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 June 30, ~~2020~~2021

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)

Delaware		63-0821819
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

~~One Allentown Parkway, Allen, TX 75002~~
~~(Address of Principal Executive Offices)(Zip Code)~~
~~(972) 390-9800~~
~~(Registrant’s Telephone Number, Including Area Code)~~

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~~Global Select 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 every Interactive Data File required to be submitted 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 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 “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	~~Non-accelerated filer~~	☐
		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

July ~~28, 2020~~29, 2021

Common stock, Par Value $0.10 per share

~~1,828,953~~1,800,629

ATRION CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

PART I. Financial Information			3

Item 1.	Financial Statements		3
		3
	Condensed Consolidated Statements of Income (Unaudited) For the Three Months Ended June 30, 2021 and June 30, 2020		3
	Condensed Consolidated Balance Sheets (Unaudited) June 30, 2021 and December 31, 2020		4
	Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended June 30, 2021 and 2020		5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) For the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020
	Condensed Consolidated Balance Sheets (Unaudited) June 30, 2020 and December 31, 2019			4
	Condensed Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2020 and 2019			5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) For the Three and Six Months Ended June 30, 2020 and 2019			6
	Notes to Condensed Consolidated Financial Statements (Unaudited)		8	8

Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations		14	15

Item 33..	Quantitative and Qualitative Disclosures About Market Risk		19	20

Item 4.	Controls and Procedures		19	20

PART II. Other Information			20	21

Item 1.	Legal Proceedings		20	21

Item 1A.	Risk Factors		20	21

Item 22.	Unregistered Sales of Equity Securities and Use of Proceeds		20	22

Item 6.	Exhibits		21	23

SIGNATURES			22	24

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. ~~Financial Statements~~

Financial Statements.

ATRION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
	(in thousands, except per share amounts)												(in thousands, except per share amounts)
Revenues	$	37,968		$	40,103		$	81,563		$	81,717		$	42,693		$	37,968		$	81,862		$	81,563
Cost of goods sold		20,499			21,511			44,226			44,422			24,826			20,499			47,656			44,226
Gross profit		17,469			18,592			37,337			37,295			17,867			17,469			34,206			37,337
Operating expenses:
Selling		1,703			2,098			3,773			4,482			1,874			1,703			3,800			3,773
General and administrative		4,628			4,304			9,028			8,490			4,753			4,628			8,925			9,028
Research and development		1,092			1,224			2,776			2,319			1,445			1,092			2,755			2,776
		7,423			7,626			15,577			15,291			8,072			7,423			15,480			15,577
Operating income		10,046			10,966			21,760			22,004			9,795			10,046			18,726			21,760

Interest and dividend income		367			581			858			1,163			183			367			399			858
Other investment income (losses)		354			161			(673	)		372			963			354			1,025			(673	)
Other income														0			0			66			0
		721			742			185			1,535			1,146			721			1,490			185

Income before provision for income taxes		10,767			11,708			21,945			23,539			10,941			10,767			20,216			21,945
Provision for income taxes		(2,162	)		(2,044	)		(4,443	)		(4,437	)		(2,017	)		(2,162	)		(3,565	)		(4,443	)

Net income	$	8,605		$	9,664		$	17,502		$	19,102		$	8,924		$	8,605		$	16,651		$	17,502

Net income per basic share	$	4.69		$	5.21		$	9.49		$	10.30		$	4.89		$	4.69		$	9.12		$	9.49
Weighted average basic shares outstanding		1,835			1,854			1,844			1,854			1,826			1,835			1,826			1,844

Net income per diluted share	$	4.68		$	5.18		$	9.47		$	10.25		$	4.88		$	4.68		$	9.10		$	9.47
Weighted average diluted shares outstanding		1,839			1,864			1,849			1,863			1,828			1,839			1,830			1,849

Dividends per common share	$	1.55		$	1.35		$	3.10		$	2.70		$	1.75		$	1.55		$	3.50		$	3.10

The accompanying notes to the condensed consolidated financial statements are an integral part of ~~this statement.~~these statements.

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ATRION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

							June 30, 2021			December 31, 2020
Assets	June 30, 2020			December 31, 2019			(in thousands)
	(in thousands)
Current assets:
Cash and cash equivalents	$	24,099		$	45,048		$	17,070		$	22,450
Short-term investments		6,574			23,766			30,478			19,258
Accounts receivable		22,441			18,886			22,682			16,445
Inventories		45,805			42,093			47,725			50,298
Prepaid expenses and other current assets		3,226			2,545			7,873			3,868
		102,145			132,338			125,828			112,319

Long-term investments		56,871			31,772			32,441			46,207

Property, plant and equipment		207,814			200,990			225,384			218,912
Less accumulated depreciation and amortization		119,947			116,384			129,372			123,977
		87,867			84,606			96,012			94,935

Other assets and deferred charges:
Patents		1,480			1,539			1,361			1,421
Goodwill		9,730			9,730			9,730			9,730
Other		2,257			2,046			2,266			2,278
		13,467			13,315			13,357			13,429

Total assets	$	260,350		$	262,031		$	267,638		$	266,890

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	11,373		$	10,855		$	11,999		$	13,200
Accrued income and other taxes		4,070			419			670			436
		15,443			11,274			12,669			13,636

Line of credit		-			-			0			0

Other non-current liabilities		11,380			12,887			14,248			12,812

Stockholders’ equity:
Common stock, par value $0.10 per share; authorized 10,000 shares, issued 3,420 shares		342			342			342			342
Paid-in capital		53,020			52,043			60,470			53,527
Retained earnings		329,494			317,745			347,954			337,700
Treasury shares,1,591 at June 30, 2020 and 1,565 at December 31, 2019, at cost		(149,329	)		(132,260	)
Treasury shares,1,609 at June 30, 2021 and 1,594 at December 31, 2020, at cost								(168,045	)		(151,127	)
Total stockholders’ equity		233,527			237,870			240,721			240,442

Total liabilities and stockholders’ equity	$	260,350		$	262,031		$	267,638		$	266,890

The accompanying notes to the condensed consolidated financial statements are an integral part of ~~this statement.~~these statements.

Table of Contents

ATRION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2021			2020
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net income	$	17,502		$	19,102		$	16,651		$	17,502
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,574			5,209			6,210			5,574
Deferred income taxes		503			1,408			1,092			503
Stock-based compensation		991			980			1,338			991
Net change in unrealized gains and losses on investments		933			(364	)		(1,024	)		933
Net change in accrued interest, premiums, and discounts on investments		(66	)		173			269			(66	)
Other		22			(6	)		25			22
		25,459			26,502			24,561			25,459

Changes in operating assets and liabilities:
Accounts receivable		(3,558	)		(3,354	)		(6,237	)		(3,558	)
Inventories		(3,712	)		(1,018	)		2,573			(3,712	)
Prepaid expenses		(681	)		311			(4,006	)		(681	)
Other non-current assets		(254	)		57			12			(254	)
Accounts payable and accrued liabilities		518			542			(1,454	)		518
Accrued income and other taxes		3,651			180			234			3,651
Other non-current liabilities		(2,000	)		912			345			(2,000	)
		19,423			24,132
Cash flows from operating activities								16,028			19,423

Cash flows from investing activities:
Property, plant and equipment additions		(8,800	)		(9,977	)		(7,252	)		(8,800	)
Purchase of investments		(30,444	)		(45,843	)		(16,110	)		(30,444	)
Proceeds from sale of investments		896			-			166			896
Proceeds from maturities of investments		20,774			28,121			19,246			20,774
		(17,574	)		(27,699	)
Cash flows from investing activities								(3,950	)		(17,574	)

Cash flows from financing activities:
Purchase of treasury stock		(17,037	)		-			(10,488	)		(17,037	)
Shares tendered for employees’ withholding taxes on stock-based compensation		(55	)		(579	)		(585	)		(55	)
Dividends paid		(5,706	)		(5,005	)		(6,385	)		(5,706	)
		(22,798	)		(5,584	)
Cash flows from financing activities								(17,458	)		(22,798	)

