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 |
or
☐ | 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 “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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 Act. ☐
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
|
Common stock, Par Value $0.10 per share |
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ATRION CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
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| Notes to Condensed Consolidated Financial Statements (Unaudited) | 7 | ||||
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I
FINANCIAL INFORMATION
| Table of Contents |
Item 1. Financial Statements.
ATRION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
| (in thousands, except per share amounts) |
| |||||
|
|
|
|
|
|
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Revenues |
| $ | 47,334 |
|
| $ | 39,993 |
|
Cost of goods sold |
|
| 34,983 |
|
|
| 24,912 |
|
Gross profit |
|
| 12,351 |
|
|
| 15,081 |
|
Operating expenses: |
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|
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|
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Selling |
|
| 2,772 |
|
|
| 2,727 |
|
General and administrative |
|
| 4,787 |
|
|
| 6,254 |
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Research and development |
|
| 1,650 |
|
|
| 1,630 |
|
|
|
| 9,209 |
|
|
| 10,611 |
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Operating income |
|
| 3,142 |
|
|
| 4,470 |
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
|
| 156 |
|
|
| 240 |
|
Other investment income/(losses) |
|
| (109 | ) |
|
| (721 | ) |
Other income |
|
| 14 |
|
|
| 10 |
|
|
|
| 61 |
|
|
| (471 | ) |
|
|
|
|
|
|
|
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Income before provision for income taxes |
|
| 3,203 |
|
|
| 3,999 |
|
Provision for income taxes |
|
| (411 | ) |
|
| (514 | ) |
|
|
|
|
|
|
|
|
|
Net income |
| $ | 2,792 |
|
| $ | 3,485 |
|
|
|
|
|
|
|
|
|
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Net income per basic share |
| $ | 1.59 |
|
| $ | 1.98 |
|
Weighted average basic shares outstanding |
|
| 1,760 |
|
|
| 1,762 |
|
|
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|
|
|
|
|
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Net income per diluted share |
| $ | 1.59 |
|
| $ | 1.98 |
|
Weighted average diluted shares outstanding |
|
| 1,761 |
|
|
| 1,763 |
|
|
|
|
|
|
|
|
|
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Dividends per common share |
| $ | 2.20 |
|
| $ | 2.15 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
| 3 |
| Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| 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) |
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|
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|
|
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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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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 |
|
|
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Income before provision for income taxes |
|
| 3,507 |
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| 10,584 |
|
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| 15,112 |
|
|
| 31,829 |
|
Provision for income taxes |
|
| (568 | ) |
|
| (1,745 | ) |
|
| (2,125 | ) |
|
| (5,143 | ) |
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Net income |
| $ | 2,939 |
|
| $ | 8,839 |
|
| $ | 12,987 |
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| $ | 26,686 |
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Net income per basic share |
| $ | 1.67 |
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| $ | 4.95 |
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| $ | 7.38 |
|
| $ | 14.89 |
|
Weighted average basic shares outstanding |
|
| 1,760 |
|
|
| 1,786 |
|
|
| 1,761 |
|
|
| 1,793 |
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Net income per diluted share |
| $ | 1.67 |
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| $ | 4.94 |
|
| $ | 7.37 |
|
| $ | 14.86 |
|
Weighted average diluted shares outstanding |
|
| 1,761 |
|
|
| 1,788 |
|
|
| 1,762 |
|
|
| 1,796 |
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Dividends per common share |
| $ | 2.20 |
|
| $ | 2.15 |
|
| $ | 6.50 |
|
| $ | 6.05 |
|
|
| March 31, 2024 |
|
| December 31, 2023 |
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Assets |
| (in thousands) |
| |||||
Current assets: |
|
|
|
|
|
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Cash and cash equivalents |
| $ | 7,135 |
|
| $ | 3,565 |
|
Short-term investments |
|
| 2,760 |
|
|
| 2,691 |
|
Accounts receivable |
|
| 25,116 |
|
|
| 23,029 |
|
Inventories |
|
| 75,000 |
|
|
| 82,307 |
|
Prepaid expenses and other current assets |
|
| 2,503 |
|
|
| 3,173 |
|
|
|
| 112,514 |
|
|
| 114,765 |
|
|
|
|
|
|
|
|
|
|
Long-term investments |
|
| 8,853 |
|
|
| 8,165 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
| 289,054 |
|
|
| 286,445 |
|
Less accumulated depreciation and amortization |
|
| 164,446 |
|
|
| 161,098 |
|
|
|
| 124,608 |
|
|
| 125,347 |
|
|
|
|
|
|
|
|
|
|
Other assets and deferred charges: |
|
|
|
|
|
|
|
|
Patents and licenses |
|
| 1,043 |
|
|
| 1,072 |
|
Goodwill |
|
| 9,730 |
|
|
| 9,730 |
|
Other |
|
| 1,879 |
|
|
| 1,746 |
|
|
|
| 12,652 |
|
|
| 12,548 |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 258,627 |
|
