ATRION CORP - Quarter Report: 2019 September (Form 10-Q)

 

 

UNITED STATES

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 Quarterly Period Ended September 30, 2019

or

 

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from to

 

Commission File Number 001-32982

 

Atrion Corporation 

(Exact Name of Registrant as Specified in its Charter)

 

One Allentown Parkway, Allen, Texas  75002  

(Address of Principal Executive Offices)     (Zip Code)

 

(972) 390-9800  

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, Par Value $0.10 per share	ATRI	The Nasdaq Stock Market LLC

 

Indicate by check mark 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                          ☐ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Registration S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ☒Yes                     ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐
Smaller reporting company ☐	Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ☐ Yes                    ☒ No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Title of Each Class		Number of Shares Outstanding at October 11, 2019
Common stock, Par Value $0.10 per share		1,854,829

 

 

 

 

 

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, 2019 and 2018	3
	Consolidated Balance Sheets (Unaudited) September 30, 2019 and December 31, 2018	4
	Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2019 and 2018	5
	Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) For the Three and Nine Months Ended September 30, 2019 and 2018	6
	Notes to Consolidated Financial Statements (Unaudited)	8
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	18
	Item 4. Controls and Procedures	18
PART II.		18
	Item 1. Legal Proceedings	18
	Item 1A. Risk Factors	19
	Item 6. Exhibits	19
SIGNATURES		20
Exhibit Index		21

  

 

 

 

PART I

 

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

ATRION CORPORATION AND SUBSIDIARIES  

(Unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2019				2018				2019				2018
		(in thousands, except per share amounts)
Revenues		$	38,883			$	39,274			$	120,600			$	117,522
Cost of goods sold			20,992				21,275				65,414				61,349
Gross profit			17,891				17,999				55,186				56,173
Operating expenses:
Selling			2,092				2,105				6,574				6,169
General and administrative			3,990				3,933				12,480				12,470
Research and development			1,359				1,204				3,678				4,145
			7,441				7,242				22,732				22,784
Operating income			10,450				10,757				32,454				33,389
Interest and dividend income			733				439				1,896				1,157
Other investment income (losses)			(106	)			21				265				(1,153	)
Other income			--				20				--				20
			627				480				2,161				24
Income before provision for income taxes			11,077				11,237				34,615				33,413
Provision for income taxes			(1,482	)			(2,016	)			(5,918	)			(6,907	)
Net income		$	9,595			$	9,221			$	28,697			$	26,506
Net income per basic share		$	5.17			$	4.98			$	15.48			$	14.30
Weighted average basic shares outstanding			1,855				1,853				1,854				1,853
Net income per diluted share		$	5.15			$	4.96			$	15.40			$	14.27
Weighted average diluted shares outstanding			1,862				1,858				1,863				1,857
Dividends per common share		$	1.55			$	1.35			$	4.25			$	3.75

 

The accompanying notes are an integral part of these statements.

 

 

 

 

ATRION CORPORATION AND SUBSIDIARIES

(Unaudited)

 

Assets		September 30, 2019				December 31, 2018
		(in thousands)
Current assets:
Cash and cash equivalents		$	63,673			$	58,753
Short-term investments			21,339				9,684
Accounts receivable			18,770				17,014
Inventories			38,314				33,572
Prepaid expenses and other current assets			2,661				3,242
			144,757				122,265
Long-term investments			16,830				21,048
Property, plant and equipment			196,250				181,582
Less accumulated depreciation and amortization			113,989				106,689
			82,261				74,893
Other assets and deferred charges:
Patents			1,569				1,659
Goodwill			9,730				9,730
Other			1,604				1,621
			12,903				13,010
Total assets		$	256,751			$	231,216
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities		$	9,878			$	9,601
Accrued income and other taxes			1,503				619
			11,381				10,220
Line of credit			--				--
Other non-current liabilities			13,065				10,229
Stockholders’ equity:
Common stock, par value $ per share; authorized shares, issued shares			342				342
Paid-in capital			51,660				50,391
Retained earnings			312,563				291,761
Treasury shares, at September 30, 2019 and 1,567 at December 31, 2018, at cost			(132,260	)			(131,727	)
Total stockholders’ equity			232,305				210,767
Total liabilities and stockholders’ equity		$	256,751			$	231,216

 

The accompanying notes are an integral part of these financial statements.  

