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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Period Ended September 30, 2004 Commission File Number 0-10763
Atrion Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 63-0821819
- -------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One Allentown Parkway, Allen, Texas 75002
-----------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(972) 390-9800
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__ NO ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding at
Title of Each Class November 2, 2004
- ---------------------------------------- --------------------------------
Common stock, Par Value $0.10 per share 1,716,407
ATRION CORPORATION AND SUBSIDIARIES
-----------------------------------
TABLE OF CONTENTS
-----------------
PART I. Financial Information 2
Item 1. Financial Statements
Consolidated Statements of Income (Unaudited)
For the Three and Nine Months Ended
September 30, 2004 and 2003 3
Consolidated Balance Sheets
September 30, 2004 (Unaudited) and December 31, 2003 4
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended
September 30, 2004 and 2003 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. Other Information 13
Item 1. Legal Proceedings 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
Item 6. Exhibits and Reports on
Form 8-K 14
SIGNATURES 15
1
PART I
FINANCIAL INFORMATION
2
Item 1. Financial Statements
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2004 2003 2004 2003
(in thousands, except per share amounts)
Revenues $ 16,704 $ 16,117 $ 49,910 $ 48,013
Cost of goods sold 10,506 10,291 31,691 31,014
--------- --------- --------- ---------
Gross profit 6,198 5,826 18,219 16,999
--------- --------- --------- ---------
Operating expenses:
Selling 1,223 1,437 4,055 4,235
General and administrative 2,170 1,987 6,270 5,872
Research and development 588 547 1,712 1,607
--------- --------- --------- ---------
3,981 3,971 12,037 11,714
--------- --------- --------- ---------
Operating income 2,217 1,855 6,182 5,285
--------- --------- --------- ---------
Other income:
Interest income 11 16 33 55
Interest expense (23) (46) (66) (161)
Other income (expense), net -- 5 45 --
--------- --------- --------- ---------
(12) (25) 12 (106)
--------- --------- --------- ---------
Income from continuing operations before provision for
income taxes 2,205 1,830 6,194 5,179
Provision for income taxes 449 500 1,708 1,551
--------- --------- --------- ---------
Income from continuing operations 1,756 1,330 4,486 3,628
Gain on disposal of discontinued operations, net of
income taxes -- -- 165 165
--------- --------- --------- ---------
Net income $ 1,756 $ 1,330 $ 4,651 $ 3,793
========= ========= ========= =========
Income per basic share:
Income from continuing operations $ 1.02 $ 0.79 $ 2.62 $ 2.11
Gain on disposal of discontinued operations -- -- 0.10 0.10
--------- --------- --------- ---------
$ 1.02 $ 0.79 $ 2.72 $ 2.21
========= ========= ========= =========
Weighted average basic shares outstanding 1,716 1,683 1,710 1,716
========= ========= ========= =========
Income per diluted share:
Income from continuing operations $ 0.95 $ 0.73 $ 2.43 $ 1.98
Gain on disposal of discontinued operations -- -- 0.09 0.09
--------- --------- --------- ---------
$ 0.95 $ 0.73 $ 2.52 $ 2.07
========= ========= ========= =========
Weighted average diluted shares outstanding 1,854 1,823 1,849 1,835
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
3
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
September 30, December 31,
2004 2003
Assets (unaudited)
- ------ ------------- ------------
Current assets:
Cash and cash equivalents $ 446 $ 298
Accounts receivable 8,100 6,226
Inventories 13,047 11,314
Deposit on land purchase 3,750 --
Prepaid expenses 1,368 1,894
Other 760 760
------------- ------------
27,471 20,492
------------- ------------
Property, plant and equipment 49,191 45,767
Less accumulated depreciation and amortization 24,360 21,578
------------- ------------
24,831 24,189
------------- ------------
Other assets and deferred charges:
Patents 1,775 2,099
Goodwill 9,730 9,730
Other 3,132 3,540
------------- ------------
14,637 15,369
------------- ------------
$ 66,939 $ 60,050
============= ============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 8,295 $ 6,038
Accrued income and other taxes 879 651
------------- ------------
9,174 6,689
------------- ------------
Line of credit 4,034 4,287
Other non-current liabilities 4,801 4,470
Stockholders' equity:
Common shares, par value $0.10 per share; authorized
10,000 shares, issued 3,420 shares 342 342
Paid-in capital 9,941 9,673
Retained earnings 72,900 68,900
Treasury shares,1,704 at September 30, 2004 and 1,720
at December 31, 2003, at cost (34,253) (34,311)
------------- ------------
Total stockholders' equity 48,930 44,604
------------- ------------
$ 66,939 $ 60,050
============= ============
The accompanying notes are an integral part of these statements.
