively, the “Existing Defaults”).
(b) Waiver of Existing Defaults. The Borrowers have requested that the Bank waive the Existing Defaults, and the Bank hereby grants such waiver upon the satisfaction by the Borrowers of all conditions precedent set forth in Section 2 below. Except as expressly provided herein, all provisions of the Loan Agreement and the other Loan Documents remain in full force and effect. The foregoing waiver shall not apply to any other or subsequent failure to comply with the Sections identified above or any other provision of the Loan Agreement or the other Loan Documents, and shall not give rise to any course of dealing or course of performance with respect to any future requests.
(c) Application of Divestiture Proceeds. Pursuant to Section 2.2(d) of the Loan Agreement, the Borrowers are required to make a Term Loan Mandatory Prepayment concurrently with the receipt of any Net Cash Proceeds from any Asset Disposition, in an amount equal to 100% of such Net Cash Proceeds. Pursuant to a letter from the Bank to the Borrowers dated January 22, 2014, the Bank consented to an Asset Disposition by the Borrowers (the “Approved Disposition”). The Borrowers have requested that the Bank waive the requirement that the Borrowers make a Term Loan Mandatory Prepayment with the Net Cash Proceeds of the Approved Disposition, and the Bank hereby so consents, provided that 100% of the Net Cash Proceeds of the Approved Disposition are promptly applied to the repayment of the outstanding Revolving Loans. It is understood and agreed that the application of such Net Cash Proceeds will not reduce the Revolving Loan Commitment.
Section 2. Delivery of Documents. At or prior to the execution of this Amendment, and as a condition precedent to the effectiveness of this Amendment, the Borrowers shall have satisfied the following conditions and delivered or caused to be delivered to the Bank the following documents each dated such date and in form and substance satisfactory to the Bank and duly executed by all appropriate parties:
(a) This Amendment, duly executed by the Borrowers.
(b) With respect to each Borrower, a copy of the resolutions of the Board of Directors of such Borrower authorizing the execution, delivery and performance of this Amendment certified as true and accurate by an officer of such Borrower, along with a certificate of such officer which (i) certifies that there has been no amendment to either the Articles of Incorporation or the Bylaws of such Borrower since true and accurate copies of the same were last delivered and certified to the Bank, and that said Articles of Incorporation or the Bylaws remain in full force and effect as of the date of this Amendment, (ii) identifies each officer of such Borrower authorized to execute this Amendment and any other instrument or agreement executed by such Borrower in connection with this Amendment, and (iii) sets forth specimen signatures of each officer of such Borrower referred to above and identifies the office or offices held by such officer.
(c) The Bank shall have received (i) an amendment and extension fee in the amount of $50,000, which fee shall be non-refundable when paid and wholly earned when received; and (ii) reimbursement for its legal fees and other expenses as described in Section 9 hereof.
(d) Such other documents or instruments as the Bank may reasonably require.
Section 3. Amendments.
