Atrion (ATRI) 10-Q 8 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 20, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	ATRION CORP
Entity Central Index Key	701,288
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		1,851,842
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,017

Consolidated Statements of Inco

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
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
Operating Expenses, Total	6,926	6,648	21,749	20,889
Operating income	11,479	10,976	32,981	31,515
Interest income	287	106	806	315
Other income (expense), net	0	1	1	(309)
Nonoperating Income	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

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Consolidated Statements Of Comprehensive Income
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

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
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
Total Current Assets	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
Property plant and equipment net	66,518	65,265
Other assets and deferred charges:
Patents	1,808	1,929
Goodwill	9,730	9,730
Other	1,494	1,609
Prepaid Expense and Other Assets, Noncurrent, Total	13,032	13,268
Total assets	202,126	181,942
Current liabilities:
Accounts payable and accrued liabilities	10,382	8,663
Accrued income and other taxes	2,312	410
Total Current Liabilities	12,694	9,073
Line of credit	0	0
Other non-current liabilities	10,981	9,881
Stockholders' equity:
Common stock, par value $0.10 per share; authorized 10,000 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

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.10	$ 0.10
Common stock, authorized	10,000	10,000
Common stock, issued	3,420	3,420
Treasury shares, shares	1,584	1,596

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities:
Net income	$ 27,947	$ 22,010
Adjustments to reconcile net income to net 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	0	345
Net change in accrued interest, premiums, and discounts on investments	(167)	(5)
Other	(2)	0
Total adjustments	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
Net Cash Provided by (Used in) Operating Activities, Continuing Operations, Total	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	0	210
Proceeds from maturities of investments	32,000	5,000
Net Cash Provided by (Used in) Investing Activities, Continuing Operations, Total	(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	0	(1,276)
Dividends paid	(6,095)	(5,196)
Net Cash Provided by (Used in) Financing Activities, Continuing Operations, Total	(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	$ 0

Consolidated Statements of Shar

Consolidated Statements of Shareholders' Equity - 9 months ended Sep. 30, 2017 - USD ($) $ in Thousands	Common Stock	Treasury Stock	Additional Paid-In Capital	Other Comprehensive Income (Loss)	Retained Earnings	Total
Beginning Balance, shares at Dec. 31, 2016	1,824	1,596
Beginning Balance, amount at Dec. 31, 2016	$ 342	$ (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, shares	46	(46)
Stock-based compensation transactions, amount			583	10,912		11,495
Shares surrendered in stock transactions	$ (34)	$ 34
Shares surrendered in stock transactions, amount			(17,972)			(17,972)
Dividends					(6,116)	(6,116)
Ending Balance, Shares at Sep. 30, 2017	1,836	1,584
Ending Balance, Amount at Sep. 30, 2017	$ 342	$ (131,663)	$ 48,360	$ (365)	$ 261,777	$ 178,451

1. Basis of Presentation

1. Basis of Presentation	9 Months Ended
	Sep. 30, 2017
Accounting Policies [Abstract]
Basis of Presentation	The accompanying unaudited consolidated financial statements of Atrion Corporation and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States 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 States 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 States requires management to make estimates and assumptions that affect the reported amounts in the financial statements and notes. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2016 ("2016 Form 10-K/A"). References herein to "Atrion," the "Company," "we," "our," and "us" refer to Atrion Corporation and its subsidiaries.

2. Inventories

2. Inventories	9 Months Ended
	Sep. 30, 2017
Inventory Disclosure [Abstract]
Inventories	Inventories are stated at the lower of cost or market. 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

3. Income per share

3. Income per share	9 Months Ended
	Sep. 30, 2017
Earnings Per Share [Abstract]
Income per share	The following is the computation for basic and diluted income per share: Three Months Ended September 30, Nine Months Ended 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 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. Dilutive securities representing 447

4. Investments

4. Investments	9 Months Ended
	Sep. 30, 2017
Investments Schedule [Abstract]
Investments	As of September 30, 2017, we held investments in certificates of deposit, commercial paper, corporate bonds and equity securities that are required to be measured for disclosure purposes at fair value on a recurring basis. 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. The equity securities are considered available for sale and recorded at fair value in the accompanying consolidated balance sheet with the unrealized gains and losses recorded as a component of other comprehensive income. These investments are considered Level 2 investments. 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 securities we intend to hold longer than 12 months. The fair values of these Level 2 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 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 The above long-term corporate bonds represent an investment in one issuer at September 30, 2017. The unrealized loss for this investment relates to a rise in interest rates which resulted in a lower market price for that security. This investment has not been in a loss position for more than 12 months. The certificates of deposit have maturities from greater than two weeks to less than eight months. The commercial paper securities have maturities from two days to less than eleven months. The corporate bonds will mature in 44.5 months.

