UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ | Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 2023 |
or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 2017
☐ | 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 001-32982
Atrion Corporation | ||
(Exact Name of Registrant as Specified in its Charter) |
Delaware | 63-0821819 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
One Allentown Parkway, Allen, Texas 75002 | ||
(Address of Principal Executive Offices) (Zip Code) |
(972) 390-9800 | ||
(Registrant’s Telephone Number, Including Area Code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common stock, Par Value $0.10 per share | ATRI | The Nasdaq Global Select Market |
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. ☑☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “accelerated filer,” “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange ActAct. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑☒ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Title of Each Class | Number of Shares Outstanding at October | |
Common stock, Par Value $0.10 per share | 1,759,836 |
ATRION CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
3 | |||||||
4 | |||||||
4 | |||||||
Condensed Consolidated Balance Sheets (Unaudited) September 30, | 5 | ||||||
6 | |||||||
7 | |||||||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 9 | ||||||
Management's Discussion and Analysis of Financial Condition and Results of Operations | 15 | ||||||
20 | |||||||
20 | |||||||
21 | |||||||
21 | |||||||
21 | |||||||
21 | |||||||
22 | |||||||
23 |
PART I
FINANCIAL INFORMATION
3 | ||||
Table of Contents | ||||
Item 1. Financial Statements
ATRION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2017 | 2016 | 2017 | 2016 | |
(in thousands, except per share amounts) | ||||
Revenues | $37,903 | $37,835 | $112,571 | $110,193 |
Cost of goods sold | 19,498 | 20,211 | 57,841 | 57,789 |
Gross profit | 18,405 | 17,624 | 54,730 | 52,404 |
Operating expenses: | ||||
Selling | 1,691 | 1,471 | 5,303 | 4,871 |
General and administrative | 4,086 | 3,613 | 12,390 | 11,442 |
Research and development | 1,149 | 1,564 | 4,056 | 4,576 |
6,926 | 6,648 | 21,749 | 20,889 | |
Operating income | 11,479 | 10,976 | 32,981 | 31,515 |
Interest and dividend income | 287 | 106 | 806 | 315 |
Other income (expense), net | -- | 1 | 1 | (309) |
287 | 107 | 807 | 6 | |
Income before provision for income taxes | 11,766 | 11,083 | 33,788 | 31,521 |
Provision for income taxes | (3,795) | (3,469) | (5,841) | (9,511) |
Net income | $7,971 | $7,614 | $27,947 | $22,010 |
Net income per basic share | $4.30 | $4.17 | $15.16 | $12.07 |
Weighted average basic shares outstanding | 1,852 | 1,825 | 1,844 | 1,823 |
Net income per diluted share | $4.29 | $4.10 | $15.06 | $11.86 |
Weighted average diluted shares outstanding | 1,857 | 1,858 | 1,856 | 1,856 |
Dividends per common share | $1.20 | $1.05 | $3.30 | $2.85 |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (in thousands, except per share amounts) |
|
| (in thousands, except per share amounts) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues |
| $ | 41,911 |
|
| $ | 44,631 |
|
| $ | 125,742 |
|
| $ | 140,651 |
|
Cost of goods sold |
|
| 28,175 |
|
|
| 26,978 |
|
|
| 79,671 |
|
|
| 82,921 |
|
Gross profit |
|
| 13,736 |
|
|
| 17,653 |
|
|
| 46,071 |
|
|
| 57,730 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling |
|
| 2,348 |
|
|
| 2,306 |
|
|
| 7,392 |
|
|
| 7,451 |
|
General and administrative |
|
| 5,453 |
|
|
| 4,493 |
|
|
| 17,658 |
|
|
| 15,217 |
|
Research and development |
|
| 1,869 |
|
|
| 1,251 |
|
|
| 5,106 |
|
|
| 4,180 |
|
|
|
| 9,670 |
|
|
| 8,050 |
|
|
| 30,156 |
|
|
| 26,848 |
|
Operating income |
|
| 4,066 |
|
|
| 9,603 |
|
|
| 15,915 |
|
|
| 30,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
|
| 320 |
|
|
| 210 |
|
|
| 687 |
|
|
| 639 |
|
Other investment income/(losses) |
|
| (782 | ) |
|
| 764 |
|
|
| (1,405 | ) |
|
| 216 |
|
Other income |
|
| - |
|
|
| 7 |
|
|
| 39 |
|
|
| 92 |
|
Interest Expense |
|
| (97 | ) |
|
| - |
|
|
| (124 | ) |
|
| - |
|
|
|
| (559 | ) |
|
| 981 |
|
|
| (803 | ) |
|
| 947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
| 3,507 |
|
|
| 10,584 |
|
|
| 15,112 |
|
|
| 31,829 |
|
Provision for income taxes |
|
| (568 | ) |
|
| (1,745 | ) |
|
| (2,125 | ) |
|
| (5,143 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 2,939 |
|
| $ | 8,839 |
|
| $ | 12,987 |
|
| $ | 26,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per basic share |
| $ | 1.67 |
|
| $ | 4.95 |
|
| $ | 7.38 |
|
| $ | 14.89 |
|
Weighted average basic shares outstanding |
|
| 1,760 |
|
|
| 1,786 |
|
|
| 1,761 |
|
|
| 1,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted share |
| $ | 1.67 |
|
| $ | 4.94 |
|
| $ | 7.37 |
|
| $ | 14.86 |
|
Weighted average diluted shares outstanding |
|
| 1,761 |
|
|
| 1,788 |
|
|
| 1,762 |
|
|
| 1,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share |
| $ | 2.20 |
|
| $ | 2.15 |
|
| $ | 6.50 |
|
| $ | 6.05 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
4 |
Table of Contents |
ATRION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2017 | 2016 | 2017 | 2016 | |
(In thousands) | ||||
Net Income | $7,971 | $7,614 | $27,947 | $22,010 |
Other Comprehensive Income (Loss) | ||||
Unrealized income (loss) on investments, net of tax expense (benefit) of $23, ($273), $58 and ($445) | 43 | (506) | 109 | (827) |
Comprehensive Income | $8,014 | $7,108 | $28,056 | $21,183 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Assets |
| (in thousands) |
| |||||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 658 |
|
| $ | 4,731 |
|
Short-term investments |
|
