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 Period Ended June 30, 2001 Commission File Number 0-10763
Atrion Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 63-0821819
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One Allentown Parkway, Allen, Texas 75002
(Address of Principal Executive Offices) (Zip Code)
(972) 390-9800
(Registrant's Telephone Number, Including Area Code)
Indicate by check 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 |X| NO |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding at
Title of Each Class August 3, 2001
Common stock, Par Value $0.10 per share 2,046,900
ATRION CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. Financial Information 2
Item 1. Financial Statements
Consolidated Statements of Income (Unaudited)
For the Three Months and Six Months Ended
June 30, 2001 and 2000 3
Consolidated Balance Sheets
June 30, 2001 (Unaudited) and December 31, 2000 4-5
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended
June 30, 2001 and 2000 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. Other Information 12
Item 4. Submission of Matters to a Vote
of Security Holders 12
Item 6. Exhibits and Reports on
Form 8-K 13
SIGNATURES 14
PART I
FINANCIAL INFORMATION
2
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
2001 2000 2001 2000
(In thousands, except per (In thousands, except per
share data) share data)
-------- -------- -------- --------
Revenues $ 14,776 $ 13,042 $ 29,579 $ 26,027
Cost of goods sold 9,156 7,903 18,286 15,907
-------- -------- -------- --------
Gross profit 5,620 5,139 11,293 10,120
-------- -------- -------- --------
Operating expenses:
Selling expense 1,706 1,901 3,484 3,833
General and administrative 1,923 1,696 3,887 3,339
Research and development 478 498 996 1,040
-------- -------- -------- --------
4,107 4,095 8,367 8,212
-------- -------- -------- --------
Operating income 1,513 1,044 2,926 1,908
-------- -------- -------- --------
Other income (expense):
Interest expense, net (76) (185) (192) (323)
Other income (expense) 430 (15) 432 (12)
-------- -------- -------- --------
(354) (200) (240) (335)
-------- -------- -------- --------
Income from continuing operations before
provision for income taxes 1,867 844 3,166 1,573
Provision for income taxes 599 205 994 402
-------- -------- -------- --------
Income from continuing operations 1,268 639 2,172 1,171
Gain on disposal of discontinued operations,
net of income taxes 165 99 165 99
-------- -------- -------- --------
Net income $ 1,433 $ 738 $ 2,337 $ 1,270
======== ======== ======== ========
Earnings per basic share:
Continuing operations $ 0.63 $ 0.31 $ 1.08 $ 0.57
Gain on disposal of discontinued operations 0.08 0.05 0.08 0.05
-------- -------- -------- --------
$ 0.71 $ 0.36 $ 1.16 $ 0.62
======== ======== ======== ========
Weighted average basic shares outstanding 2,023 2,044 2,009 2,072
======== ======== ======== ========
Earnings per diluted share:
Continuing operations $ 0.56 $ 0.30 $ 0.97 $ 0.53
Gain on disposal of discontinued operations 0.07 0.05 0.07 0.05
-------- -------- -------- --------
$ 0.63 $ 0.35 $ 1.04 $ 0.58
======== ======== ======== ========
Weighted average diluted shares outstanding 2,277 2,134 2,239 2,194
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
3
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2001 2000
Assets (unaudited)
- ------ ----------- ------------
Current assets: (In thousands)
Cash and cash equivalents $ 140 $ 159
Accounts receivable 9,927 7,175
Inventories 11,015 10,110
Prepaid expenses and other 748 752
------- -------
21,830 18,196
------- -------
Property, plant and equipment:
Original cost 38,401 37,295
Less accumulated depreciation and amortization 13,042 11,225
------- -------
25,359 26,070
------- -------
Deferred charges:
Patents 2,860 3,012
Goodwill 12,502 12,803
Other 3,497 3,609
------- -------
18,859 19,424
------- -------
$66,048 $63,690
======= =======
(Continued)
The accompanying notes are an integral part of these Consolidated Balance
Sheets.
