IntriCon Corp, part 2: What, Who, How and Where?

 WHAT is ItriCon? 

IntriCon Corp describes itself as a “manufacturing OEM.” For the uninitiated (like me) OME stands for “Original Equipment Manufacturer.”  An OEM manufactures parts and finished products which it sells to other companies, which in turn use the parts and sell the purchased products under their own brand names. 

IntriCon further describes itself as an OEM “dependent on a few large customers.” In the first quarter of 2012, 33% of IntriCon’s consolidated net sales went to two customers.  Just guessing, but my money’s on Hi HeathInnovations as one of those two customers.   This is not a new trend for IntriCon:  a year ago in the same quarter, a single customer racked up 22% of consolidated net sales.  Back in 2007, IntriCon sold parts to a few “huge” hearing aid companies, identified as Resound, Starkey, and Phonak.   

WHO is IntriCon?

A handful of engineering executives comprise IntriCon proper, many of whom have been with the company in its various forms since the 1980s (Table 1).  Those executives are partners and/or hold a lot of company stock, though they don’t pay themselves much by corporate standards (by comparison, see HearUSA series, for instance).  Aside from this hard-working crew, the company has grown through strategic alliances, at least one of which may have included bringing in a major manufacturer as an investor/owner.  I say this based on a single report in October 2007 when:

Shares jumped $1.20…about 10 percent, to $13.20 as 217,000 shares traded hands — about eight times average daily volume… the company [reported]… no imminent news and attributed the buying surge to an undisclosed institutional investor.  The investor had indicated it was interested in a stake. 

Besides the occasional mystery investor, ItriCon’s strategic alliances come in a variety of flavors, spelled out in the following pages of its 2011 annual SEC report{{2}}[[2]]IntriCon10-Q 2012.[[2]]:

• IntriCon’s 50% ownership of a “joint venture with a Swiss company to market, design, manufacture, and sell audio coils to the hearing health industry.”  (p 14)
• Its 9% partnership interest in the Hearing Instrument Manufacturers Patent Partnership (HIMPP){{1}}[[1]]See page 557 of the textlinked document.[[1]], which makes IntriCon “a party to a license agreement that grants the Company access to over 45 US registered patents.  (p 13) 
• A 5-year licensing agreement with Dynamic Hearing to develop miniature, body-worn digital processors that are “ultra” low power; also an “optional exclusive license for hearing aid products.”
• The hi HealthInnovations agreement, which “requires Intricon to establish and maintain a certain level of manufacturing, supply chain and delivery capacity.”  (p 11)

HOW Did IntriCom Get Where It Is?

As reported in the first post of this series, IntriCon Corp segued from a heating company to a small manufacturer of electronic components (Resistance Technology Inc) with little debt in 2005. CEO Mark Gorder described the evolution over the next two years this way:

“…we started to reinvent ourselves from an electronic-component manufacturer to an integrated manufacturer of body-worn medical and electronics devices, and we’re finally getting some traction,” Gorder said…. developing and making tiny, low-power electronic brains and amplifiers … high-precision plastic molded parts for medical-device manufacturers, and key components for wireless headsets worn by the likes of the Secret Service and other agencies.”  

IntriCon describes itself in broader terms than hearing aid manufacturing. Indeed, it views hearing health as only one of three key markets for which it “designs, develops and manufactures miniature and micro-miniature body-worn medical and electronics products.”  The other two markets are medical and audio/communications. For example, it got an early boost from Medtronic’s diabetes division, for which it manufactures a glucose sensor.  

In the hearing health market, IntriCon designs and manufactures “microminiature” integrated circuit components (microphones, “hybrid amplifiers,” receivers, speakers) as well as ITE and ITC faceplates, electromechanical components (volume controls, microphones, receivers, trimmers, and switches), and custom molded shells.  As the company states it on page 16 of their quarterly report, IntriCon manufacturers everything but the hearing aid battery, employing a short lead-time protocol to manufacture items to order, according to customer specifications.

Back in 2007, when IntriCon really began to rev it up, the Minneapolis Star-Tribune listed the company’s market value as “around $75 mil” on sales of $50 mil.  At that time, IntriCon employed 625 people and manufactured in Minnesota and Singapore.  Fast forward to now, when the company’s market value on the NASDAQ is $36 mil and annual sales in 2011 were around $57 mil ($21+ mil in hearing health). Really I have no idea what the drop in market value means, if anything.  Those who understand these things are invited to explain and educate me and others readers of this post.  Otherwise, over the last 5 years, sales haven’t gone up much and employees have dropped by 26.  Last report, the company had 599 FTE employees: 32 executive/administrative, 17  sale, and a whopping 550  in engineering/operations.  None of which means the company is static.  It’s growing in square feet instead of people or sales.

Where IS IntriCom?

As 2012 began, IntriCon’s manufacturing had expanded to eight leased facilities in the United States, Asia and Europe:   

1. Arden Hills, MN: Headquarters and manufacturing (body-worn electronic devices).  47,000 sq. ft.
2. 46,000 sf in Vadnais Heights, MN: Manufacturing (plastic components for body-worn devices). 46,000  sq. ft.
3.  32,000 sf in Camden, ME: Manufacturing and administration. 32,000  sq. ft.
4.  4,000 sf in Escondido, CA: Cardiac monitoring business. 4,000  sq. ft.
5. 28,000 sf in Singapore for production  and administrative. 28,000  sq. ft.
6. 15,000 sf in Indonesia for production.  15,000  sq. ft.
7. 2,000 sf in Germany for sales and administration. 2,000  sq. ft.

In case you care, here’s the math:  174,000 sq. ft. total, which means every employee gets an average of 290.5 sq. ft. — that’s a BIG desk! But, I’m guessing there’s a whole lot of equipment in those leased facilities and the employees are squeezed in a corner.  I’m also guessing that the hi HealthInnovations contract will alter sales figures for 2012.  

Tune in week when we’ll go to the burning question:  What specific products and components does ItriCon make, what are they called, and what do they do?