-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HguvqpPLXrKHpGNUIp9fSNfaW+9dOkKtgZwUED857fL7IfmRce3fqhlJvSIAjxdb 3zLg+JXGaJioby5t/IapNA== 0000950144-99-013190.txt : 19991117 0000950144-99-013190.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950144-99-013190 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATRION CORP CENTRAL INDEX KEY: 0000701288 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 630821819 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10763 FILM NUMBER: 99753629 BUSINESS ADDRESS: STREET 1: ONE ALLENTOWN PARKWAY CITY: ALLEN STATE: TX ZIP: 75002 BUSINESS PHONE: 9723909800 MAIL ADDRESS: STREET 1: POST OFFICE 3869 CITY: MUSCLE SHOALS STATE: AL ZIP: 356623869 FORMER COMPANY: FORMER CONFORMED NAME: ALATENN RESOURCES INC DATE OF NAME CHANGE: 19920703 10-Q 1 ATRION CORPORATION 1 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, 1999 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 4, 1999 - ---------------------------------------- ----------------------------------- COMMON STOCK, PAR VALUE $0.10 PER SHARE 2,440,129 2 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, 1999 and 1998 3 Consolidated Balance Sheets (Unaudited) September 30, 1999 and December 31, 1998 4-5 Consolidated Statements of Cash Flows (Unaudited) For the Nine months Ended September 30, 1999 and 1998 6 Notes to Consolidated Financial Statements (Unaudited) 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION 13 ITEM 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 EXHIBIT INDEX 15
1 3 PART I FINANCIAL INFORMATION 2 4 ATRION CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------------------------- ---------------------------------- 1999 1998 1999 1998 ----------------- ---------------- ----------------- ---------------- (In thousands, except per share data) Revenues $ 13,441 $ 11,570 $ 37,759 $ 33,108 Cost of goods sold 8,180 7,426 22,662 20,594 -------------- -------------- -------------- -------------- Gross profit 5,261 4,144 15,097 12,514 -------------- -------------- -------------- -------------- Operating expenses: Selling expense 1,650 1,406 5,139 3,751 General and administrative 2,035 1,774 5,483 5,226 Research and development 629 747 2,007 2,035 -------------- -------------- -------------- -------------- 4,314 3,927 12,629 11,012 -------------- -------------- -------------- -------------- Operating income 947 217 2,468 1,502 -------------- -------------- -------------- -------------- Other income (expense): Interest income (expense), net (75) 124 (147) 454 Other income - 13 10 53 -------------- -------------- -------------- -------------- (75) 137 (137) 507 -------------- -------------- -------------- -------------- Income from continuing operations before provision for income taxes 872 354 2,331 2,009 Provision for income taxes 218 128 663 747 -------------- -------------- -------------- -------------- Income from continuing operations 654 226 1,668 1,262 Gain on disposal of discontinued operations, net of income taxes -- -- 165 -- -------------- -------------- -------------- -------------- Net income $ 654 $ 226 $ 1,833 $ 1,262 ============== ============== ============== ============== Earnings per basic share: Continuing operations $ 0.26 $ 0.07 $ 0.63 $ 0.39 Gain on disposal of discontinued operations -- -- 0.06 -- -------------- -------------- ------------- -------------- $ 0.26 $ 0.07 $ 0.69 $ 0.39 ============== ============= ============= ============= Weighted average basic shares outstanding 2,474 3,202 2,657 3,212 ============== ============== ============== ============= Earnings per diluted share: Continuing operations $ 0.26 $ 0.07 $ 0.62 $ 0.39 Gain on disposal of discontinued operations -- -- 0.06 -- -------------- -------------- ------------- ------------- $ 0.26 $ 0.07 $ 0.68 $ 0.39 ============== ============= ============= ============= Weighted average diluted shares outstanding 2,527 3,202 2,697 3,216 ============== ============== ============== ==============
The accompanying notes are an integral part of these consolidated statements. 3 5 ATRION CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, ASSETS 1999 1998 - ------ -------------- -------------- (In thousands) Current assets: Cash and cash equivalents $ 231 $ 5,635 Accounts receivable 8,658 7,278 Inventories 9,533 8,568 Prepaid expenses and other 1,047 1,358 -------------- -------------- 19,469 22,839 -------------- -------------- Property, plant and equipment: Original cost 33,029 22,315 Less accumulated depreciation and amortization 7,159 4,921 -------------- -------------- 25,870 17,394 -------------- -------------- Deferred charges: Patents 3,391 3,620 Goodwill 13,539 13,986 Other 2,855 2,576 -------------- -------------- 19,785 20,182 -------------- -------------- $ 65,124 $ 60,415 ============== ==============
