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) November 4, 2019
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)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Common stock, par value $1.00 per share | IIN | Nasdaq Global Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
The following information is being provided pursuant to Item 2.02. Such information, including Exhibit 99.1 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 November 4, 2019, IntriCon Corporation (the “Company”) announced earnings for the quarter ended September 30, 2019. A copy of the press release is furnished as Exhibit 99.1 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 99.1 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.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
Exhibit No. |
Description |
| 99.1 | Press Release dated November 4, 2019. |
| 1 |
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 | ||
| Date: November 4, 2019 | Title: | Executive Vice President, Chief Operating Officer and Chief Financial Officer | |
E-1
Exhibit 99.1
INTRICON REPORTS THIRD QUARTER 2019 RESULTS
ARDEN HILLS, Minn. — November 4, 2019 — 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, 2019.
Third Quarter Highlights:
| ● | Revenue of $26.9 million | ||
| ○ | Revenue from largest medical customer declined 5.6% year-over-year | ||
| ● | Gross margin of 25.2% | ||
| ● | Net loss per diluted share of $0.03 versus net income of $0.22 per diluted share | ||
“In the third quarter, we continued to make progress growing our addressable market in our two core businesses: Medical Biotelemetry and Hearing Health. We also made important strides forward in identifying new partners in markets where our core competencies can provide value and significantly expand our market opportunity,” said Mark Gorder, president and chief executive officer of IntriCon. “We anticipate our diabetes business to gradually ramp-up with further acceleration in 2020, following recent international regulatory approvals. We have also begun to focus our efforts pursuing exciting opportunities within interventional pulmonology and electrophysiology, as these markets have high growth rates and steep technology curves that harbor significant potential for IntriCon. We eagerly await the draft guidance for over-the-counter hearing aids and have taken steps to ensure we are well positioned to address the need for an alternative to medically prescribed hearing aids.”
Third Quarter 2019 Financial Results
For the 2019 third quarter, the company reported net revenue of $26.9 million versus $29.6 million in the comparable prior-year period.
Revenue in IntriCon’s Medical business in the third quarter of 2019 was $19.1 million, a decrease from $19.4 million in the comparable prior-year period. The year over year decline was driven primarily by continued slower than expected international rollout from a large medical device customer, partially offset by increased sales to its medical coil customers.
Hearing Health revenue was $6.4 million in the third quarter of 2019 compared to $8.2 million in the prior-year third quarter. Similar to the second quarter of 2019, revenue decline during the third quarter was largely attributed to restructuring activities within a large insurance customer’s hearing health business, as they pivot towards a more traditional “brick-and-mortar” approach that no longer aligns with IntriCon’s partnership strategy to reach the end customer. In addition, as anticipated the company experienced a decline in its legacy OEM business.
Gross margin in the third quarter of 2019 was 25.2%, down from 31.6% in the prior-year third quarter. Gross margins were constrained by ongoing validation and qualification expense and excess capacity related to the recent manufacturing expansion to meet the anticipated higher volume requirements of its existing and future customers.
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Operating expenses for the third quarter were $7.2 million, compared to $7.0 million in the comparable prior-year period. The increase stemmed from higher non-cash stock compensation expense of $648,000 and severance expense, slightly offset by decreases in research and development expense and advertising expense in its Direct-to-End-Consumer business.
The company posted a net loss of approximately $290,000 or $0.03 per diluted share in the third quarter of 2019, versus net income of approximately $1.9 million or $0.22 per diluted share, for the 2018 third quarter.
2019 Guidance
Due to lower than expected diabetes revenue, revenue loss from the company’s large insurance customer, and the result of conscious reduction in advertising spend at HHE, IntriCon now expects revenue in the range of $112 million to $113 million and gross margin in the range of 26.5% to 27.0% for the full year 2019. This compares to prior guidance of $115 million to $117.5 million and gross margins in the range of 27.0% to 28.5% for the full year 2019.