Net change in cash and cash equivalents		(20,949	)		(9,151	)		(5,380	)		(20,949	)
Cash and cash equivalents at beginning of period		45,048			58,753			22,450			45,048
Cash and cash equivalents at end of period	$	24,099		$	49,602		$	17,070		$	24,099

Cash paid for:
Income taxes	$	199		$	2,104		$	5,095		$	199
Non-cash financing activities:
Non-cash effect of stock option exercises							$	6,012			0

The accompanying notes to the condensed consolidated financial statements are an integral part of ~~this statement.~~these statements

Table of Contents

ATRION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

For the Three Months ended June 30, 2020 and 2019
																				For the Three Months Ended June 30, 2021 and 2020
	Common Stock					Treasury Stock						Additional								Common Stock					Treasury Stock					Additional
	Shares Outstanding			Amount		Shares			Amount			Paid-in Capital		Retained Earnings			Total			Shares Outstanding			Amount		Shares		Amount			Paid-in Capital		Retained Earnings			Total
Balances, April 1, 2019		1,853		$	342		1,567		$	(131,721	)	$	50,772	$	298,690		$	218,083
Balances, April 1, 2020																					1,840		$	342		1,580	$	(141,500	)	$	52,422	$	323,733		$	234,997

Net income															9,664			9,664															8,605			8,605
Stock-based compensation transactions		3					(3	)		40			560					600										18			598					616
Shares surrendered in stock transactions		(1	)				1			(579	)							(579	)									(55	)							(55	)
Purchase of treasury stock																					(11	)				11		(7,792	)							(7,792	)
Dividends															(2,508	)		(2,508	)														(2,844	)		(2,844	)
Balances, June 30, 2019		1,855		$	342		1,565		$	(132,260	)	$	51,332	$	305,846		$	225,260
Balances, June 30, 2020																					1,829		$	342		1,591	$	(149,329	)	$	53,020	$	329,494		$	233,527

Balances, April 1, 2020		1,840		$	342	1,580	$	(141,500	)	$	52,422	$	323,733		$	234,997
Balances, April 1, 2021																		1,827		$	342	1,593		$	(157,572	)	$	59,760	$	342,221		$	244,751

Net income													8,605			8,605														8,925			8,925
Stock-based compensation transactions	��							18			598					616		1				(1	)		15			710					725
Shares surrendered in stock transactions								(55	)							(55	)
Purchase of treasury stock		(11	)			11		(7,792	)							(7,792	)	(17	)			17			(10,488	)							(10,488	)
Dividends													(2,844	)		(2,844	)													(3,192	)		(3,192	)
Balances, June 30, 2020		1,829		$	342	1,591	$	(149,329	)	$	53,020	$	329,494		$	233,527
Balances, June 30, 2021																		1,811		$	342	1,609		$	(168,045	)	$	60,470	$	347,954		$	240,721

The accompanying notes to the condensed consolidated financial statements are an integral part of ~~this statement.~~these statements.

Table of Contents

ATRION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

For the Six Months ended June 30, 2020 and 2019

Common Stock

Treasury Stock

Additional

Shares Outstanding

Amount

Shares

Amount

Paid-in
Capital

Retained
Earnings

Total

Balances, January 1, 2019

1,853

$ 342

1,567

$ (131,727 )

$ 50,391

$ 291,761

$ 210,767

Net income

19,102

19,102

Stock-based compensation transactions

3

(3 )

46

941

987

Shares surrendered in stock transactions

(1 )

1

(579 )

(579 )
Dividends

(5,017 )

(5,017 )
Balances, June 30, 2019

1,855

$ 342

1,565

$ (132,260 )

$ 51,332

$ 305,846

$ 225,260

																	For the Six Months Ended June 30, 2021 and 2020
																	Common Stock					Treasury Stock					Additional
																	Shares Outstanding			Amount		Shares		Amount			Paid-in Capital		Retained Earnings			Total
Balances, December 31, 2019	1,855		$	342	1,565	$	(132,260	)	$	52,043	$	317,745		$	237,870			1,855		$	342		1,565	$	(132,260	)	$	52,043	$	317,745		$	237,870
Cumulative change in accounting principal												(36	)		(36	)														(36	)		(36	)
Balances, January 1, 2020	1,855		$	342	1,565	$	(132,260	)	$	52,043	$	317,709		$	237,834			1,855		$	342		1,565	$	(132,260	)	$	52,043	$	317,709		$	237,834

Net income												17,502			17,502															17,502			17,502
Stock-based compensation transactions							23			977					1,000										23			977					1,000
Shares surrendered in stock transactions							(55	)							(55	)									(55	)							(55	)
Purchase of treasury stock	(26	)			26		(17,037	)							(17,037	)		(26	)				26		(17,037	)							(17,037	)
Dividends												(5,717	)		(5,717	)														(5,717	)		(5,717	)
Balances, June 30, 2020	1,829		$	342	1,591	$	(149,329	)	$	53,020	$	329,494		$	233,527			1,829		$	342		1,591	$	(149,329	)	$	53,020	$	329,494		$	233,527

Balances, January 1, 2021	1,826		$	342	1,594		$	(151,127	)	$	53,527	$	337,700		$	240,442

Net income													16,651			16,651
Stock-based compensation transactions	3				(3	)		(5,845	)		6,943					1,098
Shares surrendered in stock transactions	(1	)			1			(585	)							(585	)
Purchase of treasury stock	(17	)			17			(10,488	)							(10,488	)
Dividends													(6,397	)		(6,397	)
Balances, June 30, 2021	1,811		$	342	1,609		$	(168,045	)	$	60,470	$	347,954		$	240,721

The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.

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ATRION CORPORATION AND SUBSIDIARIES

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to condensed Consolidated Financial Statements

(Unaudited)

(1) ~~Basis of Presentation~~

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Atrion Corporation and its subsidiaries (collectively referred to herein as “Atrion” the “Company,” “we,” “our,” and “us”) have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) 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 US GAAP 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 US GAAP requires management to make estimates and assumptions that can have a significant impact on our revenue, operating income, and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheets. We base our assumptions, judgments, and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. At least quarterly, we evaluate our assumptions, judgments, and estimates, and make changes as deemed necessary.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of August 9, 2021, the date of issuance of this Quarterly Report on Form 10-Q. However, these estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 Form 10-K”).

The accompanying unaudited condensed consolidated financial statements of Atrion Corporation and its subsidiaries (collectively referred to herein as “Atrion” the “Company,” “we,” “our,” and “us”) 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 can have a significant impact on our revenue, operating income, and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheets. We base our assumptions, judgments, and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. At least quarterly, we evaluate our assumptions, judgments, and estimates, and make changes as deemed necessary.
(2)
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by using the first-in, first-out method. The following table details the major components of inventories (in thousands):

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of August 6, 2020, the date of issuance of this Quarterly Report on Form 10-Q. However, these estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. 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 for the fiscal year ended December 31, 2019 (“2019 Form 10-K”).

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which became law on March 27, 2020, includes a provision that permits an employer to defer the payment of the employer’s portion of payroll taxes that otherwise would be due between March 27, 2020 and December 31, 2020. The Company has elected to take advantage of such deferral provision and is evaluating its ability to take advantage of other provisions of the CARES Act and its amendments.

	June 30,		December 31,
	2021		2020
Raw materials	$	19,935	$	20,308
Work in process		10,626		11,339
Finished goods		17,164		18,651
Total inventories	$	47,725	$	50,298

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ATRION CORPORATION AND SUBSIDIARIES

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to condensed Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

~~(2)~~ ~~Inventories~~
(3)
Income per share
The following is the computation for basic and diluted income per share:

Inventories are stated at the lower of cost or net realizable value. Cost is determined by using the first-in, first-out method. The following table details the major components of inventories (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

(in thousands, except per share amounts)

Net income

$ 8,924

$ 8,605

$ 16,651

$ 17,502

Weighted average basic shares outstanding

1,826

1,835

1,826

1,844

Add: Effect of dilutive securities

2

4

4

5

Weighted average diluted shares outstanding

1,828

1,839

1,830

1,849

Earnings per share:

Basic

$ 4.89

$ 4.69

$ 9.12

$ 9.49

Diluted

$ 4.88

$ 4.68

$ 9.10

$ 9.47



June 30,
December 31,

2020

2019

Raw materials

$ 19,020

$ 18,157

Work in process

9,972

8,525

Finished goods

16,813

15,411

Total inventories

$ 45,805

$ 42,093

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 six and eight shares of common stock for the quarters ended June 30, 2021 and 2020, respectively, and an average of three and 12 shares of common stock for the six months ended June 30, 2021 and 2020, respectively, were excluded from the computation of weighted average diluted shares outstanding because their effect would have been anti-dilutive.