(a) Applicable Rates and Fees. The definitions of “Applicable Base Rate Margin,” “Applicable LIBOR Rate Margin,” “Applicable LOC Fee” and “Applicable Non-Use Fee” set forth in Section 1.1 of the Loan Agreement are hereby amended and restated in their entireties to read as follows:
| - 2 - |
“Applicable Base Rate Margin,” “Applicable LIBOR Rate Margin,” “Applicable LOC Fee” and “Applicable Non-Use Fee” means, as of any date, the applicable per annum rate shown in the applicable column in the table set forth below based on the then applicable Leverage Ratio:
| Revolving Loans | Term Loan | |||||
| Leverage Ratio | Applicable LIBOR Rate Margin | Applicable Base Rate Margin | Applicable LIBOR Rate Margin | Applicable Base Rate Margin | Applicable LOC Fee | Applicable Non-Use Fee |
| ≥ 3.00 to 1.00 | 3.50% | 0.75% | 4.00% | 1.25% | 3.50% | 0.25% |
| ≥ 2.00 to 1.00 and < 3.00 to 1.00 | 3.00% | 0.25% | 3.50% | 0.75% | 3.00% | 0.25% |
| < 2.00 to 1.00 | 2.75% | 0.00% | 3.00% | 0.25% | 2.75% | 0.25% |
For purposes of determining the Applicable LIBOR Rate Margin, the Applicable Base Rate Margin, the Applicable LOC Fee, and the Applicable Non-Use Fee, the Leverage Ratio will be determined as of the end of each calendar quarter occurring during the term of this Agreement (the end of each calendar quarter being a “Determination Date”) beginning with the calendar quarter ending June 30, 2014. On the Bank’s receipt of the financial statements required to be delivered to the Bank pursuant to Section 8.8, the Applicable LIBOR Rate Margin, the Applicable Base Rate Margin, the Applicable LOC Fee, and the Applicable Non-Use Fee will be subject to adjustment in accordance with the table set forth above based on the then Leverage Ratio so long as no Event of Default is existing as of applicable Determination Date or as of the effective date of adjustment. The foregoing adjustment, if applicable, to the Applicable LIBOR Rate Margin, the Applicable Base Rate Margin, the Applicable LOC Fee, and the Applicable Non-Use Fee will become effective for LIBOR Rate Loans requested, the unpaid principal balance of Base Rate Loans outstanding, non-use fees accruing, and fees due with respect to Letters of Credit issued or renewed, on and after the first day of the first calendar month following delivery to the Bank of the financial statements required to be delivered to the Bank pursuant to Section 8.8 until the next succeeding effective date of adjustment pursuant to this Agreement. Each of the financial statements required to be delivered to the Bank must be delivered to the Bank in compliance with Section 8.8. If the Borrowers, however, have not timely delivered their financial statements in accordance with Section 8.8, then, without limiting any of the rights and remedies available to the Bank by reason of such noncompliance, at the Bank’s option, commencing on the date upon which such financial statements should have been delivered in accordance with Section 8.8 and continuing until such financial statements are actually delivered in accordance with Sections 8.8, it shall be assumed for purposes of determining the Applicable LIBOR Rate Margin, the Applicable Base Rate Margin, the Applicable LOC Fee, and the Applicable Non-Use Fee that the Leverage Ratio was greater than or equal to 3.00 to 1.00 and the pricing associated with a Leverage Ratio of greater than or equal to 3.00 to 1.00 will be applicable on the then applicable Determination Date. From the date of the Sixth Amendment to this Agreement to and including the first Determination Date beginning with the calendar quarter ending June 30, 2014, (a) the Applicable LIBOR Rate Margin for Revolving Loans and the Term Loan shall be 4.00%, (b) the Applicable Base Rate Margin for Revolving Loans and the Term Loan shall be 1.25%, (c) the Applicable LOC Fee shall be 4.00%, and (d) the Applicable Non-Use Fee shall be 0.25%.
| - 3 - |
(b) Borrowing Base. The definition of “Borrowing Base Amount” set forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Borrowing Base Amount” shall mean:
(a) an amount equal to eighty-five percent (85%) of the net amount (after deduction of such reserves and allowances as the Bank deems proper and necessary in the exercise of its commercially reasonable judgment) of all Eligible Accounts of all Borrowers; provided, however, that for all Eligible Accounts for which Medtronic, Inc., United Healthcare or any subsidiary thereof, is the Account Debtor, the foregoing reference to 85% shall be deemed to be 90%; plus
(b) the lesser of (i) an amount equal to fifty percent (50%) of the lower of cost or market value (after deduction of such reserves and allowances as the Bank deems proper and necessary in the exercise of its commercially reasonable judgment) of all Eligible Inventory of all Borrowers, and (ii) Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00).
(c) Net Income. The definition of “Net Income” set forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Net Income” shall mean, with respect to the Borrowers and their respective Subsidiaries for any period, the consolidated net income (or loss) of the Borrowers and their respective Subsidiaries for such period as determined in accordance with GAAP, excluding any gains or losses from Asset Dispositions, any extraordinary gains or losses and any gains or losses from discontinued operations.