| 3,839 |
|
|
| 21,152 |
|
Accounts receivable |
|
| 23,290 |
|
|
| 23,951 |
|
Inventories |
|
| 82,946 |
|
|
| 65,793 |
|
Prepaid expenses and other current assets |
|
| 5,010 |
|
|
| 3,770 |
|
|
|
| 115,743 |
|
|
| 119,397 |
|
|
|
|
|
|
|
|
|
|
Long-term investments |
|
| 9,474 |
|
|
| 8,669 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
| 284,079 |
|
|
| 270,642 |
|
Less accumulated depreciation and amortization |
|
| 157,313 |
|
|
| 146,888 |
|
|
|
| 126,766 |
|
|
| 123,754 |
|
|
|
|
|
|
|
|
|
|
Other assets and deferred charges: |
|
|
|
|
|
|
|
|
Patents and licenses |
|
| 1,100 |
|
|
| 1,185 |
|
Goodwill |
|
| 9,730 |
|
|
| 9,730 |
|
Other |
|
| 1,996 |
|
|
| 1,977 |
|
|
|
| 12,826 |
|
|
| 12,892 |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 264,809 |
|
| $ | 264,712 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
| $ | 13,915 |
|
| $ | 18,024 |
|
Accrued income and other taxes |
|
| 1,351 |
|
|
| 74 |
|
|
|
| 15,266 |
|
|
| 18,098 |
|
|
|
|
|
|
|
|
|
|
Line of credit |
|
| 4,500 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities |
|
| 4,861 |
|
|
| 7,073 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock, par value $0.10 per share; authorized 10,000 shares, issued 3,420 shares |
|
| 342 |
|
|
| 342 |
|
Additional paid-in capital |
|
| 67,165 |
|
|
| 66,347 |
|
Retained earnings |
|
| 379,213 |
|
|
| 377,682 |
|
Treasury shares,1,660 at September 30, 2023 and 1,659 at December 31, 2022, at cost |
|
| (206,538 | ) |
|
| (204,830 | ) |
Total stockholders’ equity |
|
| 240,182 |
|
|
| 239,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
| $ | 264,809 |
|
| $ | 264,712 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
5 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Assets | September 30, 2017 | December 31, 2016 |
(in thousands) | ||
Current assets: | ||
Cash and cash equivalents | $20,995 | $20,022 |
Short-term investments | 38,959 | 24,080 |
Accounts receivable | 19,585 | 17,166 |
Inventories | 29,924 | 29,015 |
Prepaid expenses and other current assets | 3,001 | 3,181 |
112,464 | 93,464 | |
Long-term investments | 10,112 | 9,945 |
Property, plant and equipment | 167,148 | 160,413 |
Less accumulated depreciation and amortization | 100,630 | 95,148 |
66,518 | 65,265 | |
Other assets and deferred charges: | ||
Patents | 1,808 | 1,929 |
Goodwill | 9,730 | 9,730 |
Other | 1,494 | 1,609 |
13,032 | 13,268 | |
Total assets | $202,126 | $181,942 |
Liabilities and Stockholders’ Equity | ||
Current liabilities: | ||
Accounts payable and accrued liabilities | $10,382 | $8,663 |
Accrued income and other taxes | 2,312 | 410 |
12,694 | 9,073 | |
Line of credit | -- | -- |
Other non-current liabilities | 10,981 | 9,881 |
Stockholders’ equity: | ||
Common stock, par value $0.10 per share; authorized10,000 shares, issued 3,420 shares | 342 | 342 |
Paid-in capital | 48,360 | 37,448 |
Accumulated other comprehensive (loss) income | (365) | (474) |
Retained earnings | 261,777 | 239,946 |
Treasury shares,1,584 at September 30, 2017 and 1,596 at December 31, 2016, at cost | (131,663) | (114,274) |
Total stockholders’ equity | 178,451 | 162,988 |
Total liabilities and stockholders’ equity | $202,126 | $181,942 |
|
| Nine Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
| (In thousands) |
| |||||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net income |
| $ | 12,987 |
|
| $ | 26,686 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 11,090 |
|
|
| 10,339 |
|
Deferred income taxes |
|
| (1,931 | ) |
|
| (2,391 | ) |
Stock-based compensation |
|
| 1,319 |
|
|
| 1,523 |
|
Net change in unrealized gains and losses on investments |
|
| 1,405 |
|
|
| (289 | ) |
Net change in accrued interest, premiums, and discounts on investments |
|
| (98 | ) |
|
| 219 |
|
Other |
|
| - |
|
|
| - |
|
|
|
| 24,772 |
|
|
| 36,087 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 661 |
|
|
| (1,015 | ) |
Inventories |
|
| (17,153 | ) |
|
| (8,846 | ) |
Prepaid expenses |
|
| (1,450 | ) |
|
| (575 | ) |
Other non-current assets |
|
| 191 |
|
|
| 606 |
|
Accounts payable and accrued liabilities |
|
| 1,130 |
|
|
| (403 | ) |
Accrued income and other taxes |
|
| 1,277 |
|
|
| 2,523 |
|
Other non-current liabilities |
|
| (280 | ) |
|
| 570 |
|
Cash flows from operating activities |
|
| 9,148 |
|
|
| 28,947 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Property, plant and equipment additions |
|
| (19,757 | ) |
|
| (25,321 | ) |
Purchase of investments |
|
| (5,648 | ) |
|
| (25,544 | ) |
Proceeds from sale of investments |
|
| 172 |
|
|
| 240 |
|
Proceeds from maturities of investments |
|
| 20,676 |
|
|
| 42,426 |
|
Cash flows from investing activities |
|
| (4,557 | ) |
|
| (8,199 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
| (1,667 | ) |
|
| (14,430 | ) |
Shares tendered for employees’ withholding taxes on stock-based compensation |
|
| (57 | ) |
|
| (633 | ) |
Dividends paid |
|
| (11,440 | ) |
|
| (10,824 | ) |
Proceeds from draw on line of credit |
|
| 23,628 |
|
|
| - |
|
Repayment of draw on line of credit |
|
| (19,128 | ) |
|
| - |
|
Cash flows from financing activities |
|
| (8,664 | ) |
|
| (25,887 | ) |
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (4,073 | ) |
|
| (5,139 | ) |
Cash and cash equivalents at beginning of period |
|
| 4,731 |
|
|
| 32,264 |
|
Cash and cash equivalents at end of period |
| $ | 658 |
|
| $ | 27,125 |
|
|
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Income taxes |
| $ | 3,366 |
|
| $ | 5,786 |
|
Non-cash financing activities: Non-cash effect of stock option exercises |
| $ | - |
|
| $ | 4,008 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these financial statements.