The accompanying notes are an integral part of these Consolidated Balance Sheets. 4 6 ATRION CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 - ------------------------------------ -------------- -------------- (In thousands) Current liabilities: Current maturities of long-term debt $ -- $ 203 Accounts payable and accrued liabilities 5,205 3,929 -------------- -------------- 5,205 4,132 -------------- -------------- Long-term debt, less current maturities 5,981 -- Other noncurrent liabilities 7,341 6,914 -------------- -------------- Stockholders' equity: Common shares, par value $0.10 per share; authorized 10,000,000 shares, issued 3,419,953 shares 342 342 Paid-in capital 6,403 6,394 Retained earnings 48,654 46,821 Treasury shares, at cost (8,802) (4,188) -------------- -------------- Total stockholders' equity 46,597 49,369 -------------- -------------- $ 65,124 $ 60,415 ============== ==============
The accompanying notes are an integral part of these Consolidated Balance Sheets. 5 7 ATRION CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30 --------------------------------------- 1999 1998 ------------- ------------- (In thousands) Cash flows from operating activities: Net income $ 1,833 $ 1,262 Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposal of discontinued operations (165) -- Depreciation and amortization 2,914 2,510 Deferred income taxes 131 343 Other 13 155 ------------- ------------- 4,726 4,270 Change in current assets and liabilities: (Increase) in accounts receivable (1,380) (2,741) (Increase) in other current assets (653) (605) Increase in accounts payable 619 673 Increase in other current liabilities 669 1,074 ------------- ------------- Net cash provided by continuing operations 3,981 2,671 Net cash provided by (used in) discontinued operations 165 (1,609) ------------- ------------- 4,146 1,062 ------------- ------------- Cash flows from investing activities: Property, plant and equipment additions (10,714) (1,146) Acquisition of subsidiary -- (23,198) (10,714) (24,344) ------------- ------------- Cash flows from financing activities: Increase (decrease) in long-term indebtedness 5,778 (453) Issuance of common stock - 20 Repurchase of common stock (4,614) (485) ------------- ------------- 1,164 (918) Net change in cash and cash equivalents (5,404) (24,200) Cash and cash equivalents at beginning of period 5,635 32,172 ------------- ------------- Cash and cash equivalents at end of period $ 231 $ 7,972 ============= ============= Cash paid for: Interest (net of capitalized amounts) $ 158 $ 19 Income taxes (net of refunds) $ 153 $ 1,415
The accompanying notes are an integral part of these consolidated statements. 6 8 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 1998 Annual Report on Form 10-K. (2) PURCHASE OF CERTAIN QUEST MEDICAL, INC. ASSETS. On January 30, 1998, the Company, through a wholly owned Texas subsidiary then known as "QMI Medical, Inc.," acquired the cardiovascular and intravenous fluid products division of Advanced Neuromodulation Systems, Inc. (formerly known as Quest Medical, Inc. and herein referred to as "ANS") and all rights to the name "Quest Medical, Inc." The Company paid $22,922,000 (after taking into account certain postclosing adjustments and excluding $276,000 of related acquisition costs) in cash for the net assets acquired from ANS. As part of the transaction, the Company also obtained a one-year lease on ANS's facility in Allen, Texas, along with an option to buy the facility. This acquisition was accounted for using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets and liabilities acquired based on their estimated fair value at the date of acquisition. The excess of the consideration paid over the estimated fair value of the net assets acquired of $9.7 million was recorded as goodwill and is being amortized over 25 years. The Company changed the name of QMI Medical, Inc. to "Quest Medical, Inc." in June 1998, and that subsidiary is herein referred to as "Quest Medical." On February 1, 1999, the Company purchased the Allen, Texas facility for $6.5 million pursuant to the option mentioned above. The following table presents unaudited consolidated selected financial data on a pro forma basis assuming the purchase of these assets had occurred as of January 1, 1998. The unaudited consolidated pro forma data reflect certain assumptions, which are based on estimates. The unaudited consolidated pro forma combined results presented have been prepared for comparative purposes only and are not necessarily indicative of actual results that would have been achieved had the acquisition occurred at the beginning of the period presented, or of future results.