~~(3)~~ ~~Income per share~~
~~The following is the computation for basic and diluted income per share:~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

(in thousands, except per share amounts)

Net income

$ 8,605

$ 9,664

$ 17,502

$ 19,102

Weighted average basic shares outstanding

1,835

1,854

1,844

1,854

Add: Effect of dilutive securities

4

10

5

9

Weighted average diluted shares outstanding

1,839

1,864

1,849

1,863

Earnings per share:

Basic

$ 4.69

$ 5.21

$ 9.49

$ 10.30

Diluted

$ 4.68

$ 5.18

$ 9.47

$ 10.25

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 eight and zero shares of common stock for the quarters ended June 30, 2020 and 2019, respectively, and an average of 12 and zero shares of common stock for the six months ended June 30, 2020 and 2019, respectively, were excluded from the computation of weighted average diluted shares outstanding because their effect would have been anti-dilutive.
~~(4)~~ ~~Investments~~
As of June 30, 2020, we held investments in commercial paper, bonds, money market accounts, mutual funds and equity securities. The commercial paper and bonds are considered held-to-maturity and are recorded at amortized cost in the accompanying consolidated balance sheet. The money market accounts, equity securities and mutual funds are recorded at fair value in the accompanying consolidated balance sheet.
(4)
Investments
As of June 30, 2021, we held investments in commercial paper, bonds, money market accounts, mutual funds and equity securities. The commercial paper and bonds are considered held-to-maturity and are recorded at amortized cost in the accompanying consolidated balance sheets. The money market accounts, equity securities and mutual funds are recorded at fair value in the accompanying consolidated balance sheets. The fair values of these investments were estimated using recently executed transactions and market price quotations. We consider as current assets those investments which will mature in the next 12 months including interest receivable on the long-term bonds. The remaining investments are considered non-current assets including our investment in equity securities we intend to hold longer than 12 months.

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Table of Contents

ATRION CORPORATION AND SUBSIDIARIES
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to condensed Consolidated Financial Statements
(Unaudited)

The components of the Company’s cash and cash equivalents and our short and long-term investments are as follows (in thousands):


June 30,
2021

December 31,
2020

Cash and cash equivalents:

Cash deposits

$ 11,680

$ 16,628

Money market funds

4,640

4,822

Commercial paper

750

1,000

Total cash and cash equivalents

$ 17,070

$ 22,450

Short-term investments:

Commercial paper (held-to-maturity)

$ 5,852

$ 5,178

Bonds (held-to-maturity)

24,651

14,101

Allowance for credit losses

(25 )

(21 )
Total short-term investments

$ 30,478

$ 19,258

Long-term investments:

Mutual funds (available for sale)

$ 529

$ 563

Bonds (held-to-maturity)

26,915

41,619

Allowance for credit losses

(26 )

(52 )
Equity securities (available for sale)

5,023

4,077

Total long-term investments

$ 32,441

$ 46,207

Total cash, cash equivalents and short and long-term investments

$ 79,989

$ 87,915

June 30,
2020

December 31,
2019

Cash and cash equivalents:

Cash deposits

$ 21,488

$ 38,942

Money market funds

1,861

3,460

Commercial paper

750

2,646

Total cash and cash equivalents

$ 24,099

$ 45,048

Short-term investments:

Commercial paper (held-to-maturity)

$ 4,709

$ 6,778

Bonds (held-to-maturity)

1,880

16,988

Allowance for credit losses

(16 )

-

Total short-term investments

$ 6,573

$ 23,766

Long-term investments:

Mutual funds (available for sale)

$ 462

$ 1,105

Bonds (held-to-maturity)

54,353

27,845

Allowance for credit losses

(66 )

-

Equity securities (available for sale)

2,123

2,822

Total long-term investments

$ 56,872

$ 31,772

Total cash, cash equivalents and short and long-term investments

$ 87,544

$ 100,586

Newly adopted Topic 326 utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for held-to-maturity securities at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. Our credit loss calculations for held-to-maturity securities are based upon historical default and recovery rates of bonds rated with the same rating as our portfolio. We also apply an adjustment factor to these credit loss calculations based upon our assessment of the expected impact from current economic conditions on our investments, including the impact of COVID-19. We monitor the credit quality of debt securities classified as held-to-maturity through the use of their respective credit rating and update them on a quarterly basis with our latest assessment completed on June 30, 2020.
We utilize a lifetime “expected credit loss” measurement objective for the recognition of credit losses for held-to-maturity securities at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. Our credit loss calculations for held-to-maturity securities are based upon historical default and recovery rates of bonds rated with the same rating as our portfolio. We also apply an adjustment factor to these credit loss calculations based upon our assessment of the expected impact from current economic conditions on our investments, including the impact of COVID-19. We monitor the credit quality of debt securities classified as held-to-maturity through the use of their respective credit ratings and update them on a quarterly basis with our latest assessment completed on June 30, 2021. During the second quarter of 2021, our allowance for credit losses related to short-term investments increased by $3 thousand and our allowance for credit losses related to long-term investments decreased by $8 thousand.

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ATRION CORPORATION AND SUBSIDIARIES
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to condensed Consolidated Financial Statements
(Unaudited)

~~The following table summarizes the amortized cost of our held-to-maturity bonds at June 30, 2020,~~
The following table summarizes the amortized cost of our held-to-maturity bonds at June 30, 2021, aggregated by credit quality indicator (in thousands):

Held-to-Maturity Bonds
Credit Quality Indicators

Asset Backed
Bonds

Fed Govt. Bonds/Notes

Municipal
Bonds

Corporate
Bonds

Totals

AAA/AA/A

$ 83

$ 3,126

$ 634

$ 33,909

$ 37,752

BBB/BB

0

0

0

13,814

13,814

TOTAL

$ 83

$ 3,126

$ 634

$ 47,723

$ 51,566

Held-to-Maturity Bonds
Credit Quality Indicators

Asset Backed Bonds

Fed Govt Bonds/Notes

Municipal
Bonds

Corporate
Bonds

Totals

AAA/AA/A

$ 2,392

$ 3,335

$ 755

$ 34,771

$ 41,253

BBB/BB

-

-

-

14,980

14,980

TOTAL

$ 2,392

$ 3,335

$ 755

$ 49,751

$ 56,233

Our investments are required to be measured for disclosure purposes at fair value on a recurring basis. Our investments are considered Level 1 or Level 2 as detailed in the table below. The fair values of these 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):

~~The following table presents information regarding our allowance for credit losses on our short-term and long-term investments for the six months ended June 30, 2020 (in thousands):~~

Gross Unrealized

Level

Cost

Gains

Losses

Fair Value

As of June 30, 2021:

Money market

1

4,640

$ 0

$ 0

$ 4,640

Commercial paper

2

6,602

$ 1

$ 0

$ 6,603

Bonds

2

51,566

$ 249

$ (20 )

$ 51,795

Mutual funds

1

509

$ 20

$ 0

$ 529

Equity investments

2

5,675

$ 0

$ (652 )

$ 5,023

As of December 31, 2020:

Money Market

1

4,822

$ 0

$ 0

$ 4,822

Commercial paper

2

6,178

$ 0

$ 0

$ 6,178

Bonds

2

55,720

$ 505

$ (44 )

$ 56,181

Mutual funds

1

599

$ 0

$ (36 )