6 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
(Unaudited)
Nine Months Ended September 30, | ||
2017 | 2016 | |
(In thousands) | ||
Cash flows from operating activities: | ||
Net income | $27,947 | $22,010 |
Adjustments to reconcile net income tonet cash provided by operating activities: | ||
Depreciation and amortization | 6,458 | 6,655 |
Deferred income taxes | 1,002 | (116) |
Stock-based compensation | 1,240 | 1,323 |
Bond impairment | -- | 345 |
Net change in accrued interest, premiums, and discounts | ||
on investments | (167) | (5) |
Other | (2) | -- |
36,478 | 30,212 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (2,419) | (3,504) |
Inventories | (909) | (285) |
Prepaid expenses | 180 | 754 |
Other non-current assets | 115 | (633) |
Accounts payable and accrued liabilities | 1,719 | 265 |
Accrued income and other taxes | 1,902 | 1,405 |
Other non-current liabilities | 39 | 195 |
37,105 | 28,409 | |
Cash flows from investing activities: | ||
Property, plant and equipment additions | (7,590) | (8,836) |
Purchase of investments | (46,712) | (21,798) |
Proceeds from sale of investments | -- | 210 |
Proceeds from maturities of investments | 32,000 | 5,000 |
(22,302) | (25,424) | |
Cash flows from financing activities: | ||
Shares tendered for employees’ withholding taxes on stock-based compensation | (7,735) | (1,112) |
Purchase of treasury stock | -- | (1,276) |
Dividends paid | (6,095) | (5,196) |
(13,830) | (7,584) | |
Net change in cash and cash equivalents | 973 | (4,599) |
Cash and cash equivalents at beginning of period | 20,022 | 28,346 |
Cash and cash equivalents at end of period | $20,995 | $23,747 |
Cash paid for: | ||
Income taxes | $2,411 | $7,568 |
Non-cash financing activities: | ||
Non-cash effect of stock option exercises | $10,237 | -- |
|
| For the Three Months Ended |
| |||||||||||||||||||||||||
|
| Common Stock |
|
| Treasury Stock |
|
|
|
|
|
|
| ||||||||||||||||
|
|
Shares Outstanding |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
| Additional Paid-in Capital |
|
| Retained Earnings |
|
| Total |
| |||||||
Balances, July 1, 2022 |
|
| 1,788 |
|
| $ | 342 |
|
|
| 1,632 |
|
| $ | (188,219 | ) |
| $ | 66,167 |
|
| $ | 368,165 |
|
| $ | 246,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,839 |
|
|
| 8,839 |
|
Stock-based compensation transactions |
|
| 1 |
|
|
|
|
|
|
| (1 | ) |
|
| 14 |
|
|
| 77 |
|
|
|
|
|
|
| 91 |
|
Shares surrendered in stock transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (179 | ) |
|
|
|
|
|
|
|
|
|
| (179 | ) |
Purchase of treasury stock |
|
| (9 | ) |
|
|
|
|
|
| 9 |
|
|
| (5,090 | ) |
|
|
|
|
|
|
|
|
|
| (5,090 | ) |
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,841 | ) |
|
| (3,841 | ) |
Balances, September 30, 2022 |
|
| 1,780 |
|
| $ | 342 |
|
|
| 1,640 |
|
| $ | (193,474 | ) |
| $ | 66,244 |
|
| $ | 373,163 |
|
| $ | 246,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, July 1, 2023 |
|
| 1,760 |
|
| $ | 342 |
|
|
| 1,660 |
|
| $ | (206,541 | ) |
| $ | 66,946 |
|
| $ | 380,152 |
|
| $ | 240,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,939 |
|
|
| 2,939 |
|
Stock-based compensation transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
| 219 |
|
|
|
|
|
|
| 222 |
|
Shares surrendered in stock transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,878 | ) |
|
| (3,878 | ) |
Balances, September 30, 2023 |
|
| 1,760 |
|
| $ | 342 |
|
|
| 1,660 |
|
| $ | (206,538 | ) |
| $ | 67,165 |
|
| $ | 379,213 |
|
| $ | 240,182 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these financial statements.
7 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
(Unaudited)
Common Stock | Treasury Stock | |||||||
Shares Outstanding | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total | |
Balances, January 1, 2017 | 1,824 | $342 | 1,596 | $(114,274) | $37,448 | $(474) | $239,946 | $162,988 |
Net income | 27,947 | 27,947 | ||||||
Other comprehensive income (loss) | 109 | 109 | ||||||
Stock-based compensation transactions | 46 | (46) | 583 | 10,912 | 11,495 | |||
Shares surrendered in stock transactions | (34) | 34 | (17,972) | (17,972) | ||||
Dividends | (6,116) | (6,116) | ||||||
Balances, September 30, 2017 | 1,836 | $342 | 1,584 | $(131,663) | $48,360 | $(365) | $261,777 | $178,451 |
|
| For the Nine Months Ended |
| |||||||||||||||||||||||||
|
| Common Stock |
|
| Treasury Stock |
|
|
|
|
|
|
| ||||||||||||||||
|
|
Shares Outstanding |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
| Additional Paid-in Capital |
|
| Retained Earnings |
|
| Total |
| |||||||
Balances, January 1, 2022 |
|
| 1,801 |
|
| $ | 342 |
|
|
| 1,619 |
|
| $ | (174,544 | ) |
| $ | 61,174 |
|
| $ | 357,324 |
|
| $ | 244,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 26,686 |
|
|
| 26,686 |
|
Stock-based compensation transactions |
|
| 4 |
|
|
|
|
|
|
| (4 | ) |
|
| (3,867 | ) |
|
| 5,070 |
|
|
|
|
|
|
| 1,203 |
|
Shares surrendered in stock transactions |
|
| (1 | ) |
|
|
|
|
|
| 1 |
|
|
| (633 | ) |
|
|
|
|
|
|
|
|
|
| (633 | ) |
Purchase of Treasury Stock |
|
| (24 | ) |
|
|
|
|
|
| 24 |
|
|
| (14,430 | ) |
|
|
|
|
|
|
|
|
|
| (14,430 | ) |
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,847 | ) |
|
| (10,847 | ) |
Balances, September 30, 2022 |
|
| 1,780 |
|
| $ | 342 |
|
|
| 1,640 |
|
| $ | (193,474 | ) |
| $ | 66,244 |
|
| $ | 373,163 |
|
| $ | 246,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2023 |
|
| 1,761 |
|
| $ | 342 |
|
|
| 1,659 |
|
| $ | (204,830 | ) |
| $ | 66,347 |
|
| $ | 377,682 |
|
| $ | 239,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,987 |
|
|
| 12,987 |
|
Stock-based compensation transactions |
|
| 1 |
|
|
|
|
|
|
| (1 | ) |
|
| 16 |
|
|
| 818 |
|
|
|
|
|
|
| 834 |
|
Shares surrendered in stock transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (57 | ) |
|
|
|
|
|
|
|
|
|
| (57 | ) |
Purchase of Treasury Stock |
|
| (2 | ) |
|
|
|
|
|
| 2 |
|
|
| (1,667 | ) |
|
|
|
|
|
|
|
|
|
| (1,667 | ) |
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,456 | ) |
|
| (11,456 | ) |
Balances, September 30, 2023 |
|
| 1,760 |
|
| $ | 342 |
|
|
| 1,660 |
|
| $ | (206,538 | ) |
| $ | 67,165 |
|
| $ | 379,213 |
|
| $ | 240,182 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these financial statements
8 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)
The accompanying unaudited condensed consolidated financial statements of Atrion Corporation and its subsidiaries (collectively referred to herein as “Atrion,” the “Company,” “we,” “our,” or “us”) have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United StatesUS GAAP for complete financial statements. In the opinion of management, these statements include all normal and recurring adjustments necessary to present a fair statement of our consolidated results of operations, financial position, and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. Preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United StatesUS GAAP requires management to make estimates and assumptions that affectcan have a significant impact on our revenue, operating income, and net income, as well as on the reported amounts invalue of certain assets and liabilities on our consolidated balance sheets. We base our assumptions, judgments, and estimates on historical experience and various other factors that we believe to be reasonable under the financial statementscircumstances. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of November 7, 2023, the date of issuance of this Quarterly Report on Form 10-Q. However, these estimates may change as new events occur and notes.additional information is obtained. Actual results could differ materially from those estimates. these estimates under different assumptions or conditions. At least quarterly, we evaluate our assumptions, judgments, and estimates, and make changes as we deem necessary.