(d) Revolving Loan Maturity Date. The definition of “Revolving Loan Maturity Date” set forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Revolving Loan Maturity Date” shall mean February 28, 2018, unless extended by the Bank pursuant to any modification, extension or renewal note executed by the Borrowers and accepted by the Bank in its sole and absolute discretion in substitution for the Revolving Note.
(e) Term Loan Maturity Date. The definition of “Term Loan Maturity Date” set forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Term Loan Maturity Date” shall mean February 28, 2018, unless extended by the Bank pursuant to any modification, extension or renewal note executed by the Borrowers and accepted by the Bank in its sole and absolute discretion in substitution for the Term Note.
| - 4 - |
(f) Financial Covenants. Section 10 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Section 10. FINANCIAL COVENANTS.
10.1 [Intentionally omitted]
10.2 Funded Debt to EBITDA. As of each of the measurement dates set forth in the chart below, the Borrowers and their respective consolidated Subsidiaries shall maintain a ratio of: (a) consolidated Funded Debt as of such date, minus the aggregate collected cash balance in Deposit Accounts of the Borrowers maintained with the Bank as of such date; to (b) consolidated EBITDA (the “Leverage Ratio”) for the period of twelve (12) consecutive calendar months then-ended, plus, to the extent deducted in calculating consolidated EBITDA for the applicable measurement period, (i) up to $230,000 in restructuring charges incurred during the fiscal year ended December 31, 2013 and (ii) up to $50,000 in restructuring charges incurred during January 2014, of not greater than the amount set forth opposite such measurement date in the chart below:
| Measurement Date | Maximum Leverage Ratio |
| April 30, 2014 | 3.25 to 1.00 |
| June 30, 2014 | 2.75 to 1.00 |
| September 30, 2014 | 2.75 to 1.00 |
| December 31, 2014 and the last day of each calendar quarter ending thereafter | 2.50 to 1.00 |
10.3 Fixed Charge Coverage. As of each of the measurement dates set forth in the chart below, for the period of twelve (12) consecutive calendar months then-ended, the Borrowers and their respective consolidated Subsidiaries shall maintain a ratio (the “Fixed Charge Coverage Ratio”) of: (a) the total of consolidated EBITDA for such period, minus the sum of all income taxes paid in cash by the Borrowers on a consolidated basis, minus all Capital Expenditures of the Borrowers made during such period which are not financed with Funded Debt, minus that portion of the aggregate cash payments made by the applicable Borrower(s) in respect of the Subject Agreements and Applicable Agreements during such period that was not deducted as an expense in arriving at Net Income for such period, plus, to the extent deducted in calculating consolidated EBITDA for the applicable measurement period, (i) up to $230,000 in restructuring charges incurred during the fiscal year ended December 31, 2013 and (ii) up to $50,000 in restructuring charges incurred during January 2014; to (b) the sum for such period of (i) Interest Charges paid in cash, plus (ii) regularly scheduled payments made (and, without duplication, payments required to be made) in respect of principal of Funded Debt (including the Term Loan, but excluding the Revolving Loans), plus (iii) all cash dividends and distributions paid or declared in respect of Capital Securities of the Borrowers, of not less than the amount set forth opposite such measurement date in the chart below:
| - 5 - |
| Measurement Date | Minimum Fixed Charge Coverage Ratio |
| April 30, 2014 | 1.15 to 1.00 |
| June 30, 2014 and the last day of each calendar quarter ending thereafter | 1.25 to 1.00 |
10.4 Capital Expenditures. The Borrowers shall not incur Capital Expenditures in an amount greater than $3,500,000 in the aggregate in Borrower’s fiscal year ending December 31, 2014 or any fiscal year ending thereafter.”
(g) Form of Compliance Certificate. Exhibit 8.13 to the Loan Agreement is hereby replaced with Exhibit 8.13 attached hereto.