$ 563

Equity investments

2

5,675

$ 0

$ (1,598 )

$ 4,077

Short- Term Securities

Long- Term Securities

Total

Beginning balance, December 31, 2019

$ -

$ -

$ -

Allowance recognized upon adoption of Topic 326

9

33

42

Provision for credit loss expense

7

33

40

Ending balance, June 30, 2020

$ 16

$ 66

$ 82

Our investments are required to be measured for disclosure purposes at fair value on a recurring basis. Our investments are considered Level 1 or Level 2 as detailed in the table below. The fair values of these 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
Level Cost Gains Losses Fair Value
As of June 30, 2020:
Money market
1
1,861 $ -- $ -- $ 1,861
Commercial paper
2
5,459 $ 14 $ -- $ 5,473
Bonds
2
56,233 $ 575 $ (45 ) $ 56,763
Mutual funds
1
561 $ -- $ (99 ) $ 462
Equity investments
2
5,675 $ -- $ (3,552 ) $ 2,123
As of December 31, 2019:
Money Market
1
3,460 $ -- $ -- $ 3,460
Commercial paper
2
9,424 $ 2 $ -- $ 9,426
Bonds
2
44,833 $ 138 $ (19 ) $ 44,952
Mutual funds
1
1,052 $ 53 $ -- $ 1,105
Equity investments
2

5,675

$ --

$ (2,853 )

$ 2,822

The carrying value of our investments is reviewed quarterly for changes in circumstances or the occurrence of events that suggest an investment may not be fully recoverable. The bonds represent investments in various issuers at June 30, 2021. The unrealized losses for some of these bond investments reflect changes in interest rates following their acquisition. As of June 30, 2021, we had no bond investments in a loss position for more than 12 months.
At June 30, 2021, the length of time until maturity of the commercial paper we owned ranged from less than a month to 10 months and the length of time to maturity for the bonds ranged from less than a month to 54 months.

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ATRION CORPORATION AND SUBSIDIARIES
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to condensed Consolidated Financial Statements
(Unaudited)

~~The above bonds represent investments in various issuers at June 30, 2020.~~
(5)
Patents and Licenses
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):

The unrealized losses for these bond investments relate to the impact of COVID-19 on the bond market which resulted in a lower market price for those securities. None of these bond investments has been in a loss position for more than 12 months.
June 30, 2021

December 31, 2020

Weighted Average
Original Life
(years)

Gross
Carrying
Amount

Accumulated
Amortization

Weighted Average
Original Life
(years)

Gross
Carrying
Amount

Accumulated
Amortization

15.67

$ 13,840

$ 12,479

15.67

$ 13,840

$ 12,419

~~The commercial paper has maturities from less than a month~~ ~~to five months. The bonds have maturities from less than a month~~ ~~to 57 months~~.
~~(5)~~ ~~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):
June 30, 2020

December 31, 2019

Weighted Average
Original Life
(years)

Gross
Carrying
Amount

Accumulated
Amortization

15.67

$ 13,840

$ 12,360

15.67

$ 13,840

$ 12,301

~~Aggregate amortization expense for patents and licenses was $30,000 in each of the three months ended June 30, 2020 and 2019 and $60,000 in each of the six months ended June 30, 2020 and 2019.~~
~~Estimated future amortization expense for each of the years set forth below ending December 31 is as follows (in thousands):~~
2021 $ 119
2022 $ 117
2023 $ 113
2024 $ 113
2025

$ 112

~~(6)~~ ~~Revenues~~
Aggregated amortization expense for patents and licenses was $30 thousand in each of the three month periods ended June 30, 2021 and 2020 and $60 thousand in each of the six month periods ended June 30, 2021 and 2020.

Estimated future amortization expense for each of the years set forth below ending December 31 is as follows (in thousands):
2022

$ 117

2023

$ 113

2024

$ 113

2025

$ 112

2026

$ 112

(6)
Revenues
We recognize revenue when performance obligations under the terms of a contract with our customer are satisfied. This occurs with the transfer of control of our products to customers when products are shipped. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services. Sales and other taxes we may collect concurrent with revenue-producing activities are excluded from revenue.

A summary of revenues by geographic area, based on shipping destination, for the three and six months ended June 30, 2021 and 2020 are as follows (in thousands):

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

United States

$ 24,649

$ 19,530

$ 46,687

$ 45,722

Italy

2,908

2,072

4,982

3,554

China

2,611

1,800

4,212

2,998

Germany

2,064

2,918

4,464

6,155

Other countries less than 5% of revenues

10,461

11,648

21,517

23,134

Total

$ 42,693

$ 37,968

$ 81,862

$ 81,563

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Table of Contents

ATRION CORPORATION AND SUBSIDIARIES
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to condensed Consolidated Financial Statements
(Unaudited)

~~A summary of revenues by geographic area, based on shipping destination, for the three and six months ended June 30, 2020 and 2019 are~~
A summary of revenues by product line for the three and six months ended June 30, 2021 and 2020 is as follows (in thousands):

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Fluid Delivery

$ 20,920

$ 21,761

$ 39,995

$ 44,108

Cardiovascular

13,157

10,841

25,987

25,666

Ophthalmology

2,102

936

3,796

1,800

Other

6,514

4,430

12,084

9,989

Total

$ 42,693

$ 37,968

$ 81,862

$ 81,563

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
United States $ 19,530 $ 25,780 $ 45,722 $ 52,769
Germany 2,918 2,095 6,155 4,259
Other countries less than 5% of revenues 15,520 12,228 29,686 24,689
Total

$ 37,968

$ 40,103

$ 81,563

$ 81,717

~~A summary of revenues by product line for the three and six months ended June 30, 2020 and 2019 are as follows (in thousands):~~

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Fluid Delivery

$ 21,761

$ 18,285

$ 44,108

$ 36,446

Cardiovascular

10,841

14,579

25,666

29,999

Ophthalmology

936

1,817

1,800

4,100

Other

4,430

5,422

9,989

11,172

Total

$ 37,968

$ 40,103

$ 81,563

$ 81,717

More than 99 percent of our total revenue in the periods presented herein is pursuant to shipments initiated by a purchase order (our “contract”) and recognized at a single point in time when the performance obligation of the product being shipped is satisfied, rather than recognized over time, and is presented as a receivable on the balance sheet. Payment is typically due within 30 days.
We maintain an allowance for doubtful accounts to reflect estimated losses resulting from the failure of customers to make required payments. Effective January 1, 2020, we adopted the new credit loss accounting methodology as discussed in footnote 7 to calculate our credit loss allowance for our trade receivables.
More than 99 percent of our total revenue in the periods presented herein is pursuant to shipments initiated by a purchase order (our “contract”) and recognized at a single point in time when the performance obligation of the product being shipped is satisfied, rather than recognized over time, and is presented as a receivable on the balance sheet. Payment is typically due within 30 days.
We maintain an allowance for doubtful accounts to reflect estimated losses resulting from the failure of customers to make required payments. Effective January 1, 2020, we adopted a new credit loss accounting methodology to calculate our credit loss allowance for our trade receivables following a lifetime “expected credit loss” measurement objective. An account is written off when we determine the receivable will not be collected. Historically, bad debt has been immaterial.

We have elected to recognize the cost of shipping as an expense in cost of sales when control over the product has transferred to the customer.

We do not make any material accruals for product returns and warranty obligations because our returns and warranty obligations have been very low due to our focus on quality control.

