Edgar Filing: INTRICON CORP

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q


(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012

or

o TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 1-5005


INTRICON CORPORATION
(Exact name of registrant as specified in its charter)


Pennsylvania		23-1069060
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)


1260 Red Fox Road
Arden Hills, Minnesota		55112
(Address of principal executive offices)		(Zip Code)

(651) 636-9770

(Registrant’s telephone number, including area code)


	N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

o Yes x No

The number of outstanding shares of the registrant’s common stock, $1.00 par value, on April 30, 2012 was 5,669,426.

INTRICON CORPORATION

I N D E X


			Page Numbers
PART I: FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Condensed Balance Sheets as of March 31, 2012 (Unaudited) and December 31, 2011	3

		Consolidated Condensed Statements of Operations (Unaudited) for the Three Months Ended March 31, 2012 and 2011	4

		Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited) for the Three Months Ended March 31, 2012 and 2011	5

		Consolidated Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2012 and 2011	6

		Notes to Consolidated Condensed Financial Statements (Unaudited)	7-14

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15-23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

	Item 4.	Controls and Procedures	24

PART II: OTHER INFORMATION

	Item 1.	Legal Proceedings	25

	Item 1A.	Risk Factors	25

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

	Item 3.	Defaults Upon Senior Securities	25

	Item 4.	Mine Safety Disclosures	25

	Item 5.	Other Information	25

	Item 6.	Exhibits	26

	Signatures		27

	Exhibit Index		28


	March 31, 2012 (Unaudited)			December 31, 2011
Current assets:
Cash	$	208		$	119
Restricted cash		558			540
Accounts receivable, less allowance for doubtful accounts of $222 at March 31, 2012 and $223 at December 31, 2011		7,535			8,545
Inventories		11,759			11,720
Refundable income taxes		99			82
Other current assets		1,171			652
Total current assets		21,330			21,658

Machinery and equipment		39,520			39,170
Less: Accumulated depreciation		32,603			32,164
Net machinery and equipment		6,917			7,006

Goodwill		9,709			9,709
Investment in partnerships		1,296			1,283
Other assets, net		1,031			1,074
Total assets	$	40,283		$	40,730

Current liabilities:
Checks written in excess of cash	$	568		$	396
Current maturities of long-term debt		3,222			2,883
Accounts payable		5,725			6,298
Accrued salaries, wages and commissions		1,988			1,617
Deferred gain		110			110
Partnership payable		240			240
Other accrued liabilities		1,816			1,907
Total current liabilities		13,669			13,451

Long-term debt, less current maturities		7,158			8,217
Other postretirement benefit obligations		681			685
Accrued pension liabilities		434			431
Deferred gain		358			385
Other long-term liabilities		119			115
Total liabilities		22,419			23,284

Commitments and contingencies (note 10)

Shareholders’ equity:
Common stock, $1.00 par value per share; 20,000 shares authorized; 5,666 and 5,646 shares issued outstanding at March 31, 2012 and December 31, 2011, respectively		5,666			5,646
Additional paid-in capital		15,401			15,259
Accumulated deficit		(2,826	)		(3,069	)
Accumulated other comprehensive loss		(377	)		(390	)
Total shareholders’ equity		17,864			17,446
Total liabilities and shareholders’ equity	$	40,283		$	40,730


	Three Months Ended
	March 31, 2012 (Unaudited)			March 31, 2011 (Unaudited)

Sales, net	$	16,524		$	13,768
Cost of sales		12,367			10,688
Gross profit		4,157			3,080

Operating expenses:
Sales and marketing		875			803
General and administrative		1,626			1,404
Research and development		1,137			1,249
Total operating expenses		3,638			3,456
Operating income (loss)		519			(376	)

Interest expense		(179	)		(142	)
Equity in income (loss) of partnerships		(24	)		209
Other (expense) income		(39	)		(8	)
Income (loss) before income taxes		277			(317	)

Income tax expense (benefit)		34			(27	)
Net income (loss)	$	243		$	(290	)

Net income (loss) per share:
Basic	$	0.04		$	(0.05	)
Diluted	$	0.04		$	(0.05	)

Average shares outstanding:
Basic		5,654			5,559
Diluted		5,933			5,559


1.	General
	In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly IntriCon Corporation’s (“IntriCon” or the “Company”) consolidated financial position as of March 31, 2012 and December 31, 2011, and the consolidated results of its operations for the three months ended March 31, 2012 and 2011. Results of operations for the interim periods are not necessarily indicative of the results of the operations expected for the full year or any other interim period.