This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in itsour Annual Report on Form 10-K/A10-K for the fiscal year ended December 31, 20162022 ("20162022 Form 10-K/A"10-K"). References herein to "Atrion," the "Company," "we," "our," and "us" refer to Atrion Corporation and its subsidiaries.
(2)
Inventories are stated at the lower of cost or market.net realizable value. Cost is determined by using the first-in, first-out method. The following table details the major components of inventories (in thousands):
September 30, | December 31, | |
2017 | 2016 | |
Raw materials | $13,334 | $12,984 |
Work in process | 7,174 | 6,230 |
Finished goods | 9,416 | 9,801 |
Total inventories | $29,924 | $29,015 |
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Raw materials |
| $ | 37,890 |
|
| $ | 33,329 |
|
Work in process |
|
| 17,036 |
|
|
| 13,618 |
|
Finished goods |
|
| 28,020 |
|
|
| 18,846 |
|
Total inventories |
| $ | 82,946 |
|
| $ | 65,793 |
|
9 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3)
The following is the computation for basic and diluted income per share:
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2017 | 2016 | 2017 | 2016 | |
(in thousands, except per share amounts) | ||||
Net income | $7,971 | $7,614 | $27,947 | $22,010 |
Weighted average basic shares outstanding | 1,852 | 1,825 | 1,844 | 1,823 |
Add: Effect of dilutive securities | 5 | 33 | 12 | 33 |
Weighted average diluted shares outstanding | 1,857 | 1,858 | 1,856 | 1,856 |
Earnings per share: | ||||
Basic | $4.30 | $4.17 | $15.16 | $12.07 |
Diluted | $4.29 | $4.10 | $15.06 | $11.86 |
|
| Three Months ended September 30, |
|
| Nine Months ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (in thousands, except per share amounts) |
| |||||||||||||
Net income |
| $ | 2,939 |
|
| $ | 8,839 |
|
| $ | 12,987 |
|
| $ | 26,686 |
|
Weighted average basic shares outstanding |
|
| 1,760 |
|
|
| 1,786 |
|
|
| 1,761 |
|
|
| 1,793 |
|
Add: Effect of dilutive securities |
|
| 1 |
|
|
| 2 |
|
|
| 1 |
|
|
| 3 |
|
Weighted average diluted shares outstanding |
|
| 1,761 |
|
|
| 1,788 |
|
|
| 1,762 |
|
|
| 1,796 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.67 |
|
| $ | 4.95 |
|
| $ | 7.38 |
|
| $ | 14.89 |
|
Diluted |
| $ | 1.67 |
|
| $ | 4.94 |
|
| $ | 7.37 |
|
| $ | 14.86 |
|
Incremental shares from stock options and restricted stock units were included in the calculation of weighted average diluted shares outstanding using the treasury stock method. DilutivePotential dilutive securities representing 447 and 41 shares of common stock for the quarters ended September 30, 2017 and 2016, respectively, were excluded from the computation of weighted average diluted shares outstanding because their effect would have been excluded when their inclusion would be anti-dilutive.
(4)
As of September 30, 2017,2023, we held investments in certificates of deposit, commercial paper, corporate bonds, money market accounts, mutual funds, and equity securities that are required to be measured for disclosure purposes at fair value on a recurring basis.securities. The certificates of deposit, commercial paper and corporate bonds are considered held-to-maturity and are recorded at amortized cost in the accompanying consolidated balance sheet.sheets. The money market accounts, equity securities, and mutual funds are considered available for sale and recorded at fair value in the accompanying consolidated balance sheet with the unrealized gainssheets. The fair values of these investments were estimated using recently executed transactions and losses recorded as a component of other comprehensive income. These investments are considered Level 2 investments.market price quotations. We consider as current assets those investments which will mature in the next 12 months including interest receivable on the long-term corporate bonds. The remaining investments are considered non-current assets including our investment in equity securitieswhich we intend to hold longer than 12 months.
10 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The components of the Company’s cash and cash equivalents and our short- and long-term investments are as follows (in thousands):
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Cash and cash equivalents: |
|
|
|
|
|
| ||
Money market funds |
| $ | 656 |
|
| $ | 2,380 |
|
Cash deposits |
|
| 2 |
|
|
| 603 |
|
Commercial paper |
|
| - |
|
|
| 1,748 |
|
Total cash and cash equivalents |
| $ | 658 |
|
| $ | 4,731 |
|
|
|
|
|
|
|
|
|
|
Short-term investments: |
|
|
|
|
|
|
|
|
Bonds (held-to-maturity) |
| $ | 3,748 |
|
| $ | 8,597 |
|
Equity securities (available for sale) |
|
| 91 |
|
|
| 330 |
|
Commercial paper (held-to-maturity) |
|
| - |
|
|
| 12,227 |
|
Allowance for credit losses |
|
| - |
|
|
| (2 | ) |
Total short-term investments |
| $ | 3,839 |
|
| $ | 21,152 |
|
Long-term investments: |
|
|
|
|
|
|
|
|
Equity securities (available for sale) |
| $ | 3,910 |
|
| $ | 5,139 |
|
Bonds (held-to-maturity) |
|
| 3,839 |
|
|
| 3,180 |
|
Mutual funds (available for sale) |
|
| 1,725 |
|
|
| 350 |
|
Total long-term investments |
| $ | 9,474 |
|
| $ | 8,669 |
|
Total cash, cash equivalents and short and long-term investments |
| $ | 13,971 |
|
| $ | 34,552 |
|
We utilize a lifetime “expected credit loss” measurement objective for the recognition of credit losses for held-to-maturity securities at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. During the third quarter of 2023, our allowance for credit losses was immaterial.