We do not disclose the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount for which we have the right to invoice. We believe that the complexity added to our disclosures by the inclusion of a large amount of insignificant detail in attempting to disclose information about immaterial contracts would potentially obscure more useful and important information.
(7)
Recent Accounting Pronouncements
From time to time, new accounting pronouncements applicable to us are issued by the Financial Accounting Standards Board or other standards-setting bodies. We generally adopt these standards as of the specified effective date. Unless otherwise discussed, we believe the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

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Table of Contents

~~ATRION CORPORATION AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~
~~(7)~~ ~~Recent Accounting Pronouncements~~
~~ASU No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~.
~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~. The ASU introduces a new credit loss methodology, Current Expected Credit Losses (CECL), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. Since its original issuance in 2016, the FASB has issued several updates to the original ASU.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities and trade and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The methodology replaces the multiple existing impairment methods in current GAAP, which generally require that a loss be incurred before it is recognized.
On January 1, 2020, we adopted the guidance prospectively with a cumulative adjustment to retained earnings. Atrion has not restated comparative information for 2019 and, therefore, the comparative information for 2019 is reported under the old model and is not comparable to the information presented for 2020.
At adoption, we recognized an incremental allowance for credit losses on our allowance for credit losses related to our held-to-maturity debt securities of approximately $42,000 and our trade accounts receivable of approximately $4,000. Additionally, we recorded an approximately $36,000 decrease in retained earnings associated with the increased estimated credit losses on our trade accounts receivable and investments.
From time to time, new accounting pronouncements applicable to us are issued by the FASB, or other standards setting bodies, which we will adopt as of the specified effective date. Unless otherwise discussed, we believe the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.
Item 2.
14
~~Table~~Management’s Discussion and Analysis of ~~Contents~~Financial Condition and Results of Operations.
~~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, engineering, customer service and delivery time.

Our business strategy is to provide hospitals, physicians and other healthcare providers with the tools they need to improve the lives of the patients they serve. To do so, we provide a broad selection of products in the areas of our expertise. We have diverse product lines serving primarily the fluid delivery, cardiovascular and ophthalmic markets, and this diversity has served us well as we encounter changing market conditions. Research and development, or R&D, 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~~or eliminate indebtedness, to fund capital expenditures, to make investments, 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;~~Maintaining a culture of controlling cost; and

·
Preserving and fostering a collaborative, ~~respectful and~~ entrepreneurial ~~culture.~~management structure.

For the three months ended June 30, ~~2020,~~2021, we reported revenues of ~~$38.0~~$42.7 million, up 12 percent, operating income of ~~$10.0~~$9.8 million, down 2 percent and net income of ~~$8.6~~$8.9 million, ~~down 5~~up 4 percent ~~down 8 percent and down 11 percent, respectively,~~ from the three months ended June 30, ~~2019.~~2020.
14
Table of Contents

Results for the three months ended June 30, ~~2020~~2021
Consolidated net income totaled $8.9 million, or $4.89 per basic and $4.88 per diluted share, in the second quarter of 2021. This is compared with consolidated net income of $8.6 million, or $4.69 per basic and $4.68 per diluted share, in the second quarter of 2020. ~~This is compared with consolidated net income of $9.7 million, or $5.21 per basic and $5.18 per diluted share, in the second quarter of 2019.~~ The income per basic share computations are based on weighted average basic shares outstanding of ~~1,835,000~~1,826 thousand in the ~~2020~~2021 period and ~~1,854,000~~1,835 thousand in the ~~2019~~2020 period. The income per diluted share computations are based on weighted average diluted shares outstanding of ~~1,839,000~~1,828 thousand in the 2021 period and 1,839 thousand in the 2020 ~~period and 1,864,000 in the 2019~~ period.

Consolidated revenues of $42.7 million for the second quarter of 2021 were 12.4 percent higher than revenues of $38.0 million for the second quarter of ~~2020 were 5 percent lower than revenues~~2020. This increase was primarily due to sales volumes of ~~$40.1 million for~~our Cardiovascular products. Sales volumes in our Other product line also increased. The COVID-19 pandemic had a negative impact on our sales in the second quarter of ~~2019. This decrease was primarily attributable to decrease in volumes of our Cardiovascular and Ophthalmology products partially offset by increased volumes of our Fluid Delivery products.~~2020 as patients deferred elective procedures.
15
~~Table of Contents~~

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

Three Months ended
June 30,

Three Months Ended
June 30,

2020

2019

2021

2020

Fluid Delivery

$ 21,761

$ 18,285

$ 20,920

$ 21,761

Cardiovascular

10,841

14,579

13,157

10,841

Ophthalmology

936

1,817

2,102

936

Other

4,430

5,422

6,514

4,430

Total

$ 37,968

$ 40,103

$ 42,693

$ 37,968

Cost of goods sold of $24.8 million for the second quarter of 2021 was 21.1 percent higher than our cost of goods sold of $20.5 million for the second quarter of 2020 ~~was 4.7 percent lower than cost of goods sold of $21.5 million for the second quarter of 2019~~ primarily due to ~~lower~~higher sales ~~volumes.~~volumes, sales mix and higher manufacturing costs. Our cost of goods sold in the second quarter of ~~2020~~2021 was ~~54.0~~58.2 percent of revenues compared ~~with 53.6~~to 54.0 percent of revenues in the second quarter of ~~2019.~~2020.

Gross profit of ~~$17.5~~$17.9 million in the second quarter of ~~2020~~2021 was ~~$1.1~~$0.4 million or ~~6.0~~2.3 percent ~~lower~~higher than in the comparable ~~2019~~2020 period. Our gross profit percentage in the second quarter of ~~2020~~2021 was ~~46.0~~41.8 percent of revenues compared with ~~46.4~~46.0 percent of revenues in the second quarter of ~~2019.~~2020. The decrease in gross profit percentage in the ~~2020~~2021 period compared to the ~~2019~~2020 period was primarily related to ~~increased manufacturing costs~~a 2021 product sales mix with lower ~~sales volumes.~~margins, inefficiencies in our manufacturing operations in 2021 and higher manufacturing costs.

Our second quarter ~~2020~~2021 operating expenses of ~~$7.4~~$8.1 million were ~~$203,000 lower~~$649 thousand higher than the operating expenses for the second quarter of ~~2019.~~2020. This ~~decrease~~increase was attributable to a $132,000 decrease in Research and Development, or R&D, expenses and a $395,000 decrease in Selling expenses. General and Administrative, or G&A, expenses partially offset these declines with a $324,000 increase. The decrease$353 thousand increase in R&D expenses ~~was~~ primarily for outside services related to ~~company mandated travel restrictions due to COVID-19~~ongoing projects and ~~rescheduled international registrations. The decrease in~~increased salaries. Selling expenses ~~was~~increased $171 thousand primarily for travel and commissions related to ~~Company-mandated travel restrictions~~higher sales. General and ~~cancelled conferences due to COVID-19. The increase~~Administrative expenses were $125 thousand higher primarily in ~~G&A expenses was mainly due to increased software maintenance and salary expenses.~~compensation.

Operating income in the second quarter of ~~2020~~2021 decreased ~~$920,000~~by $251 thousand to ~~$10.0~~$9.8 million ~~an 8 percent decrease compared~~due to ~~our~~higher operating ~~income in the quarter ended June 30, 2019.~~expenses discussed above. Operating income was 2622.9 percent of revenues for the second quarter of ~~2020~~2021 and 2726.5 percent of revenues for the second quarter of ~~2019.~~2020.

Interest and dividend income in the second quarter of ~~2020~~2021 was ~~$367,000~~$183 thousand compared with ~~$581,000~~$367 thousand for the same period in the prior year. The decline in interest and dividend income was largely due to lower interest rates in the 2021 period as compared to the 2020 ~~versus 2019.~~period.

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Table of Contents

Other investment income in the second quarter of ~~2020~~2021 was ~~$354,000~~$963 thousand compared with Other investment income of ~~$161,000~~$354 thousand in the second quarter of ~~2019.~~2020. These amounts were attributable to unrealized gains and losses on equity investments resulting from changes in the market values of the investments in each ~~respective~~ quarter.

Income tax expense was $2.0 million for the second quarter of 2021 compared with $2.2 million for the second quarter of ~~2020 compared with $2.0 million for the second quarter of 2019.~~2020. The effective tax rate for the second quarter of ~~2020~~2021 was ~~20.1~~18.4 percent compared with ~~17.5~~20.1 percent for the second quarter of ~~2019.~~2020. The ~~increase~~decrease in the ~~2020~~2021 period’s effective tax rate compared to the prior-year period was primarily related to ~~decreased tax benefits from stock compensation.~~lower state income taxes.

