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 MARCH 31, 2000 COMMISSION FILE NUMBER 0-10763
ATRION CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 63-0821819
- ------------------------------ -------------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
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 [X] 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 MAY 5, 2000
- ------------------------------------------- ---------------------------------
COMMON STOCK, PAR VALUE $0.10 PER SHARE 2,035,593
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 Ended
March 31, 2000 and 1999 3
Consolidated Balance Sheets (Unaudited)
March 31, 2000 and December 31, 1999 4-5
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended
March 31, 2000 and 1999 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 10
ITEM 6. Exhibits and Reports on
Form 8-K 10
SIGNATURES 11
EXHIBIT INDEX 12
1
PART I
FINANCIAL INFORMATION
2
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
------------------------
2000 1999
------------------------
(In thousands, except per share data)
Revenues $ 12,985 $ 11,580
Cost of goods sold 8,005 6,956
--------- ---------
Gross profit 4,980 4,624
--------- ---------
Operating expenses:
Selling expense 1,932 1,666
General and administrative 1,642 1,652
Research and development 542 700
--------- ---------
4,116 4,018
--------- ---------
Operating income 864 606
--------- ---------
Other income:
Interest (expense) income, net (138) 6
Other income 3 11
--------- ---------
(135) 17
--------- ---------
Income before provision for income taxes 729 623
Provision for income taxes 197 229
--------- ---------
Net income $ 532 $ 394
========= =========
Earnings per basic share $ 0.25 $ 0.13
========= =========
Weighted average basic shares
outstanding 2,099 2,920
========= =========
Earnings per diluted share $ 0.24 $ 0.13
========= =========
Weighted average diluted shares
outstanding 2,177 2,944
========= =========
The accompanying notes are an integral part of these consolidated statements.
3
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
ASSETS 2000 1999
- ------ --------------- --------------
(In thousands)
Current assets:
Cash and cash equivalents $ 419 $ 70
Accounts receivable 9,393 8,522
Inventories 10,102 9,106
Prepaid expenses and other 1,061 1,004
--------- ---------
20,975 18,702
--------- ---------
Property, plant and equipment:
Original cost 35,313 34,417
Less accumulated depreciation and amortization 8,815 7,999
--------- ---------
26,498 26,418
--------- ---------
Deferred charges:
Patents 3,240 3,316
Goodwill 13,242 13,393
Other 2,883 2,811
--------- ---------
19,365 19,520
--------- ---------
$ 66,838 $ 64,640
========= =========
(Continued)
The accompanying notes are an integral part of these Balance Sheets.
4
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
- ------------------------------------ --------------- --------------
(In thousands)
Current liabilities:
Accounts payable $ 3,190 $ 2,142
Accrued liabilities 1,882 1,815
--------- ---------
5,072 3,957
--------- ---------
Long-term debt 10,887 10,417
--------- ---------
Other noncurrent liabilities 7,752 7,693
--------- ---------
Stockholders' equity:
Common shares, par value $0.10 per share;
authorized 10,000,000 shares,
issued 3,419,953 shares 342 342
Paid-in capital 6,403 6,403
Retained earnings 49,646 49,114
Treasury shares, at cost (13,264) (13,286)
--------- ---------
Total stockholders' equity 43,127 42,573
--------- ---------
$ 66,838 $ 64,640
========= =========
The accompanying notes are an integral part of these Balance Sheets.
5
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
-------------------------------
2000 1999
-------------- -------------
(In thousands)
Cash flows from operating activities:
Net income $ 532 $ 394
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,042 927
Deferred income taxes 51 66
Other (65) (252)
-------- --------
1,560 1,135
Change in current assets and liabilities:
Increase in accounts receivable (871) (485)
Increase in other current assets (1,053) (1,081)
Increase in accounts payable 1,048 1,384
Increase (decrease) in other current
liabilities 67 (88)
-------- --------
751 865
-------- --------
Cash flows from investing activities:
Property, plant and equipment additions (895) (7,224)
-------- --------
(895) (7,224)
-------- --------
Cash flows from financing activities:
Increase in long-term indebtedness 470 1,967
Issuance of common stock 23 --
Repurchase of common stock -- (1,062)
-------- --------
493 905
-------- --------
Net change in cash and cash equivalents 349 (5,454)
Cash and cash equivalents at beginning of period 70 5,635
-------- --------
Cash and cash equivalents at end of period $ 419 $ 181
======== ========
Cash paid for:
Interest (net of capitalization amounts) $ 175 $ 1
Income taxes (net of refunds) $ 129 $ 42
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 1999 Annual Report on Form 10-K.