11 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the amortized cost of our held-to-maturity bonds at September 30, 2023 aggregated by credit quality indicator (in thousands):
Held-to-Maturity Bonds
Credit Quality Indicators |
| Fed Govt. Bonds/Notes |
|
| Corporate Bonds |
|
| Totals |
| |||
AAA/AA/A |
| $ | 104 |
|
| $ | 3,693 |
|
| $ | 3,797 |
|
BBB/BB |
|
| - |
|
|
| 3,790 |
|
|
| 3,790 |
|
TOTAL |
| $ | 104 |
|
| $ | 7,483 |
|
| $ | 7,587 |
|
Our investments are required to be measured for disclosure purposes at fair value on a recurring basis. Our investments are considered Level 1 or Level 2 as detailed in the table below. The fair values of these Level 2 investments were estimated using recently executed transactions and market price quotations.
Gross Unrealized | ||||
Cost | Gains | Losses | Fair Value | |
As of September 30, 2017: | ||||
Short-term Investments: | ||||
Certificates of Deposit | $9,096 | $-- | $(1) | $9,095 |
Commercial Paper | $29,833 | $62 | $(4) | $29,891 |
Corporate bonds | $30 | $-- | $-- | $30 |
Long-term Investments | ||||
Corporate bonds | $5,000 | $-- | $(36) | $4,964 |
Equity investments | $5,675 | $-- | $(563) | $5,112 |
Gross Unrealized | ||||
Cost | Gains | Losses | Fair Value | |
As of December 31, 2016: | ||||
Short-term Investments: | ||||
Certificates of Deposit | $24,000 | $9 | $-- | $24,009 |
Corporate bonds | $80 | $-- | $-- | $80 |
Long-term Investments | ||||
Corporate bonds | $5,000 | $-- | $(287) | $4,713 |
Equity investments | $5,675 | $-- | $(730) | $4,945 |
|
|
|
|
|
| Gross Unrealized |
|
|
| |||||||||||
|
| Level |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
| |||||
As of September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Money market |
|
| 1 |
|
|
| 656 |
|
| $ | - |
|
| $ | - |
|
| $ | 656 |
|
Commercial paper |
|
| 2 |
|
|
| - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Bonds |
|
| 2 |
|
|
| 7,587 |
|
| $ | 4 |
|
| $ | (144 | ) |
| $ | 7,447 |
|
Mutual funds |
|
| 1 |
|
|
| 1,781 |
|
| $ | - |
|
| $ | (56 | ) |
| $ | 1,725 |
|
Equity investments |
|
| 2 |
|
|
| 6,054 |
|
| $ | - |
|
| $ | (2,053 | ) |
| $ | 4,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market |
|
| 1 |
|
|
| 2,380 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,380 |
|
Commercial paper |
|
| 2 |
|
|
| 13,975 |
|
| $ | 1 |
|
| $ | (9 | ) |
| $ | 13,967 |
|
Bonds |
|
| 2 |
|
|
| 11,777 |
|
| $ | - |
|
| $ | (353 | ) |
| $ | 11,424 |
|
Mutual funds |
|
| 1 |
|
|
| 466 |
|
| $ | - |
|
| $ | (116 | ) |
| $ | 350 |
|
Equity investments |
|
| 2 |
|
|
| 6,054 |
|
| $ | - |
|
| $ | (585 | ) |
| $ | 5,469 |
|
The above long-term corporatecarrying value of our investments is reviewed quarterly for changes in circumstances or the occurrence of events that suggests an investment may not be fully recoverable. The bonds represent an investmentinvestments in one issuervarious issuers at September 30, 2017.2023. The unrealized losslosses for this investment relates to a risesome of these bond investments reflect changes in interest rates which resulted in a lower market price for that security. This investment has not beenfollowing their acquisition. As of September 30, 2023, we had six bond investments in a loss position for more than 12 months.
At September 30, 2023, the length of deposit have maturitiestime to maturity for the bonds we held ranged from greater than two weeks to less than eighta month to 27 months. The commercial paper securities have maturities from two days to less than eleven months. The corporate bonds will mature in 44.5 months.
12 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(5)
Patents and Licenses
Patents and license fees paid for the use of other entities’ patents are amortized over the useful life of the patent or license. The following tables provide information regarding patents and licenses (dollars in thousands):
September 30, 2017 | December 31, 2016 | ||||
Weighted Average Original Life (years) | Gross Carrying Amount | Accumulated Amortization | Weighted Average Original Life (years) | Gross Carrying Amount | Accumulated Amortization |
15.67 | $13,840 | $12,032 | 15.67 | $13,840 | $11,911 |
September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||
Weighted Average Original Life (years) |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Weighted Average Original Life (years) |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
| ||||||
| 15.67 |
|
| $ | 13,840 |
|
| $ | 12,740 |
|
|
| 15.67 |
|
| $ | 13,840 |
|
| $ | 12,655 |
|
Aggregated amortization expense for patents and licenses was $30,000 and $63,000 for$28 thousand in the three monthsthree-month period ended September 30, 20172023 and 2016, respectively, and $121,000 and $188,000 for$29 thousand in the nine monthsthree month period ended September 30, 20172022. Aggregated amortization expense for patents and 2016, respectively.
Estimated future amortization expense for each of the years set forth below ending December 31 is as follows (in thousands):
2018 | $119 |
2019 | $119 |
2020 | $119 |
2021 | $119 |
2022 | $117 |
2024 |
| $ | 113 |
|
2025 |
| $ | 112 |
|
2026 |
| $ | 112 |
|
2027 |
| $ | 108 |
|
2028 |
| $ | 108 |
|
(6) Revenues
We recognize revenue when performance obligations under the terms of a contract with our customer are satisfied. This occurs with the transfer of control of our products to customers when products are shipped. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services. Sales and other taxes we may collect concurrent with revenue-producing activities are excluded from revenue.
A summary of revenue by geographic area, based on shipping destination, for the three and nine months ended September 30, 2023 and 2022 is as follows (in thousands):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
United States |
| $ | 26,146 |
|
| $ | 27,779 |
|
| $ | 78,594 |
|
| $ | 84,121 |
|
European Union |
|
| 6,695 |
|
|
| 6,371 |
|
|
| 21,361 |
|
|
| 23,851 |
|
All other regions |
|
| 9,070 |
|
|
| 10,481 |
|
|
| 25,787 |
|
|
| 32,679 |
|
Total |
| $ | 41,911 |
|
| $ | 44,631 |
|
| $ | 125,742 |
|
| $ | 140,651 |
|
13 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A summary of revenue by product line for the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09,
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Fluid Delivery |
| $ | 17,717 |
|
| $ | 19,303 |
|
| $ | 52,591 |
|
| $ | 64,973 |
|
Cardiovascular |
|
| 17,170 |
|
|
| 16,780 |
|
|
| 51,568 |
|
|
| 50,165 |
|
Ophthalmology |
|
| 2,700 |
|
|
| 1,607 |
|
|
| 6,849 |
|
|
| 4,495 |
|
Other |
|
| 4,324 |
|
|
| 6,941 |
|
|
| 14,734 |
|
|
| 21,018 |
|
Total |
| $ | 41,911 |
|
| $ | 44,631 |
|
| $ | 125,742 |
|
| $ | 140,651 |
|
More than 98 percent of our total revenue in the periods presented herein is pursuant to Employee Share-Based Payment Accounting
We maintain an allowance for doubtful accounts to reflect estimated losses resulting from the failure of customers to make required payments. We calculate our credit loss allowance for our trade receivables following a tax-paying component of an entitylifetime “expected credit loss” measurement objective. An account is written off when we determine the receivable will not be offset and presented as a single amount is not affected by this guidance. ASU 2015-17 is effective for annual and interim periods beginning after December 15, 2016 but early application is permitted and the guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. collected. Historically, bad debt has been immaterial.