NINE MONTHS ENDED September 30, 1998 ----------------------- (in thousands, except per share data) Revenues $ 34,229 Income from continuing operations $ 1,285 Net income $ 1,285 Net income per basic and diluted share $ 0.40
For further information regarding the acquisition of these assets, refer to the Company's Report on Form 8-K, filed with the Securities and Exchange Commission on February 17, 1998, as amended on April 15, 1998. 7 9 ATRION CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 The Company's consolidated net income for the quarter ended September 30, 1999 was $654,000 or $.26 per basic and diluted share, compared with $226,000, or $.07 per basic and diluted share, for the third quarter of 1998. The earnings per basic share computations are based on weighted average basic shares outstanding of 2,474,029 in 1999 and 3,201,645 in 1998. The earnings per diluted share computations are based on weighted average diluted shares outstanding of 2,526,722 in 1999 and 3,201,645 in 1998. Consolidated revenues of $13.4 million for the third quarter of 1999 were $1.9 million or 16 percent higher than revenues for the third quarter of 1998. The increase in revenues in the third quarter of 1999 was a result of improved sales at all operations. Gross profit of $5.3 million in the third quarter of 1999 was $1.1 million or 27 percent higher than that in the comparable 1998 period. The previously mentioned increased revenues were the primary contributors to this increase. An increase in the gross profit percentage for the third quarter of 1999 to 39.1 percent from 35.8 percent in the same period of 1998 also contributed to this increase. The Company's third quarter 1999 operating expenses of $4.3 million were $387,000 higher than the operating expenses for the third quarter of 1998. This increase is primarily the result of increased costs associated with the development and marketing of the Company's Myocardial Protection System ("MPS") during the current year partially offset by lower spending at the parent company level in the 1999 period compared to the same period in 1998. Operating income in the third quarter of 1999 totaled $947,000 compared with $217,000 in the third quarter of 1998. Net interest expense for the third quarter of 1999 was $75,000 compared with net interest income of $124,000 for the same period in 1998. This change is primarily attributable to the Company's use of cash and cash equivalents in late 1998 to fund repurchases of outstanding common stock of the Company and in February 1999 to fund the purchase of its Allen, Texas facility and borrowings by the Company to fund its repurchases of outstanding common stock of the Company during the first nine months of 1999. Tax credits attributable to the Company's research and development activities resulted in a lower effective income tax rate in the third quarter of 1999 as compared to the same period in 1998. The Company believes that based on recent trends and certain standing orders, revenues, cost of goods sold, gross profit and operating income for the fourth quarter of 1999 will be higher than the comparable 1998 period. The Company also anticipates that its effective income tax rate for the fourth quarter of 1999 will be lower than in the comparable 1998 period and that 1999 earnings per share from continuing operations will significantly exceed the 1998 level. RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 The Company's consolidated net income for the nine-month period ended September 30, 1999 was $1.8 million, or $.69 per basic and $.68 per diluted share, compared with $1.3 million, or $.39 per basic and diluted share, for the first nine months of 1998. Income from 8 10 continuing operations for the first nine months of 1999 was $1.7 million, or $.63 per basic and $.62 per diluted share, compared with $1.3 million, or $.39 per basic and diluted share for the comparable period in 1998. The earnings per basic share computations are based on weighted average basic shares outstanding of 2,657,175 in 1999 and 3,212,448 in 1998. The earnings per diluted share computations are based on weighted average diluted shares outstanding of 2,697,261 in 1999 and 3,216,205 in 1998. Consolidated revenues of $37.8 million for the nine months ended September 30, 1999 were $4.7 million or 14 percent higher than revenues for the nine months ended September 30, 1998. All operations realized increased revenues for the first nine months of 1999, compared with the same period in the prior year. Increased placements by the Company of its MPS units and higher sales of related disposables added to the 1999 revenue increase. The increase in revenues for the first nine months of 1999, compared to the same period in the prior year, was also a result of the inclusion of the operations of Quest Medical for nine full months in the current-year period compared with the inclusion of the Quest Medical operations in the prior year period for the eight months subsequent to its