Results for the six months ended June 30, ~~2020~~2021

Consolidated net income totaled $16.7 million, or $9.12 per basic and $9.10 per diluted share, in first six months of 2021. This is compared with consolidated net income of $17.5 million, or $9.49 per basic and $9.47 per diluted share, in ~~first six months of 2020. This is compared with consolidated net income of $19.1 million, or $10.30 per basic and $10.25 per diluted share, in~~ the first six months of ~~2019.~~2020. The income per basic share computations are based on weighted average basic shares outstanding of ~~1,844,000~~1,826 thousand in the ~~2020~~2021 period and ~~1,854,000~~1,844 thousand in the ~~2019~~2020 period. The income per diluted share computations are based on weighted average diluted shares outstanding of ~~1,849,000~~1,830 thousand in the 2021 period and 1,849 thousand in the 2020 ~~period and 1,863,000 in the 2019~~ period.

Consolidated revenues of $81.9 million for the first six months of 2021 were slightly higher than revenues of $81.6 million for the first six months of ~~2020 approximated revenues of $81.7 million for the first six months of 2019. Higher~~2020. Increased sales in ~~Fluid Delivery~~Other and Ophthalmic products were offset by lower ~~Cardiovascular, Ophthalmology and Other~~Fluid Delivery sales.

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

Six Months ended
June 30,

Six Months Ended
June 30,

2020

2019

2021

2020

Fluid Delivery

$ 44,108

$ 36,446

$ 39,995

$ 44,108

Cardiovascular

25,666

29,999

25,987

25,666

Ophthalmology

1,800

4,100

3,796

1,800

Other

9,989

11,172

12,084

9,989

Total

$ 81,563

$ 81,717

$ 81,862

$ 81,563

Cost of goods sold of ~~$44.2~~$47.7 million for the first six months of ~~2020~~2021 was ~~$154,000 lower~~$3.4 million higher than in the comparable ~~2019~~2020 period. ~~A favorable~~This increase is due to an unfavorable product sales mix and ~~continued cost improvement projects more than offset increased~~higher manufacturing costs in the first six months of ~~2020.~~2021. Our cost of goods sold in the first six months of ~~both~~2021 and 2020 was 58.2 percent and ~~2019 was 54.4~~54.2 percent of ~~revenues.~~revenues, respectively.

Gross profit was $34.2 million in the first six months of 2021 and $37.3 million in the first six months of ~~both 2020 and 2019.~~2020. Our gross profit percentage was ~~45.8~~41.8 percent of revenues in the first six months in ~~2020~~2021 and ~~45.6~~45.8 percent in ~~2019. Favorable~~2020. This decrease was driven by unfavorable product sales mix and ~~continued cost improvements offset~~ increased manufacturing ~~costs as mentioned above.~~costs.

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Operating expenses of $15.5 million for the first six months ~~2020~~2021 were ~~$286,000 higher~~$97 thousand lower than the operating expenses for the first six months of ~~2019.~~2020. This ~~increase was comprised of a $457,000 increase in R&D expenses, $538,000 increase in G&A expenses and a $709,000~~ decrease ~~in Selling expenses. The increase in R&D expenses~~ was primarily ~~related to increased outside services~~in general and ~~compensation. The increase in G&A expenses for the first six months~~administrative expense as a result of 2020 was principally attributable to increased compensation, software maintenance, and outside services. The decrease in Selling expenses was principally attributable to Company-mandated travel restrictions and cancelled conferences due to COVID-19.lower compensation.

Operating income in the first six months of ~~2020~~2021 decreased ~~$244,000~~$3.0 million to ~~$21.8~~$18.7 million, a 113.9 percent decrease from our operating income in the six months ended June 30, ~~2019.~~2020. Operating income for the first six months in 2021 and 2020 was 22.9 percent and ~~2019 was 27~~26.7 percent of ~~revenues.~~revenues respectively.

Interest and dividend income for the first six months of ~~2020~~2021 was ~~$858,000,~~$399 thousand, compared with ~~$1.2 million~~$858 thousand for the same period in the prior year. The decline in interest and dividend income was largely due to lower interest rates in the 2021 period versus the 2020 ~~versus 2019.~~period.

Other investment ~~loss~~income for the first six months of ~~2020~~2021 was ~~$673,000~~$1.0 million compared ~~with an investment income of $372,000~~to a $673 thousand loss in the first six months of ~~2019.~~2020. These amounts were attributable to unrealized ~~losses~~gains and ~~gains~~losses on equity investments resulting from changes in the market values of ~~the~~our investments in each ~~respective quarter.~~time period. The impact of COVID-19 ~~significantly~~on equity markets in the 2020 period also impacted ~~certain equity market valuations in 2020, also impacting~~ our investments.

Income tax expense was ~~$4.4~~$3.6 million for the first six months ~~of both 2020~~in 2021 and ~~2019.~~$4.4 million the first six months in 2020. The effective tax rate for the first six months of ~~2020~~2021 was ~~20.2~~17.6 percent, compared with ~~18.8~~20.2 percent for the first six months of ~~2019.~~2020. The ~~increase~~decrease in the ~~2020~~2021 period effective tax rate was primarily related to ~~decreased tax benefits from stock compensation.~~a decrease in state income taxes. We expect the effective tax rate for ~~the remainder of 2020~~2021 to be approximately 2017 percent.

Liquidity and Capital Resources

As of June 30, ~~2020,~~2021, 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.~~2024. The credit facility is secured by substantially all of our inventories, equipment and accounts receivable. Interest under the credit facility is assessed at 30-day, 60-day or 90-day LIBOR, as selected by us, plus 1.0 percent and is payable monthly. We had no outstanding borrowings under ~~our~~the credit facility at June 30, 2020. 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, depreciation2021 and ~~amortization. At June 30, 2020,~~ we were in compliance with all financial covenants.

At June 30, ~~2020,~~2021, we had a total of ~~$87.5~~$80.0 million in cash and cash equivalents, short-term investments and long-term ~~investments, a decrease of $13.1 million from~~investments. At December 31, ~~2019. The principal contributor to this decrease was stock buybacks of $17.0~~2020, cash and cash equivalents, short-term investments and long-term investments were $87.9 million.

Cash flows from operating activities of ~~$19.4~~$16.0 million for the six months ended June 30, ~~2020~~2021 were primarily comprised of net income plus the net effect of non-cash expenses, ~~and increases in accrued income and other taxes partially offset by~~ increases in accounts receivable, and ~~inventories.~~decreases in accounts payable and prepaid expenses. During the first six months of ~~2020,~~2021, we ~~expended $30.4~~used $16.1 million for the purchase of investments, ~~$8.8~~$7.3 million for the addition of property and equipment, ~~$17.0~~$10.5 million infor the purchase of treasury stock ~~buybacks~~ and ~~$5.7~~$6.4 million for dividends. During the same period, maturities and sales of investments generated ~~$20.7~~$19.4 million in cash.
At June 30, 2021, we had working capital of $113.2 million, including $17.0 million in cash and cash equivalents and $30.5 million in short-term investments compared to working capital of $98.7 million at December 31, 2020. The $14.5 million increase in working capital during the six months of 2021 was primarily related to an increase in short term investments $11.2 million and an increase in accounts receivable of $6.2 million.