 

 

 

ATRION CORPORATION AND SUBSIDIARIES

(Unaudited)

 

(In thousands)		Nine Months Ended September 30,
		2019				2018
Cash flows from operating activities:
Net income		$	28,697			$	26,506
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			7,961				6,702
Deferred income taxes			1,922				17
Stock-based compensation			1,306				1,297
Net change in unrealized gains and losses on investments			(257	)			1,143
Net change in accrued interest, premiums, and discounts on investments			367				(81	)
Other			(6	)			(17	)
			39,990				35,567
Changes in operating assets and liabilities:
Accounts receivable			(1,756	)			(3,690	)
Inventories			(4,742	)			(2,818	)
Prepaid expenses			581				600
Other non-current assets			17				(145	)
Accounts payable and accrued liabilities			277				2,240
Accrued income and other taxes			884				125
Other non-current liabilities			914				812
			36,165				32,691
Cash flows from investing activities:
Property, plant and equipment additions			(15,239	)			(12,671	)
Purchase of investments			(54,539	)			(27,001	)
Proceeds from maturities of investments			46,992				33,913
			(22,786	)			(5,759	)
Cash flows from financing activities:
Shares tendered for employees’ withholding taxes on stock-based compensation			(579	)			(90	)
Dividends paid			(7,880	)			(6,947	)
			(8,459	)			(7,037	)
Net change in cash and cash equivalents			4,920				19,895
Cash and cash equivalents at beginning of period			58,753				30,136
Cash and cash equivalents at end of period		$	63,673			$	50,031
Cash paid for:
Income taxes		$	2,630			$	2,027

 

The accompanying notes are an integral part of these financial statements.

 

 

 

 

 

ATRION CORPORATION AND SUBSIDIARIES

(Unaudited)   

		For the Three Months ended September 30, 2019 and 2018
		Common Stock						Treasury Stock
		SharesOutstanding			Amount			Shares			Amount			Additional Paid-in Capital			Retained Earnings			Total
Balances, July 1, 2018			1,853		$	342			1,567		$	(131,727	)	$	49,635		$	279,807		$	198,057
Net income																		9,221			9,221
Stock-based compensation transactions															387						387
Shares surrendered in stock transactions
Dividends																		(2,508	)		(2,508	)
Balances, September 30, 2018			1,853		$	342			1,567		$	(131,727	)	$	50,022		$	286,520		$	205,157
Balances, July 1, 2019			1,855		$	342			1,565		$	(132,260	)	$	51,332		$	305,846		$	225,260
Net income																		9,595			9,595
Stock-based compensation transactions															328						328
Shares surrendered in stock transactions
Dividends																		(2,878	)		(2,878	)
Balances, September 30, 2019			1,855		$	342			1,565		$	(132,260	)	$	51,660		$	312,563		$	232,305

 

 

 

 

ATRION CORPORATION AND SUBSIDIARIES

Consolidated statementS of changes in stockholders’ equity

(Unaudited) 

		For the Nine Months ended September 30, 2019 and 2018
		Common Stock						Treasury Stock
		Shares Outstanding			Amount			Shares			Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balances, January 1, 2018			1,852		$	342			1,568		$	(131,663	)	$	48,730		$	(1,215	)	$	268,194		$	184,388
Net income																					26,506			26,506
Reclass from adopting ASO 2016-01																		1,215			(1,215	)		--
Stock-based compensation transactions			1						(1	)		26			1,292									1,318
Shares surrendered in stock transactions												(90	)											(90	)
Dividends																					(6,965	)		(6,965	)
Balances, September 30, 2018			1,853		$	342			1,567		$	(131,727	)	$	50,022		$	--		$	286,520		$	205,157
Balances, January 1, 2019			1,853		$	342			1,567		$	(131,727	)	$	50,391		$	--		$	291,761		$	210,767
Net income																					28,697			28,697
Stock-based compensation transactions			3						(3	)		46			1,269									1,315
Shares surrendered in stock transactions			(1	)					1			(579	)											(579	)
Dividends																					(7,895	)		(7,895	)
Balances, September 30, 2019			1,855		$	342			1,565		$	(132,260	)	$	51,660		$	--		$	312,563		$	232,305