4
ATRION CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
------------- ------------
2004 2003
------------- ------------
Cash flows from operating activities:
Net income $ 4,651 $ 3,793
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on disposal of discontinued operations (165) (165)
Depreciation and amortization 3,732 3,369
Deferred income taxes 297 298
Tax benefit related to stock plans 43 204
Other 1 31
------------- ------------
8,559 7,530
Change in operating assets and liabilities:
Accounts receivable (1,874) (1,132)
Inventories (1,733) (1,638)
Prepaid expenses 526 755
Other non-current assets 409 215
Accounts payable and current liabilities 2,257 1,653
Accrued income and other taxes 228 567
Other non-current liabilities 34 420
------------- ------------
Net cash provided by continuing operations 8,406 8,370
Net cash provided by discontinued operations 165 165
------------- ------------
8,571 8,535
------------- ------------
Cash flows from investing activities:
Property, plant and equipment additions (4,052) (3,611)
Deposit on land purchase (3,750) --
Property, plant and equipment sales -- 20
------------- ------------
(7,802) (3,591)
------------- ------------
Cash flows from financing activities:
Net change in line of credit (253) (2,835)
Purchase of treasury stock (84) (4,069)
Issuance of common stock 367 2,240
Dividends (651) (202)
------------- ------------
(621) (4,866)
------------- ------------
Net change in cash and cash equivalents 148 78
Cash and cash equivalents at beginning of period 298 353
------------- ------------
Cash and cash equivalents at end of period $ 446 $ 431
============= ============
Cash paid for:
Interest $ 68 $ 171
Income taxes $ 635 $ 1,105
The accompanying notes are an integral part of these statements.
5
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
In the opinion of management, all adjustments necessary for a fair
presentation of results of operations for the periods presented have been
included in the accompanying unaudited consolidated financial statements of
Atrion Corporation (the "Company"). Such adjustments consist of normal
recurring items. The accompanying financial statements have been prepared
in accordance with the instructions to Form 10-Q and include the
information and notes required by such instructions. Accordingly, the
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes included in the
Company's 2003 Annual Report on Form 10-K.
(2) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by using the first-in, first-out method. The following table details the
major components of inventories (in thousands):
September 30, December 31,
2004 2003
- --------------------------------------------------------------------------------
Raw materials $ 5,671 $ 5,641
Finished goods 4,208 4,044
Work in process 3,168 1,629
- --------------------------------------------------------------------------------
Total inventories $ 13,047 $ 11,314
================================================================================
(3) Income per share
The following is the computation for basic and diluted income per share
from continuing operations:
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
------------------- -------------------
(in thousands, except per share amounts)
Income from continuing operations $ 1,756 $ 1,330 $ 4,486 $ 3,793
=================== ===================
Weighted average basic shares
outstanding
1,716 1,683 1,710 1,716
Add: Effect of dilutive securities
(options) 138 140 139 119
------------------- -------------------
Weighted average diluted shares
outstanding 1,854 1,823 1,849 1,835
=================== ===================
Earnings per share from
continuing operations:
Basic $ 1.02 $ 0.79 $ 2.62 $ 2.11
=================== ===================
Diluted $ 0.95 $ 0.73 $ 2.43 $ 1.98
=================== ===================
Outstanding options that were not included in the diluted income per share
calculation because their effect would be anti-dilutive totaled zero for
the three-month periods ended September 30, 2004 and September 30, 2003,
respectively, and 34,667 and 33,667 for the nine-month periods ended
September 30, 2004 and September 30, 2003, respectively.