acquisition in January 1998. Gross profit of $15.1 million for the first nine months of 1999 was $2.6 million or 21 percent higher than that in the comparable period of 1998. This increase is the result of increased revenues at all operations and the inclusion of the operations of Quest Medical for a full nine-month period in 1999 compared to eight months in the 1998 period. The gross profit percentage for the first nine months of 1999 of 40.0 percent was higher than the gross profit percentage in the same period of 1998 of 37.8 percent due to the inclusion of Quest Medical for the full nine months in 1999 compared to eight months in the 1998 period. Quest Medical generally has a higher gross profit percentage than the Company's other operations. The Company's operating expenses of $12.6 million for the first nine months of 1999 were $1.6 million higher than operating expenses for the first nine months of 1998. This increase is the result of increased costs associated with the development and marketing of the MPS during the current year partially offset by reduced spending at the parent company level for the 1999 period compared to the same period in 1998. The increase in operating expenses for the first nine months of 1999, compared to the same period in the prior year, was also a result of the inclusion of the operations of Quest Medical for nine full months in the current year period compared with the inclusion of the Quest Medical operations in the prior year period for the eight months subsequent to its acquisition in late January 1998. Operating income in the nine months ended September 30,1999 totaled $2.5 million compared with $1.5 million in the same period of 1998. Net interest expense for the nine months ended September 30, 1999 was $147,000 compared with net interest income of $454,000 for the same period in 1998. This change is primarily attributable to the Company's use of cash and cash equivalents in late 1998 to fund repurchases of outstanding common stock of the Company and in February 1999 to fund the purchase of its Allen, Texas facility and borrowings by the Company to fund its repurchases of outstanding common stock of the Company. Tax credits attributable to the Company's research and development activities resulted in a lower effective income tax rate in the first nine months of 1999 as compared to the nine months ended September 30,1998. 9 11 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 $.06 per basic and diluted share, for the nine months ended September 30,1999. There was no similar transaction during the same period of 1998. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1999, the Company had cash and cash equivalents of $231,000 compared with $5.6 million at December 31, 1998. The decrease in cash and cash equivalents from December 31, 1998 to September 30, 1999 was primarily attributable to the Company's February 1, 1999 purchase of its Allen, Texas facility for $6.5 million. The Company had $6.0 million of long-term debt, borrowed under a $20 million revolving loan facility, at September 30, 1999 compared with no long-term debt at December 31, 1998. This increase in long-term debt from December 31, 1998 to September 30, 1999 was primarily attributable to the above mentioned facility purchase, repurchases of outstanding common stock of the Company and purchases of automation equipment. Since the end of the third quarter of 1999, the Company has replaced the $20 million revolving loan facility with a new $18.5 million credit facility with a regional bank. Under the $18.5 million credit facility, the Company, and certain of its subsidiaries, have a line of credit, which is secured by inventory, equipment and accounts receivable. At the Company's option, and subject to certain conditions, the amount that can be borrowed under the facility may be increased to $25.0 million upon the lender's determination that it has adequate security or upon the Company's grant of such additional security as the lender deems reasonably necessary. The term of the agreement expires November 11, 2002 and may be extended under certain circumstances. At any time during the agreement, the Company may convert any or all outstanding amounts under the facility to a term loan with a maturity of two years. The Company's ability to borrow funds from time to time under the facility is contingent on meeting certain covenants in the loan agreement. As previously reported to stockholders, the Company is continuing to develop a strategy to adapt certain of Quest Medical's technology to the delivery and control of protective drugs during the reperfusion of clotted arteries in cardiac catheterization laboratories. The Company believes that the adaptation of its technology for such a purpose would require significant upfront expenditures and is not currently planning to undertake the implementation of such a program unless it is able to structure a partnership or similar arrangement in which another party would bear all or a