5. Patents and Licenses

5. Patents and Licenses	9 Months Ended
	Sep. 30, 2017
Patents And Licenses
Patents and Licenses	Purchased 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 Aggregate amortization expense for patents and licenses was $30,000 and $63,000 for the three months ended September 30, 2017 and 2016, respectively, and $121,000 and $188,000 for the nine months ended September 30, 2017 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

6. Recent Accounting Pronouncem

6. Recent Accounting Pronouncements	9 Months Ended
	Sep. 30, 2017
Accounting Changes and Error Corrections [Abstract]
6. Recent Accounting Pronouncements	In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ● We established a cross-functional project management implementation team to assess all potential impacts of this standard. This team identified significant contracts and relationships and assessed the impact of the new standard on those contracts. ● We evaluated the contract provisions and performed a comparison of historical accounting policies and practices to the requirements of the new standard (including the related qualitative disclosures regarding the potential impact of the effects of the accounting policies we expect to apply), and a comparison to our current revenue recognition policies is in process. ● We are currently reviewing our current accounting policies and practices to identify potential differences that would result from the application of this standard. ● We are determining key factors from the five step process to recognize revenue as prescribed by the new standard that may be applicable to our business. We expect to complete this process prior to the filing of, and make disclosures in, our Form 10-K for the fiscal year ended December 31, 2017. Based on our evaluation, we determined no significant changes are required to our business processes, systems and controls to effectively report revenue recognition under the new standard. Adoption of the new standard is not expected to materially change the timing or amount of revenue recognized in our Consolidated Financial Statements. From time to time, new accounting standards updates applicable to us are issued by the FASB which we will adopt 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.

2. Inventories (Tables)

2. Inventories (Tables)	9 Months Ended
	Sep. 30, 2017
Inventory Disclosure [Abstract]
Inventories	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

3. Income per share (Tables)

3. Income per share (Tables)	9 Months Ended
	Sep. 30, 2017
Earnings Per Share [Abstract]
Computation for Basic and Diluted Income Per Share	Three Months Ended September 30, Nine Months Ended 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

4. Investments (Tables)

4. Investments (Tables)	9 Months Ended
	Sep. 30, 2017
Investments Schedule [Abstract]
Investments, Held-to-Maturity Securities	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

5. Patents and Licenses (Tables

5. Patents and Licenses (Tables)	9 Months Ended
	Sep. 30, 2017
Patents And Licenses Tables
Patents and Licenses	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
Future Amortization Expense	2018 $ 119 2019 $ 119 2020 $ 119 2021 $ 119 2022 $ 117

2. Inventories (Details)

2. Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
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

3. Income Per Share (Details)

3. Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
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

3. Income per share (Details Na

3. Income per share (Details Narrative) - shares	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
Shares Excluded from Computation of Weighted average diluted Shares outstanding	447	41

4. Investments (Details)

4. Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Certificates of Deposits [Member] | Short Term Investments [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost	$ 9,096	$ 24,000
Gross Unrealized Gains	0	9
Gross Unrealized Losses	(1)	0
Fair Value	9,095	24,009
Commercial Paper [Member] | Short Term Investments [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost	29,833
Gross Unrealized Gains	62
Gross Unrealized Losses	(4)
Fair Value	29,891
Corporate Bond Securities [Member] | Short Term Investments [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost	30	80
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	30	80
Corporate Bond Securities [Member] | Long Term Investments [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost	5,000	5,000
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(36)	(287)
Fair Value	4,964	4,713
Equity Investments [Member] | Long Term Investments [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost	5,675	5,675
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(563)	(730)
Fair Value	$ 5,112	$ 4,945

4. Investments (Details Narrati

4. Investments (Details Narrative)	9 Months Ended
	Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]
Securities maturity length	44.5 months

5. Patents and Licenses (Detail

5. Patents and Licenses (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Patents And Licenses Details
Weighted Average Original Life (years)	15 years 8 months 1 day	15 years 8 months 1 day
Gross Carrying Amount	$ 13,840	$ 13,840
Accumulated Amortization	$ 12,032	$ 11,911

5. Patents and Licenses (Deta24

5. Patents and Licenses (Details 1) $ in Thousands	Sep. 30, 2017USD ($)
Patents And Licenses Details 1
2,018	$ 119
2,019	119
2,020	119
2,021	119
2,022	$ 117

5. Patents and Licenses (Deta25

5. Patents and Licenses (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Patents And Licenses Details Narrative
Amortization expense for patents and licenses	$ 30	$ 63	$ 121	$ 188