6
ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(4) Stock-Based Compensation
At September 30, 2004, the Company had three stock-based employee
compensation plans. The Company accounts for those plans under the
recognition and measurement provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. No stock-based employee compensation cost is reflected in
net income, as all options granted under those plans had an exercise price
equal to the market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net income and income
per share if the Company had applied the fair value recognition provisions
of FASB SFAS No. 123, "Accounting for Stock-Based Compensation," to
stock-based employee compensation:
Three Months ended Nine Months ended
September 30, September 30,
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
(in thousands, except per share amounts)
Net income, as reported $ 1,756 $ 1,330 $ 4,651 $ 3,793
Deduct: Total stock-based employee
compensation expense determined
under fair value-based methods for
all awards, net of tax effects 153 245 640 457
-------- -------- -------- --------
Pro forma net income $ 1,603 $ 1,085 $ 4,011 $ 3,336
======== ======== ======== ========
Income per share:
Basic - as reported $ 1.02 $ 0.79 $ 2.72 $ 2.21
======== ======== ======== ========
Basic - pro forma $ 0.93 $ 0.64 $ 2.35 $ 1.94
======== ======== ======== ========
Diluted - as reported $ 0.95 $ 0.73 $ 2.52 $ 2.07
======== ======== ======== ========
Diluted - pro forma $ 0.86 $ 0.60 $ 2.17 $ 1.82
======== ======== ======== ========
(5) Pension Benefits
The components of net periodic pension cost are as follows for the three
and nine months ended September 30, 2004 and September 30, 2003 (in
thousands):
Three Months ended Nine Months ended
September 30, September 30,
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
Service cost $ 60 $ 53 $ 180 $ 159
Interest cost 78 74 234 222
Expected return on assets (106) (87) (318) (261)
Prior service cost amortization (9) (9) (27) (27)
Actuarial loss 26 32 78 96
Transition amount amortization (11) (11) (33) (33)
-------- -------- -------- --------
Net periodic pension cost $ 38 $ 52 $ 114 $ 156
======== ======== ======== ========
7
ATRION CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company designs, develops, manufactures, markets, sells and distributes
products and components, primarily for the medical and health care
industry. The Company markets components to other equipment manufacturers
for incorporation in their products and sells finished devices to
physicians, hospitals, clinics and other treatment centers. The Company's
products and services primarily range from ophthalmology and cardiovascular
products to fluid delivery devices, contract manufacturing and kitting
services.
The Company's products are used in a wide variety of applications by
numerous customers. The Company encounters competition in all of its
markets and competes primarily on the basis of product quality, price,
engineering, customer service and delivery time.
For the three months ended September 30, 2004, the Company reported
revenues of $16.7 million, operating income of $2.2 million and net income
of $1.8 million, up 4 percent, 20 percent and 32 percent, respectively,
from the three months ended September 30, 2003. For the nine months ended
September 30, 2004, the Company reported revenues of $49.9 million,
operating income of $6.2 million and net income of $4.7 million, up 4
percent, 17 percent and 23 percent, respectively, from the nine months
ended September 30, 2003.
Results for the three months ended September 30, 2004
The Company's net income for the three months ended September 30, 2003 was
$1.8 million, or $1.02 per basic and $0.95 per diluted share, compared with
net income for the three months ended September 30, 2003 of $1.3 million,
or $0.79 per basic and $0.73 per diluted share. The income per basic share
computations are based on weighted average basic shares outstanding of
1,715,991 in the 2004 period and 1,683,339 in the 2003 period. The income
per diluted share computations are based on weighted average diluted shares
outstanding of 1,853,860 in the 2004 period and 1,822,881 in the 2003
period.
Consolidated revenues of $16.7 million for the third quarter of 2004 were 4
percent higher than revenues of $16.1 million for the third quarter of
2003. This increase in revenues for the third quarter of 2004 over the
third quarter of 2003 is primarily attributable to increases in the
revenues from the Company's fluid delivery products, cardiovascular
products and other products. These increases, which are generally
attributable to higher sales volumes, are largely offset by a decrease in
the revenues from the Company's ophthalmic products following the
fulfillment of a customer's requirements in late 2003. Revenue comparisons
for the remainder of the year will be similarly affected by the completion
of that order. Cost of goods sold of $10.5 million for the third quarter of
2004 was 2 percent higher than in the comparable 2003 period primarily as a
result of increased revenues offset by a change in product mix.