4
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2001 2000
Liabilities and Stockholders' Equity (unaudited)
- ------------------------------------ ----------- -----------
(In thousands)
Current liabilities:
Accounts payable and accrued liabilities $ 5,607 $ 4,518
Accrued income and other taxes 558 187
-------- --------
6,165 4,705
-------- --------
Long-term debt 5,520 7,400
-------- --------
Other noncurrent liabilities 7,853 7,571
-------- --------
Stockholders' equity:
Common shares, par value $0.10 per share; authorized
10,000,000 shares, issued 3,419,953 shares in
2001 and 2000 342 342
Paid-in capital 6,457 6,419
Retained earnings 54,244 51,906
Treasury shares,1,381,053 in 2001 and 1,427,660
in 2000, at cost (14,533) (14,653)
-------- --------
Total stockholders' equity 46,510 44,014
-------- --------
$ 66,048 $ 63,690
======== ========
The accompanying notes are an integral part of these Consolidated Balance
Sheets.
5
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
------------------
2001 2000
------- -------
(in thousands)
Cash flows from operating activities:
Net income $ 2,337 $ 1,270
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on disposal of discontinued operations (165) (99)
Depreciation and amortization 2,271 1,993
Deferred income taxes 61 (432)
Other (94) 56
------- -------
4,410 2,788
Change in current assets and liabilities:
(Increase) in accounts receivable (2,752) (162)
(Increase) in other current assets (901) (1,221)
Increase in accounts payable 1,207 661
Increase in other current liabilities 253 467
------- -------
Net cash provided by continuing operations 2,217 2,533
Net cash provided by discontinued operations 165 99
------- -------
2,382 2,632
------- -------
Cash flows from investing activities:
Property, plant and equipment additions (1,283) (1,457)
Property, plant and equipment sales 176 --
Patent sale 428 --
------- -------
(679) (1,457)
------- -------
Cash flows from financing activities:
Decrease in long-term indebtedness (1,880) (370)
Issuance of common stock 256 23
Repurchase of common stock (98) (808)
------- -------
(1,722) (1,155)
------- -------
Net change in cash and cash equivalents (19) 20
Cash and cash equivalents at beginning of period 159 70
------- -------
Cash and cash equivalents at end of period $ 140 $ 90
======= =======
Cash paid for:
Interest $ 252 $ 374
Income taxes (net of refunds) $ 694 $ 162
The accompanying notes are an integral part of these consolidated statements.
6
ATRION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
In the opinion of management, all adjustments necessary for a fair
presentation of results of operations for the periods presented have been
included in the accompanying unaudited consolidated financial statements of
Atrion Corporation (the "Company"). Such adjustments consist of normal
recurring items. The accompanying financial statements have been prepared
in accordance with the instructions to Form 10-Q and include the
information and notes required by such instructions. Accordingly, the
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes included in the
Company's 2000 Annual Report on Form 10-K.
(2) New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" (effective July 1, 2001) and SFAS No. 142,
"Goodwill and Other Intangible Assets" (effective for the Company on
January 1, 2002). SFAS No. 141 prohibits pooling-of-interests accounting
for acquisitions. SFAS No. 142 specifies that goodwill and some intangible
assets will no longer be amortized but instead will be subject to periodic
impairment testing. The Company is in the process of evaluating the
financial statement impact of adoption of SFAS No. 142.
7
ATRION CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results for the three months ended June 30, 2001
The Company's consolidated net income for the quarter ended June 30, 2001
was $1,433,000, or $.71 per basic and $.63 per diluted share, compared with
$738,000, or $.36 per basic and $.35 per diluted share, for the second
quarter of 2000. The earnings per basic share computations are based on
weighted average basic shares outstanding of 2,022,515 in 2001 and
2,043,780 in 2000. The earnings per diluted share computations are based on
weighted average diluted shares outstanding of 2,276,570 in 2001 and
2,133,642 in 2000.