| $ | 260,825 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 11,112 |
|
| $ | 12,515 |
|
Accrued income and other taxes |
|
| 1,140 |
|
|
| 106 |
|
|
|
| 12,252 |
|
|
| 12,621 |
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities |
|
| 4,452 |
|
|
| 5,315 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock, par value $0.10 per share; authorized 10,000 shares, issued 3,420 shares |
|
| 342 |
|
|
| 342 |
|
Additional paid-in capital |
|
| 67,472 |
|
|
| 67,331 |
|
Retained earnings |
|
| 380,665 |
|
|
| 381,754 |
|
Treasury shares,1,660 at March 31, 2024 and 1,660 at December 31, 2023, at cost |
|
| (206,556 | ) |
|
| (206,538 | ) |
Total stockholders’ equity |
|
| 241,923 |
|
|
| 242,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
| $ | 258,627 |
|
| $ | 260,825 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
| 4 |
| Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETSSTATEMENTS OF CASH FLOWS
(Unaudited)
|
| 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 |
|
|
|
|
|
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Current liabilities: |
|
|
|
|
|
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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 |
|
| Three Months Ended March 31, |
| ||||||
|
| 2024 |
|
| 2023 |
| ||
(In thousands) |
| |||||||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net income |
| $ | 2,792 |
|
| $ | 3,485 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 3,943 |
|
|
| 3,509 |
|
Deferred income taxes |
|
| (135 | ) |
|
| (1,394 | ) |
Stock-based compensation |
|
| 235 |
|
|
| 407 |
|
Net change in unrealized gains and losses on investments |
|
| 109 |
|
|
| 721 |
|
Net change in accrued interest, premiums, and discounts on investments |
|
| (5 | ) |
|
| (77 | ) |
|
|
| 6,939 |
|
|
| 6,651 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (2,087 | ) |
|
| 4,527 |
|
Inventories |
|
| 7,307 |
|
|
| (9,300 | ) |
Prepaid expenses |
|
| 345 |
|
|
| 979 |
|
Other non-current assets |
|
| 192 |
|
|
| 382 |
|
Accounts payable and accrued liabilities |
|
| (1,504 | ) |
|
| 167 |
|
Accrued income and other taxes |
|
| 1,034 |
|
|
| 984 |
|
Other non-current liabilities |
|
| (728 | ) |
|
| (62 | ) |
Cash flows from operating activities |
|
| 11,498 |
|
|
| 4,328 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Property, plant and equipment additions |
|
| (3,175 | ) |
|
| (7,543 | ) |
Purchase of investments |
|
| (3,608 | ) |
|
| (4,160 | ) |
Proceeds from sale of investments |
|
| 228 |
|
|
| 52 |
|
Proceeds from maturities of investments |
|
| 2,519 |
|
|
| 11,574 |
|
Cash flows from investing activities |
|
| (4,036 | ) |
|
| (77 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
| - |
|
|
| (613 | ) |
Shares tendered for employees’ withholding taxes on stock-based compensation |
|
| (20 | ) |
|
| (22 | ) |
Dividends paid |
|
| (3,872 | ) |
|
| (3,784 | ) |
Cash flows from financing activities |
|
| (3,892 | ) |
|
| (4,419 | ) |
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 3,570 |
|
|
| (168 | ) |
Cash and cash equivalents at beginning of period |
|
| 3,565 |
|
|
| 4,731 |
|
Cash and cash equivalents at end of period |
| $ | 7,135 |
|
| $ | 4,563 |
|
|
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Income taxes |
| $ | 11 |
|
| $ | 146 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.statements
| 5 |
| Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWSCHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
|
| 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 |
|
For the Three Months Ended | ||||||||||||||||||||||||||||
|
| Common Stock |
|
| Treasury Stock |
|
| Additional |
|
|
|
|
| |||||||||||||||
|
| Shares Outstanding |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| Retained Earnings |
|
| Total |
| |||||||
Balances, January 1, 2023 |
|
| 1,761 |
|
| $ | 342 |
|
|
| 1,659 |
|
| $ | (204,830 | ) |
| $ | 66,347 |
|
| $ | 377,682 |
|
| $ | 239,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,485 |
|
|
| 3,485 |
|
Stock-based compensation transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2 |
|
|
| 35 |
|
|
|
|
|
|
| 37 |
|
Shares surrendered in stock transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (22 | ) |
|
|
|
|
|
|
|
|
|
| (22 | ) |
Purchase of treasury stock |
|
| (1 | ) |
|
|
|
|
|
| 1 |
|
|
| (613 | ) |
|
|
|
|
|
|
|
|
|
| (613 | ) |
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,787 | ) |
|
| (3,787 | ) |
Balances, March 31, 2023 |
|
| 1,760 |
|
| $ | 342 |
|
|
| 1,660 |
|
| $ | (205,463 | ) |
| $ | 66,382 |
|
| $ | 377,380 |
|
| $ | 238,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2024 |
|
| 1,760 |
|
| $ | 342 |
|
|
| 1,660 |
|
| $ | (206,538 | ) |
| $ | 67,331 |
|
| $ | 381,754 |
|
| $ | 242,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,792 |
|
|
| 2,792 |
|
Stock-based compensation transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2 |
|
|
| 141 |
|
|
|
|
|
|
| 143 |
|
Shares surrendered in stock transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (20 | ) |
|
|
|
|
|
|
|
|
|
| (20 | ) |
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,881 | ) |
|
| (3,881 | ) |
Balances, March 31, 2024 |
|
| 1,760 |
|
| $ | 342 |
|
|
| 1,660 |
|
| $ | (206,556 | ) |
| $ | 67,472 |
|
| $ | 380,665 |
|
| $ | 241,923 |
|
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements
| 6 |
| Table of Contents |
ATRION CORPORATION AND SUBSIDIARIESNOTES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
|
| 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 statements.
