Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Principles of Consolidation | ' |
Principles of Consolidation |
The consolidated financial statements include the accounts of Atrion Corporation and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. |
Estimates | ' |
Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
Cash equivalents include cash on hand and in the bank as well as money market accounts and debt securities with original maturities of 90 days or less. |
Trade Receivables | ' |
Trade Receivables |
Trade accounts receivable are recorded at the original sales price to the customer. We maintain an allowance for doubtful accounts to reflect estimated losses resulting from the failure of customers to make required payments. On an ongoing basis, the collectability of accounts receivable is assessed based upon historical collection trends, current economic factors and the assessment of the collectability of specific accounts. We evaluate the collectability of specific accounts and determine when to grant credit to our customers using a combination of factors, including the age of the outstanding balances, evaluation of customers’ current and past financial condition, recent payment history, current economic environment, and discussions with appropriate Company personnel and with the customers directly. Accounts are written off when we determine the receivable will not be collected. |
Investments | ' |
Investments |
Our investments consist of taxable corporate bonds. Our investment policy is to seek to preserve principal and maintain adequate liquidity while at the same time maximizing yields without significantly increasing risk. We are required to classify our investments as trading, available-for-sale or held-to-maturity. Our investments are accounted for as held-to-maturity since we have the positive intent and ability to hold these investments to maturity. These investments are reported at cost, adjusted for premiums and discounts that are recognized in interest income, using a method that approximates the effective interest method, over the period to maturity and unrealized gains and losses are excluded from earnings. We consider as current assets those investments which will mature in the next 12 months. The remaining investments are considered non-current assets. |
Inventories | ' |
Inventories |
Inventories are stated at the lower of cost (including materials, direct labor and applicable overhead) or market. Cost is determined by using the first-in, first-out method. The following table details the major components of inventory (in thousands): |
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| | December 31, | | | | | |
| | 2013 | | | 2012 | | | | | |
Raw materials | | $ | 10,744 | | | $ | 10,017 | | | | | |
Work in process | | | 6,246 | | | | 5,268 | | | | | |
Finished goods | | | 9,276 | | | | 8,494 | | | | | |
Total inventories | | $ | 26,266 | | | $ | 23,779 | | | | | |
Accounts Payable | ' |
Accounts Payable |
We reflect disbursements as trade accounts payable until such time as payments are presented to our bank for payment. At December 31, 2013 and 2012, disbursements totaling approximately $443,000 and $495,000, respectively, had not been presented for payment to our bank. |
Income Taxes | ' |
Income Taxes |
We account for income taxes utilizing Accounting Standards Codification (ASC) 740, Income Taxes (“ASC 740”). ASC 740 requires the asset and liability method for the recording of deferred income taxes, whereby deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the financial statement and the tax bases of assets and liabilities, as measured at current enacted tax rates. When appropriate, we evaluate the need for a valuation allowance to reduce deferred tax assets. |
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ASC 740 also requires the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attributes of income tax positions taken or expected to be taken on a tax return. Under ASC 740, the impact of an uncertain tax position taken or expected to be taken on an income tax return must be recognized in the financial statements at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more-likely-than-not of being sustained. |
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Our uncertain tax positions are recorded as “Other non-current liabilities.” We classify interest expense on underpayments of income taxes and accrued penalties related to unrecognized tax benefits in the income tax provision. |
Property Plant and Equipment | ' |
Property, Plant and Equipment |
Property, plant and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. Additions and improvements are capitalized, including all material, labor and engineering costs to design, install or improve the asset. Expenditures for repairs and maintenance are charged to expense as incurred. The following table represents a summary of property, plant and equipment at original cost (in thousands): |
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| | December 31, | | | Useful | |
| | 2013 | | | 2012 | | | Lives | |
Land | | $ | 5,260 | | | $ | 5,260 | | | — | |
Buildings | | | 31,314 | | | | 30,664 | | | 30-40 yrs | |
Machinery and equipment | | | 93,930 | | | | 88,256 | | | 3-15 yrs | |
Total property, plant and equipment | | $ | 130,504 | | | $ | 124,180 | | | | | |
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Depreciation expense of $8,413,000, $7,448,000 and $6,272,000 was recorded for the years ended December 31, 2013, 2012 and 2011, respectively. Depreciation expense is recorded in either cost of goods sold or operating expenses based on the associated assets’ usage. |
Patents and Licenses | ' |
Patents and Licenses |