Gross profit of $6.2 million in the third quarter of 2004 was $372,000, or
6 percent, higher than in the comparable 2003 period. The Company's gross
profit percentage in the third quarter of 2004 was 37.1 percent of revenues
compared with 36.1 percent of revenues in the third quarter of 2003. This
increase in gross profit percentage is primarily related to a change in
product mix. Revenues from ophthalmic products in the 2003 period generated
a lower gross profit percentage as compared with the gross profit
percentage in the current year period generated by the higher revenues from
the Company's fluid delivery products, cardiovascular products and other
products.
8
The Company's third quarter 2004 operating expenses of $4.0 million were
$10,000 higher than the operating expenses for the third quarter of 2003,
resulting from a $183,000 increase in general and administrative (G&A)
expenses and a $41,000 increase in research and development (R&D) expenses
largely offset by a $214,000 decrease in selling expenses. The increase in
G&A expenses for the third quarter of 2004 is primarily attributable to
increases in legal costs. The decrease in selling expenses for the third
quarter of 2004 is primarily attributable to decreases in outside services,
travel-related expenses and compensation. Operating income in the third
quarter of 2004 increased $362,000, or 20 percent, to $2.2 million from
$1.9 million in the third quarter of 2003. Operating income was 13.3
percent of revenues in the third quarter of 2004 compared to 11.5 percent
of revenues in the third quarter of 2003. The improvement in operating
income is primarily attributable to the previously mentioned gross profit
improvement.
Interest expense for the third quarter of 2004 was $23,000 compared to
interest expense of $46,000 for the same period in the prior year. The
decrease in the 2004 period from the 2003 period is primarily attributable
to the Company's lower average borrowing level in the current-year period.
Income tax expense for the third quarter of 2004 was $449,000 compared to
income tax expense of $500,000 for the same period in the prior year. The
effective tax rate for the third quarter of 2004 was 20.4 percent compared
with 27.3 percent for the third quarter of 2003. The lower effective tax
rate for the third quarter of 2004 is primarily a result of benefits from
tax incentives for exports and R&D expenditures being a larger percentage
of taxable income in 2004 than in 2003 and the utilization of capital loss
carryforwards being a larger percentage of taxable income in 2004 than in
2003.
Results for the nine months ended September 30, 2004
The Company's income from continuing operations for the nine months ended
September 30, 2003 was $4.5 million, or $2.62 per basic and $2.43 per
diluted share, compared with income from continuing operations for the nine
months ended September 30, 2003 of $3.6 million, or $2.11 per basic and
$1.98 per diluted share. Consolidated net income, including discontinued
operations, totaled $4.7 million, or $2.72 per basic and $2.52 per diluted
share, in the first nine months of 2004. This is compared with consolidated
net income, including discontinued operations, of $3.8 million, or $2.21
per basic and $2.07 per diluted share, in the first nine months of 2003.
The income per basic share computations are based on weighted average basic
shares outstanding of 1,709,663 in the 2004 period and 1,716,349 in the
2003 period. The income per diluted share computations are based on
weighted average diluted shares outstanding of 1,848,826 in the 2004 period
and 1,835,132 in the 2003 period.
Consolidated revenues of $49.9 million for the first nine months of 2004
were 4 percent higher than revenues of $48.0 million for the first nine
months of 2003. This increase in revenues for the first nine months of 2004
over the first nine months of 2003 is primarily attributable to an increase
in the revenues from the Company's fluid delivery products, cardiovascular
products and other products. These increases, which are generally
attributable to higher sales volumes, are partially offset by a decrease in
the revenues from the Company's ophthalmic products following the
fulfillment of a customer's requirements in late 2003. Cost of goods sold
of $31.7 million for the first nine months of 2004 was 2 percent higher
than in the comparable 2003 period. The increase in cost of goods sold is
primarily the result of higher sales volumes.