We elected to adopt this ASU in the first quarter of 2017 on a retrospective basis. Amounts reclassified from “Deferred income taxes” to “Other non-current liabilities” were $651,000 as of December 31, 2016.The adoption did not have a material impact on our consolidated financial statements.
We do not make any material accruals for product returns and warranty obligations because our returns and warranty obligations have been very low due to our focus on quality control.
We do not disclose the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount for which we have the right to invoice. We believe that the complexity added to our disclosures by the inclusion of a large amount of revenueinsignificant detail in attempting to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in United States Generally Accepteddisclose information about immaterial contracts would potentially obscure more useful and important information.
(7) Recent Accounting Principles when it becomes effective. In July 2015, the FASB voted to delay the effective date of ASU 2014-09 by one year, making it effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted as of the original effective date. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. Based on our evaluation, we will adopt the requirements of the new standard on January 1, 2018, but have not yet selected a transition method for adoption. Presented below is the status of the process we have utilized for the adoption of the new standard and the significant implementation matters addressed:
From time to time, new accounting standards updatespronouncements applicable to us are issued by the FASB which we willFinancial Accounting Standards Board or other standards-setting bodies. We generally adopt these standards as of the specified effective date. Unless otherwise discussed, we believe the impact of recently issued standards updates that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.
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Table of Contents |
Item 2.
Overview
We develop and manufacture products primarily for medical applications. We market components to other equipment manufacturers for incorporation in their products and sell finished devices to physicians, hospitals, clinics, and other treatment centers. Our medical products primarily serve the fluid delivery, cardiovascular, and ophthalmology markets. Our other medical and non-medical products include instrumentation and disposables used in dialysis and valves and inflation devices used in marine and aviation safety products.
Our products are used in a wide variety of applications by numerous customers. We encounter competition in all of our markets and compete primarily on the basis of product quality, price, engineering, customer service, and delivery time.
Our business strategy is to provide hospitals, physicians, and other healthcare providers with the tools they need to improve the lives of the patients they serve. To do so, we provide a broad selection of products in the areas of our expertise. We have diverse product lines serving primarily the fluid delivery, cardiovascular, and ophthalmic markets, and this diversity has served us well as we encounter changing market conditions. Research and development, or R&D, efforts are focused on improving current products and developing highly-engineered products that meet customer needs and serve niche markets with meaningful sales potential. Proposed new products may be subject to regulatory clearance or approval prior to commercialization and the time period for introducing a new product to the marketplace can be unpredictable. We also focus on controlling costs by investing in modern manufacturing technologies and controlling purchasing processes. We have been successful in consistently generating cash from operations and have used that cash to reduce or eliminate indebtedness, to fund capital expenditures, to make investments, to repurchase stock, and to pay dividends.
Our strategic objective is to further enhance our position in our served markets by:
· | Focusing on customer needs; | |
· | Expanding existing product lines and developing new ones; | |
· | Investing in our future growth, while balancing the need to sensibly control cost; and | |
· | Preserving and fostering a collaborative, entrepreneurial management culture. |
For the three months ended September 30, 2017,2023, we reported revenues of $37.9$41.9 million, down 6 percent, operating income of $11.5$4.1 million, down 58 percent, and net income of $8.0$2.9 million, up less than 1down 67 percent up 5 percent and up 5 percent, respectively, from the three months ended September 30, 2016. For the nine months ended September 30, 2017, we reported revenues of $112.6 million, operating income of $33.0 million and net income of $27.9 million, up 2 percent, up 5 percent and up 27 percent, respectively, from the nine months ended September 30, 2016.
Results for the three months ended September 30, 2017
Consolidated net income totaled $8.0$2.9 million, or $4.30$1.67 per basic and $4.29diluted share, in the third quarter of 2023. This is compared with consolidated net income total of $8.8 million, or $4.95 per basic and $4.94 per diluted share, in the third quarter of 2017. This is compared with consolidated net income of $7.6 million, or $4.17 per basic and $4.10 per diluted share, in the third quarter of 2016.2022. The income per basic share computations are based on weighted average basic shares outstanding of 1,852,0001,760 thousand in the 20172023 period and 1,825,0001,786 thousand in the 20162022 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,857,0001,761 thousand in the 20172023 period and 1,858,0001,788 thousand in the 20162022 period.
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Consolidated revenues of $37.9$41.9 million for the third quarter of 20172023 were less than 16.1 percent higherlower than revenues of $37.8$44.6 million for the third quarter of 2016.
Revenues by product line were as follows (in thousands):
Three Months ended September 30, | ||
2017 | 2016 | |
Fluid Delivery | $16,083 | $16,573 |
Cardiovascular | 12,837 | 11,389 |
Ophthalmology | 3,595 | 4,386 |
Other | 5,388 | 5,487 |
Total | $37,903 | $37,835 |
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Fluid Delivery |
| $ | 17,717 |
|
| $ | 19,303 |
|
Cardiovascular |
|
| 17,170 |
|
|
| 16,780 |
|
Ophthalmology |
|
| 2,700 |
|
|
| 1,607 |
|
Other |
|
| 4,324 |
|
|
| 6,941 |
|
Total |
| $ | 41,911 |
|
| $ | 44,631 |
|
Cost of goods sold of $19.5$28.2 million for the third quarter of 20172023 was 4 percent lowerhigher than our cost of goods sold of $20.2$27.0 million for the third quarter of 20162022, primarily due to a favorable product sales mix, improvedincreased manufacturing efficiencies and the impact of continued cost improvement projects.costs. Our cost of goods sold in the third quarter of 20172023 was 51.467.2 percent of revenuesrevenue compared with 53.4to 60.4 percent of revenuesrevenue in the third quarter of 2016.
Gross profit of $18.4$13.7 million in the third quarter of 20172023 was $781,000,$3.9 million or 422.2 percent higherlower than in the comparable 20162022 period. Our gross profit percentage in the third quarter of 20172023 was 48.632.8 percent of revenues compared with 46.639.6 percent of revenues in the third quarter of 2016.2022. The increasedecrease in gross profit percentage in the 20172023 period compared to the 20162022 period was primarily related to the favorable product sales mix, improvedhigher manufacturing efficiencies and cost improvement projects mentioned above.
