IntriCon second-quarter net sales increase 16.6% to $14.9 million

Jul 28 2010

IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of body-worn medical devices, today announced financial results for its second quarter ended June 30, 2010.

“We're pleased with our second-quarter performance—delivering both year-over-year and sequential top- and bottom-line gains”

For the second quarter, the company reported net sales of $14.9 million, an increase of 16.6 percent from net sales of $12.8 million for the prior-year period. Net income in the 2010 second-quarter was $269,000, or $0.05 per diluted share, versus a net loss of $598,000, or $0.11 per diluted share, for the prior-year period.

IntriCon reported 2010 second-quarter income from continuing operations—which consists of the company's body-worn device business (medical, hearing health and professional audio communications)—of $404,000, or $0.07 per diluted share. Second-quarter results from discontinued operations in 2010 were a net loss of $135,000, including the $35,000 gain on the sale of RTI Electronics, or $0.02 per diluted share.

On May 28, 2010, the company completed the previously announced divestiture of its non-core electronics business, Anaheim, Calif.-based RTI Electronics, Inc. IntriCon sold substantially all of the assets of the business to an affiliate of Shackleton Equity Partners, a Los Angeles-based private equity group. The company received $850,000 in cash and reported a $35,000 gain on the sale of RTI Electronics in the second quarter.

"We're pleased with our second-quarter performance—delivering both year-over-year and sequential top- and bottom-line gains," said Mark S. Gorder, president and chief executive officer of IntriCon. "Moreover, the sale of RTI Electronics allows us to focus on our core body-worn business.

"Medical continued to post record revenues, rising 19 percent from the previous year. Once again, medical gains were the result of continued sales of wireless glucose monitors and the addition of sales from our proprietary cardiac diagnostic monitoring devices, or CDMs. Currently, CDM sales consist of digital holter monitors designed for continuous electrocardiograph (ECG) data recording. Additionally, the wireless glucose monitors we manufacture for a large medical OEM are first- and second-generation devices. We are actively involved with this customer for future development of next-generation wireless glucose monitors."

Professional audio communications rose 50 percent from the prior year, primarily through organic growth, sales of headset devices to the installed sound market and communication devices to security agencies. Fueling this business is increasing marketplace demand for smaller and more durable devices that perform well in noisy or hazardous environments.

Hearing health revenues remained relatively flat compared to the 2009 second quarter. Growth was hampered by sustained sluggishness in consumer spending on hearing aids.

Said Gorder, "In the first quarter, we introduced the Scenic™ and Overtus™ DSP amplifiers. While these technology-leading products are anticipated to have a positive impact in late 2010, they are still gaining traction with customers. As the hearing health market rebounds, we believe these products will be the drivers of future hearing health growth."

Gross profit in the 2010 second quarter was 27.0 percent, up significantly from 21.0 percent in the year-ago period—and also up from 2010 first-quarter gross profit of 25.3 percent. The primary drivers of the gains were higher sales volumes and the impact of various margin enhancement programs. IntriCon continues to implement gross profit improvement initiatives, including production transfers to lower-cost manufacturing facilities and the rollout of lean manufacturing programs.

For the 2010 six-month period, IntriCon reported net sales of $29.5 million and net income of $287,000, or $0.05 per diluted share. This was up from 2009 net sales of $24.7 million and a net loss of $1.6 million, or $(0.30) per diluted share. Six-month 2010 net income from the company's core business was $581,000, or $0.11 per share, with a non-core net loss of $294,000 (including the $35,000 gain on sale of RTI Electronics), or a loss of $0.06 per share. For the six months ended June 30, 2009, core business net loss was $1.2 million, or $0.23 per share; non-core business net loss was $357,000, or $0.07 per share.

During the first six months of 2010, IntriCon paid down bank debt from $8.4 million at 2009 year end to $7.1 million. This was driven by improved financial performance, tight cash management and the sale of RTI Electronics.

Business Update
In the medical arena, the company continues to make progress with its new Centauri cardiac diagnostic monitoring device. Centauri is a next-generation wireless outpatient monitoring device that uses a proven automatic arrhythmia detection algorithm. Said Gorder, "We anticipate 2010 fourth quarter FDA approval and we will begin selling the Centauri product right afterward."

In April, IntriCon unveiled its Overtus DSP amplifier at AudiologyNOW!—the annual convention of the American Academy of Audiology. Overtus DSP is designed to optimize open in-the-canal (ITC) type fittings and features an advanced adaptive feedback canceller and an acoustic switch that eliminates the need for a mechanical switch and allows for further miniaturization. Overtus is expected to be released at the end of the third quarter and is anticipated to have a modest sales impact throughout the remainder of the 2010 fiscal year.

The company's new PhysioLink™ wireless technology, which also premiered at AudiologyNOW!, is currently being incorporated into IntriCon products in the medical, hearing health and professional audio communication markets. PhysioLink consists of a 2.4GHz radio, communications protocol processing and miniature antenna, packaged into a compact module suitable for ear-worn and body-worn applications of audio and data streaming over distances of up to five meters.

Said Gorder, "PhysioLink has the potential to span all of our businesses including hearing aids, professional audio products, situational listening devices, cardiac diagnostic monitors and other biotelemetry devices. This proprietary technology allows for wireless data links, which consume significantly less power than Bluetooth radios, resulting in more compact devices."

The company continues development of its situational listening device (SLD) product line. SLDs help hearing-impaired people in noisy environments, and allow them to listen to television and music by direct wireless connection. SLDs supplement conventional hearing aids that don't handle noisy situations well. IntriCon anticipates a 2011 first-quarter launch for its line of SLDs.

Concluded Gorder, "We spent a large part of 2009 positioning IntriCon to better support our medical, hearing health and professional audio communications customers with new devices. In 2010, our efforts are starting to pay off and now more than ever, we're able to fully focus our resources and capital on our core strengths: making body-worn devices smaller, more effective and better connected than ever before. We're excited about the future and remain cautiously optimistic about our ability to continue to deliver growth."

Source IntriCon Corporation