IntriCon Corporation is an international company engaged in designing, developing,
engineering, manufacturing and distributing body-worn devices. The Company serves
the body-worn device market by designing, developing, engineering, manufacturing
and distributing micro-miniature products, microelectronics, micro-mechanical
assemblies, complete assemblies and software solutions, primarily for the emerging
value hearing health market, the medical bio-telemetry market and the professional
audio communication market. The Company, headquartered in Arden Hills, Minnesota,
has facilities in Minnesota, California, Singapore, Indonesia, the United Kingdom
and Germany, and operates through subsidiaries. The Company is a Pennsylvania
corporation formed in 1930, and has gone through several transformations since
its formation. The Company’s core business of body-worn devices was established
in 1993 through the acquisition of Resistance Technologies Inc., now known as
IntriCon, Inc. The majority of IntriCon’s current management came to the
Company with the Resistance Technologies Inc. acquisition, including IntriCon’s
President and CEO, who was a co-founder of Resistance Technologies Inc.
Currently, the Company operates in one operating segment, the body-worn device
segment. On June 13, 2013, the Company announced a global restructuring plan
to accelerate future growth and reduce costs. As part of the restructuring,
the Company sold its security and certain microphone and receiver operations
on January 27, 2014 to Sierra Peaks Corporation. For all periods presented,
the Company classified these businesses as discontinued operations, and, accordingly,
has reclassified historical financial data presented herein.
IntriCon serves the body-worn device market by designing, developing, engineering,
manufacturing and distributing micro-miniature products, microelectronics, micro-mechanical
assemblies, complete assemblies and software solutions, primarily for the emerging
value hearing health market, the medical bio-telemetry market and the professional
audio communication market.
The Company believes the value hearing health (VHH) market offers significant
growth opportunities. In the United States alone, there are approximately 48
million adults that report some degree of hearing loss. In adults the most common
cause of hearing loss is aging and noise. In fact, by the age of 65 year old,
one out of three people have hearing loss. The hearing impaired population is
expected to grow significantly over the next decade due to an aging population
and more frequent exposure to loud sounds that can cause noise-induced hearing
loss. It is estimated that hearing aids can help more than 90 percent of people
with hearing loss, however the current market penetration into the U.S. hearing
impaired population is approximately 20 percent, a percentage that has remained
essentially unchanged for the last four decades. In early January, the U.S.
Food and Drug Administration (FDA) weighed in on low hearing aid penetration
rates with an announcement that highlighted statistics from the National Institute
on Deafness and Other Communication Disorders. They found that 37.5 million
U.S. adults aged 18 and older report some form of hearing loss. However, only
30 percent of adults over 70, and 16 percent of those aged 20 to 69 who could
benefit from wearing hearing aids, have ever used them. Based on these statistics,
the FDA has reopened the public comment period on draft guidance related to
the agency’s premarket requirements for hearing aids and PSAPs. The FDA’s
intent is to consider ways in which regulation can support further penetration
into the hearing market.
We believe the U.S. market penetration is low primarily due to the high costs
to purchase a hearing aids, consolidation at the retail level and inconveniences
in the distribution channel. These factors have created the opportunity for
alternative care models, such as the value hearing aid (VHA) channel and personal
sound amplifier (PSAP) channel. The VHA channel is outcome based focused and
requires the best device and software technology, to provide the most efficient,
lowest cost solution to the consumer. IntriCon has positioned itself as a leader
in these channels through significant, on-going investments in sales and marketing
and research and development. The Company is aggressively pursuing prospective
partnerships and customers who can benefit from our value proposition and the
VHA and PSAP channels.
We also believe there are niches in the conventional hearing health channel
that will embrace our VHA proposition in the United States and Europe. High
costs of conventional devices and retail consolidation have constrained the
growth potential of the independent audiologist and dispenser. We believe our
software and product offering can provide independent audiologists and dispensers
the ability to compete with larger retailers, such as Costco, and manufacturer
owned retail distributors. In Europe, we recently secured a two-year supply
agreement with AudioNova International, one of Europe’s leading hearing
aid providers, operating more than 1,300 retail stores in 11 countries. Through
our new supply agreement, AudioNova will offer hearing devices, manufactured
by IntriCon. AudioNova’s smartsound brand is based on IntriCon’s
Audion™ amplifier, and offers technically advanced features at value hearing
health price points. AudioNova has begun rollout of the smartsound brand in
the Netherlands and intends to expand the program to other targeted European
countries in the future. In the third quarter of 2015, we announced a joint
venture with The Academy of Doctors of Audiology (ADA) to provide hearing instruments
and educational resources to audiologists and their patients. The joint venture
will operate under the name earVenture LLC. earVenture was officially launched
in November at the ADA conference. We expect that this joint venture will capitalize
on our established reputation as a leading provider of high quality, low-cost
hearing aids and the ADA’s respected position as the only national membership
association focused on ownership of the audiology profession through autonomous
practice and clinical excellence. To date, more than 400 of the 1,200 ADA members
have registered to join the earVenture program and we have delivered initial
units. In 2016, earVenture will be rolling-out a comprehensive marketing and
sales plan to convert those registered members to consistent customers as well
as solicit non-registered ADA members to join the program.
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