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 SEPTEMBER 30, 2000 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
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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 NOVEMBER 5, 2000
- --------------------------------------- --------------------------------
COMMON STOCK, PAR VALUE $0.10 PER SHARE 2,020,593
ATRION CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION 2
ITEM 1. Financial Statements
Consolidated Statements of Income (Unaudited)
For the Three and Nine Months Ended
September 30, 2000 and 1999 3
Consolidated Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999 4-5
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended
September 30, 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
ITEM 6. Exhibits and Reports on
Form 8-K 11
SIGNATURES 12
1
PART I
FINANCIAL INFORMATION
2
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------------------- -------------------------------------
2000 1999 2000 1999
(In thousands, except per share data) (In thousands, except per share data)
--------------------- ---------------- ----------------- -------------------
Revenues $ 12,459 $ 13,441 $ 38,487 $ 37,759
Cost of goods sold 7,695 8,180 23,603 22,662
-------------- -------------- -------------- --------------
Gross profit 4,764 5,261 14,884 15,097
-------------- -------------- -------------- --------------
Operating expenses:
Selling expense 1,649 1,650 5,482 5,139
General and administrative 1,546 2,035 4,885 5,483
Research and development 513 629 1,553 2,007
-------------- -------------- -------------- --------------
3,708 4,314 11,920 12,629
-------------- -------------- -------------- --------------
Operating income 1,056 947 2,964 2,468
-------------- -------------- -------------- --------------
Other income (expense):
Interest expense, net (173) (75) (496) (147)
Other income (expense) 2 - (10) 10
-------------- -------------- -------------- --------------
(171) (75) (506) (137)
-------------- -------------- -------------- --------------
Income from continuing operations before
provision for income taxes 885 872 2,458 2,331
Provision for income taxes 187 218 589 663
-------------- -------------- -------------- --------------
Income from continuing operations 698 654 1,869 1,668
Gain on disposal of discontinued operations,
net of income taxes 30 - 129 165
-------------- -------------- -------------- --------------
Net income $ 728 $ 654 $ 1,998 $ 1,833
============== ============== ============== ==============
Earnings per basic share:
Continuing operations $ 0.34 $ 0.26 $ 0.91 $ 0.63
Gain on disposal of discontinued operations 0.02 - 0.06 0.06
------------- -------------- ------------- -------------
$ 0.36 $ 0.26 $ 0.97 $ 0.69
============= ============= ============= =============
Weighted average basic shares outstanding 2,033 2,474 2,059 2,657
============== ============== ============== ==============
Earnings per diluted share:
Continuing operations $ 0.33 $ 0.26 $ 0.87 $ 0.62
Gain on disposal of discontinued operations 0.01 - 0.06 0.06
------------- -------------- ------------- -------------
$ 0.34 $ 0.26 $ 0.93 $ 0.68
============= ============= ============= =============
Weighted average diluted shares outstanding 2,128 2,527 2,144 2,697
============== ============== ============== ==============
The accompanying notes are an integral part of these consolidated statements.
3
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
ASSETS (UNAUDITED)
- ------ ---------------------- ----------------------
Current assets: (in thousands)
Cash and cash equivalents $ 85 $ 70
Accounts receivable 8,980 8,522
Inventories 10,417 9,106
Prepaid expenses and other 1,005 1,004
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20,487 18,702
-------------- --------------
Property, plant and equipment:
Original cost 36,133 34,417
Less accumulated depreciation and amortization 10,460 7,999
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25,673 26,418
-------------- --------------
Deferred charges:
Patents 3,088 3,316
Goodwill 12,954 13,393
Other 2,759 2,811
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18,801 19,520
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$ 64,961 $ 64,640
============== ==============
The accompanying notes are an integral part of these Consolidated Balance
Sheets.
(continued)
4
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
- ------------------------------------ (UNAUDITED
---------------------- --------------------
Current liabilities:
Accounts payable and accrued liabilities $ 5,167 $ 3,957
-------------- --------------
5,167 3,957
-------------- --------------
Long-term debt, less current maturities 8,800 10,417
-------------- --------------
Other noncurrent liabilities 7,400 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 51,112 49,114
Treasury shares, 1,399,360 shares in 2000 and 1,322,360 shares in 1999,
at cost (14,263) (13,286)
-------------- --------------
Total stockholders' equity 43,594 42,573
-------------- --------------
$ 64,961 $ 64,640
============== ==============
The accompanying notes are an integral part of these Consolidated Balance
Sheets.