 

The accompanying notes are an integral part of these financial statements

 

 

 

ATRION CORPORATION AND SUBSIDIARIES

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ATRION CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

We develop and manufacture products primarily for medical applications. We market components to other equipment manufacturers for incorporation in their products and sell finished devices to physicians, hospitals, clinics and other treatment centers. Our medical products primarily serve the fluid delivery, cardiovascular and ophthalmology markets. Our other medical and non-medical products include instrumentation and disposables used in valves and inflation devices used in marine and aviation safety products.

 

Our products are used in a wide variety of applications by numerous customers. We encounter competition in all of our markets and compete primarily on the basis of design, product quality, price, customer service and delivery time.

 

Our strategy is to provide a broad selection of products in the areas of our expertise. Research and development efforts are focused on improving current products and developing highly-engineered products that meet customer needs and serve niche markets with meaningful sales potential. Proposed new products may be subject to regulatory clearance or approval prior to commercialization and the time period for introducing a new product to the marketplace can be unpredictable. We also focus on controlling costs by investing in modern manufacturing technologies and controlling purchasing processes. We have been successful in consistently generating cash from operations and have used that cash to reduce and payoff indebtedness, to fund capital expenditures, to repurchase stock and to pay dividends.

 

Our strategic objective is to further enhance our position in our served markets by:

 

	●	Focusing on customer needs;
	●	Expanding existing product lines and developing new products;
	●	Manufacturing products to exacting quality standards; and
	●	Preserving and fostering a collaborative, respectful and entrepreneurial culture.

 

For the three months ended September 30, 2019, we reported revenues of $38.9 million, operating income of $10.5 million and net income of $9.6 million, down 1 percent, down 3 percent and up 4 percent, respectively, from the three months ended September 30, 2018. For the nine months ended September 30, 2019, we reported revenues of $120.6 million, operating income of $32.5 million and net income of $28.7 million, up 3 percent, down 3 percent and up 8 percent, respectively, from the nine months ended September 30, 2018.

 

Results for the three months ended September 30, 2019

 

Consolidated net income totaled $9.6 million, or $5.17 per basic and $5.15 per diluted share, in the third quarter of 2019. This is compared with consolidated net income of $9.2 million, or $4.98 per basic and $4.96 per diluted share, in the third quarter of 2018. The income per basic share computations are based on weighted average basic shares outstanding of 1,855,000 in the 2019 period and 1,853,000 in the 2018 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,862,000 in the 2019 period and 1,858,000 in the 2018 period. 

 

 

 

Consolidated revenues of $38.9 million for the third quarter of 2019 were 1 percent lower than revenues of $39.3 million for the third quarter of 2018. This decrease was primarily attributable to decreased volumes of our ophthalmology products and other non-medical products partially offset by increased volumes of our fluid delivery products and cardiovascular products.

 

Revenues by product line were as follows (in thousands):

 

		Three Months ended September 30,
		2019				2018
Fluid Delivery		$	17,888			$	17,106
Cardiovascular			14,565				13,292
Ophthalmology			1,556				2,768
Other			4,874				6,108
Total		$	38,883			$	39,274

 

Cost of goods sold of $21.0 million for the third quarter of 2019 was 1 percent lower than cost of goods sold of $21.3 million for the third quarter of 2018 primarily due to lower sales volumes and the impact of continued cost improvement projects partially offset by increased depreciation and compensation costs. Our cost of goods sold in the third quarter of 2019 was 54.0 percent of revenues compared with 54.2 percent of revenues in the third quarter of 2018.