Consolidated revenues of $14.8 million for the second quarter of 2001 were
$1.7 million, or 13 percent, higher than revenues for the second quarter of
2000. Gross profit of $5.6 million in the second quarter of 2001 was
$481,000, or 9 percent, higher than in the comparable 2000 period.
The Company's second quarter 2001 operating expenses of $4.1 million were
$12,000 higher than the operating expenses for the second quarter of 2000.
This increase was the result of increased general and administrative (G&A)
expenses offset by reductions in selling expenses and research and
development (R&D) expenses in the current three-month period. G&A expenses
for the second quarter of 2001 were $227,000 higher than G&A expenses for
the same period in 2000 primarily as a result of increased spending on
compensation and benefit programs. Selling expenses for the second quarter
of 2001 were $195,000 lower than selling expenses for the second quarter of
2000 due to a partial reorganization of the sales team to optimize sales.
Operating income of $1.5 million in the second quarter of 2001 was
$469,000, or 45 percent, higher than the operating income in the second
quarter of 2000.
Net interest expense of $76,000 for the three months ended June 30, 2001
was $109,000 lower than net interest expense for the comparable 2000
period. This reduction was primarily related to the Company's reduction of
its level of borrowings. Other income for the second quarter of 2001 was
$430,000 compared to other expense of $15,000 for the same period in the
prior year. This increase is primarily attributable to the Company's
one-time gain of $428,000 on the sale of a patent in the second quarter of
2001.
Income tax expense for the second quarter of 2001 was $599,000 compared to
income tax expense of $205,000 for the same period in the prior year
reflecting the increased operating income level in the second quarter of
2001 and the one-time gain on the sale of a patent.
The Company recorded a gain on the disposal of discontinued operations
relating to the sale of its natural gas operations of $165,000 after tax,
or $.08 per basic and $.07 per diluted share, for the second quarter of
2001 compared with a gain of $99,000 after tax, or $.05 per basic and
diluted share, for the second quarter of 2000.
8
The second quarter of 2001 was the ninth consecutive quarter in which the
Company's earnings per share from continuing operations exceeded those of
the same period in the prior year. The Company anticipates that this trend
will continue for the remainder of 2001 and that diluted earnings per share
from continuing operations will comfortably exceed the 2000 level by more
than 25%.
Results for the six months ended June 30, 2001
The Company's consolidated net income for the six months ended June 30,
2001 was $2,337,000, or $1.16 per basic and $1.04 per diluted share,
compared with $1,270,000, or $.62 per basic and $.58 per diluted share, for
the same period of 2000. The earnings per basic share computations are
based on weighted average basic shares outstanding of 2,008,883 in 2001 and
2,071,527 in 2000. The earnings per diluted share computations are based on
weighted average diluted shares outstanding of 2,238,622 in 2001 and
2,194,493 in 2000.
Consolidated revenues of $29.6 million for the first six months of 2001
were $3.6 million, or 14 percent, higher than revenues for the same period
of 2000. The increase in revenues for the six-months ended June 30, 2000
was a result of improved revenues at all operations.
Gross profit of $11.3 million for the six-months ended June 30, 2001 was
$1.2 million, or 12 percent, higher than in the comparable 2000 period. The
previously mentioned increase in revenues was the primary contributor to
this increase.
The Company's operating expenses of $8.4 million for the first six months
of 2001 were $155,000 higher than the operating expenses for the same
period of 2000. This increase was the result of increased G&A expenses
offset by reductions in selling expenses and R&D expenses in the current
six-month period. G&A expenses for the first six months of 2001 were
$548,000 higher than G&A expenses for the same period in 2000 primarily as
a result of increased spending on outside services, compensation and
benefit programs. Selling expenses for the six-months ended June 30, 2001
were $349,000 lower than selling expenses for the comparable period of 2000
due to a partial reorganization of the sales team to optimize sales.
Operating income of $2.9 million in the first six months of 2001 was $1.0
million, or 53 percent, higher than the operating income in the comparable
period of 2000.