Section 4. Representations; No Default. Each Borrower represents and warrants that: (a) the representation and warranties contained in Section 7 of the Loan Agreement are true and correct in all material respects, as though made on the date hereof, except to the extent such representation and warranty, by its express terms, relates solely to a prior date, and except that the representations and warranties contained in Section 7.26 of the Loan Agreement shall be true and correct in all material respects, as though made on the date of the financial statements most recently delivered to the Bank pursuant to Section 8.8(a) of the Loan Agreement; (b) such Borrower has the power and legal right and authority to enter into this Amendment and has duly authorized the execution and delivery of this Amendment and other agreements and documents executed and delivered by such Borrower in connection herewith; (c) neither this Amendment nor the agreements contained herein contravene or constitute an Unmatured Event of Default or Event of Default under the Loan Agreement or a default under any other agreement, instrument or indenture to which such Borrower is a party or a signatory, or any provision of such Borrower’s Articles of Incorporation or Bylaws or, to the best of such Borrower’s knowledge, any other agreement or requirement of law, or result in the imposition of any lien or other encumbrance on any of its property under any agreement binding on or applicable to such Borrower or any of its property except, if any, in favor of the Bank; (d) no consent, approval or authorization of or registration or declaration with any party, including but not limited to any governmental authority, is required in connection with the execution and delivery by the Borrower of this Amendment or other agreements and documents executed and delivered by such Borrower in connection herewith or the performance of obligations of such Borrower herein described, except for those which such Borrower has obtained or provided and as to which such Borrower has delivered certified copies of documents evidencing each such action to the Bank; (e) no events have taken place and no circumstances exist at the date hereof which would give such Borrower grounds to assert a defense, offset or counterclaim to the obligations of such Borrower under the Loan Agreement or any of the other Loan Documents; (f) there are no known claims, causes of action, suits, debts, liens, obligations, liabilities, demands, losses, costs and expenses (including attorneys’ fees) of any kind, character or nature whatsoever, fixed or contingent, which such Borrower may have or claim to have against the Bank, which might arise out of or be connected with any act of commission or omission of the Bank existing or occurring on or prior to the date of this Amendment, including, without limitation, any claims, liabilities or obligations arising with respect to the indebtedness evidenced by the Notes (as defined in the Loan Agreement); and (g) after giving effect to this Amendment, no Unmatured Event of Default or Event of Default has occurred and is continuing under the Loan Agreement.
Section 5. Affirmation; Further References. The Bank and each Borrower acknowledge and affirm that the Loan Agreement, as hereby amended, is hereby ratified and confirmed in all respects and all terms, conditions and provisions of the Loan Agreement (except as amended by this Amendment) and of each of the other Loan Documents shall remain unmodified and in full force and effect. All references in any document or instrument to the Loan Agreement are hereby amended and shall refer to the Loan Agreement as amended by this Amendment.
| - 6 - |
Section 6. Merger and Integration; Superseding Effect. This Amendment, from and after the date hereof, embodies the entire agreement and understanding between the parties hereto and supersedes and has merged into it all prior oral and written agreements on the same subjects by and between the parties hereto with the effect that this Amendment, shall control with respect to the specific subjects hereof and thereof.
Section 7. Severability. Whenever possible, each provision of this Amendment and any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be interpreted in such manner as to be effective, valid and enforceable under the applicable law of any jurisdiction, but, if any provision of this Amendment or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be held to be prohibited, invalid or unenforceable under the applicable law, such provision shall be ineffective in such jurisdiction only to the extent of such prohibition, invalidity or unenforceability, without invalidating or rendering unenforceable the remainder of such provision or the remaining provisions of this Amendment or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto in such jurisdiction, or affecting the effectiveness, validity or enforceability of such provision in any other jurisdiction.
Section 8. Successors. This Amendment shall be binding upon the Borrowers, the Bank and their respective successors and assigns, and shall inure to the benefit of the Borrowers, the Bank and to the respective successors and assigns of the Bank.
Section 9. Costs and Expenses. Each Borrower agrees to reimburse the Bank, upon execution of this Amendment, for all reasonable out-of-pocket expenses (including attorneys’ fees and legal expenses of counsel for the Bank) incurred in connection with the Loan Agreement, including in connection with the negotiation, preparation and execution of this Amendment and all other documents negotiated, prepared and executed in connection with this Amendment, and in enforcing the obligations of the Borrowers under this Amendment, and to pay and save the Bank harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of this Amendment.