7
ATRION CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000
The Company's consolidated net income for the quarter ended March 31, 2000
was $532,000, or $.25 per basic and $.24 per diluted share, compared with
$394,000, or $.13 per basic and diluted share, for the first quarter of
1999. The earnings per basic share computations are based on weighted
average basic shares outstanding of 2,099,274 in 2000 and 2,920,055 in
1999. The earnings per diluted share computations are based on weighted
average diluted shares outstanding of 2,176,735 in 2000 and 2,943,766 in
1999.
Consolidated revenues of $13.0 million for the first quarter of 2000 were
$1.4 million or 12% higher than revenues for the first quarter of 1999.
The increase in revenues in the first quarter of 2000 was primarily a
result of improved revenues at all operations.
Gross profit of $5.0 million in the first quarter of 2000 was $356,000 or
8 percent higher than in the comparable 1999 period. The previously
mentioned increase in revenues and improved manufacturing efficiencies
offset by a slightly less profitable product mix were the primary
contributors to this increase.
The Company's first quarter 2000 operating expenses of $4.1 million were
$98,000 higher than the operating expenses for the first quarter of 1999.
This slight increase in operating expenses for the three months ended
March 31, 2000, was the result of increased selling expenses offset by
lower research and development costs and reductions in certain corporate
expenses. Operating income in the first quarter of 2000 was $864,000 or
42% higher than the operating income in the first quarter of 1999.
Net interest expense for the first quarter of 2000 was $138,000 compared
to net interest income of $6,000 for the same period in the prior year.
This change is primarily attributable to the Company's use of cash and
cash equivalents in February 1999 to fund the purchase of its Allen, Texas
facility and borrowings by the Company to fund its repurchases of
outstanding common stock of the Company during 1999.
Income tax expense for the first quarter of 2000 was $197,000 compared to
income tax expense of $229,000 for the same period in the prior year. An
increase in our foreign sales corporation benefit and an expected increase
in the Company's research and development tax credit resulted in a lower
effective tax rate for the first quarter of 2000 compared with the same
period in 1999.
The Company believes that revenues, cost of goods sold, gross profit,
operating income from continuing operations, and earnings per share from
continuing operations for the nine months ending December 31, 2000, will
be higher than comparable 1999 period amounts.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash and cash equivalents of $418,000
compared with $70,000 at December 31, 1999. The increase in cash and cash
equivalents from December 31, 1999 to March 31, 2000 was primarily
attributable to the Company's operational results. The Company had $10.9
million of long-tem debt, borrowed under
8
its $18.5 million revolving loan facility, at March 31, 2000 compared with
$10.4 million of long-term debt at December 31, 1999. This increase in
long-term debt from December 31, 1999 to March 31, 2000 was primarily
attributable to purchases of manufacturing equipment for the Company.
In April 2000, the Company's Board of Directors authorized a program under
which the Company may repurchase up to 200,000 shares of its common stock
in open market or negotiated transactions at such times and at such prices
as management may from time to time decide. To date, no common stock has
been repurchased under this program.
The Company believes that its existing cash and cash equivalents, cash
flows from operations, borrowings available under the Company's revolving
loan facility and other equity or debt financing, which the Company
believes would be available, will be sufficient to fund the Company's cash
requirements for the foreseeable future.
IMPACT OF YEAR 2000
The Company has experienced no significant disruptions in business due to
Year 2000 issues and is not aware of any material problems resulting from
Year 2000 issues, either with its products, its internal systems, or the
products and services of third party suppliers. The Company will continue
to monitor its information systems, facilities and equipment to ensure
that any latent Year 2000 matters that may arise are addressed promptly.
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
results of operations for the nine months ended December 31, 2000, as well
as future liquidity and capital resources and Year 2000 compliance and
impact. 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, 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, 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, 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.
9
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
NONE
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10a Atrion Corporation Amended and Restated Incentive
Compensation Plan for Chief Financial Officer
10b Severance Plan
Exhibit 27--Financial Data Schedules (filed electronically only)
(b) No reports on Form 8-K have been filed during the quarter ended
March 31, 2000.
10
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: May 12, 2000 /s/ EMILE A. BATTAT
-----------------------
Emile A. Battat
Chairman, President and
Chief Executive Officer
Date: May 12, 2000 /s/ JEFFERY STRICKLAND
-----------------------
Jeffery Strickland
Vice President and
Chief Financial Officer
11
EXHIBIT INDEX
EXHIBIT
NUMBERS DESCRIPTION PAGE
10a Atrion Corporation Amended and Restated Incentive
Compensation Plan for Chief Financial Officer 13
10b Severance Plan 14
27 Financial Data Schedules (filed electronically only)
12