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 |
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for the Quarterly Period Ended June 30, | |
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or | |
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☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| for the Transition Period from |
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.) |
| ||
| ||
| ||
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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 |
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 | ☐ |
| ☐ | ||
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 |
Common stock, Par Value $0.10 per share |
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ATRION CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
2 |
Table of Contents |
PART I
FINANCIAL INFORMATION
Item 1. | 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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||||||||||||||
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 |
| ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
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 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income |
| $ | 8,605 |
|
| $ | 9,664 |
|
| $ | 17,502 |
|
| $ | 19,102 |
|
| $ | 8,924 |
|
| $ | 8,605 |
|
| $ | 16,651 |
|
| $ | 17,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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| ||||||||||||||
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
| ||||||||||||||
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.
3 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| June 30, |
|
| December 31, 2020 |
| ||||||||||
Assets |
| June 30, |
|
| 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 |
| 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 |
|
| (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.
4 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| 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
5 |
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 |
|
|
|
|
| Shares |
|
|
|
|
| Paid-in Capital |
|
| Retained Earnings |
| Total |
|
| Shares Outstanding |
|
|
|
|
|
|
| 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.
6 |
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 |
|
|
|
|
| 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 |
|
|
|
|
|
|
|
|
|
|
| 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.
7 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to condensed Consolidated Financial Statements
(Unaudited)
(1) | 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 |
|
8 |
Table of Contents |
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(3) Income per share The following is the computation for basic and diluted income per share: Three Months Ended Six Months Ended 2021 2020 2021 2020 (in thousands, except per share amounts) Net income Weighted average basic shares outstanding Add: Effect of dilutive securities Weighted average diluted shares outstanding Earnings per share: Basic Diluted June 30, December 31, 2020 2019 Raw materials Work in process Finished goods Total inventories 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. Three Months Ended Six Months Ended 2020 2019 2020 2019 (in thousands, except per share amounts) Net income Weighted average basic shares outstanding Add: Effect of dilutive securities Weighted average diluted shares outstanding Earnings per share: Basic Diluted (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. ATRION CORPORATION AND SUBSIDIARIES (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 Money market funds Commercial paper Total cash and cash equivalents Short-term investments: Commercial paper (held-to-maturity) Bonds (held-to-maturity) Allowance for credit losses Total short-term investments Long-term investments: Mutual funds (available for sale) Bonds (held-to-maturity) Allowance for credit losses Equity securities (available for sale) Total long-term investments Total cash, cash equivalents and short and long-term investments June 30, 2020 December 31, 2019 Cash and cash equivalents: Cash deposits Money market funds Commercial paper Total cash and cash equivalents Short-term investments: Commercial paper (held-to-maturity) Bonds (held-to-maturity) Allowance for credit losses Total short-term investments Long-term investments: Mutual funds (available for sale) Bonds (held-to-maturity) Allowance for credit losses Equity securities (available for sale) Total long-term investments Total cash, cash equivalents and short and long-term investments 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. ATRION CORPORATION AND SUBSIDIARIES (Unaudited) 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 BBB/BB TOTAL Held-to-Maturity Bonds Credit Quality Indicators Asset Backed Bonds Fed Govt Bonds/Notes Municipal Bonds Corporate Bonds Totals AAA/AA/A BBB/BB TOTAL 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, 2021: Money market 1 Commercial paper 2 Bonds 2 Mutual funds 1 Equity investments 2 As of December 31, 2020: Money Market 1 Commercial paper 2 Bonds 2 Mutual funds 1 Equity investments 2 Short- Term Securities Long- Term Securities Total Beginning balance, December 31, 2019 Allowance recognized upon adoption of Topic 326 Provision for credit loss expense Ending balance, June 30, 2020 1 2 2 1 2 1 2 2 1 2 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. ATRION CORPORATION AND SUBSIDIARIES (Unaudited) (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): June 30, 2021 December 31, 2020 Weighted Average Gross Weighted Average Gross 15.67 June 30, 2020 December 31, 2019 Weighted Average Gross Accumulated 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 2023 2024 2025 2026 (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 Italy China Germany Other countries less than 5% of revenues Total ATRION CORPORATION AND SUBSIDIARIES (Unaudited) 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 Cardiovascular Ophthalmology Other Total Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Fluid Delivery Cardiovascular Ophthalmology Other Total 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. Item 2. 