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At June, 30, 2020, we had working capital of $86.7 million, including $24.1 million in cash and cash equivalents and $6.6 million in short-term investments. The $34.4 million decrease in working capital during the first six months of 2020 was primarily related to decreases of cash and cash equivalents of $20.1 million and short term investments of $17.2 million.
We believe that our ~~$87.5~~$80.0 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 increase during the remainder of 2020.~~

COVID-19 Impact

The COVID-19 ~~which has spread throughout the United States and the world,~~pandemic has resulted in travel and other restrictions to reduce the implementation of numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. Although we are unable to predict accurately the full impact that COVID-19 will have on our results of operations, financial condition, liquidity, and cash flows due to numerous uncertainties, including the duration and severityspread of the ~~pandemic~~disease, including governmental orders across the globe, which, among other things, directed individuals to shelter at their places of residence, directed businesses and ~~containment measures, our compliance with~~governmental agencies to cease non-essential operations at physical locations, prohibited certain non-essential gatherings, maintain social distancing, and order cessation of non-essential travel. As a result of these ~~measures has disrupted our business and operations, as well as those of many~~developments, we implemented work-from-home policies for certain of our key customers, suppliers, and other counterparties. In response to the COVID-19 pandemic, various national, state, and local governments where we, our customers, and our suppliers operate have issued decrees prohibiting certain businesses from continuing to operate or restricting certain of their operations. To help protect the health and well-being of our employees and communities, some of our employees have been working remotely, and we have implemented additional health and safety measures in our facilities.employees. In addition, many of our customers ~~have~~ implemented and are continuing similar measures in their facilities, which ~~has~~have delayed, and may continue to delay, the timing of some orders and deliveries. The effects of shelter-in-place and social distancing orders, government-imposed quarantines, and work-from-home policies may continue negatively impacting productivity, disrupting our business, and delaying our development timelines beyond the delays we have already experienced and disclosed, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. Such restrictions and limitations may also continue negatively impacting our access to regulatory authorities (which are affected, among other things, by applicable travel restrictions and may be delayed in responding to inquiries, reviewing filings, and conducting inspections); our ability to perform regularly scheduled quality checks and maintenance; and our ability to obtain services from third-party specialty vendors and other providers or to access their expertise as fully and timely as needed. The COVID-19 pandemic has resulted and may continue resulting in the loss of some of our key personnel, either temporarily or permanently. In addition, our sales and marketing efforts have been negatively impacted and may be further negatively impacted by postponement or cancellation of face-to-face meetings and restrictions on access by non-essential personnel to hospitals or clinics to the extent such measures slow down adoption or further commercialization of our marketed products. The demand for our products has been and may continue to be adversely impacted by the restrictions and limitations adopted in response to the COVID-19 pandemic, particularly to the extent they affect the patients’ ability or willingness to undergo elective surgeries. As a result, some of our inventory may become obsolete and may need to be written off, impacting our operating results. These and similar, and perhaps more severe, disruptions in our operations may materially adversely impact our business, operating results, and financial condition.

~~Although such disruptions did not have a material adverse impact on our financial results for~~The global COVID-19 pandemic continues to evolve as progress in fighting the ~~first six months~~pandemic is being made in the United States and some other countries with greater percentages of ~~fiscal 2020, for~~ the ~~three months ended June 30, 2020, our revenues were down 5 percent, our operating income was down 8 percent and net income was down 11 percent from~~populations being vaccinated. However, the ~~three months ended June 30, 2019 and results for the third and fourth quarters of 2020 and for an indeterminate period thereafter could be affected by the~~ultimate impact of the pandemic remains highly uncertain and subject to change. Accordingly, we do not yet know the full impact that the pandemic will have on our business, healthcare systems, or the global pandemic. OEM customers and end users of our products may experience financial distress, mass illness, supply chain disruptions, and government prohibitions that could impact purchases of products from us. Illnesses, government prohibitions and restrictions, and supply chain disruptions could also impact our ability to fulfill orders. Additionally, we may be unable to collect receivables from those customers significantly impacted by COVID-19. A decrease in orders in a given period could negatively affect our revenues in future periods, particularly if experienced on a sustained basis.
~~We will continue to evaluate the nature and extent of the impact of COVID-19 to our business.~~economy.

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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 income tax rate for ~~the remainder of 2020,~~2021, 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 impact of the COVID-19 pandemic on our business and operations, and our financial ~~results, the increase in cash, cash equivalents, and investments during the remainder of 2020.~~results. 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: the risk that the COVID-19 pandemic ~~could lead~~leads to further material delays and cancellations of, or reduced demand for, procedures in which our products are utilized; curtailed or delayed capital spending by hospitals and other healthcare providers; disruption to our supply chain; closures of our facilities; delays in training; delays in gathering clinical evidence; diversion of management and other resources to respond to the COVID-19 outbreak; the impact of global and regional economic and credit market conditions on healthcare spending; the risk that the COVID-19 virus further disrupts local economies and causes economies in our key markets to enter prolonged recessions; 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~~
Quantitative and Qualitative Disclosures About Market Risk.

For the quarter ended June 30, ~~2020,~~2021, we did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in our ~~2019~~2020 Form 10-K.
Item 4. ~~Controls and Procedures~~
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 June 30, ~~2020.~~2021. 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 June 30, ~~2020~~2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

2019
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PART II - OTHER INFORMATION

Item 1.
Legal Proceedings.
~~OTHER INFORMATION~~
We have no pending legal proceedings of the type described in Item 103 of Regulation S-K.

~~ITEM 1. LEGAL PROCEEDINGS~~
Item 1A.
Risk Factors.

~~From time to time, we may be involved in claims or litigation that arise~~As of the date of this Report, there has been no material change 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~~
~~Item 1A. of~~risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019 and Part II, Item 1A. of~~2020, as supplemented by the risk factor described in our Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020 include a discussion of our risk factors. There have been no material changes in the risk factors described in those reports, except as discussed below.~~
~~The COVID-19 pandemic has adversely affected our consolidated results of operations and~~ ~~may continue to do so.~~
COVID-19, which has spread throughout the United States and the world, has resulted in the implementation of numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. Although we are unable to predict accurately the full impact that COVID-19 will have on our results of operations, financial condition, liquidity, and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has disrupted our business and operations, as well as those of many of our key customers, suppliers, and other counterparties. In response to the COVID-19 pandemic, various national, state, and local governments where we, our customers, and our suppliers operate have issued decrees prohibiting certain businesses from continuing to operate or restricting certain of their operations. To help protect the health and well-being of our employees and communities, some of our employees have been working remotely, and we have implemented additional health and safety measures in our facilities. In addition, many of our customers have implemented similar measures in their facilities, which has delayed, and may continue to delay, the timing of some orders and deliveries.
Although such disruptions did not have a material adverse impact on our financial results for the first six months of fiscal 2020, for the three months ended June 30, 2020, our revenues were down 5 percent, our operating income was down 8 percent and net income was down 11 percent from the three months ended June 30, 2019 and results in the third and fourth quarters of 2020 and for an indeterminate period thereafter could be affected, by the impact of the global pandemic. OEM customers and end users of our products may experience financial distress, mass illness, supply chain disruptions, and government prohibitions that could impact purchases of products from us. Illnesses, government prohibitions and restrictions, and supply chain disruptions could also impact our ability to fulfill orders. Additionally, we may be unable to collect receivables from those customers significantly impacted by COVID-19. A decrease in orders in a given period could negatively affect our revenues in future periods, particularly if experienced on a sustained basis.
~~We will continue to evaluate the nature and extent of the impact of COVID-19 to our business.~~2021.

Item 2.
21
~~Table~~Unregistered Sales of ~~Contents~~Equity Securities and Use of Proceeds.
~~Item 2.~~ ~~Unregistered Sales of Equity Securities and Use of Proceeds~~

The table below sets forth information with respect to our purchases of our common stock during each of the three months in the period ended June 30, ~~2020.~~2021.

Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾

4/1/2020 through 4/30/2020

3,500

$ 624.81

3,500

213,689

5/1/2020 through 5/31/2020

4,916

$ 645.02

4,916

208,773

6/1/2020 through 6/30/2020

3,742

$ 650.53

3,742

205,031

Total

12,158

$ 640.90

12,158

205,031

Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾

4/1/2021 to 4/30/2021

-

$ -

-

202,018

5/1/2021 to 5/31/2021

1,095

$ 601.31

1,095

200,923

6/1/2021 to 6/30/2021

16,028

$ 613.28

16,028

184,895

Total

17,123

$ 612.52

17,123

184,895

(1)
On May 21, 2015, our Board of Directors approved a stock repurchase program pursuant to which we can repurchase up to 250,000 shares of our common stock from time to time in open market or privately-negotiated transactions. At June 30, ~~2020,~~2021, we had repurchased ~~44,969~~65,105 shares of our common stock authorized under the program approved in May 2015. Our stock repurchase program has no expiration date but may be terminated by our Board of Directors at any time.