 

Gross profit of $17.9 million in the third quarter of 2019 was $108,000, or 1 percent, lower than in the comparable 2018 period. Our gross profit percentage in the third quarter of 2019 was 46.0 percent of revenues compared with 45.8 percent of revenues in the third quarter of 2018. The increase in gross profit percentage in the 2019 period compared to the 2018 period was primarily related to improved manufacturing efficiencies and cost improvement projects mentioned above partially offset by increased depreciation and compensation costs.

 

Our third quarter 2019 operating expenses of $7.4 million were $199,000 higher than the operating expenses for the third quarter of 2018. This increase was attributable to a $155,000 increase in Research and Development, or R&D, expenses and a $57,000 increase in General and Administrative, or G&A, expenses partially offset by a $13,000 decrease in Selling expenses. The increase in R&D expenses was primarily related to increased outside services and increased materials and supplies costs. The increase in G&A expenses was primarily related to increased depreciation and increased information technology costs. The decrease in Selling expenses was principally attributable to decreased travel partially offset by increased compensation and commissions.

 

 

 

 

 

Operating income in the third quarter of 2019 decreased $307,000 to $10.5 million, a 3 percent decrease compared to our operating income in the quarter ended September 30, 2018. Operating income was 27 percent of revenues for both the third quarter of 2019 and the third quarter of 2018.

 

Interest and dividend income in the third quarter of 2019 was $733,000 compared with $439,000 for the same period in the prior year. Increased levels of investment and increased interest rates were the primary reasons for the increase.

 

Other investment loss in the third quarter of 2019 was $106,000 compared with investment income of $21,000 in the third quarter of 2018. These amounts were attributable to unrealized losses and gains on equity investments resulting from changes in the market values of the investments in each respective quarter.

 

Income tax expense was $1.5 million for the third quarter of 2019 compared with $2.0 million for the third quarter of 2018. The effective tax rate for the third quarter of 2019 was 13.4 percent compared with 17.9 percent for the third quarter of 2018. The decrease in the 2019 period effective tax rate was primarily related to increased tax benefits from foreign sales transactions and higher tax credits from our research activities. We expect the effective tax rate for the remainder of 2019 to be approximately 19 percent.

 

Results for the nine months ended September 30, 2019

 

Consolidated net income totaled $28.7 million, or $15.48 per basic and $15.40 per diluted share, in the first nine months of 2019. This is compared with consolidated net income of $26.5 million, or $14.30 per basic and $14.27 per diluted share, in the first nine months of 2018. The income per basic share computations are based on weighted average basic shares outstanding of 1,854,000 in the 2019 period and 1,853,000 in the 2018 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,863,000 in the 2019 period and 1,857,000 in the 2018 period.

 

Consolidated revenues of $120.6 million for the first nine months of 2019 were 3 percent higher than revenues of $117.5 million for the first nine months of 2018. This increase was primarily attributable to increased volumes of our cardiovascular products partially offset by decreased volumes of our ophthalmology products.

 

Revenues by product line were as follows (in thousands):

 

		Nine Months ended September 30,
		2019				2018
Fluid Delivery		$	54,334			$	54,033
Cardiovascular			44,564				39,505
Ophthalmology			5,656				8,405
Other			16,046				15,579
Total		$	120,600			$	117,522

 

 

 

 

Cost of goods sold of $65.4 million for the first nine months of 2019 was $4.1 million higher than in the comparable 2018 period. The primary contributor to the increase in our cost of goods sold was increased volumes, a less favorable product sales mix and increased depreciation and compensation costs partially offset by the impact of continued cost improvement projects in the first nine months of 2019. Our cost of goods sold in the first nine months of 2019 was 54.2 percent of revenues compared with 52.2 percent of revenues in the first nine months of 2018.