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 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 Our strategic objective is to further enhance our position in our served markets by: �� · · · · For the three months ended June 30, Results for the three months ended June 30, 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. 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 Revenues by product line were as follows (in thousands): Three Months ended Three Months Ended 2020 2019 2021 2020 Fluid Delivery Cardiovascular Ophthalmology Other Total 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 Gross profit of Our second quarter Operating income in the second quarter of Interest and dividend income in the second quarter of Other investment income in the second quarter of Income tax expense was $2.0 million for the second quarter of 2021 compared with $2.2 million for the second quarter of Results for the six months ended June 30, 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 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 Revenues by product line were as follows (in thousands): Six Months ended Six Months Ended 2020 2019 2021 2020 Fluid Delivery Cardiovascular Ophthalmology Other Total Cost of goods sold of Gross profit was $34.2 million in the first six months of 2021 and $37.3 million in the first six months of Operating expenses of $15.5 million for the first six months Operating income in the first six months of Interest and dividend income for the first six months of Other investment Income tax expense was Liquidity and Capital Resources As of June 30, At June 30, Cash flows from operating activities of 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. We believe that our COVID-19 Impact The COVID-19 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 Item 3. Quantitative and Qualitative Disclosures About Market Risk. For the quarter ended June 30, 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 June 30, PART II - OTHER INFORMATION Item 1. Legal Proceedings. We have no pending legal proceedings of the type described in Item 103 of Regulation S-K. Item 1A. Risk Factors. Item 2. 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, Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) 4/1/2020 through 4/30/2020 213,689 5/1/2020 through 5/31/2020 6/1/2020 through 6/30/2020 Total Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) 4/1/2021 to 4/30/2021 5/1/2021 to 5/31/2021 6/1/2021 to 6/30/2021 Total (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, Item 6. Exhibits. Exhibit Index Exhibit Number 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) Form of Common Stock Award Agreement under Atrion Corporation 2021 Equity Incentive Plan Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer 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 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) David A. Battat President and Chief Executive Officer Date: August By: /s/ Jeffery Strickland Jeffery Strickland Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) (2) InventoriesInventories 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):
June 30,
June 30,$ 8,924 $ 8,605 $ 16,651 $ 17,502 1,826 1,835 1,826 1,844 2 4 4 5 1,828 1,839 1,830 1,849 $ 4.89 $ 4.69 $ 9.12 $ 9.49 $ 4.88 $ 4.68 $ 9.10 $ 9.47 $ 19,020 $ 18,157 9,972 8,525 16,813 15,411 $ 45,805 $ 42,093 (3) Income per shareThe following is the computation for basic and diluted income per share:
June 30,
June 30,$ 8,605 $ 9,664 $ 17,502 $ 19,102 1,835 1,854 1,844 1,854 4 10 5 9 1,839 1,864 1,849 1,863 $ 4.69 $ 5.21 $ 9.49 $ 10.30 $ 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) InvestmentsAs 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. 9 Table of Contents NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to condensed Consolidated Financial Statements$ 11,680 $ 16,628 4,640 4,822 750 1,000 $ 17,070 $ 22,450 $ 5,852 $ 5,178 24,651 14,101 (25 ) (21 ) $ 30,478 $ 19,258 $ 529 $ 563 26,915 41,619 (26 ) (52 ) 5,023 4,077 $ 32,441 $ 46,207 $ 79,989 $ 87,915 $ 21,488 $ 38,942 1,861 3,460 750 2,646 $ 24,099 $ 45,048 $ 4,709 $ 6,778 1,880 16,988 (16 ) - $ 6,573 $ 23,766 $ 462 $ 1,105 54,353 27,845 (66 ) - 2,123 2,822 $ 56,872 $ 31,772 $ 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. 10 Table of Contents NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to condensed Consolidated Financial StatementsThe following table summarizes the amortized cost of our held-to-maturity bonds at June 30, 2020,$ 83 $ 3,126 $ 634 $ 33,909 $ 37,752 0 0 0 13,814 13,814 $ 83 $ 3,126 $ 634 $ 47,723 $ 51,566 $ 2,392 $ 3,335 $ 755 $ 34,771 $ 41,253 - - - 14,980 14,980 $ 2,392 $ 3,335 $ 755 $ 49,751 $ 56,233 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):4,640 $ 0 $ 0 $ 4,640 6,602 $ 1 $ 0 $ 6,603 51,566 $ 249 $ (20 ) $ 51,795 509 $ 20 $ 0 $ 529 5,675 $ 0 $ (652 ) $ 5,023 4,822 $ 0 $ 0 $ 4,822 6,178 $ 0 $ 0 $ 6,178 55,720 $ 505 $ (44 ) $ 56,181 599 $ 0 $ (36 ) $ 563 5,675 $ 0 $ (1,598 ) $ 4,077 $ - $ - $ - 9 33 42 7 33 40 $ 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 1,861 $ -- $ -- $ 1,861 Commercial paper 5,459 $ 14 $ -- $ 5,473 Bonds 56,233 $ 575 $ (45 ) $ 56,763 Mutual funds 561 $ -- $ (99 ) $ 462 Equity investments 5,675 $ -- $ (3,552 ) $ 2,123 As of December 31, 2019: Money Market 3,460 $ -- $ -- $ 3,460 Commercial paper 9,424 $ 2 $ -- $ 9,426 Bonds 44,833 $ 138 $ (19 ) $ 44,952 Mutual funds 1,052 $ 53 $ -- $ 1,105 Equity investments 5,675 $ -- $ (2,853 ) $ 2,822 11 Table of Contents NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to condensed Consolidated Financial StatementsThe above bonds represent investments in various issuers at June 30, 2020.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.