Section 10. Headings. The headings of various sections of this Amendment have been inserted for reference only and shall not be deemed to be a part of this Amendment.
Section 11. Counterparts; Digital Copies. This Amendment may be executed in several counterparts as deemed necessary or convenient, each of which, when so executed, shall be deemed an original, provided that all such counterparts shall be regarded as one and the same document, and any party to this Amendment may execute any such agreement by executing a counterpart of such agreement. A facsimile or digital copy (pdf) of this signed Amendment shall be deemed to be an original thereof.
Section 12. Release of Rights and Claims. Each Borrower, for itself and its successors and assigns, hereby releases, acquits, and forever discharges Bank and its successors and assigns for any and all manner of actions, suits, claims, charges, judgments, levies and executions occurring or arising from the transactions entered into with Bank prior to entering into this Amendment whether known or unknown, liquidated or unliquidated, fixed or contingent, direct or indirect which such Borrower may have against Bank.
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Section 13. Governing Law. This Amendment shall be governed by the internal laws of the State of Minnesota, without giving effect to conflict of law principles thereof.
Section 14. No Waiver. Except as expressly set forth in Section 1 hereof, nothing contained in this Amendment (or in any other agreement or understanding between the parties) shall constitute a waiver of, or shall otherwise diminish or impair, the Bank’s rights or remedies under the Loan Agreement or any of the other Loan Documents, or under applicable law.
[Remainder of page intentionally blank;
signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above written.
| BORROWERS: |
INTRICON CORPORATION, a Pennsylvania corporation |
||||
| By | /s/ Scott Longval | ||||
| Scott Longval, Chief Financial Officer | |||||
|
INTRICON, INC. (formerly known as Resistance Technology, Inc.), a Minnesota corporation |
|||||
| By | /s/ Scott Longval | ||||
| Scott Longval, Chief Financial Officer | |||||
|
INTRICON TIBBETTS CORPORATION (formerly known as TI Acquisition Corporation), a Maine corporation |
|||||
| By | /s/ Scott Longval | ||||
| Scott Longval, Chief Financial Officer | |||||
|
INTRICON DATRIX CORPORATION (formerly known as Jon Barron, Inc.) (d/b/a Datrix), a California corporation |
|||||
| By | /s/ Scott Longval | ||||
| Scott Longval, Chief Financial Officer | |||||
| BANK: |
THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation |
||||
| By | /s/ Seth Hove | ||||
| Seth Hove, Managing Director | |||||
[Signature page to Sixth Amendment to Loan and Security Agreement and Wavier]
Exhibit 99.1
FOR IMMEDIATE RELEASE
INTRICON AMENDS DOMESTIC CREDIT FACILITIES
Extends Term Four Years and Increases Domestic Borrowing Capacity
ARDEN HILLS, Minn. — February 14, 2014—IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of miniature and micro-miniature body-worn devices, today announced it has amended its credit facilities with The PrivateBank and Trust Company.
Terms of the amendment include, among other things:
| · | Extending the term loan and revolving loan maturity date to February 28, 2018, keeping the existing term loan amortization schedule in place; |
| · | Increasing the eligible borrowing capacity under the revolving line of credit facility; |
| · | Amending the applicable base rate margin, applicable LIBOR rate margin, applicable LOC fee and applicable non-use fee based on the then applicable leverage ratio; and |
| · | Amending the funded debt to EBITDA and fixed charge coverage financial covenants. |
Said Mark S. Gorder, president and chief executive officer, "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. We're using the facilities to fund anticipated working capital growth requirements."
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.
IntriCon Corporation
February 14, 2014
Page 2
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.
Contacts
| At IntriCon: | At PadillaCRT: |
| Scott Longval, CFO | Matt Sullivan |
| 651-604-9526 | 612-455-1700 |
| slongval@intricon.com | matt.sullivan@padillacrt.com |
###
Exhibit 99.2
INTRICON REPORTS 2013 FOURTH-QUARTER RESULTS
Posts Strongest Sales Quarter of the Year;
Company Achieves Profitability from Continuing Operations
ARDEN HILLS, Minn. — Feb. 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.