ATRION CORPORATION AND SUBSIDIARIES
NOTES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
|
| 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 statements.
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)Basis of Presentation
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 US 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 US GAAP requires management to make estimates and assumptions that can have a significant impact on our revenue, operating income, and net income, as well as on the value 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 circumstances. 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,May 10, 2024, the date of issuance of this Quarterly Report on Form 10-Q. However, these estimates may change as new events occur and additional information is obtained. Actual results could differ materially from 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 20222023 ("20222023 Form 10-K").
(2) Inventories
Inventories are stated at the lower of cost or 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):
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Raw materials |
| $ | 36,518 |
|
| $ | 37,770 |
|
Work in process |
|
| 17,756 |
|
|
| 17,462 |
|
Finished goods |
|
| 20,726 |
|
|
| 27,075 |
|
Total inventories |
| $ | 75,000 |
|
| $ | 82,307 |
|
|
| 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 |
|
The decrease in inventories is partially due to a $2.3 million one-time inventory write-off at one of our subsidiaries attributable to a correction of a prior-year immaterial error related to our 2023 10-K.
| Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3)Income per share
The following is the computation for basic and diluted income per share:
|
| Three Months ended September 30, |
| Nine Months ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
| ||||||
|
| (in thousands, except per share amounts) |
|
| (in thousands, except per share amounts) |
| ||||||||||||||||||
Net income |
| $ | 2,939 |
|
| $ | 8,839 |
|
| $ | 12,987 |
|
| $ | 26,686 |
|
| $ | 2,792 |
|
| $ | 3,485 |
|
Weighted average basic shares outstanding |
| 1,760 |
| 1,786 |
| 1,761 |
| 1,793 |
|
| 1,760 |
| 1,762 |
| ||||||||||
Add: Effect of dilutive securities |
|
| 1 |
|
|
| 2 |
|
|
| 1 |
|
|
| 3 |
|
|
| 1 |
|
|
| 1 |
|
Weighted average diluted shares outstanding |
|
| 1,761 |
|
|
| 1,788 |
|
|
| 1,762 |
|
|
| 1,796 |
|
|
| 1,761 |
|
|
| 1,763 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic |
| $ | 1.67 |
|
| $ | 4.95 |
|
| $ | 7.38 |
|
| $ | 14.89 |
|
| $ | 1.59 |
|
| $ | 1.98 |
|
Diluted |
| $ | 1.67 |
|
| $ | 4.94 |
|
| $ | 7.37 |
|
| $ | 14.86 |
|
| $ | 1.59 |
|
| $ | 1.98 |
|
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. Potential dilutive securities have been excluded when their inclusion would be anti-dilutive.