 

Gross profit of $55.2 million in the first nine months of 2019 was $987,000, or 2 percent, lower than in the comparable 2018 period. Our gross profit percentage in the first nine months of 2019 was 45.8 percent of revenues compared with 47.8 percent of revenues in the first nine months of 2018. The decrease in gross profit percentage in the 2019 period compared to the 2018 period was primarily related to the less favorable product sales mix and increased depreciation and compensation costs partially offset by cost improvement projects mentioned above.

 

Operating expenses of $22.7 million for the first nine months of 2019 were $52,000 lower than the operating expenses for the first nine months of 2018. This decrease was attributable to a $467,000 decrease in R&D expenses largely offset by a $10,000 increase in G&A expenses and a $405,000 increase in Selling expenses. The decrease in R&D expenses was primarily related to decreased compensation, decreased outside services and decreased materials and supplies costs partially offset by increased regulatory costs. The increase in G&A expenses for the first nine months of 2019 was principally attributable to increased information technology costs partially offset by decreased outside services. The increase in Selling expenses was principally attributable to increased compensation, commissions and promotion costs partially offset by decreased travel and decreased outside services.

 

Operating income in the first nine months of 2019 decreased $935,000 to $32.5 million, a 3 percent decrease from our operating income in the nine months ended September 30, 2018. Operating income was 27 percent of revenues in the first nine months of 2019 and 28 percent of revenues in the first nine months of 2018.

 

Interest and dividend income for the first nine months of 2019 was $1.9 million compared with $1.2 million for the same period in the prior year. Increased levels of investment and increased dividend income were the primary reasons for the increase.

 

Other investment income for the first nine months of 2019 was $265,000 compared with an investment loss of $1.2 million in the first nine months of 2018. These amounts are attributable to unrealized gains and losses on equity investments resulting from changes in the market values of the investments in each respective nine month period.

 

Income tax expense for the first nine months of 2019 was $5.9 million compared to income tax expense of $6.9 million for the same period in the prior year. The effective tax rate for the first nine months of 2019 was 17.1 percent, compared with 20.7 percent for the first nine months of 2018. The decrease in the 2019 period effective tax rate was primarily related to increased tax benefits from stock compensation and foreign sales transactions.

 

 

 

 

Liquidity and Capital Resources

 

As of September 30, 2019, we had a $75.0 million revolving credit facility with a money center bank pursuant to which the lender is obligated to make advances until February 28, 2022.  We had no outstanding borrowings under our credit facility at September 30, 2019. Our ability to borrow funds under the credit agreement from time to time is contingent on meeting certain covenants in the loan agreement, the most restrictive of which is the ratio of total debt to earnings before interest, income tax, depreciation and amortization. At September 30, 2019, we were in compliance with all financial covenants.

 

At September 30, 2019, we had a total of $101.8 million in cash and cash equivalents, short-term investments and long-term investments, an increase of $12.4 million from December 31, 2018. The principal contributor to this increase was operating results.

 

Cash flows from operating activities of $36.2 million for the nine months ended September 30, 2019 were primarily comprised of net income plus the net effect of non-cash expenses, increases in other non-current liabilities and increases in accrued income and other taxes partially offset by increases in accounts receivable and increases in inventories. During the first nine months of 2019, we expended $15.2 million for the addition of property and equipment, $54.5 million for the purchase of investments and $7.9 million for dividends. During the same period, maturities of investments generated $47.0 million in cash.

 

At September 30, 2019, we had working capital of $133.4 million, including $63.7 million in cash and cash equivalents and $21.3 million in short-term investments. The $21.3 million increase in working capital during the first nine months of 2019 was primarily related to an increase in cash and cash equivalents, short-term investments and inventories. This increase was partially offset by increases in accrued income and other taxes. The increase in cash and cash equivalents and short-term investments was primarily related to operating results. The increase in accounts receivable was primarily related to increased revenues for the third quarter of 2019 as compared to the fourth quarter of 2018. The increase in inventories was primarily related to replenishment of inventories to levels required for operational effectiveness. The increases in accrued income and other taxes are primarily related to accrued federal and state income taxes relating to operating results.