9
Gross profit of $18.2 million in the first nine months of 2004 was $1.2
million, or 7 percent, higher than in the comparable 2003 period. The
Company's gross profit percentage in the first nine months of 2004 was 36.5
percent of revenues compared with 35.4 percent of revenues in the first
nine months of 2003. This increase in gross profit percentage is primarily
related to a change in product mix. Revenues from ophthalmic products in
the 2003 period generated a lower gross profit percentage as compared with
the gross profit percentage in the current year period generated by the
higher revenues from the Company's fluid delivery products, cardiovascular
products and other products.
The Company's operating expenses of $12.0 million for the first nine months
of 2004 were $323,000 higher than the operating expenses for the first nine
months of 2003. This resulted from a $398,000 increase in G&A expenses, a
$180,000 decrease in selling expenses and a $105,000 increase in R&D
expenses. The increase in G&A expenses for the first nine months of 2004 is
primarily attributable to a write-off of $124,000 for the impairment of a
patent related to a discontinued product and increased outside services,
compensation and legal costs. Operating income in the first nine months of
2004 increased $897,000, or 17 percent, to $6.2 million from $5.3 million
in the first nine months of 2003. Operating income was 12.4 percent of
revenues in the first nine months of 2004 compared to 11.0 percent of
revenues in the first nine months of 2003. The improvement in operating
income is primarily attributable to the previously mentioned gross profit
improvement partially offset by the increase in operating expenses.
Interest expense for the first nine months of 2004 was $66,000 compared to
interest expense of $161,000 for the same period in the prior year. The
decrease in the 2004 period from the 2003 period is primarily attributable
to the Company's lower average borrowing level in the current-year period.
Income tax expense for the first nine months of 2004 was $1.7 million
compared to income tax expense of $1.6 million for the same period in the
prior year. The effective tax rate for the first nine months of 2004 was
27.6 percent compared with 29.9 percent for the first nine months of 2003.
The Company recorded a gain on the disposal of discontinued operations
relating to the 1997 sale of its natural gas operations of $165,000 after
tax, or $0.10 per basic and $0.09 per diluted share, for the first nine
months of 2004 and $165,000 after tax, or $0.10 per basic and $0.09 per
diluted share, for the first nine months of 2003, resulting from the
receipt of contingent deferred payments in each year.
10
Liquidity and Capital Resources
At September 30, 2004, the Company had cash and cash equivalents of
$446,000 compared with $298,000 at December 31, 2003. The Company had
outstanding borrowings of $4.0 million under its $25 million revolving
credit facility ("Credit Facility") at September 30, 2004 and $4.3 million
at December 31, 2003. The decrease in the outstanding balance under the
Credit Facility in the first nine months of 2004 is primarily attributable
to cash provided by operations offset by borrowings to make a deposit on
the purchase of a parcel of land and the purchase of property and
equipment. The deposit on the land purchase is related to a proposed new
manufacturing facility for the Company's Florida operation which is
expected to be constructed by May 2006. The Credit Facility, which expires
November 12, 2006, and may be extended under certain circumstances,
contains various restrictive covenants, none of which is expected to impact
the Company's liquidity or capital resources. At September 30, 2004, the
Company was in compliance with all financial covenants.
As of September 30, 2004, the Company had working capital of $18.3 million,
including $446,000 in cash and cash equivalents. The $4.5 million increase
in working capital during the first nine months of 2004 was primarily
related to the $3.8 million deposit on land purchase, increases in accounts
receivable and inventories offset by increases in current liabilities. The
increase in accounts receivable during the first nine months of 2004 is
directly related to the increase in revenues for the third quarter of 2004
as compared to the fourth quarter of 2003. The increase in inventories is
primarily attributable to planned increases related to new product
introductions. The increase in current liabilities is primarily related to
standard accruals made in the normal course of operations and accruals for
income and other taxes. Cash flows from continuing operations generated
$8.4 million for the nine months ended September 30, 2004 as compared to
$8.4 million for the nine months ended September 30, 2003. During the first
nine months of 2004, the Company expended $3.8 million on a deposit for a
land purchase and $4.1 million for the addition of property and equipment.
The Company received net proceeds of $367,000 from the exercise of employee
stock options during the first nine months of 2004. During the first nine
months of 2004 the Company paid dividends totaling $651,000 to its
stockholders.