	The Company has evaluated subsequent events occurring after the date of the consolidated financial statements for events requiring recording or disclosure in the financial statements.

2.	New Accounting Pronouncements

	In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update number 2011-05, Comprehensive Income (Topic 220) — Presentation of Comprehensive Income (“ASU 2011-05”), to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05 (“ASU 2011-12”), which defers the effective date of those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. The adoption of ASU 2011-05 and ASU 2011-12 resulted in a change in how the Company presents the components of comprehensive income effective for the March 31, 2012 quarter-end.

3.	Product Warranty

	In general, the Company warrants its products to be free from defects in material and workmanship and will fully conform to and perform to specifications for a period of one year. The following table presents changes in the Company’s warranty liability for the three months ended March 31, 2012 and the year ended December 31, 2011:


	March 31, 2012			December 31, 2011
Beginning balance	$	82		$	105

Warranty expense		—			27
Closed warranty claims		(9	)		(50	)

Ending balance	$	73		$	82


4.	Geographic Information

	The geographical distribution of long-lived assets to geographical areas consisted of the following at:


	March 31, 2012		December 31, 2011
United States	$	5,427	$	5,382
Other – primarily Singapore		1,880		2,014

Consolidated	$	7,307	$	7,396


	Long-lived assets consist of property and equipment and certain other assets as they are difficult to move and relatively illiquid. Excluded from long-lived assets are investments in partnerships, patents, license agreements and goodwill. The Company capitalizes long-lived assets pertaining to the production of specialized parts. These assets are periodically reviewed to assure the net realizable value from the estimated future production based on forecasted cash flows exceeds the carrying value of the assets.

	The geographical distribution of net sales to geographical areas for the three months ended March 31, 2012 and 2011 were as follows:


	Three months ended
Net Sales to Geographical Areas	March 31, 2012		March 31, 2011

United States	$	12,060	$	9,950
Germany		590		542
China		514		527
Switzerland		294		180
Japan		412		289
France		377		376
Singapore		186		117
United Kingdom		601		217
Vietnam		296		201
Hong Kong		129		178
All other countries		1,065		1,191
Consolidated	$	16,524	$	13,768


	Geographic net sales are allocated based on the location of the customer. All other countries include net sales primarily to various countries in Europe and in the Asian Pacific.

	For the three months ended March 31, 2012, two customers accounted for a combined 33 percent of the Company’s consolidated net sales. For the three months ended March 31, 2011, one customer accounted for 22 percent of the Company’s consolidated net sales.

	At March 31, 2012, two customers accounted for 10 and 11 percent, respectively, of the Company’s consolidated accounts receivable. At December 31, 2011, one customer accounted for 12 percent of the Company’s consolidated accounts receivable.

5.	Inventories

	Inventories consisted of the following at:


	Raw materials		Work-in process		Finished products and components		Total

March 31, 2012:
Domestic	$	3,615	$	1,840	$	2,617	$	8,072
Foreign		2,713		767		207		3,687
Total	$	6,328	$	2,607	$	2,824	$	11,759

December 31, 2011:
Domestic	$	4,198	$	1,793	$	2,317	$	8,308
Foreign		2,174		1,078		160		3,412
Total	$	6,372	$	2,871	$	2,477	$	11,720


6.	Short and Long-Term Debt

	Short and long-term debt is summarized as follows:


	March 31, 2012			December 31, 2011

Domestic Asset-Based Revolving Credit Facility	$	4,618		$	5,369
Foreign Overdraft and Letter of Credit Facility		2,162			1,881
Domestic Term-Loan		3,250			3,500
Note Payable Datrix Purchase		350			350
Total Debt		10,380			11,100
Less: Current maturities		(3,222	)		(2,883	)
Total Long-Term Debt	$	7,158		$	8,217


		Domestic Credit Facilities

	The Company and its domestic subsidiaries are parties to a credit facility with The PrivateBank and Trust Company. The credit facility, as amended, provides for:

	■	an $8,000 revolving credit facility, with a $200 subfacility for letters of credit. Under the revolving credit facility, the availability of funds depends on a borrowing base composed of stated percentages of the Company’s eligible trade receivables and eligible inventory, and eligible equipment less a reserve; and

	■	a term loan of $4,000.

	In August 2011, the Company amended the credit facility with The PrivateBank. Per the terms of the amended agreement, the maturity of both the term loan and the revolving credit facility was extended to expire on August 13, 2014. Further, the term loan was increased from its then current balance of $2,225 to $4,000 and certain financial covenants were reset.

	In March 2012, the Company entered into an amendment with The PrivateBank to waive certain covenant violations at December 31, 2011 and reset certain covenants in the agreement. The Company was in compliance with all applicable covenants under the credit facility, as amended, as of March 31, 2012.

	Loans under the credit facility are secured by a security interest in substantially all of the assets of the Company and its domestic subsidiaries including a pledge of the stock of its domestic subsidiaries. Loans under the credit facility bear interest at varying rates based on the Company’s leverage ratio of funded debt / EBITDA, at the option of the Company, at:

	■	the London InterBank Offered Rate (“LIBOR”) plus 3.00% - 4.00%, or

	■	the base rate, which is the higher of (a) the rate publicly announced from time to time by the lender as its “prime rate” and (b) the Federal Funds Rate plus 0.5%, plus 0.25% - 1.25% depending on the Company’s leverage ratio.

	Weighted average interest on the domestic asset-based revolving credit facility was 4.75% for the three months ended March 31, 2012 and 3.93% for the year ended December 31, 2011. The outstanding balance of the revolving credit facility was $4,618 and $5,369 at March 31, 2012 and December 31, 2011, respectively. The total remaining availability on the domestic revolving credit facility was approximately $2,499 and $1,935 at March 31, 2012 and December 31, 2011, respectively. The credit facility expires on August 13, 2014 and all outstanding borrowings will become due and payable.

	The outstanding principal balance of the term loan, as amended, is payable in quarterly installments of $250, commencing with the calendar quarter ended September 30, 2011. Any remaining principal and accrued interest is payable on August 13, 2014. IntriCon is also required to use 100% of the net cash proceeds of certain asset sales (excluding inventory and certain other dispositions), sale of capital securities or issuance of debt to pay down the term loan. The outstanding principal balance of the term loan was $3,250 and $3,500 at March 31, 2012 and December 31, 2011, respectively.


8.	Shareholders’ Equity and Stock-based Compensation

	The Company has a 2001 stock option plan, a non-employee directors’ stock option plan and a 2006 equity incentive plan. New grants may not be made under the 2001 and the non-employee directors’ stock option plans; however certain option grants under these plans remain exercisable as of March 31, 2012. The aggregate number of shares of common stock for which awards could be granted under the 2006 Equity Incentive Plan as of the date of adoption was 699 shares. The Plan was amended in 2010 to allow for an additional 250 shares issuable under the plan. Additionally, as outstanding options under the 2001 stock option plan and non-employee directors’ stock option plan expire, the shares of the Company’s common stock subject to the expired options will become available for issuance under the 2006 Equity Incentive Plan. On May 1, 2012, the Company’s shareholders approved an amendment to the 2006 Equity Incentive Plan to among other things, increase the authorized number of shares of the Company’s common stock reserved and issuable under the plan by an additional 300 shares.