 

We believe that our $101.8 million in cash, cash equivalents, short-term investments and long-term investments, along with cash flows from operations and available borrowings of up to $75.0 million under our credit facility, will be sufficient to fund our cash requirements for at least the foreseeable future, including the costs associated with the planned expansion of one of our manufacturing facilities. We believe that our strong financial position would allow us to access equity or debt financing should that be necessary. Additionally, we believe that our cash and cash equivalents, short-term investments and long-term investments, as a whole, will continue to increase during the remainder of 2019.

 

 

 

 

Forward-Looking Statements

 

Statements in this Management’s Discussion and Analysis and elsewhere in this Quarterly Report on Form 10-Q that are forward looking are based upon current expectations, and actual results or future events may differ materially. Therefore, the inclusion of such forward-looking information should not be regarded as a representation by us that our objectives or plans will be achieved. Such statements include, but are not limited to, our effective tax rate for the remainder of 2019, our ability to fund our cash requirements for the foreseeable future with our current assets, long-term investments, cash flow and borrowings under the credit facility, our access to equity and debt financing, and the increase in cash, cash equivalents, and investments during the remainder of 2019. Words such as “expects,” “believes,” “anticipates,” “intends,” “should,” “plans,” 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 or future events to differ materially, including, but not limited to, the following: changing economic, market and business conditions; acts of war or terrorism; 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; our ability to protect our intellectual property; changes in the prices of raw materials; changes in product mix; intellectual property and product  liability claims and product recalls; the ability to attract and retain qualified personnel; and the loss of, or any material reduction in sales to, any significant customers. 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 us to alter our marketing, capital expenditures or other budgets, which in turn may affect our results of operations and financial condition. The forward-looking statements in this Quarterly Report on Form 10-Q are made as of the date hereof, and we do not undertake any obligation, and disclaim any duty, to supplement, update or revise such statements, whether as a result of subsequent events, changed expectations or otherwise, except as required by applicable law.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

For the quarter ended September 30, 2019, we did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in our 2018 Form 10-K.

 

Item 4.

Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2019. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting for the quarter ended September 30, 2019 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

 

OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

From time to time, we may be involved in claims or litigation that arise in the normal course of business. We are not currently a party to any legal proceedings, which, if decided adversely, would have a material adverse effect on our business, financial condition, or results of operations .

 

 

 

 

 

Item 1A.

Risk Factors

 

There have been no material changes to the risk factors as described in Part I, Item 1A, “Risk Factors,” in our 2018 Form 10-K other than the supplemental risk factor set forth below:

 

Our business is dependent on third-party sterilization for many of our products, and the closure of sterilization facilities that have provided sterilization services for us may adversely affect our business.

 

The United States Food and Drug Administration, or FDA, recently issued a caution concerning a nationwide shortage of medical devices due to issues with contract sterilizers. Two significant contract sterilization facilities that service many medical device companies have been shut down due to environmental concerns—one permanently and one temporarily—and local officials have asked a third facility to voluntarily halt operations. This loss of sterilization capacity is causing significant delays at this country’s remaining sterilization facilities. As a result, FDA has reported that companies in the medical device industry are encountering backlogs to get products sterilized. We and our OEM customers utilized the two closed facilities, as well as other contract sterilizers still in operation, prior to their closures to sterilize some of our products requiring sterilization. We anticipate that the shortage of sterilization capacity, until remedied, will delay our delivery of some products that require sterilization and may push sales that would normally occur in one reporting period into subsequent reporting periods.

 

Item 6.

Exhibits

 

Exhibit Number		Description
31.1		Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer
31.2		Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer
32.1		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002
32.2		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

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 1, 2019	By:	/s/ David A. Battat
		David A. Battat
		President and Chief Executive Officer

 

Date:  November 1, 2019	By:	/s/ Jeffery Strickland
		Jeffery Strickland
		Vice President and Chief Financial Officer
		(Principal Accounting and Financial Officer)

 

 

 

 

 

Exhibit  Number		Description
31.1		Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer
31.2		Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer
32.1		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002
32.2		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document