IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of body-worn medical devices, today announced financial results for its third quarter ended September 30, 2010.
“Year over year, our business mix was stable. Medical continued to post strong revenues, rising 11 percent from the previous year. Gains were again due to continued sales of wireless glucose monitors and new sales from our proprietary cardiac diagnostic monitoring devices, or CDMs.”
For the third quarter, the company reported net sales of $14.7 million, an increase of 14 percent from net sales of $12.9 million for the prior-year period. Net income in the 2010 third quarter was $243,000, or $0.04 per diluted share, versus a net loss of $736,000, or $(0.14) per diluted share, for the prior-year period. Included in the 2009 third-quarter results were Datrix-related acquisition costs and bank financing charges totaling $532,000, or $0.10 per diluted share.
"We continue to deliver measureable year-over-year revenue and earnings progress," said Mark S. Gorder, president and chief executive officer of IntriCon. "At the same time, we are investing significantly in our business, including several key research and development initiatives. While this impacts certain sequential and year-over-year comparisons, we firmly believe it strengthens our platform for future IntriCon growth."
Business Performance
For the third quarter, IntriCon experienced double-digit growth in all three core markets. As a percentage of total revenue, the medical business contributed 44 percent, with hearing health and professional audio communications contributing 33 percent and 23 percent, respectively.
Said Gorder, "Year over year, our business mix was stable. Medical continued to post strong revenues, rising 11 percent from the previous year. Gains were again due to continued sales of wireless glucose monitors and new sales from our proprietary cardiac diagnostic monitoring devices, or CDMs."
Hearing health sales rose 20 percent from the 2009 third quarter. Driving this increase was a rebound in the hearing health market. IntriCon believes more significant future growth will stem from the introduction and acceptance of new products in early 2011.
Professional audio communications rose 15 percent from the prior year. The gain was from higher sales of headset devices to existing customers and communication devices to government agencies. These customers continue to demand smaller and more durable products that perform well in noisy or hazardous environments.
Gross profits in the 2010 third quarter were 25.9 percent, up significantly from 20.3 percent in the year-ago period. Higher sales volumes, increased proprietary technology in products—which generates higher margins—and the impact of previously discussed profit enhancement programs, including production transfers to lower-cost manufacturing facilities and the ongoing rollout of lean manufacturing programs, drove improvements.
Nine-month Results
For the 2010 nine-month period, IntriCon reported net sales of $44.2 million and net income of $530,000, or $0.10 per diluted share. This was up from 2009 net sales of $37.5 million and a net loss of $2.3 million, or $(0.43) per diluted share. Included in the 2009 nine-month results were Datrix-related acquisition costs and bank financing charges of $546,000, or $0.10 per diluted share.
For the 2010 nine months, IntriCon's medical business represented 44 percent of total revenue, with hearing health and professional audio communications contributing 34 percent and 22 percent, respectively. This compares to 2009 nine-month levels of 44 percent, 36 percent and 20 percent for medical, hearing health and professional audio communications, respectively.
Gross profits for the 2010 nine months were 26.1 percent, up from 19.9 percent a year earlier. Gains were driven by the same factors detailed above in the third-quarter description.
Key Milestones
Earlier this year, IntriCon unveiled its hybrid Overtus™ DSP amplifier. Overtus is designed to: optimize open in-the-canal (ITC) fittings; utilize an advanced adaptive feedback canceller; and incorporate an acoustic switch that eliminates the need for a bulky mechanical switch, allowing for further miniaturization. This amplifier utilizes two patent-pending technologies that allow customers to produce their open in-the-ear devices. Overtus will enter production in the near future and sales are expected to have a modest impact on fourth-quarter results.
Said Gorder, "As the amplifier component of hearing aids, Overtus brings significant technology advantages over existing devices. We've taken that technology and developed our own complete hearing device, the all-new, patent-pending APT™ Open ITC.
"The APT, introduced at the European Hearing Aid Acousticians event earlier this month, is powered by Overtus and includes our Reliant CLEAR™ adaptive feedback canceller and the AcousTAP ™ acoustic push button. In addition, the APT utilizes the patent pending Concha Lock System technology that allows for the suspension of an open in-the-ear device in the ear canal. These features create stable and effective amplification, occlusion-free comfort and easy integration into existing fitting systems. Our OEM customers now have the option of using Overtus in their own devices, or purchasing our complete APT device."
In the medical arena, IntriCon continues to make progress with its new Centauri CDM device. Centauri is a next-generation wireless outpatient monitoring device that uses a proven automatic arrhythmia detection algorithm. The company anticipates submitting Centauri for FDA approval in the upcoming weeks.
IntriCon is in the process of finalizing development of its PhysioLink™ wireless technology, which will be incorporated into products in the medical, hearing health and professional audio communication markets. PhysioLink enables audio and data streaming to ear-worn and body-worn applications over distances of up to five meters.
IntriCon's situational listening device (SLD) product line leverages PhysioLink. SLDs help hearing-impaired people in noisy environments, allowing them to listen to television, music and direct broadcast by wireless connection. SLDs supplement conventional hearing aids that don't handle noisy situations well. The company anticipates production of its SLD platform in early 2011.
Gorder indicated that while IntriCon is seeing customers continue to reengage in all markets on new programs, persisting economic sluggishness has caused many patients to delay discretionary medical procedures, and hospitals and doctors to cut back on purchases of legacy med-tech products. During the course of the year several large medical customers experienced temporary fluctuations in demand. As some customers have ordered above their immediate needs, the company anticipates certain medical orders to slow in the fourth quarter—however it believes these deferrals to be temporary.
Concluded Gorder, "Across the board, we are focusing our resources and capital on our strengths: making body-worn devices smaller and better. We're doing so by accelerating the development of proprietary core technologies. This is demonstrated by our increasing number of new products based on patent pending technologies, such as the Overtus and APT. We believe our continued prudent investments in new initiatives will fuel long-term growth. This strategy centers on the idea of enhancing the mobility and effectiveness of miniature, body-worn devices—and creating entirely new technology-driven products."
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