	Under the various plans, executives, employees and outside directors receive awards of options to purchase common stock. Under the 2006 Equity Incentive Plan, the Company may also grant stock awards, stock appreciation rights, restricted stock units and other equity-based awards, although no such awards, other than awards under the programs discussed in the next two paragraphs, had been granted as of March 31, 2012. Under all awards, the terms are fixed on the grant date. Generally, the exercise price equals the market price of the Company’s stock on the date of the grant. Options under the plans generally vest over three years, and have a maximum term of 10 years.


	Foreign Credit Facility

	In addition to its domestic credit facilities, the Company’s wholly-owned subsidiary, IntriCon, PTE LTD., entered into an international senior secured credit agreement with Oversea-Chinese Banking Corporation Ltd. that provides for a $1,977 line of credit. The international credit agreement was modified in August 2010 and again in August 2011 to allow for an additional total of $736 in borrowing under the existing base to fund the Singapore facility relocation, Batam facility construction and various other capital needs. Borrowings bear interest at a rate of .75% to 2.5% over the lender’s prevailing prime lending rate. Weighted average interest on the international credit facilities was 3.95% for the three months ended March 31, 2012 and 4.28% for the year ended December 31, 2011. The outstanding balance was $2,162 and $1,881 at March 31, 2012 and December 31, 2011, respectively. The total remaining availability on the international senior secured credit agreement was approximately $551 and $832 at March 31, 2012 and December 31, 2011, respectively.

	Datrix Promissory Note

	A portion of the purchase price of the Datrix acquisition was paid by the issuance of a promissory note to the seller in the amount of $1,050 bearing annual interest at 6%. The remaining principal amount of the promissory note is payable in one installment of $350 plus interest on August 13, 2012. The note bears annual interest at 6% and is payable with each installment of principal as set forth above. The Company made the first two installment payments, including interest, of $413 and $395 on August 13, 2010 and August 13, 2011, respectively.

7.	Income Taxes

	Income tax expense for the three months ended March 31, 2012 was $34, compared to benefit of ($27) for the same period in 2011. The expense for the three months ended March 31, 2012 was primarily due to foreign operating income. The benefit for the three months ended March 31, 2011 was primarily due to Federal Alternative Minimum Tax refunds, partially offset by foreign operating income (loss). The Company has net operating loss carryforwards for U.S. federal income tax purposes and, consequently, minimal federal benefit or expense from the domestic operations was recognized as the deferred tax asset has a full valuation allowance.

	The following was the income (loss) before income taxes for each jurisdiction in which the Company has operations for the three months ended March 31, 2012 and 2011:


	Additionally, the board has established the non-employee directors’ stock fee election program, referred to as the director program, as an award under the 2006 equity incentive plan. The director program gives each non-employee director the right under the 2006 equity incentive plan to elect to have some or all of his quarterly director fees paid in common shares rather than cash. There was 1 share issued in lieu of cash for director fees under the director program for each of the three months ended March 31, 2012 and 2011, respectively.

	On July 23, 2008, the Compensation Committee of the Board of Directors approved the non-employee director and executive officer stock purchase program, referred to as the management purchase program, as an award under the 2006 Plan. The purpose of the management purchase program is to permit the Company’s non-employee directors and executive officers to purchase shares of the Company’s common stock directly from the Company. Pursuant to the management purchase program, as amended, participants may elect to purchase shares of common stock from the Company not exceeding an aggregate of $100 during any fiscal year. Participants may make such election one time during each twenty business day period following the public release of the Company’s earnings announcement, referred to as a window period, and only if such participant is not in possession of material, non-public information concerning the Company, subject to the discretion of the Board to prohibit any transactions in common stock by directors and executive officers during a window period. There were no shares purchased under the management purchase program during the three months ended March 31, 2012 or 2011.