The Company believes that its existing cash and cash equivalents, cash
flows from operations, borrowings available under the Company's credit
facility, supplemented, if necessary, with equity or debt financing, which
the Company believes would be available, will be sufficient to fund the
Company's cash requirements for the foreseeable future.
For information about certain litigation to which a Company subsidiary is a
party, see Item 2 of Part II of the Form 10-Q.
Forward-Looking Statements
The statements in this Management's Discussion and Analysis that are
forward-looking are based upon current expectations, and actual results may
differ materially. Therefore, the inclusion of such forward-looking
information should not be regarded as a representation by the Company that
the objectives or plans of the Company would be achieved. Such statements
include, but are not limited to, the Company's expectations regarding
future liquidity and capital resources. Words such as "anticipates,"
"believes," "expects," "estimated" and variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements involve risks and uncertainties. The following are some of the
factors that could cause actual results to differ materially from those
expressed in or underlying the Company's forward-looking statements:
changing economic, market and business conditions; market acceptance of the
Company's products; the effects of governmental regulation; acts of war or
terrorism; competition and new technologies; slower-than-anticipated
introduction of new products or implementation of marketing strategies;
changes in the prices or availability of raw materials; changes in product
mix; product liability and patent infringement claims and product recalls;
the ability to attract and retain qualified personnel and the loss of any
significant customer. In addition, assumptions relating to budgeting,
marketing, product development and other management decisions are
subjective in many respects and thus susceptible to interpretations and
periodic review which may cause the Company to alter its marketing, capital
expenditures or other budgets, which in turn may affect the Company's
results of operations and financial condition.
11
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For the quarter ended September 30, 2004, the Company did not experience
any material changes in market risk exposures that affect the quantitative
and qualitative disclosures presented in the Company's 2003 Annual Report
on Form 10K.
Item 4. Controls and Procedures
With the participation of management, the Company's Chief Executive Officer
and its Chief Financial Officer evaluated the effectiveness of the
Company's disclosure controls and procedures as of September 30, 2004.
Based upon this evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) required to be disclosed
by the Company in the reports that the Company files with the Securities
and Exchange Commission.
There has been no change in the Company's internal controls over financial
reporting during the Company's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
12
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 6, 2004, Halkey-Roberts Corporation, a subsidiary of the
Company ("HRC"), filed an action for declaratory judgment against
Filtertek Inc., a subsidiary of ESCO Technologies, Inc. ("Filtertek")
in the United States District Court for the Middle District of
Florida, Tampa Division, service of process for which was effected on
Filtertek on August 5, 2004. HRC is seeking a declaration that a
swabable valve that it manufactures and sells does not infringe on
Filtertek's U.S. patent no. 5,360,413 and that the claims of such
patent asserted by Filtertek against HRC are invalid and that
Filtertek be enjoined from asserting that such patent, or any claim
thereof, is infringed by HRC. Filtertek has filed a counterclaim
alleging that HRC's swabable valve infringes on the above-listed
patent and seeking injunctive relief and damages. This litigation is
in its early stage, and the ultimate outcome cannot be determined at
this time.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the third quarter of 2004, the Company repurchased the
following shares of the Company's common stock:
Total number
of shares
purchased as
part of Maximum number of
Total number Average publicly shares that may yet
of shares price paid announced plan be purchased under
purchased per share or program Plan or Program (a)
July 1, 2004 -
July 31, 2004 - - 94,000
August 1, 2004 -
August 31, 2004 1,900 $ 44.16 1,900 92,100
September 1, 2004 -
September 30, 2004 - - 92,100
1,900 $ 44.16 1,900 92,100
Total
(a) This program was announced in April 2000 and initially provided for 200,000
shares to be repurchased.
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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
(b) Reports on Form 8-K
On July 29, 2005, the Company filed a report on Form 8-K with the
SEC regarding the public dissemination of a press release
announcing its financial results for the second quarter ended
June 30, 2004.
14
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
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(Registrant)
Date: November 12, 2004 /s/ Emile A. Battat
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Emile A. Battat
Chairman, President and
Chief Executive Officer
Date: November 12, 2004 /s/ Jeffery Strickland
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Jeffery Strickland
Vice President and
Chief Financial Officer
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