substantial part of the costs of adapting the technology. The Company is exploring the opportunities for such partnership or arrangement, but there is no assurance that the Company will enter into any such relationship. The Company is presently unable to determine whether Quest Medical's technology can be cost-effectively adapted to the delivery and control of protective drugs during clotted artery reperfusion, the terms of the partnership or arrangement, if any, under which such program would be conducted, or the cost to the Company of such a program, if undertaken. The Company believes that its existing cash and cash equivalents, cash flows from operations, borrowings available under the Company's revolving loan facility and other equity or debt financing, which the Company believes would be available, will be sufficient to fund the Company's cash requirements, including any funding required for a partnership or arrangement discussed above, for at least the next two years. 10 12 YEAR 2000 ISSUES In 1998, the Company began its assessment of its information systems, products, facilities and equipment to determine if they are Year 2000 ready. At that time, the Company's operating units were using several different information systems. As a part of the Company's ongoing efforts to achieve operating synergies, as well as to assure Year 2000 compliance, the Company has purchased and has installed new computer systems in one of its units and has taken steps to determine whether its new and existing computer systems are Year 2000 compliant. The Company has contacted its major suppliers, as well as certain other suppliers and utilities, to determine whether they are Year 2000 compliant. In addition, the Company has reviewed its products that process information that may be date sensitive and believes that those products are not Year 2000 sensitive products. The Company's facilities and equipment have also been examined to determine whether they are Year 2000 ready. The Company has substantially completed its assessment of its information systems, facilities and equipment and believes that they are Year 2000 compliant. The Company has no means of ensuring that all of its suppliers are or will be Year 2000 compliant. The failure of certain of these suppliers to be Year 2000 compliant could materially impact the Company. Additionally, the failure of communication, financial and transportation systems would have a material adverse impact on the Company, as would the failure of local utilities. As a result, where appropriate and feasible, the Company will consider new business relationships with alternate providers. The Company has incurred costs of approximately $140,000, including the cost and time for Company employees, to address Year 2000 issues, and believes that any additional costs of addressing its Year 2000 transition will not have a material adverse effect on the Company's financial condition or business operations. Given the uncertain consequences of failure to resolve significant Year 2000 issues, however, there is no assurance that any one or more of such failures would not have a material adverse impact on the Company. Plans have been developed at all locations to address failures that may occur; however, the Company does not believe that such contingency plans can adequately deal with major external system failures such as in communications, transportation or utilities. 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 revenues, cost of sales, gross profit, operating income and effective tax rate for the fourth quarter of 1999 and 1999 earnings per share from continuing operations, as well as future liquidity and capital resources and Year 2000 compliance and impact. Words such as "anticipates," "believes," "expects," "estimated" and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements contained herein involve numerous risks and uncertainties, and there are a number of factors that could cause actual results to differ materially including, but not limited to, the following: changing economic, market and business conditions; the effects of governmental regulation; the impact of competition and new technologies; slower-than-anticipated introduction of new products, implementation of marketing strategies or new manufacturing processes or implementation of new information systems; changes in the prices of raw materials; 11 13 changes in product mix; product recalls; the ability to attract and retain qualified personnel; market acceptance of the Company's products; Year 2000 problems; 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. 12 14 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits 10a Atrion Corporation Incentive Compensation Plan for Chief Executive Officer 10b Atrion Corporation Incentive Compensation Plan for Chief Financial Officer 27 Financial Data Schedule (filed electronically only) (for SEC use only) (b) No reports on Form 8-K have been filed during the quarter ended September 30, 1999.