Conference Call
IntriCon’s management team will hold a conference call today, Monday, November 4, 2019, beginning at 4:00 p.m. CT / 5:00 p.m. ET. Investors interested in listening to the conference call may do so by dialing (866) 795-7248 for domestic callers or (470) 495-9160 for international callers, using conference ID: 7296587. A live and archived webcast will be available on the “Investors” sections of the company’s website at: 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, including estimates of future results, 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, 2018. 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.
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.
Investor
Contact
Leigh Salvo
(415) 937-5404
investorrelations@intricon.com
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INTRICON CORPORATION
MARKET REVENUE
(Unaudited)
| THIRD QUARTER | YEAR TO DATE | |||||||||||||||||||||||
| ($ in 000's) | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||||
| Medical | $ | 19,099 | $ | 19,356 | -1.3 | % | $ | 60,784 | $ | 55,487 | 9.5 | % | ||||||||||||
| Diabetes | 15,723 | 16,662 | -5.6 | % | 50,837 | 47,531 | 7.0 | % | ||||||||||||||||
| Other Medical | 3,376 | 2,694 | 25.3 | % | 9,947 | 7,956 | 25.0 | % | ||||||||||||||||
| Hearing Health | 6,358 | 8,206 | 22.5 | % | 20,044 | 22,750 | -11.9 | % | ||||||||||||||||
| Value Based Direct-to-End-Consumer | 1,510 | 1,490 | 1.3 | % | 4,876 | 5,327 | -8.5 | % | ||||||||||||||||
| Value Based Indirect-to-End-Consumer | 2,443 | 3,660 | -33.3 | % | 7,419 | 8,923 | -16.9 | % | ||||||||||||||||
| Legacy OEM | 2,405 | 3,056 | -21.3 | % | 7,749 | 8,500 | -8.8 | % | ||||||||||||||||
| Professional Audio Communications | 1,436 | 2,004 | -28.3 | % | 4,972 | 5,353 | -7.1 | % | ||||||||||||||||
| Total | $ | 26,893 | $ | 29,566 | -9.0 | % | $ | 85,800 | $ | 83,590 | 2.6 | % | ||||||||||||
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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, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenue, net | $ | 26,893 | $ | 29,566 | $ | 85,800 | $ | 83,590 | ||||||||
| Cost of goods sold | 20,120 | 20,236 | 62,253 | 56,435 | ||||||||||||
| Gross profit | 6,773 | 9,330 | 23,547 | 27,155 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 2,609 | 2,784 | 9,071 | 8,023 | ||||||||||||
| General and administrative | 3,715 | 2,921 | 10,551 | 8,429 | ||||||||||||
| Research and development | 840 | 1,251 | 2,902 | 3,693 | ||||||||||||
| Impairment loss | — | — | 3,765 | — | ||||||||||||
| Total operating expenses | 7,164 | 6,956 | 26,289 | 20,145 | ||||||||||||
| Operating income (loss) | (391 | ) | 2,374 | (2,742 | ) | 7,010 | ||||||||||
| Interest income (expense), net | 240 | (48 | ) | 703 | (453 | ) | ||||||||||
| Other expense, net | (52 | ) | (221 | ) | (458 | ) | (650 | ) | ||||||||
| Income (loss) from continuing operations before income taxes and discontinued operations | (203 | ) | 2,105 | (2,497 | ) | 5,907 | ||||||||||
| Income tax expense | 87 | (97 | ) | 334 | 358 | |||||||||||
| Income (loss) from continuing operations before discontinued operations | (290 | ) | 2,202 | (2,831 | ) | 5,549 | ||||||||||
| Loss on disposal of discontinued operations | — | — | (1,116 | ) | — | |||||||||||
| Loss from discontinued operations, net of income taxes | — | (299 | ) | (597 | ) | (870 | ) | |||||||||
| Net income (loss) | $ | (290 | ) | $ | 1,903 | $ | (4,544 | ) | $ | 4,679 | ||||||