Our third quarter 20172023 operating expenses of $6.9$9.7 million were $278,000$1.6 million higher than the operating expenses for the third quarter of 2016.2022. This increase was attributable to a $473,000$959 thousand increase in Generalgeneral and Administrative, or G&A,administrative expenses and a $220,000 increase in Selling expenses partially offsetdriven by a $415,000 decrease in Research and Development, or R&D, expenses. The increase in G&A expenses for the third quarter of 2017 was principally attributable to increased compensation and outside services. The increase in Selling expenses was principally attributable to increased commissions, compensation, outside services and travel costs. The decreasecompensation, as well as a $618 thousand increase in R&D expenses, was primarily related to decreasedoutside services and supplies. Selling expenses increased $42 thousand, primarily related to outside services.
Operating income of $4.1 million in the third quarter of 2017 increased $503,000 to $11.52023 represented a $5.5 million, a 5or 57.7 percent, increasedecrease in operating income compared to ourthird quarter 2022 operating income inincome. This decrease was due to lower sales and the quarter ended September 30, 2016.gross profit decrease discussed above. Operating income was 309.7 percent of revenues for the third quarter of 2017 compared to 292023 and 21.5 percent of revenues for the third quarter of 2016.
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Interest and dividend income in the third quarter of 20172023 was $287,000,$320 thousand compared with $106,000 for the same period in the prior year. Increased levels of investment, increased interest rates and higher dividends were the primary reasons for the increase.
Other investment income in the third quarter of 2023 was a $782 thousand loss compared with Other investment gain of $764 thousand in the third quarter of 2022. These amounts were attributable to unrealized gains and losses on equity investments resulting from changes in the market values of the investments in each quarter.
Income tax expense was $568 thousand for the third quarter of 2023 compared with $1.7 million for the third quarter of 2022. The effective tax rate for the third quarter of 20172023 was 32.316.2 percent compared with 31.316.5 percent for the third quarter of 2016. We expect the effective tax rate for the remainder of 2017 to be approximately 32.0 percent.
Results for the nine months ended September 30, 2017
Consolidated net income totaled $28.0$13.0 million, or $15.16$7.38 per basic and $15.06$7.37 per diluted share, in the first nine months of 2017.2023. This is compared with consolidated net income of $22.0$26.7 million, or $12.07$14.89 per basic and $11.86$14.86 per diluted share, in the first nine months of 2016.2022. The income per basic share computations are based on weighted average basic shares outstanding of 1,844,0001,761 thousand in the 20172023 period and 1,823,0001,793 thousand in the 20162022 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,856,0001,762 thousand in both the 20172023 period and 2016 periods.
Consolidated revenues of $112.6$125.7 million for the first nine months of 20172023 were 210.6 percent higherlower than revenues of $110.2$140.7 million for the first nine months of 2016.2022. This increasedecrease in revenue was primarily attributabledue to increaseddecreased sales volumes of our fluid delivery19.1 percent in Fluid Delivery and cardiovascular products.
Revenues by product line were as follows (in thousands):
Nine Months ended September 30, | ||
2017 | 2016 | |
Fluid Delivery | $49,718 | $47,183 |
Cardiovascular | 36,523 | 35,649 |
Ophthalmology | 11,030 | 12,417 |
Other | 15,300 | 14,944 |
Total | $112,571 | $110,193 |
|
| Nine Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Fluid Delivery |
| $ | 52,591 |
|
| $ | 64,973 |
|
Cardiovascular |
|
| 51,568 |
|
|
| 50,165 |
|
Ophthalmology |
|
| 6,849 |
|
|
| 4,495 |
|
Other |
|
| 14,734 |
|
|
| 21,018 |
|
Total |
| $ | 125,742 |
|
| $ | 140,651 |
|
Cost of goods sold of $57.8$79.7 million for the first nine months of 20172023 was $52,000 higher$3.3 million lower than in the comparable 20162022 period. The primary contributorsThis decrease was due to the increase in our cost of goods sold werelower sales volumes and increased sales and manufacturing inefficiencies in the first quarter of 2017 partially offset by a favorable product sales mix.costs. Our cost of goods sold in the first nine months of 20172023 was 51.463.4 percent of revenues compared with 52.4to 59.0 percent of revenues in the first nine months of 2016.
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Gross profit of $54.7was $46.1 million in the first nine months of 2017 was $2.32023 and $57.7 million or 4 percent, higher than in the comparable 2016 period. Our gross profit percentage in the first nine months of 20172022. Our gross profit percentage was 48.6 percent of revenues compared with 47.636.6 percent of revenues in the first nine months of 2016.in 2023 and 41.0 percent in 2022. The increasedecrease in gross profit percentage in the 20172023 period compared to the 20162022 period was primarily related to a favorable product sales mix partially offset byhigher manufacturing inefficiencies incosts.
Operating expenses of $30.2 million for the first quarter of 2017.
Operating income of $15.9 million for the first nine months of 2017 was principally attributable to increased compensation and outside services partially offset by decreased travel and depreciation. The increase in Selling expenses was primarily related to increased travel, commissions, outside services and compensation partially offset by reduced promotion costs. The2023 represented a $15.0 million or 48.5 percent decrease in R&D costs was primarily relatedoperating income as compared to decreased outside services and supplies.
Interest and dividend income for the first nine months of 20172023 was $806,000,$687 thousand, compared with $315,000$639 thousand for the same period in the prior year. Increased levels of investment, increasedThe increase in interest rates and higher dividends were the primary reasons for the increase.
Other investment income for the first nine months of 20172023 was $5.8a $1.4 million loss compared to incomea $216 thousand gain in the first nine months of 2022. These amounts were attributable to unrealized gains and losses on equity investments resulting from changes in the market values of our investments in each time period.
Income tax expense of $9.5was $2.1 million for the same periodfirst nine months in 2023 and $5.1 million for the prior year.first nine months in 2022. The effective tax rate for the first nine months of 20172023 was 17.314.1 percent, compared with 30.216.2 percent for the first nine months of 2016.2022. The decrease in the 2023 period effective tax rate for the first nine months of 2017 was favorably impacted by a tax benefit of $5.3 millionprimarily related to excess tax benefits from stock compensation as a resultthe impact of the adoption of ASU 2016-09.
Liquidity and Capital Resources
As of September 30, 2023, we had a $40.0$75.0 million revolving credit facility with a money center bank that could be utilized forpursuant to which the fundinglender is obligated to make advances until February 28, 2024. The credit facility is secured by substantially all of operationsour inventories, equipment, and for major capital projectsaccounts receivable. Interest under the credit facility is assessed at 30-day, 60-day, or acquisitions, subject to certain limitations90-day Adjusted Term SOFR, as selected by us, plus 1.0 percent, and restrictions.is payable monthly. We had no outstanding borrowings under ourthe credit facility at December 31, 2016. At December 31, 2016,September 30, 2023 of $4.5 million, and we were in compliance with all financial covenants in the credit facility.