13 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Atrion Corporation (Registrant) Date: November 15, 1999 /s/ Emile A. Battat ------------------------------ Emile A. Battat Chairman, President and Chief Executive Officer Date: November 15, 1999 /s/ Jeffery Strickland ------------------------------ Jeffery Strickland Vice President and Chief Financial Officer 14 16 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION PAGE -------------- ----------- ---- 10a Atrion Corporation Incentive 16 Compensation Plan for Chief Executive Officer 10b Atrion Corporation Incentive 19 Compensation Plan for Chief Financial Officer 27 Financial Data Schedule (filed 20 electronically only)(for SEC use only) 15 EX-10.(A) 2 INCENTIVE PLAN FOR CHIEF EXECUTIVE OFFICER 1 EXHIBIT 10a ATRION CORPORATION INCENTIVE COMPENSATION PLAN FOR CHIEF EXECUTIVE OFFICER 1. PURPOSES OF THE PLAN The purposes of this Incentive Compensation Plan for Chief Executive Officer (the "Plan") are to assist Atrion Corporation (the "Company) in securing the continuing services of Emile A. Battat ("Battat") as Chief Executive Officer of the Company and to provide an opportunity for Battat to receive incentive compensation that is tied to the enhancement of shareholder value. The Plan gives Battat, whose annual base salary was set by the Board of Directors of the Company in October 1998 at the lower end of the range of base salaries of chief executive officers of comparable companies and which in accordance with Battat's request has not been increased since that time, the opportunity to receive incentive compensation when he ceases to serve as Chief Executive Officer of the Company. The Plan permits the payment of incentive compensation only if shareholder value has been substantially enhanced over the $9.19 per share closing sale price of the Company's common stock on the day immediately preceding adoption of the Plan. 2. DEFINITIONS. (a) "Average Market Price" means (i) the average closing sales price per share of the Company's Common Stock for the ten (10) trading days immediately preceding the Determination Date as reported by either (A) any national securities exchange on which the shares of Common Stock are actively traded or (B) if not so traded, the Nasdaq Stock Market or (ii) if the Common Stock is not traded on any exchange or the Nasdaq Stock Market, the mean between the bid and asked prices as reported by any nationally-recognized quotation service selected by the Committee plus (iii) if any property or cash is distributed to stockholders of the Company after the Effective Date and prior to the Determination Date, the sum of (X) the Fair Market Value of any property or securities distributed with respect to each share of Common Stock and (Y) the amount of any cash distributed with respect to each share of Common Stock. (b) "Business Combination" means any merger (other than a change of domicile merger) or consolidation in which the stockholders of the Company exchange their shares of common stock of the Company or in which their shares are converted to the right to receive cash, any sale by the Company of all or substantially all of the assets of the Company and its subsidiaries or any exchange by the stockholders of the Company of their shares for shares of another corporation. (c) "Committee" means the Compensation Committee of the Board of Directors of the Company. (d) "Common Stock" means the common stock of the Company. 16 2 (e) "Determination Date" means the date that Battat ceases to serve as Chief Executive Officer of the Company or, if Battat ceases to serve in such capacity in connection with a Business Combination that closes within sixty (60) days after such date, the date on which such Business Combination closes. (f) "Effective Date" means July 23, 1999. (g) "Fair Market Value" means (i) in the case of publicly-traded securities, the closing sales price per share of such securities as reported by either (A) any national securities exchange on which such securities are actively traded or (B) the Nasdaq Stock Market or, if such securities are not traded on any exchange or the Nasdaq Stock Market, the mean between the bid and asked prices as reported by any nationally-recognized quotation service selected by the Committee or (ii) in the case of securities that are not publicly traded and other property, the price at which such securities or property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts, as determined by a nationally-recognized valuation expert selected by the Committee. (h) "Value of Consideration Received" means (i) the Fair Market Value of any property or securities distributed with respect to each Share of Common Stock in connection with a Business Combination plus (ii) if any property or cash is distributed to stockholders of the Company after the Effective Date and prior to the Determination Date, the sum of (X) the Fair Market Value of any property or securities distributed with respect to each share of Common Stock and (Y) the amount of any cash distributed with respect to each share of Common Stock. 