Net interest expense of $192,000 for the six months ended June 30, 2001 was
$131,000 lower than net interest expense for the comparable 2000 period.
This reduction was primarily related to the Company's reduction of its
level of borrowings. Other income for the six-month period ended June 30,
2001 was $432,000 compared to other expense of $12,000 for the same period
in the prior year. This increase is primarily attributable to the Company's
one-time gain on the sale of a patent in the second quarter of 2001.
9
Income tax expense for the six-month period ended June 30, 2001 was
$994,000 compared to income tax expense of $402,000 for the same period in
the prior year reflecting the increased operating income level for the
first six months of 2001 and the one-time gain on the sale of a patent in
2001.
As discussed above, the Company recorded a gain on the disposal of
discontinued operations relating to the sale of its natural gas operations
of $165,000 after tax, or $.08 per basic and $.07 per diluted share, for
the six months ended June 30, 2001 compared with a gain of $99,000 after
tax, or $.05 per basic and diluted share, for the six months ended June 30,
2000.
Liquidity and Capital Resources
At June 30, 2001, the Company had cash and cash equivalents of $140,000
compared with $159,000 at December 31, 2000. The Company had $5.5 million
of long-tem debt borrowed under its $18.5 million revolving credit facility
at June 30, 2001 compared with $7.4 million of long-term debt at December
31, 2000. This decrease in long-term debt from December 31, 2000 to June
30, 2001 was attributable the Company's use of cash flow from continuing
operations to reduce its borrowing level.
The Company believes that its existing cash and cash equivalents, cash
flows from operations, borrowings available under the Company's credit
facility and debt financing, which the Company believes would be available,
will be sufficient to fund the Company's cash requirements for at least the
foreseeable future.
Forward-Looking Statements
The statements in this Management's Discussion and Analysis that are
forward-looking are based upon current expectations, and actual results may
differ materially. Therefore, the inclusion of such forward-looking
information should not be regarded as a representation by the Company that
the objectives or plans of the Company would be achieved. Such statements
include, but are not limited to, the Company's expectations regarding the
trend in earnings per share from continuing operations for the remainder of
2001 and regarding diluted earnings per share from continuing operations
for the year 2001, as well as future liquidity and capital resources. Words
such as "anticipates," "believes," "expects," "estimated" 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 to differ materially including, but not
limited to, the following: changing economic, market and business
conditions, market acceptance of the Company's products, the effects of
governmental regulation, the impact of competition and new technologies,
slower-than-anticipated introduction of new products or implementation of
marketing strategies, changes in the prices or availability of raw
materials, changes in product mix, product recalls, the ability to attract
and retain qualified personnel and the loss of any significant customer. In
addition, assumptions relating to budgeting, marketing,
10
product development and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic review which
may cause the Company to alter its marketing, capital expenditures or other
budgets, which in turn may affect the Company's results of operations and
financial condition.
11
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 2001 Annual Meeting of Stockholders on May
15,2001 at its offices in Allen, Texas. At such meeting, the Company's
stockholders ratified the Board of Director's appointment of Arthur
Andersen LLP as independent accountants with 1,709,263 shares voted
for ratification, 12,946 voted against and 3,185 abstentions. The
voting with respect to the nominees for election as directors was as
follows:
Nominee Votes For Votes Withheld
------- --------- --------------
John P. Stupp, Jr. 1,698,077 27,317
Roger F. Stebbing 1,698,077 27,317
The terms of the following directors continued after the meeting:
Richard O. Jacobson, Jerome J. McGrath, Hugh J. Morgan, Jr., Emile A.
Battat and John H. P. Maley.
ITEM 5. OTHER INFORMATION
None
12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) No reports on Form 8-K have been filed during the quarter ended
June 30, 2001.
13
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: August 13, 2001 /s/ Emile A. Battat
-----------------------------
Emile A. Battat
Chairman, President and
Chief Executive Officer
Date: August 13, 2001 /s/ Jeffery Strickland
-----------------------------
Jeffery Strickland
Vice President and
Chief Financial Officer
14