Original Life
(years)
Carrying
Amount
Accumulated
Amortization
Original Life
(years)
Carrying
Amount
Accumulated
Amortization$ 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 LicensesPurchased 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):
Original Life
(years)
Carrying
Amount
Amortization15.67 $ 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$ 117 $ 113 $ 113 $ 112 $ 112 $ 24,649 $ 19,530 $ 46,687 $ 45,722 2,908 2,072 4,982 3,554 2,611 1,800 4,212 2,998 2,064 2,918 4,464 6,155 10,461 11,648 21,517 23,134 $ 42,693 $ 37,968 $ 81,862 $ 81,563 12 Table of Contents NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to condensed Consolidated Financial StatementsA summary of revenues by geographic area, based on shipping destination, for the three and six months ended June 30, 2020 and 2019 are$ 20,920 $ 21,761 $ 39,995 $ 44,108 13,157 10,841 25,987 25,666 2,102 936 3,796 1,800 6,514 4,430 12,084 9,989 $ 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):$ 21,761 $ 18,285 $ 44,108 $ 36,446 10,841 14,579 25,666 29,999 936 1,817 1,800 4,100 4,430 5,422 9,989 11,172 $ 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. 13 Table of Contents ATRION CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(7) Recent Accounting PronouncementsASU 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.14TableManagement’s Discussion and Analysis of ContentsFinancial Condition and Results of Operations.Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operationsdesign, product quality, price, engineering, customer service and delivery time.and payoffor eliminate indebtedness, to fund capital expenditures, to make investments, to repurchase stock and to pay dividends.Focusing on customer needs; Expanding existing product lines and developing new products; Manufacturing products to exacting quality standards;Maintaining a culture of controlling cost; andPreserving and fostering a collaborative, respectful and entrepreneurial culture.management structure.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 5up 4 percent down 8 percent and down 11 percent, respectively, from the three months ended June 30, 2019.2020.14 Table of Contents 20202021This 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 1,835,0001,826 thousand in the 20202021 period and 1,854,0001,835 thousand in the 20192020 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,839,0001,828 thousand in the 2021 period and 1,839 thousand in the 2020 period and 1,864,000 in the 2019 period.2020 were 5 percent lower than revenues2020. This increase was primarily due to sales volumes of $40.1 million forour Cardiovascular products. Sales volumes in our Other product line also increased. The COVID-19 pandemic had a negative impact on our sales in the second quarter of 2019. This decrease was primarily attributable to decrease in volumes of our Cardiovascular and Ophthalmology products partially offset by increased volumes of our Fluid Delivery products.2020 as patients deferred elective procedures.15Table of Contents
June 30,
June 30,$ 21,761 $ 18,285 $ 20,920 $ 21,761 10,841 14,579 13,157 10,841 936 1,817 2,102 936 4,430 5,422 6,514 4,430 $ 37,968 $ 40,103 $ 42,693 $ 37,968 was 4.7 percent lower than cost of goods sold of $21.5 million for the second quarter of 2019 primarily due to lowerhigher sales volumes.volumes, sales mix and higher manufacturing costs. Our cost of goods sold in the second quarter of 20202021 was 54.058.2 percent of revenues compared with 53.6to 54.0 percent of revenues in the second quarter of 2019.2020.$17.5$17.9 million in the second quarter of 20202021 was $1.1$0.4 million or 6.02.3 percent lowerhigher than in the comparable 20192020 period. Our gross profit percentage in the second quarter of 20202021 was 46.041.8 percent of revenues compared with 46.446.0 percent of revenues in the second quarter of 2019.2020. The decrease in gross profit percentage in the 20202021 period compared to the 20192020 period was primarily related to increased manufacturing costsa 2021 product sales mix with lower sales volumes.margins, inefficiencies in our manufacturing operations in 2021 and higher manufacturing costs.20202021 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 decreaseincrease 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-19ongoing projects and rescheduled international registrations. The decrease inincreased salaries. Selling expenses wasincreased $171 thousand primarily for travel and commissions related to Company-mandated travel restrictionshigher sales. General and cancelled conferences due to COVID-19. The increaseAdministrative expenses were $125 thousand higher primarily in G&A expenses was mainly due to increased software maintenance and salary expenses.compensation.20202021 decreased $920,000by $251 thousand to $10.0$9.8 million an 8 percent decrease compareddue to ourhigher 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 20202021 and 2726.5 percent of revenues for the second quarter of 2019.2020.20202021 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. 1615Table of Contents 20202021 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.2020 compared with $2.0 million for the second quarter of 2019.2020. The effective tax rate for the second quarter of 20202021 was 20.118.4 percent compared with 17.520.1 percent for the second quarter of 2019.2020. The increasedecrease in the 20202021 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.20202021first 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 1,844,0001,826 thousand in the 20202021 period and 1,854,0001,844 thousand in the 20192020 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,849,0001,830 thousand in the 2021 period and 1,849 thousand in the 2020 period and 1,863,000 in the 2019 period.2020 approximated revenues of $81.7 million for the first six months of 2019. Higher2020. Increased sales in Fluid DeliveryOther and Ophthalmic products were offset by lower Cardiovascular, Ophthalmology and OtherFluid Delivery sales.