	Stock option activity as of and during the three months ended March 31, 2012 was as follows:


	Number of Shares			Weighted- average Exercise Price		Aggregate Intrinsic Value

Outstanding at December 31, 2011		1,085		$	5.84	$	1,933
Options forfeited or cancelled		(3	)		6.76
Options granted		140			6.26
Options exercised		(17	)		2.40

Outstanding at March 31, 2012		1,205		$	5.93	$	2,342

Exercisable at March 31, 2012		844		$	6.33	$	1,707

Available for future grant at December 31, 2011		239

Available for future grant at March 31, 2012		102


	The number of shares available for future grant at March 31, 2012 does not include a total of up to 268 shares subject to options outstanding under the 2001 stock option plan and non-employee directors’ stock option plan as of March 31, 2012, which will become available for grant under the 2006 Equity Incentive Plan in the event of the expiration of such options.

	The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of subjective assumptions, including the expected stock price volatility. Because the Company’s options have characteristics different from those of traded options, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of its options. The weighted average fair value of options granted was $3.71 for options granted during the three months ended March 31, 2012. The weighted average fair value of options granted was $2.34 for options granted during the three months ended March 31, 2011.

	The Company calculates expected volatility for stock options and awards using the Company’s historical volatility.


	The Company currently estimates a five percent forfeiture rate for stock options, but will continue to review this estimate in future periods.

	The risk-free rates for the expected terms of the stock options and awards is based on the U.S. Treasury yield curve in effect at the time of grant.

	The weighted average remaining contractual life of options exercisable at March 31, 2012 was 4.90 years.

	The Company recorded $96 of non-cash stock option expense for the three months ended March 31, 2012. The Company recorded $19 of non-cash stock option expense for the three months ended March 31, 2011. As of March 31, 2012, there was $823 of total unrecognized compensation costs related to non-vested awards that are expected to be recognized over a weighted-average period of 2.11 years.

	The Company also has an Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan initially provided that a maximum of 100 shares may be sold under the Purchase Plan as of the date of adoption. On April 27, 2011, the Company’s shareholders approved an amendment to the Purchase Plan to increase the number of shares which may be purchased under the plan by an additional 100 shares. There were 4 shares purchased under the plan for each of the three months ended March 31, 2012 and 2011, respectively.

9.	Income Per Share

	The following table presents a reconciliation between basic and diluted earnings per share:


	The dilutive impact summarized above relates to the periods when the average market price of Company stock exceeded the exercise price of the potentially dilutive option securities granted. Earnings per common share was based on the weighted average number of common shares outstanding during the periods when computing the basic earnings per share. When dilutive, stock options are included as equivalents using the treasury stock market method when computing the diluted earnings per share.

	Excluded from the computation of diluted earnings per share for the three months ended March 31, 2012 were outstanding options to purchase approximately 329 common shares because the effect was anti-dilutive. Excluded from the computation of diluted earnings per share for the three months ended March 31, 2011 were all options outstanding of approximately 1,040 common shares, because the effect would have been anti-dilutive due to the Company’s net loss in the period.

10.	Legal Proceedings

	The Company is a defendant along with a number of other parties in lawsuits alleging that plaintiffs have or may have contracted asbestos-related diseases as a result of exposure to asbestos products or equipment containing asbestos sold by one or more named defendants. Due to the noninformative nature of the complaints, the Company does not know whether any of the complaints state valid claims against us. Certain insurance carriers have informed us that the primary policies for the period August 1, 1970-1973, have been exhausted and that the carriers will no longer provide a defense under those policies. We have requested that the carriers substantiate this situation. The Company believes it has additional policies available for other years which have been ignored by the carriers. Because settlement payments are applied to all years a litigant was deemed to have been exposed to asbestos, the Company believes when settlement payments are applied to these additional policies, it will have availability under the years deemed exhausted. The Company does not believe that the asserted exhaustion of the primary insurance coverage for this period will have a material adverse effect on the financial condition, liquidity, or results of operations. Management believes that the number of insurance carriers involved in the defense of the suits and the significant number of policy years and policy limits, to which these insurance carriers are insuring us, make the ultimate disposition of these lawsuits not material to our consolidated financial position or results of operations.


	The Company’s wholly owned French subsidiary, Selas SAS, filed for insolvency in France and is being managed by a court appointed judiciary administrator. The Company may be subject to additional litigation or liabilities as a result of the French insolvency proceeding.