(4) Investments
As of September 30, 2023,March 31, 2024, we held investments in bonds, money market accounts, mutual funds, and equity securities. The bonds are considered held-to-maturity and are recorded at amortized cost in the accompanying consolidated balance sheets. The money market accounts, equity securities, and mutual funds are recorded at fair value in the accompanying consolidated balance sheets. The fair values of these investments were estimated using recently executed transactions and 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 bonds. The remaining investments are considered non-current assets which we intend to hold longer than 12 months.
| 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 |
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
| ||||||
Money market funds |
| $ | 656 |
| $ | 2,380 |
|
| $ | 7,133 |
| $ | 3,563 |
| ||
Cash deposits |
| 2 |
| 603 |
|
|
| 2 |
|
|
| 2 |
| |||
Commercial paper |
|
| - |
|
|
| 1,748 |
| ||||||||
Total cash and cash equivalents |
| $ | 658 |
|
| $ | 4,731 |
|
| $ | 7,135 |
|
| $ | 3,565 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Short-term investments: |
|
|
|
|
|
|
|
|
|
| ||||||
Bonds (held-to-maturity) |
| $ | 3,748 |
| $ | 8,597 |
|
| $ | 2,618 |
| $ | 2,552 |
| ||
Equity securities (available for sale) |
| 91 |
| 330 |
|
|
| 142 |
|
|
| 139 |
| |||
Commercial paper (held-to-maturity) |
| - |
| 12,227 |
| |||||||||||
Allowance for credit losses |
|
| - |
|
|
| (2 | ) | ||||||||
Total short-term investments |
| $ | 3,839 |
|
| $ | 21,152 |
|
| $ | 2,760 |
|
| $ | 2,691 |
|
Long-term investments: |
|
|
|
|
|
|
|
|
|
| ||||||
Equity securities (available for sale) |
| $ | 3,910 |
| $ | 5,139 |
|
| $ | 4,227 |
| $ | 4,354 |
| ||
Bonds (held-to-maturity) |
| 3,839 |
| 3,180 |
|
| 3,307 |
| 3,575 |
| ||||||
Mutual funds (available for sale) |
|
| 1,725 |
|
|
| 350 |
|
|
| 1,319 |
|
|
| 236 |
|
Total long-term investments |
| $ | 9,474 |
|
| $ | 8,669 |
|
| $ | 8,853 |
|
| $ | 8,165 |
|
Total cash, cash equivalents and short and long-term investments |
| $ | 13,971 |
|
| $ | 34,552 |
|
| $ | 18,748 |
|
| $ | 14,421 |
|
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 thirdfirst quarter of 2023,2024, our allowance for credit losses was immaterial.
| 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, 2023March 31, 2024 aggregated by credit quality indicator (in thousands):
Held-to-Maturity Bonds
Held-to-Maturity Bonds | Held-to-Maturity Bonds | |||||||||||||||||||||||
Credit Quality Indicators |
| Fed Govt. Bonds/Notes |
|
| Corporate Bonds |
|
| Totals |
|
| Fed Govt. Bonds/Notes |
|
| Corporate Bonds |
|
| Totals |
| ||||||
AAA/AA/A |
| $ | 104 |
| $ | 3,693 |
| $ | 3,797 |
|
| $ | 2,384 |
| $ | 500 |
| $ | 2,884 |
| ||||
BBB/BB |
|
| - |
|
|
| 3,790 |
|
|
| 3,790 |
|
|
| - |
|
|
| 3,041 |
|
|
| 3,041 |
|
TOTAL |
| $ | 104 |
| $ | 7,483 |
| $ | 7,587 |
|
| $ | 2,384 |
| $ | 3,541 |
| $ | 5,925 |
| ||||
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 investments were estimated using recently executed transactions and market price quotations. The amortized cost and fair value of our investments, and the related gross unrealized gains and losses, were as follows as of the dates shown below (in thousands):
|
|
|
| Gross Unrealized |
|
|
|
|
|
|
| Gross Unrealized |
|
| ||||||||||||||||||||||||||||||||
|
| Level |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
|
| Level |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
| ||||||||||||||||
As of September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
As of March 31, 2024: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Money market |
| 1 |
| 656 |
| $ | - |
| $ | - |
| $ | 656 |
|
| 1 |
| 7,133 |
| $ | - |
| $ | - |
| $ | 7,133 |
| ||||||||||||||||||
Commercial paper |
| 2 |
| - |
| $ | - |
| $ | - |
| $ | - |
| ||||||||||||||||||||||||||||||||
Bonds |
| 2 |
| 7,587 |
| $ | 4 |
| $ | (144 | ) |
| $ | 7,447 |
|
| 2 |
| 5,925 |
| $ | 1 |
| $ | (86 | ) |
| $ | 5,840 |
| ||||||||||||||||
Mutual funds |
| 1 |
| 1,781 |
| $ | - |
| $ | (56 | ) |
| $ | 1,725 |
|
| 1 |
| 1,347 |
| $ | - |
| $ | (28 | ) |
| $ | 1,319 |
| ||||||||||||||||
Equity investments |
| 2 |
| 6,054 |
| $ | - |
| $ | (2,053 | ) |
| $ | 4,001 |
|
| 2 |
| 6,054 |
| $ | - |
| $ | (1,685 | ) |
| $ | 4,369 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