Costs for patents and licenses acquired are determined at acquisition date. Patents and licenses are amortized over the useful lives of the individual patents and licenses, which are from 7 to 20 years. Patents and licenses are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. |
Goodwill | ' |
Goodwill |
Goodwill represents the excess of cost over the fair value of tangible and identifiable intangible net assets acquired. Annual impairment testing for goodwill is done using a qualitative assessment on goodwill impairment to determine whether it is necessary to perform the two-step goodwill impairment test. Goodwill is also reviewed whenever events or changes in circumstances indicate a change in value may have occurred. We have identified three reporting units where goodwill was recorded for purposes of testing goodwill impairment annually: (1) Atrion Medical Products, Inc., (2) Halkey-Roberts Corporation and (3) Quest Medical, Inc. The total carrying amount of goodwill in each of the years ended December 31, 2013, 2012 and 2011 was $9,730,000. Our evaluation of goodwill during the year resulted in no impairment losses. |
Current Accrued Liabilities | ' |
Current Accrued Liabilities |
The items comprising current accrued liabilities are as follows (in thousands): |
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| | December 31, | | | | | |
| | 2013 | | | 2012 | | | | | |
Accrued payroll and related expenses | | $ | 3,711 | | | $ | 2,276 | | | | | |
Accrued vacation | | | 229 | | | | 210 | | | | | |
Other accrued liabilities | | | 483 | | | | 414 | | | | | |
Total accrued liabilities | | $ | 4,423 | | | $ | 2,900 | | | | | |
Revenues | ' |
Revenues |
We recognize revenue when our products are shipped to our customers, provided an arrangement exists, the fee is fixed and determinable and collectability is reasonably assured. All risks and rewards of ownership pass to the customer upon shipment. Net sales represent gross sales invoiced to customers, less certain related charges, including discounts, returns and other allowances. Revenues are recorded exclusive of sales and similar taxes. Returns, discounts and other allowances have been insignificant historically. |
Shipping and Handling Policy | ' |
Shipping and Handling Policy |
Shipping and handling fees charged to customers are reported as revenue and all shipping and handling costs incurred related to products sold are reported as cost of goods sold. |
Research and Development Costs | ' |
Research and Development Costs |
Research and development costs relating to the development of new products and improvements of existing products are expensed as incurred. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
We have stock-based compensation plans covering certain of our officers, directors and key employees. As explained in detail in Note 8, we account for stock-based compensation utilizing the fair value recognition provisions of ASC 718, Compensation-Stock Compensation, (“ASC 718”). |
New Accounting Pronouncements | ' |
New Accounting Pronouncements |
From time to time, new accounting pronouncements applicable to us are issued by the Financial Accounting Standards Board (“FASB”) or other standards setting bodies, which we will adopt 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. |
Fair Value Measurements | ' |
Fair Value Measurements |
Accounting standards use a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. These tiers are: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists therefore requiring an entity to develop its own assumptions. |
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As of December 31, 2013 and 2012, we held certain investments that were required to be measured for disclosure purposes at fair value on a recurring basis. These investments are considered Level 2 assets. The fair value of our investments is estimated using recently executed transactions and market price quotations. At December 31, 2013 and 2012, the fair value of our investments approximated or exceeded the carrying value of the investments (see Note 2). |
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The carrying values of our other financial instruments including cash and cash equivalents, money market accounts, accounts receivable, accounts payable, accrued liabilities, and accrued income and other taxes approximated fair value due to their liquid and short-term nature. |
Concentration of Credit Risk | ' |
Concentration of Credit Risk |
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, investments and accounts receivable. |
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Our cash is held in high credit quality financial institutions. As of December 31, 2013, we had $28.6 million in cash and cash equivalents invested as follows: $2.6 million invested in money market mutual funds and $26.0 million held in depository accounts. From time to time, deposits held with financial institutions exceed the amount of Federal Deposit Insurance Corporation, or FDIC, insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk. At December 31, 2013, our uninsured cash and cash equivalents totaled approximately $27.0 million. |
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For accounts receivable, we perform ongoing credit evaluations of our customers’ financial condition and generally do not require collateral. We maintain reserves for possible credit losses. As of December 31, 2013 and 2012, we had allowances for doubtful accounts of approximately $86,000 and $47,000, respectively. The carrying amount of the receivables approximates their fair value. Our customer that generates our largest revenues accounted for 8.2%, 16.3% and 6.7% of accounts receivable as of December 31, 2013, 2012 and 2011, respectively. No other customer exceeded 10% of our accounts receivable as of December 31, 2013, 2012 or 2011. |