5
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
---------------------------------------------
2000 1999
------------------- -------------------
Cash flows from operating activities:
Net income $ 1,998 $ 1,833
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on disposal of discontinued operations (129) (165)
Depreciation and amortization 3,128 2,914
Deferred income taxes (396) 131
Other 154 13
------------- ------------
4,755 4,726
Change in current assets and liabilities:
(Increase) in accounts receivable (458) (1,380)
(Increase) in other current assets (1,312) (653)
Increase in accounts payable 488 619
Increase in other current liabilities 722 669
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Net cash provided by continuing operations 4,195 3,981
Net cash provided by discontinued operations 129 165
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4,324 4,146
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Cash flows from investing activities:
Property, plant and equipment additions (1,915) (10,714)
Property, plant and equipment sales 199 -
------------- -------------
(1,716) (10,714)
------------- -------------
Cash flows from financing activities:
(Decrease) increase in long-term indebtedness (1,617) 5,778
Issuance of common stock 23 -
Repurchase of common stock (999) (4,614)
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(2,593) 1,164
-------------- -------------
Net change in cash and cash equivalents 15 (5,404)
Cash and cash equivalents at beginning of period 70 5,635
------------- -------------
Cash and cash equivalents at end of period $ 85 $ 231
============= =============
Cash paid for:
Interest (net of capitalized amounts) $ 566 $ 158
Income taxes (net of refunds) $ (382) $ 153
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 SEPTEMBER 30, 2000
The Company's consolidated net income for the quarter ended September
30, 2000 was $728,000, or $.36 per basic and $.34 per diluted share,
compared with $654,000, or $.26 per basic and diluted share, for the
third quarter of 1999. Income from continuing operations for the third
quarter of 2000 was $698,000, or $.34 per basic and $.33 per diluted
share, compared with $654,000, or $.26 per basic and diluted share, for
the third quarter of 1999. The earnings per basic share computations
are based on weighted average basic shares outstanding of 2,033,093 in
2000 and 2,474,029 in 1999. The earnings per diluted share computations
are based on weighted average diluted shares outstanding of 2,127,883
in 2000 and 2,526,722 in 1999.
Consolidated revenues of $12.4 million for the third quarter of 2000
were $982,000 or 7 percent lower than revenues for the third quarter of
1999. Revenues for the third quarter of 1999 reflect an unusually high
level of product shipments to two of the Company's largest OEM
customers who were building up their inventory levels of our products
at that time. Gross profit of $4.8 million in the third quarter of 2000
was $497,000 or 9 percent lower than that in the comparable 1999
period. The Company's gross profit for the third quarter of 2000 was 38
percent of sales, which was lower than the gross profit percentage for
the same period in 1999 of 39 percent of sales. The lower gross profit
percentage in the third quarter of 2000 is primarily the result of
product mix and manufacturing inefficiencies at certain of the
Company's operations.
The Company's third quarter 2000 operating expenses of $3.7 million
were $606,000 lower than the operating expenses for the third quarter
of 1999. General and administrative (G&A) expenses for the second
quarter of 2000 were $489,000 lower than G&A expenses for the same
period in 1999 primarily as a result of lower spending on outside
services, compensation and benefit programs. Research and development
(R&D) expenses were $116,000 lower for the three months ended September
30, 2000 as compared with the same 1999 period. This reduction is
primarily the result of decreased costs associated with the development
of the Company's MPS product line during the current-year period.
Operating income in the third quarter of 2000 totaled $1,056,000
compared with $947,000 in the third quarter of 1999.
Net interest expense for the third quarter of 2000 was $173,000
compared with net interest expense of $75,000 for the same period in
1999. This change is primarily attributable to additional borrowings
under the Company's revolving credit facility to fund its repurchases
of outstanding common stock of the Company during 1999 and 2000.
The Company recorded a gain of $30,000 after tax, or $.02 per basic and
$.01 per diluted share for the third quarter of 2000, on the sale of
certain natural gas properties related to discontinued operations.
There were no transactions related to discontinued operations during
the third quarter of 1999. Increases in benefits from the Company's
foreign sales corporation and tax credits attributable to the Company's
research and development activities resulted in a lower effective
income tax rate, and contributed to improved earnings, in the third
quarter of 2000 as compared to the third quarter of 1999.