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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.
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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.
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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.”
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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.
Contacts
| At IntriCon: Scott Longval, CFO 651-604-9526 slongval@intricon.com |
At PadillaCRT: Matt Sullivan 612-455-1709 matt.sullivan@padillacrt.com |
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INTRICON CORPORATION
Consolidated Condensed Statements of Operations
(In Thousands, Except Per Share Amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, 2013 (Unaudited) | December 31, 2012 (Unaudited) | December 31, 2013 (Unaudited) | December 31, 2012 (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 marketing | 884 | 961 | 3,308 | 3,324 | ||||||||||||
| General and administrative | 1,350 | 1,127 | 5,789 | 5,426 | ||||||||||||
| Research and development | 1,184 | 1,182 | 4,181 | 4,481 | ||||||||||||
| Restructuring charges | 30 | — | 229 | — | ||||||||||||
| Total operating expenses | 3,448 | 3,270 | 13,507 | 13,231 | ||||||||||||
| Operating income (loss) | 389 | 726 | (1,338 | ) | 2,068 | |||||||||||
| Interest expense | (132 | ) | (186 | ) | (600 | ) | (755 | ) | ||||||||
| Equity in loss of partnerships | (78 | ) | (39 | ) | (262 | ) | (116 | ) | ||||||||
| Gain on sale of investment in partnership | — | — | — | 822 | ||||||||||||
| Other income (expense) | 14 | (4 | ) | 127 | (96 | ) | ||||||||||
| Income (loss) from continuing operations before income taxes and discontinued operations | 193 | 497 | (2,073 | ) | 1,923 | |||||||||||
| Income tax expense | 58 | 9 | 217 | 164 | ||||||||||||
| Income (loss) before discontinued operations | 135 | 488 | (2,290 | ) | 1,759 | |||||||||||
| Loss from discontinued operations, net of income taxes | (1,558 | ) | (156 | ) | (3,872 | ) | (1,050 | ) | ||||||||
| Net income (loss) | $ | (1,423 | ) | $ | 332 | $ | (6,162 | ) | $ | 709 | ||||||
| Basic income (loss) per share: | ||||||||||||||||
| Continuing operations | $ | 0.02 | $ | 0.09 | $ | (0.40 | ) | $ | 0.31 | |||||||
| Discontinued operations | (0.27 | ) | (0.03 | ) | (0.68 | ) | (0.19 | ) | ||||||||
| Net income (loss) per share: | $ | (0.25 | ) | $ | 0.06 | $ | (1.08 | ) | $ | 0.13 | ||||||
| Diluted income (loss) per share: | ||||||||||||||||
| Continuing operations | $ | 0.02 | $ | 0.08 | $ | (0.40 | ) | $ | 0.30 | |||||||
| Discontinued operations | (0.27 | ) | (0.03 | ) | (0.68 | ) | (0.18 | ) | ||||||||
| Net income (loss) per share: | $ | (0.25 | ) | $ | 0.06 | $ | (1.08 | ) | $ | 0.12 | ||||||
| Average shares outstanding: | ||||||||||||||||
| Basic | 5,710 | 5,678 | 5,699 | 5,669 | ||||||||||||
| Diluted | 5,710 | 5,819 | 5,699 | 5,888 | ||||||||||||
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INTRICON CORPORATION
Consolidated Condensed Balance Sheets
(In Thousands, Except Per Share Amounts)
| December
31, 2013 | December
31, 2012 | |||||||
| Current assets: | ||||||||
| Cash | $ | 217 | $ | 225 | ||||
| Restricted cash | 568 | 563 | ||||||
| Accounts receivable, less allowance for doubtful accounts of $124 at December 31, 2013 and $154 at December 31, 2012 | 5,433 | 6,877 | ||||||
| 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 operations | 154 | 173 | ||||||
| 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 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively | 5,727 | 5,687 | ||||||
| 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 | ||||
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