At September 30, 2017, we were in compliance with all financial covenants. We believe the bank providing the credit facility is highly-rated and that the entire $75.0 million under the credit facility is currently available to us.
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Cash flows from operating activities of $37.1$9.1 million for the nine months ended September 30, 20172023 were primarily comprised of net income plus the net effect of non-cash expenses increases to accrued income and other taxes, accounts payablean increase in inventory and accrued expenses partially offset by increases to accounts receivable.prepaid expenses. During the first nine months of 2017,2023, we expended $7.6used $19.8 million for the addition of property and equipment, $46.7$11.4 million for dividends, and $5.6 million for the purchase of investments. During the same period, our maturities and sales of investments generated $20.8 million in cash, and our cash borrowings under our credit facility at September 30, 2023 were $4.5 million. For the nine months ended September 30, 2022, cash flows from operating activities of $28.9 million were primarily comprised of net income plus the net effect of non-cash expenses and an increase in inventory. During the first nine months of 2022, we used $25.5 million for the purchase of investments, $7.7$25.3 million for shares tendered on stock-based compensation for tax withholdingthe addition of property and $6.1equipment, $10.8 million for dividends. dividends, and $14.4 million for the purchase of treasury stock. During the same period, maturities and sales of investments generated $32.0 million.
At September 30, 2017,2023, we had working capital of $99.8$100.5 million, including $21.0 million$658 thousand in cash and cash equivalents and $39.0$3.8 million in short-term investments.investments, compared to working capital of $101.3 million at December 31, 2022. The $14.7 million increase$822 thousand decrease in working capital during the first nine months of 20172023 was primarily related to increases in short-term investments, accounts receivable and cash and cash equivalents. This increase was partially offset by increases in accrued income and other taxes and increases in accounts payable and accrued liabilities. The net increasea decrease in cash and short-term investments, was primarily related to operating results. Thepartially offset by an increase in accounts receivable was primarily related to increased revenues for the third quarter of 2017 as compared to the fourth quarter of 2016. The increase in accrued incomeinventory and other taxes is primarily related to accrued state income taxes. The increase in accounts payable and accrued liabilities is primarily related to timing of payments for replenishment of inventories, and operating expenditures.
We believe that our $70.1$14.0 million in cash, cash equivalents, short-term investments, and long-term investments, along with cash flows from operations and available borrowings of up to $75.0$70.5 million under our new credit facility, will be sufficient to fund our cash requirements for at least the foreseeable future, including the costs associated with the planned expansion of one of our manufacturing facilities.future. We believe that our strong financial position would allow us to access equity or debt financing should that be necessary. Additionally, we
COVID-19 Impact
We believe the impact of COVID-19 on our business has largely diminished at this time; however, uncertainties continue, particularly around disruptions to the global economy, supply chains, and healthcare systems. Even with the public health actions that our cash and cash equivalents, short-term investments and long-term investments, as a whole,have been taken to date, the disease may pose future risks with the emergence of new variants. We will continue to increase during the remainder of 2017.
19 |
Table of Contents |
Forward-Looking Statements
Statements in this Management’s Discussion and Analysis and elsewhere in this Quarterly Report on Form 10-Q that are forward lookingforward-looking are based upon current expectations, and actual results or future events may differ materially. Therefore, the inclusion of such forward-looking information should not be regarded as a representation by us that our objectives or plans will be achieved. Such statements include, but are not limited to, our effective tax rate for the remainder of 2017, our ability to fund our cash requirements for the foreseeable future with our current assets, long-term investments, cash flow, and borrowings under the credit facility, the impact of the restrictive covenants in our credit facility, on our liquidity and capital resources, our access to equity and debt financing, and the increase in cash, cash equivalents, and investments during the remainder of 2017.financing. Words such as “expects,” “believes,” “anticipates,” “intends,” “should,” “plans,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements contained herein involve numerous risks and uncertainties, and there are a number of factors that could cause actual results or future events to differ materially, including, but not limited to, the following: the risk that COVID-19 leads to further material delays and cancellations of, or reduced demand for, procedures in which our products are utilized; curtailed or delayed capital spending by hospitals and other healthcare providers; disruption to our supply chain; closures of our facilities; delays in training; delays in gathering clinical evidence; diversion of management and other resources to respond to COVID-19; the impact of global and regional economic and credit market conditions on healthcare spending; the risk that COVID-19 further disrupts local economies and causes economies in our key markets to enter prolonged recessions; changing economic, market and business conditions; acts of war or terrorism; the effects of governmental regulation; the impact of competition and new technologies; slower-than-anticipated introduction of new products or implementation of marketing strategies; implementation of new manufacturing processes or implementation of new information systems; our ability to protect our intellectual property; changes in the prices of raw materials; changes in product mix; intellectual property and product liability claims and product recalls; the ability to attract and retain qualified personnel; and the loss of, or any material reduction in sales to, any significant customers. In addition, assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic review which may cause us to alter our marketing, capital expenditures or other budgets, which in turn may affect our results of operations and financial condition.
Item 3.Quantitative3. Quantitative and Qualitative Disclosures About Market Risk
For the quarter ended September 30, 2017,2023, we did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in our 20162022 Form 10-K/A.
Item 4.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2017.2023. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting for the quarter ended September 30, 20172023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
20 |
Table of Contents |
PART II - OTHER INFORMATION
Item 1.
LegalWe have no pending legal proceedings of the type described in Item 103 of Regulation S-K.
Item 1A. Risk Factors.
As of the date of this Report, there has been no material change in the risk factors described in our 2022 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
On May 21, 2015, our Board of Directors approved a stock repurchase program pursuant to which we can repurchase up to 250,000 shares of our common stock from time to time wein open market or privately-negotiated transactions. Our stock repurchase program has no expiration date but may be involved in claims or litigation that arise interminated by our Board of Directors at any time. No repurchases of our stock were made during the normal coursethree months ended September 30, 2023. As of business. We are not currently a party to any legal proceedings, which, if decided adversely, would have a material adverse effect onSeptember 30, 2023, we had repurchased 121,247 shares of our business, financial condition, or resultscommon stock authorized under the program and the number of operations
Item 6. Exhibits.
Exhibit Index
Exhibit Number | Description | |
Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer | ||
Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
22 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Atrion Corporation (Registrant) | |||
Date: November 7, | By: | /s/David A. Battat | |
David A. Battat | |||
President and |
Date: November 7, 2023 | By: | /s/ Cindy Ferguson | |
Cindy Ferguson | |||
Vice President and | |||
Chief Financial Officer | |||
(Principal Accounting and Financial Officer) |