| Basic income (loss) per share attributable to IntriCon shareholders: | ||||||||||||||||
| Continuing operations | $ | (0.03 | ) | $ | 0.28 | $ | (0.32 | ) | $ | 0.77 | ||||||
| Discontinued operations | — | (0.04 | ) | (0.20 | ) | (0.12 | ) | |||||||||
| Net income (loss) per share: | $ | (0.03 | ) | $ | 0.24 | $ | (0.52 | ) | $ | 0.65 | ||||||
| Diluted income (loss) per share attributable to IntriCon shareholders: | ||||||||||||||||
| Continuing operations | $ | (0.03 | ) | $ | 0.25 | $ | (0.32 | ) | $ | 0.66 | ||||||
| Discontinued operations | — | (0.03 | ) | (0.20 | ) | (0.10 | ) | |||||||||
| Net income (loss) per share: | $ | (0.03 | ) | $ | 0.22 | $ | (0.52 | ) | $ | 0.56 | ||||||
| Average shares outstanding: | ||||||||||||||||
| Basic | 8,764 | 7,825 | 8,738 | 7,249 | ||||||||||||
| Diluted | 8,764 | 8,822 | 8,738 | 8,360 | ||||||||||||
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INTRICON CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(In Thousands, Except Per Share Amounts)
| September 30, | December 31, | |||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash, cash equivalents and restricted cash | $ | 8,688 | $ | 8,047 | ||||
| Short-term investments | 20,315 | 38,093 | ||||||
| Accounts receivable, less allowance for doubtful accounts of $306 at September 30, 2019 and $807 at December 31, 2018 | 8,425 | 11,266 | ||||||
| Inventories | 17,883 | 18,163 | ||||||
| Contract assets | 8,513 | 5,624 | ||||||
| Other current assets | 2,290 | 2,146 | ||||||
| Current assets of discontinued operations | 239 | 1,205 | ||||||
| Total current assets | 66,353 | 84,544 | ||||||
| Machinery and equipment | 40,525 | 36,725 | ||||||
| Less: Accumulated depreciation | 26,867 | 25,303 | ||||||
| Net machinery and equipment | 13,658 | 11,422 | ||||||
| Goodwill | 9,551 | 10,808 | ||||||
| Intangible assets, net | — | 2,585 | ||||||
| Operating lease right of use asset | 4,749 | — | ||||||
| Investment in partnerships | 1,409 | 2,091 | ||||||
| Long-term investments | 13,764 | — | ||||||
| Other assets, net | 6,196 | 3,427 | ||||||
| Noncurrent assets of discontinued operations | — | 371 | ||||||
| Total assets | $ | 115,680 | $ | 115,248 | ||||
| Current liabilities: | ||||||||
| Current financing leases | $ | 108 | $ | — | ||||
| Current operating leases | 1,790 | — | ||||||
| Accounts payable | 11,407 | 12,871 | ||||||
| Accrued salaries, wages and commissions | 3,063 | 4,409 | ||||||
| Other accrued liabilities | 4,033 | 4,031 | ||||||
| Liabilities of discontinued operations | 393 | 336 | ||||||
| Total current liabilities | 20,794 | 21,647 | ||||||
| Noncurrent financing leases | 55 | — | ||||||
| Noncurrent operating leases | 3,296 | — | ||||||
| Other postretirement benefit obligations | 343 | 377 | ||||||
| Accrued pension liabilities | 725 | 706 | ||||||
| Other long-term liabilities | 1,162 | 544 | ||||||
| Total liabilities | 26,375 | 23,274 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Common stock, $1.00 par value per share; 20,000 shares authorized; 8,778 and 8,664 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 8,778 | 8,664 | ||||||
| Additional paid-in capital | 86,358 | 84,999 | ||||||
| Accumulated deficit | (5,054 | ) | (509 | ) | ||||
| Accumulated other comprehensive loss | (524 | ) | (927 | ) | ||||
| Total shareholders' equity | 89,558 | 92,227 | ||||||
| Non-controlling interest | (253 | ) | (253 | ) | ||||
| Total equity | 89,305 | 91,974 | ||||||
| Total liabilities and equity | $ | 115,680 | $ | 115,248 | ||||