June 30,
June 30,$ 44,108 $ 36,446 $ 39,995 $ 44,108 25,666 29,999 25,987 25,666 1,800 4,100 3,796 1,800 9,989 11,172 12,084 9,989 $ 81,563 $ 81,717 $ 81,862 $ 81,563 $44.2$47.7 million for the first six months of 20202021 was $154,000 lower$3.4 million higher than in the comparable 20192020 period. A favorableThis increase is due to an unfavorable product sales mix and continued cost improvement projects more than offset increasedhigher manufacturing costs in the first six months of 2020.2021. Our cost of goods sold in the first six months of both2021 and 2020 was 58.2 percent and 2019 was 54.454.2 percent of revenues.revenues, respectively.both 2020 and 2019.2020. Our gross profit percentage was 45.841.8 percent of revenues in the first six months in 20202021 and 45.645.8 percent in 2019. Favorable2020. This decrease was driven by unfavorable product sales mix and continued cost improvements offset increased manufacturing costs as mentioned above.costs. 1716Table of Contents 20202021 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 servicesin general and compensation. The increase in G&A expenses for the first six monthsadministrative 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.20202021 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 2726.7 percent of revenues.revenues respectively.20202021 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.lossincome for the first six months of 20202021 was $673,000$1.0 million compared with an investment income of $372,000to a $673 thousand loss in the first six months of 2019.2020. These amounts were attributable to unrealized lossesgains and gainslosses on equity investments resulting from changes in the market values of theour investments in each respective quarter.time period. The impact of COVID-19 significantlyon equity markets in the 2020 period also impacted certain equity market valuations in 2020, also impacting our investments.$4.4$3.6 million for the first six months of both 2020in 2021 and 2019.$4.4 million the first six months in 2020. The effective tax rate for the first six months of 20202021 was 20.217.6 percent, compared with 18.820.2 percent for the first six months of 2019.2020. The increasedecrease in the 20202021 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 20202021 to be approximately 2017 percent.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 ourthe 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.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 frominvestments. At December 31, 2019. The principal contributor to this decrease was stock buybacks of $17.02020, cash and cash equivalents, short-term investments and long-term investments were $87.9 million.$19.4$16.0 million for the six months ended June 30, 20202021 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 $30.4used $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. 1817Table of Contents 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.$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.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 pandemicdisease, 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 withgovernmental 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 manydevelopments, 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 hashave 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 forThe global COVID-19 pandemic continues to evolve as progress in fighting the first six monthspandemic 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 frompopulations 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 theultimate 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. 1918Table of Contents 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 leadleads 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. Quantitative and Qualitative Disclosures About Market Risk2020,2021, we did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in our 20192020 Form 10-K. Controls and Procedures2020.2021. 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, 20202021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. 2019Table of Contents OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSFrom time to time, we may be involved in claims or litigation that ariseAs 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 FACTORSItem 1A. ofrisk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Part II, Item 1A. of2020, 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.2021.21TableUnregistered Sales of ContentsEquity Securities and Use of Proceeds.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds2020.2021.
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs3,500 $ 624.81 3,500 4,916 $ 645.02 4,916 208,773 3,742 $ 650.53 3,742 205,031 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- $ - - 202,018 1,095 $ 601.31 1,095 200,923 16,028 $ 613.28 16,028 184,895 17,123 $ 612.52 17,123 184,895 2020,2021, we had repurchased 44,96965,105 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. 2220Table of Contents ITEM 6. Exhibits.Description101.SCH 2321Table of Contents Date: August 6, 20209, 2021By: /s/ David A. Battat Chief Executive Officer 6, 20209, 2021Vice President andChief Financial Officer22