As of December 31, 2022: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
As of December 31, 2023: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Money Market |
| 1 |
| 2,380 |
| $ | - |
| $ | - |
| $ | 2,380 |
|
| 1 |
| 3,563 |
| $ | - |
| $ | - |
| $ | 3,563 |
| ||||||||||||||||||
Commercial paper |
| 2 |
| 13,975 |
| $ | 1 |
| $ | (9 | ) |
| $ | 13,967 |
| |||||||||||||||||||||||||||||||
Bonds |
| 2 |
| 11,777 |
| $ | - |
| $ | (353 | ) |
| $ | 11,424 |
|
| 2 |
| 6,127 |
| $ | 1 |
| $ | (82 | ) |
| $ | 6,046 |
| ||||||||||||||||
Mutual funds |
| 1 |
| 466 |
| $ | - |
| $ | (116 | ) |
| $ | 350 |
|
| 1 |
| 279 |
| $ | - |
| $ | (43 | ) |
| $ | 236 |
| ||||||||||||||||
Equity investments |
| 2 |
| 6,054 |
| $ | - |
| $ | (585 | ) |
| $ | 5,469 |
|
| 2 |
| 6,054 |
| $ | - |
| $ | (1,561 | ) |
| $ | 4,493 |
| ||||||||||||||||
The carrying 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 investments in various issuers at September 30, 2023.March 31, 2024. The unrealized losses for some of these bond investments reflect changes in interest rates following their acquisition. As of September 30, 2023,March 31, 2024, we had sixfour bond investments in a loss position for more than 12 months.
At September 30, 2023,March 31, 2024, the length of time to maturity for the bonds we held ranged from less than a month12 to 2724 months.
| 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, 2023 |
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||||||||||
March 31, 2024 | March 31, 2024 |
| December 31, 2023 |
| ||||||||||||||||||||||||||||||||||||||||
Weighted Average Original Life (years) | Weighted Average Original Life (years) |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Weighted Average Original Life (years) |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
| 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 |
| 15.67 |
| $ | 13,840 |
| $ | 12,797 |
| 15.67 |
| $ | 13,840 |
| $ | 12,768 |
| ||||||||||||
Aggregated amortization expense for patents and licenses was $29 thousand and $28 thousand in the three-month period ended September 30,March 31, 2024 and March 31, 2023, and $29 thousand in the three month period ended September 30, 2022. Aggregated amortization expense for patents and licenses was $85 thousand in the nine-month period ended September 30, 2023 and $89 thousand in the nine-month period ended September 30, 2022.respectively.
Estimated future amortization expense for each of the years set forth below ending December 31 is as follows (in thousands):
2024 |
| $ | 113 |
| ||||
2025 |
| $ | 112 |
|
| $ | 112 |
|
2026 |
| $ | 112 |
|
| $ | 112 |
|
2027 |
| $ | 108 |
|
| $ | 108 |
|
2028 |
| $ | 108 |
|
| $ | 108 |
|
2029 |
| $ | 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,March 31, 2024 and 2023 and 2022 is as follows (in thousands):
|
| Three Months Ended |
| Nine Months Ended |
| |||||||||||||||||||
|
| September 30, |
| September 30, |
| |||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
| ||||||
United States |
| $ | 26,146 |
| $ | 27,779 |
| $ | 78,594 |
| $ | 84,121 |
|
| $ | 31,087 |
| $ | 24,868 |
| ||||
European Union |
| 6,695 |
| 6,371 |
| 21,361 |
| 23,851 |
|
| 6,313 |
| 8,085 |
| ||||||||||
All other regions |
|
| 9,070 |
|
|
| 10,481 |
|
|
| 25,787 |
|
|
| 32,679 |
|
|
| 9,934 |
|
|
| 7,040 |
|
Total |
| $ | 41,911 |
|
| $ | 44,631 |
|
| $ | 125,742 |
|
| $ | 140,651 |
|
| $ | 47,334 |
|
| $ | 39,993 |
|
A summary of revenue by product line for the three months ended March 31, 2024 and 2023 is as follows (in thousands):
|
| 2024 |
|
| 2023 |
| ||
Fluid Delivery |
| $ | 19,537 |
|
| $ | 17,585 |
|
Cardiovascular |
|
| 20,016 |
|
|
| 15,665 |
|
Ophthalmology |
|
| 1,476 |
|
|
| 1,359 |
|
Other |
|
| 6,305 |
|
|
| 5,384 |
|
Total |
| $ | 47,334 |
|
| $ | 39,993 |
|
| Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A summary of revenue by product line 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 |
| ||||
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 shipments initiated by a purchase order (our “contract”) and recognized at a single point in time when the performance obligation of the product being shipped is satisfied, rather than recognized over time, and is presented as a receivable on the balance sheet. Payment is typically due within 30 days.