	The Company is also involved in other lawsuits arising in the normal course of business. While it is not possible to predict with certainty the outcome of these matters, management is of the opinion that the disposition of these lawsuits and claims will not materially affect our consolidated financial position, liquidity or results of operations.

11.	Related-Party Transactions

	One of the Company’s subsidiaries leases office and factory space from a partnership consisting of three present or former officers of the subsidiary, including Mark Gorder, a member of the Company’s Board of Directors and the President and Chief Executive Officer of the Company. The subsidiary is required to pay all real estate taxes and operating expenses. The total base rent expense, real estate taxes and other charges incurred under the lease were approximately $120 and $122 for the three months ended March 31, 2012 and 2011, respectively. On October 31, 2011, the subsidiary executed a lease amendment with the partnership to extend the term of the lease for two years. The total annual base rent expense, real estate taxes and other charges under the lease amendment are expected to be approximately $481 through October 2013.

	The Company uses the law firm of Blank Rome LLP for legal services. A partner of that firm is the son-in-law of the Chairman of the Company’s Board of Directors. For the three months ended March 31, 2012, the Company paid that firm approximately $16 for legal services and costs. For the three months ended March 31, 2011, the Company paid that firm approximately $7 for legal services and costs. The Chairman of our Board of Directors is considered independent under applicable Nasdaq and Securities Exchange Commission rules because (i) no payments were made to the Chairman or the partner directly in exchange for the services provided by the law firm and (ii) the amounts paid to the law firm did not exceed the thresholds contained in the Nasdaq standards. Furthermore, the aforementioned partner does not provide any legal services to the Company and is not involved in billing matters.

12.	Statements of Cash Flows

	The following table provides supplemental disclosures of cash flow information:


13.	Investment in Partnerships

	The Company owns a 9% partnership interest in the Hearing Instrument Manufacturers Patent Partnership (HIMPP), and is a party to a license agreement that grants the Company access to over 45 US registered patents. The Company recorded a decrease of $49 in the carrying amount of the investment, reflecting amortization of the patents, other intangibles and the Company’s portion of the partnership’s operating results for the three months ended March 31, 2012. The Company recorded an increase of $43 in the carrying amount of the investment, reflecting amortization of the patents, other intangibles and the Company’s portion of the partnership’s operating results for the three months ended March 31, 2011.


	The Company owns a 50% interest in a joint venture with a Swiss company to market, design, manufacture, and sell audio coils to the hearing health industry. The Company has recorded an increase of $25 in the carrying amount of the investment, reflecting the Company’s portion of the joint venture’s operating results for the three months ended March 31, 2012. The Company has recorded an increase of $166 in the carrying amount of the investment, reflecting the Company’s portion of the joint venture’s operating results for the three months ended March 31, 2011.

	Condensed unaudited financial information of the joint venture was as follows:


	March 31, 2012		December 31, 2011
Balance Sheet:
Current assets	$	1,575	$	1,594
Non-current assets		125		124
Total assets	$	1,700	$	1,718

Current liabilities	$	669	$	737
Stockholders’ equity		1,031		981
Total liabilities and stockholders’ equity	$	1,700	$	1,718


14.	Revenue by Market

	The following tables set forth, for the periods indicated, net revenue by market:


	§	the ability to successfully implement the Company’s business and growth strategy;
	§	risks arising in connection with the insolvency of our former subsidiary, Selas SAS, and potential liabilities and actions arising in connection therewith;
	§	potential obligations to indemnify the purchaser of our former electronics business for certain material claims that may arise;
	§	the volume and timing of orders received by the Company;
	§	changes in estimated future cash flows;
	§	ability to collect on our accounts receivable;
	§	foreign currency movements in markets the Company services;
	§	changes in the global economy and financial markets;
	§	weakening demand for the Company’s products due to general economic conditions;
	§	changes in the mix of products sold;
	§	ability to meet demand;
	§	changes in customer requirements;
	§	timing and extent of research and development expenses;
	§	FDA approval, timely release and acceptance of the Company’s products;
	§	competitive pricing pressures;
	§	pending and potential future litigation;
	§	cost and availability of electronic components and commodities for the Company’s products;
	§	ability to create and market products in a timely manner and develop products that are inexpensive to manufacture;
	§	ability to comply with covenants in our debt agreements;
	§	ability to repay debt when it comes due;
	§	the loss of one or more of our major customers;
	§	ability to identify, complete and integrate acquisitions;
	§	effects of legislation;
	§	effects of foreign operations;
	§	foreign currency risks;
	§	ability to develop new products such as Centauri, Overtus, Scenic and APT;
	§	ability to recruit and retain engineering and technical personnel;
	§	the costs and risks associated with research and development investments;
	§	delays in United States government budget and debt ceiling approval;
	§	risks under our manufacturing agreement with hi HealthInnovations;
	§	the recent recessions in Europe and the debt crisis in certain countries in the European Union;
	§	our ability and the ability of our customers to protect intellectual property; and
	§	loss of members of our senior management team.


					Change
Three months ended March 31	2012		2011		Dollars			Percent
Medical	$	6,104	$	5,413	$	691			12.8	%
Hearing Health		7,573		5,428		2,145			39.5	%
Professional Audio Communications		2,847		2,927		(80	)		(2.7	%)
Consolidated Net Sales	$	16,524	$	13,768	$	2,756			20.0	%


	March 31, 2012		December 31, 2011

Total borrowing capacity under existing facilities	$	13,080	$	13,517

Facility Borrowings:
Domestic revolving credit facility		4,618		5,369
Domestic term loan		3,250		3,500
Foreign overdraft and letter of credit facility		2,162		1,881
Total borrowings and commitments		10,030		10,750
Remaining availability under existing facilities	$	3,050	$	2,767


	Revenue Recognition – The Company recognizes revenue when the customer takes ownership, primarily upon product shipment, and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.

	Customers have 30 days to notify the Company if the product is damaged or defective. Beyond that, there are no significant obligations that remain after shipment other than warranty obligations. Contracts with customers do not include product return rights, however, the Company may elect in certain circumstances to accept returns of products. The Company records revenue for product sales net of returns. Sales and use tax are reported on a net basis. The Company defers recognition of revenue on discounts to customers if discounts are considered significant.

	In general, the Company warrants its products to be free from defects in material and workmanship and will fully conform to and perform to specifications for a period of one year. While the Company’s warranty costs have historically been within its expectations, the Company cannot guarantee that it will continue to experience the same warranty return rates or repair costs that it has experienced in the past.


(a)	Exhibits

10.1	Third Amendment to Loan and Security Agreement and Waiver dated as of March 1, 2012 to Loan and Security Agreement dated as of August 13, 2009 by and among IntriCon Corporation, IntriCon, Inc., IntriCon Tibbetts Corporation, IntriCon Datrix Corporation and The PrivateBank and Trust Company (incorporated by reference from the Company’s annual report on Form 10-K for the year ended December 31, 2011).

10.2	Annual Incentive Plan for Executives and Key Employees (management contract, compensatory plan or arrangement).

31.1	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of principal executive officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of principal financial officer to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following materials from IntriCon Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets as of March 31, 2012 (Unaudited) and December 31, 2011; (ii) Consolidated Condensed Statements of Operations (Unaudited) for the Three Months Ended March 31, 2012 and 2011; (iii) Consolidated Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2012 and 2011; (iv) Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited) for the Three Months Ended March 31, 2012 and 2011; and (v) Notes to Consolidated Condensed Financial Statements (Unaudited)*



*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.


	INTRICON CORPORATION (Registrant)


Date: May 7, 2012	By:	/s/ Mark S. Gorder
		Mark S. Gorder
		President and Chief Executive Officer
		(principal executive officer)


Date: May 7, 2012
	By:	/s/ Scott Longval
		Scott Longval
		Chief Financial Officer and Treasurer
		(principal financial officer)