The Company anticipates that sales and earnings per share from
continuing operations for the fourth quarter of 2000 will exceed the
comparable 1999 period. The Company also believes that 2000 earnings
per share from continuing operations will exceed the 1999 level by at
least 30%.
8
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
The Company's consolidated net income for the nine-month period ended
September 30, 2000 was $2.0 million, or $.97 per basic and $.93 per
diluted share, compared with $1.8 million, or $.69 per basic and $.68
per diluted share, for the first nine months of 1999. Income from
continuing operations for the first nine months of 2000 was $1.9
million, or $.91 per basic and $.87 per diluted share, compared with
$1.7 million, or $.63 per basic and $.62 per diluted share, for the
comparable period in 1999. The earnings per basic share computations
are based on weighted average basic shares outstanding of 2,058,622 in
2000 and 2,657,175 in 1999. The earnings per diluted share computations
are based on weighted average diluted shares outstanding of 2,143,606
in 2000 and 2,697,261 in 1999.
Consolidated revenues of $38.5 million for the nine months ended
September 30, 2000 were $728,000 or 2 percent higher than revenues for
the nine months ended September 30, 1999. Gross profit of $14.9 million
for the first nine months of 2000 was $212,000 or 1 percent lower than
that in the comparable period of 1999. The Company's gross profit for
the nine months ended September 30, 2000 was 39 percent of sales, which
was lower than the gross profit percentage for the same period in 1999
of 40 percent of sales. The lower gross profit percentage in 2000 is
primarily related to manufacturing inefficiencies at certain of the
Company's operations.
The Company's operating expenses of $11.9 million for the first nine
months of 2000 were $709,000 lower than operating expenses for the
first nine months of 1999. G&A expenses for the first nine months of
2000 were $598,000 lower than G&A expenses for the same period in 1999
primarily as a result of lower spending on outside services,
compensation and benefit programs. R&D expenses were $454,000 lower for
the nine months ended September 30, 2000 as compared with the same 1999
period primarily as a the result of decreased costs associated with the
development of the Company's MPS during the current period. Selling
expenses for the nine months ended September 30, 2000 were $343,000
higher than the comparable 1999 period. This increase is primarily
attributable to the expansion of marketing efforts associated with the
Company's MPS product line. Operating income in the nine months ended
September 30, 2000 totaled $3.0 million compared with $2.5 million in
the same period of 1999.
Net interest expense for the nine months ended September 30, 2000 was
$496,000 compared with net interest expense of $147,000 for the same
period in 1999. This change is primarily attributable to additional
borrowings under the Company's revolving credit facility to fund its
repurchases of outstanding common stock of the Company. Increases in
benefits from the Company's foreign sales corporation and tax credits
attributable to the Company's research and development activities
resulted in a lower effective income tax rate, and contributed to
improved earnings, in the first nine months of 2000 as compared to the
nine months ended September 30,1999.
The Company recorded a gain on the disposal of discontinued operations
of $129,000 after tax, or $.06 per basic and diluted share, for the
nine months ended September 30, 2000 compared with a gain of $165,000
after tax, or $.06 per basic and diluted share, for the nine months
ended September 30, 1999.
9
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had cash and cash equivalents of
$85,000 compared with $70,000 at December 31, 1999. The Company had
long-tem debt of $8.8 million under its $18.5 million revolving credit
facility at September 30, 2000 compared with long-term debt of $10.4
million at December 31, 1999. This reduction in long-term debt from
December 31, 1999 to September 30, 2000 was primarily funded by net
cash from operating activities remaining after capital expenditures and
repurchases of outstanding common stock of 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,
the Company has repurchased 15,000 shares of its common stock under
this program.
The Company believes that its existing cash and cash equivalents, cash
flows from operations, borrowings available under the Company's
revolving credit 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 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 sales for the fourth quarter of 2000 and earnings per share
from continuing operations for the fourth quarter of 2000 and for the
year 2000, 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, 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.
10
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
27 Financial Data Schedules (filed electronically only)
(b) No reports on Form 8-K have been filed during the quarter
ended September 30, 2000.
11
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: November 13, 2000 /s/ EMILE A. BATTAT
-----------------------------------
Emile A. Battat
Chairman, President and
Chief Executive Officer
Date: November 13, 2000 /s/ JEFFERY STRICKLAND
-----------------------------------
Jeffery Strickland
Vice President and
Chief Financial Officer
12