We maintain an allowance for doubtful accountscredit losses 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 lifetime “expected credit loss” measurement objective. An account is written off when we determine the receivable will not be collected. Historically, bad debt has been immaterial.
We have elected to recognize the cost of shipping as an expense in cost of sales when control over the product has transferred to the customer.
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 insignificant detail in attempting to disclose information about immaterial contracts would potentially obscure more useful and important information.
(7) Recent Accounting Pronouncements
From time to time, new accounting pronouncements applicable to us are issued by the Financial 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 that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 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, 2023,March 31, 2024, we reported revenues of $41.9$47.3 million, down 6up 18 percent, operating income of $4.1$3.1 million, down 5830 percent, and net income of $2.9$2.8 million, down 6720 percent fromas compared to the three months ended September 30, 2022.March 31, 2023.
Results for the three months ended September 30, 2023March 31, 2024
Consolidated net income totaled $2.9$2.8 million, or $1.67$1.59 per basic and diluted share, in the thirdfirst quarter of 2023.2024. This is compared with consolidated net income total of $8.8$3.5 million, or $4.95$1.98 per basic and $4.94 per diluted share, in the thirdfirst quarter of 2022.2023. The income per basic share computations are based on weighted average basic shares outstanding of 1,760 thousand in the 20232024 period and 1,7861,762 thousand in the 20222023 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,761 thousand in the 20232024 period and 1,7881,763 thousand in the 20222023 period.
| Table of Contents |
Consolidated revenues of $41.9$47.3 million for the thirdfirst quarter of 20232024 were 6.118.4 percent lowerhigher than revenues of $44.6$40.0 million for the thirdfirst quarter of 2022 Although revenues in each of the2023. Our first three quarters of 2023 were down from the comparable quarters in 2022, the percentage of the spread has narrowed each quarter as supply chain shortages have eased. Our third quarter 20232024 results were unfavorablyfavorably impacted by a 27.8 percent increase in Cardiovascular revenue, an 8.211.1 percent decreaseincrease in Fluid Delivery revenue, an 8.6 percent increase in Ophthalmic revenue, and a 37.717.1 percent decreaseincrease in Other product line revenue as compared to the thirdfirst quarter of 2022.2023.
Revenues by product line were as follows (in thousands):
|
| Three Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Fluid Delivery |
| $ | 17,717 |
| $ | 19,303 |
|
| $ | 19,537 |
| $ | 17,585 |
| ||
Cardiovascular |
| 17,170 |
| 16,780 |
|
| 20,016 |
| 15,665 |
| ||||||
Ophthalmology |
| 2,700 |
| 1,607 |
|
| 1,476 |
| 1,359 |
| ||||||
Other |
|
| 4,324 |
|
|
| 6,941 |
|
|
| 6,305 |
|
|
| 5,384 |
|
Total |
| $ | 41,911 |
|
| $ | 44,631 |
|
| $ | 47,334 |
|
| $ | 39,993 |
|
Cost of goods sold of $28.2$35.0 million for the thirdfirst quarter of 20232024 was 440.4 percent higher than our cost of goods sold of $27.0$24.9 million for the thirdfirst quarter of 2022,2023, primarily due to increased revenue, and higher manufacturing costs.costs, including a $2.3 million one-time inventory write-off at one of our subsidiaries attributable to a correction of a prior-year immaterial error related to our 2023 10-K. Our cost of goods sold in the thirdfirst quarter of 20232024 was 67.273.9 percent of revenue compared to 60.462.3 percent of revenue in the thirdfirst quarter of 2022.2023.
Gross profit of $13.7$12.4 million in the thirdfirst quarter of 20232024 was $3.9$2.7 million or 22.218.1 percent lower than in the comparable 20222023 period. Our gross profit percentage in the thirdfirst quarter of 20232024 was 32.826.1 percent of revenues compared with 39.637.7 percent of revenues in the thirdfirst quarter of 2022.2023. The decrease in gross profit percentage in the 20232024 period compared to the 20222023 period was related to the higher manufacturing costs.costs mentioned above, as well as mix of products sold.
Our thirdfirst quarter 20232024 operating expenses of $9.7$9.2 million were $1.6$1.4 million higherlower than the operating expenses for the thirdfirst quarter of 2022.2023. This increasedecrease was attributable to a $959 thousand increase$1.5 million decrease in general and administrative expenses, largely driven by outside services andreduced compensation as well as a $618 thousandcosts, partially offset by an increase in R&Dselling expense of $44.7 thousand driven by commissions. There was also a slight increase of $20.7 thousand in research and development expenses primarily related to outside services and supplies. Selling expenses increased $42 thousand, primarily related todriven by supplies, which was offset by a decrease in outside services.