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~~ITEM 6. Exhibits~~
Item 6..
Exhibits.

Exhibit Index

Exhibit
Number
~~Description~~

Description
10.1
Atrion Corporation 2021 Equity Incentive Plan effective May 21, 2021 (incorporated by reference to Appendix A of Atrion Corporation’s Definitive Proxy Statement filed on April 7, 2021)
10.2
Form of Common Stock Award Agreement under Atrion Corporation 2021 Equity Incentive Plan
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

~~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

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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 ~~6, 2020~~9, 2021 By: /s/ David A. Battat

David A. Battat

President and Chief Executive Officer

~~Chief Executive Officer~~

Date: August ~~6, 2020~~9, 2021
By:
/s/ Jeffery Strickland

Jeffery Strickland
~~Vice President and~~
~~Chief Financial Officer~~

Vice President and
Chief Financial Officer
(Principal Accounting and Financial Officer)


22

(2)	Inventories

	Inventories are stated at the lower of cost or net realizable value. Cost is determined by using the first-in, first-out method. The following table details the major components of inventories (in thousands):

(3)	Income per share

	The following is the computation for basic and diluted income per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in thousands, except per share amounts)
Net income	$	8,924	$	8,605	$	16,651	$	17,502
Weighted average basic shares outstanding		1,826		1,835		1,826		1,844
Add: Effect of dilutive securities		2		4		4		5
Weighted average diluted shares outstanding		1,828		1,839		1,830		1,849
Earnings per share:
Basic	$	4.89	$	4.69	$	9.12	$	9.49
Diluted	$	4.88	$	4.68	$	9.10	$	9.47

(4)	Investments

	As of June 30, 2021, we held investments in commercial paper, bonds, money market accounts, mutual funds and equity securities. The commercial paper and bonds are considered held-to-maturity and are recorded at amortized cost in the accompanying consolidated balance sheets. The money market accounts, equity securities and mutual funds are recorded at fair value in the accompanying consolidated balance sheets. The fair values of these investments were estimated using recently executed transactions and market price quotations. We consider as current assets those investments which will mature in the next 12 months including interest receivable on the long-term bonds. The remaining investments are considered non-current assets including our investment in equity securities we intend to hold longer than 12 months.

	June 30, 2021			December 31, 2020
Cash and cash equivalents:
Cash deposits	$	11,680		$	16,628
Money market funds		4,640			4,822
Commercial paper		750			1,000
Total cash and cash equivalents	$	17,070		$	22,450
Short-term investments:
Commercial paper (held-to-maturity)	$	5,852		$	5,178
Bonds (held-to-maturity)		24,651			14,101
Allowance for credit losses		(25	)		(21	)
Total short-term investments	$	30,478		$	19,258
Long-term investments:
Mutual funds (available for sale)	$	529		$	563
Bonds (held-to-maturity)		26,915			41,619
Allowance for credit losses		(26	)		(52	)
Equity securities (available for sale)		5,023			4,077
Total long-term investments	$	32,441		$	46,207
Total cash, cash equivalents and short and long-term investments	$	79,989		$	87,915

	June 30, 2020			December 31, 2019
Cash and cash equivalents:
Cash deposits	$	21,488		$	38,942
Money market funds		1,861			3,460
Commercial paper		750			2,646
Total cash and cash equivalents	$	24,099		$	45,048
Short-term investments:
Commercial paper (held-to-maturity)	$	4,709		$	6,778
Bonds (held-to-maturity)		1,880			16,988
Allowance for credit losses		(16	)		-
Total short-term investments	$	6,573		$	23,766
Long-term investments:
Mutual funds (available for sale)	$	462		$	1,105
Bonds (held-to-maturity)		54,353			27,845
Allowance for credit losses		(66	)		-
Equity securities (available for sale)		2,123			2,822
Total long-term investments	$	56,872		$	31,772
Total cash, cash equivalents and short and long-term investments	$	87,544		$	100,586

Held-to-Maturity Bonds
Credit Quality Indicators	Asset Backed Bonds		Fed Govt. Bonds/Notes		Municipal Bonds		Corporate Bonds		Totals
AAA/AA/A	$	83	$	3,126	$	634	$	33,909	$	37,752
BBB/BB		0		0		0		13,814		13,814
TOTAL	$	83	$	3,126	$	634	$	47,723	$	51,566

Held-to-Maturity Bonds
Credit Quality Indicators	Asset Backed Bonds		Fed Govt Bonds/Notes		Municipal Bonds		Corporate Bonds		Totals
AAA/AA/A	$	2,392	$	3,335	$	755	$	34,771	$	41,253
BBB/BB		-		-		-		14,980		14,980
TOTAL	$	2,392	$	3,335	$	755	$	49,751	$	56,233

	Gross Unrealized
	Level		Cost		Gains		Losses			Fair Value
As of June 30, 2021:
Money market		1		4,640	$	0	$	0		$	4,640
Commercial paper		2		6,602	$	1	$	0		$	6,603
Bonds		2		51,566	$	249	$	(20	)	$	51,795
Mutual funds		1		509	$	20	$	0		$	529
Equity investments		2		5,675	$	0	$	(652	)	$	5,023

As of December 31, 2020:
Money Market		1		4,822	$	0	$	0		$	4,822
Commercial paper		2		6,178	$	0	$	0		$	6,178
Bonds		2		55,720	$	505	$	(44	)	$	56,181
Mutual funds		1		599	$	0	$	(36	)	$	563
Equity investments		2		5,675	$	0	$	(1,598	)	$	4,077

	Short- Term Securities		Long- Term Securities		Total
Beginning balance, December 31, 2019	$	-	$	-	$	-
Allowance recognized upon adoption of Topic 326		9		33		42
Provision for credit loss expense		7		33		40
Ending balance, June 30, 2020	$	16	$	66	$	82

(5)	Patents and Licenses

	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):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
United States	$	24,649	$	19,530	$	46,687	$	45,722
Italy		2,908		2,072		4,982		3,554
China		2,611		1,800		4,212		2,998
Germany		2,064		2,918		4,464		6,155
Other countries less than 5% of revenues		10,461		11,648		21,517		23,134
Total	$	42,693	$	37,968	$	81,862	$	81,563

(7)	Recent Accounting Pronouncements

	From time to time, new accounting pronouncements applicable to us are issued by the Financial Accounting Standards Board or other standards-setting bodies. We generally adopt these standards as of the specified effective date. Unless otherwise discussed, we believe the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

��	·	Focusing on customer needs;

	·	Expanding existing product lines and developing new products;

	·	~~Manufacturing products to exacting quality standards;~~Maintaining a culture of controlling cost; and

	·	Preserving and fostering a collaborative, ~~respectful and~~ entrepreneurial ~~culture.~~management structure.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
4/1/2020 through 4/30/2020		3,500	$	624.81		3,500	213,689
5/1/2020 through 5/31/2020		4,916	$	645.02		4,916		208,773
6/1/2020 through 6/30/2020		3,742	$	650.53		3,742		205,031
Total		12,158	$	640.90		12,158		205,031

Exhibit
Number		~~Description~~
		Description
10.1		Atrion Corporation 2021 Equity Incentive Plan effective May 21, 2021 (incorporated by reference to Appendix A of Atrion Corporation’s Definitive Proxy Statement filed on April 7, 2021)
10.2		Form of Common Stock Award Agreement under Atrion Corporation 2021 Equity Incentive Plan
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
~~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

	Atrion Corporation
	(Registrant)

Date: August ~~6, 2020~~9, 2021	By:	/s/ David A. Battat
		David A. Battat
		President and Chief Executive Officer
		~~Chief Executive Officer~~


Date: August ~~6, 2020~~9, 2021	By:	/s/ Jeffery Strickland
		Jeffery Strickland
		~~Vice President and~~
		~~Chief Financial Officer~~
		Vice President and
		Chief Financial Officer (Principal Accounting and Financial Officer)