Operating income of $4.1$3.1 million in the thirdfirst quarter of 20232024 represented a $5.5$1.3 million, or 57.729.7 percent, decrease in operating income as compared to thirdfirst quarter 20222023 operating income. This decrease was due to lower sales and the gross profit decrease discussed above. Operating income was 9.76.6 percent of revenues for the thirdfirst quarter of 20232024 and 21.511.2 percent of revenues for the thirdfirst quarter of 2022.2023.
| Table of Contents |
Interest and dividend income in the thirdfirst quarter of 20232024 was $320$156 thousand compared with $210$240 thousand for the same period in the prior year. The increasedecrease in interest and dividend income was due to dividends received on equity investmentsa decrease in the thirdinterest income as compared to first quarter of 2023.
Other investment income in the thirdfirst quarter of 20232024 was a $782$109 thousand loss compared with Other investment gain of $764$721 thousand loss in the thirdfirst quarter of 2022.2023. 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$411 thousand for the thirdfirst quarter of 20232024 compared with $1.7 million for the third quarter of 2022. The effective tax rate for the third quarter of 2023 was 16.2 percent compared with 16.5 percent for the third quarter of 2022.
Results for the nine months ended September 30, 2023
Consolidated net income totaled $13.0 million, or $7.38 per basic and $7.37 per diluted share, in the first nine months of 2023. This is compared with consolidated net income of $26.7 million, or $14.89 per basic and $14.86 per diluted share, in the first nine months of 2022. The income per basic share computations are based on weighted average basic shares outstanding of 1,761$514 thousand in the 2023 period and 1,793 thousand in the 2022 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,762 thousand in the 2023 period and 1,796 thousand in the 2022 period.
Consolidated revenues of $125.7 million for the first nine monthsquarter of 2023 were 10.6 percent lower than revenues of $140.7 million for the first nine months of 2022. This decrease in revenue was due to decreased sales volumes of 19.1 percent in Fluid Delivery and 29.9 percent in Other product lines compared to the first nine months of 2022.
Revenues by product line were as follows (in thousands):
|
| 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 $79.7 million for the first nine months of 2023 was $3.3 million lower than in the comparable 2022 period. This decrease was due to lower sales volumes and increased manufacturing costs. Our cost of goods sold in the first nine months of 2023 was 63.4 percent of revenues compared to 59.0 percent of revenues in the first nine months of 2022.
Gross profit was $46.1 million in the first nine months of 2023 and $57.7 million in the first nine months of 2022. Our gross profit percentage was 36.6 percent of revenues in the first nine months in 2023 and 41.0 percent in 2022. The decrease in gross profit percentage in the 2023 period compared to the 2022 period was related to higher manufacturing costs.
Operating expenses of $30.2 million for the first nine months of 2023 were $3.3 million higher than the operating expenses for the first nine months of 2022. This increase was attributable to a $2.4 million increase in general and administrative expenses and a $925 thousand increase in R&D expenses, primarily driven by outside services and compensation. This increase was partially offset by a $59 thousand decrease in selling expenses.
Operating income of $15.9 million for the first nine months of 2023 represented a $15.0 million or 48.5 percent decrease in operating income as compared to the first nine months of 2022. Operating income was 12.7 percent of revenues for the first nine months of 2023 and 22.0 percent of revenues for the first nine months of 2022.
Interest and dividend income for the first nine months of 2023 was $687 thousand, compared with $639 thousand for the same period in the prior year. The increase in interest and dividend income was primarily related to an increase in dividends received on equity investments in the current-year period.
Other investment income for the first nine months of 2023 was a $1.4 million loss compared to a $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 was $2.1 million for the first nine months in 2023 and $5.1 million for the first nine months in 2022.2023. The effective tax rate for the first nine monthsquarter of 20232024 was 14.112.8 percent compared with 16.212.9 percent for the first nine monthsquarter of 2022. The decrease in the 2023 period effective tax rate was primarily related to the impact of the R&D tax credit on lower income before income taxes.2023.
Liquidity and Capital Resources
As of September 30, 2023,March 31, 2024, we had a $75.0$25.0 million revolving credit facility with a money centermoney-center bank pursuant to which the lender is obligated to make advances until February 28, 2024.December 21, 2026. The credit facility is secured by substantially all of our inventories, equipment, and accounts receivable. Interest under the credit facility is assessed at 30-day, 60-day, or 90-day Adjusted Term SOFR, as selected by us, plus 1.0 percent, and is payable monthly. We had no outstanding borrowings under the credit facility at September 30, 2023 of $4.5 million,March 31, 2024, and we were in compliance with all financial covenants.
At September 30, 2023,March 31, 2024, we had a total of $14.0$18.7 million in cash and cash equivalents, short-term investments, and long-term investments. At December 31, 2022,2023, cash and cash equivalents, short-term investments, and long-term investments totaled $34.6$14.4 million.
Cash flows from operating activities of $9.1$11.5 million for the ninethree months ended September 30, 2023March 31, 2024 were primarily comprised of net income plus the net effect of non-cash expenses, a decrease in inventory, and an increase in inventory and prepaid expenses.accounts receivable. During the first ninethree months of 2023,2024, we used $19.8$3.8 million to pay dividends, $3.6 million to purchase investments, and $3.2 million for the addition of property and equipment, $11.4 million for dividends, and $5.6 million for the purchase of investments.equipment. During the same period, our maturities and sales of investments generated $20.8$2.7 million in cash, and our cash borrowings under our credit facility at September 30, 2023 were $4.5 million.cash. For the ninethree months ended September 30, 2022,March 31, 2023, cash flows from operating activities of $28.9$4.3 million were primarily comprised of net income plus the net effect of non-cash expenses, and an increase in inventory.inventory, and a decrease in accounts receivable. During the first ninethree months of 2022,2023, we used $25.5 million for the purchase of investments, $25.3$7.5 million for the addition of property and equipment, $10.8$4.2 million for the purchase of investments, $3.8 million for dividends, and $14.4 million$613 thousand for the purchase of treasury stock. During the same period, maturities and sales of investments generated $42.7$11.6 million in cash.
At September 30, 2023,March 31, 2024, we had working capital of $100.5$100.3 million, including $658 thousand$7.1 million in cash and cash equivalents and $3.8$2.8 million in short-term investments, compared to working capital of $101.3$102.1 million at December 31, 2022.2023. The $822 thousand$1.8 million decrease in working capital during the first ninethree months of 20232024 was primarily related to a decrease in cashinventory and short-term investments,prepaid expenses, partially offset by an increase in inventorycash and prepaid expenses.cash equivalents and accounts receivable.
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We believe that our $14.0$18.7 million in cash, cash equivalents, short-term investments, and long-term investments, along with cash flows from operations and available borrowings of up to $70.5$25.0 million under our credit facility, will be sufficient to fund our cash requirements for at least the foreseeable future. We believe that our strong financial position would allow us to access equity or debt financing should that be necessary.
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 have been taken to date, the disease may pose future risks with the emergence of new variants. We will continue to monitor COVID-19 as well as resulting legislative and regulatory changes to manage our response and assess and seek to mitigate potential adverse impacts on our business. For additional discussion regarding COVID-19 and our related risks, see Part I, Item 1A, “Risk Factors” included in our 20222023 Form 10-K.
Forward-Looking Statements
Statements in this Management’s Discussion and Analysis and elsewhere in this Quarterly Report on Form 10-Q that are forward-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 plans to hold certain investments for longer than 12 months, our belief that the impact of standards recently issued by the Financial Accounting Standards Board, or other standard-setting bodies, that are not yet effective, will not have a material impact on our consolidated financial statements upon adoption, and our ability to fund our cash requirements for the foreseeable future with our current assets, long-term investments, cash flow, and borrowings under our credit facility, and our access to equity and debt financing. Implementing control and procedure improvements will address the material weakness described below. 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. The forward-looking statements in this Quarterly Report on Form 10-Q are made as of the date hereof, and we do not undertake any obligation, and disclaim any duty, to supplement, update or revise such statements, whether as a result of subsequent events, changed expectations or otherwise, except as required by applicable law.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For the quarter ended September 30, 2023,March 31, 2024, we did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in our 20222023 Form 10-K.
Item 4. Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2023.March 31, 2024. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.not effective due to the material weakness described in our 2023 Form 10-K. There were no changes in our internal control over financial reporting for the quarter ended September 30, 2023March 31, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. However, as reported in our 2023 Form 10-K, we are planning, initiating, and implementing control and procedure improvements and anticipate that these improvements will address the material weakness.
PART II - OTHER INFORMATION
Item 1.Legal Proceedings.
We 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 20222023 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 in open market or privately-negotiated transactions. Our stock repurchase program has no expiration date but may be terminated by our Board of Directors at any time. No repurchases of our stock were made during the three months ended September 30, 2023.March 31, 2024. As of September 30, 2023,March 31, 2024, we had repurchased 121,247 shares of our common stock authorized under the program and the number of shares still available for repurchase under the program was 128,753.
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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 |
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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: | By: | /s/ David A. Battat | |||
David A. Battat | |||||
President and | |||||
Chief Executive Officer | |||||
Date: May 10, 2024 | By: | /s/ Cindy Ferguson |
| ||
| Cindy Ferguson |
| |||
| Vice President and |
| |||
| Chief Financial Officer |
| |||
| (Principal Accounting and Financial Officer) |
| |||