3. ADMINISTRATION. The Plan shall be administered by the Committee. Subject to the provisions hereof, the Committee shall have the power and authority to direct the payment by the Company of incentive compensation hereunder and shall have the authority, in its sole discretion, in accordance with the provisions hereof, to make any and all determinations deemed necessary or advisable for the administration of the Plan. 4. INCENTIVE COMPENSATION. Within ten (10) days following the Determination Date, the Company shall pay to Battat incentive compensation determined as follows: If the Average Market Price or, in the event Battat ceases to serve as Chief Executive Officer in connection with a Business Combination, the Value of Consideration Received is $12.00 or less, then Battat shall be paid no incentive compensation under the Plan. If the Average Market Price or, in the event Battat ceases to serve as Chief Executive Officer in connection with a Business Combination, the Value of Consideration Received is greater than $12.00, Battat shall be paid incentive compensation equal to the sum of (A) the product of (i) $150,000 and (ii) the amount not to exceed $3.00 by which the Average Market Price or Value of Consideration Received, as the case may be, exceeds $12.00, plus (B) the product of (i) $200,000 and (ii) the amount not to exceed $3.00 by which the Average Market Price or Value of Consideration Received, as the case may be, exceeds $15.00, plus (C) the product of (i) $250,000 and (ii) the amount by which the Average Market Price or Value of Consideration Received, as the case may be, exceeds $18.00. 17 3 5. WITHHOLDING. Any payment of incentive compensation under the Plan shall be subject to applicable withholding, social security and other state, federal and local taxes and deductions. 6. MISCELLANEOUS PROVISIONS. (a) The Plan shall be governed by and construed in accordance with the laws of the State of Texas applied without giving effect to any conflict-of-laws principles. (b) No member of the Board of Directors of the Company or the Committee nor any officer or employee of the Company acting on behalf of the Board of Directors or the Committee shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan; and all members of the Board of Directors and the Committee and each officer and employee acting on their behalf shall, to the extent permitted by law, be indemnified and held harmless by the Company in respect of any such action, determination or interpretation. (c) All obligations of the Company under the Plan with respect to the payment of incentive compensation shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase of all or substantially all of the assets of the Company or a merger or consolidation or otherwise. (d) In the event the Common Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company (whether by reason of recapitalization, reclassification, split, reverse split, combination of shares, or otherwise) or if the number of such shares of Common Stock shall be increased through the payment of a stock dividend, then the incentive compensation payable hereunder shall be adjusted as may be necessary to reflect the foregoing events. In the event there shall be any other change in the number or kind of the outstanding shares of Common Stock, or of any stock or other securities into which such shares shall have been changed, or for which they shall have been exchanged, then, if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in incentive compensation which may be granted under the Plan, such adjustments shall be made in accordance with such determination. 18 EX-10.(B) 3 INCENTIVE PLAN FOR CHIEF FINANCIAL OFFICER 1 EXHIBIT 10b Atrion Corporation Incentive Compensation Plan for Chief Financial Officer This plan provides the opportunity for Jeffery Strickland, Vice President and Chief Financial Officer of Atrion Corporation, to receive incentive compensation based on the attainment of certain stated goals during the calendar years 1998, 1999 and 2000. Financial Goals: The financial goals for Atrion are set forth in the earnings per share (EPS) estimates (i.e., those included in the "Revised Budget") prepared by management for the years 1999 and 2000 submitted to the Board of Directors at its May 12, 1998 meeting. These EPS figures are the targets for this plan. All figures are from continuing operations and exclude extraordinary and one-time items. At the end of each year, the EPS target for that year is to be adjusted upwards where necessary to reflect for the years 1998, 1999 and 2000, respectively, an 8%, 9% and 10% minimum pre-tax return on average assets used in continuing operations during that year. For the years 1998, 1999 and 2000, if the targeted EPS figures, as adjusted, are met, then Jeffery Strickland (JS) is entitled to incentive compensation equal to 25% of his base salary for that year. If the target is exceeded by 50% or more, then the incentive compensation for JS will be doubled. For results between these two target figures, the incentive compensation for JS will be adjusted proportionately. Non-Financial Goals: JS's performance shall be evaluated by the Board without stated non-financial goals and any incentive compensation award shall be at the discretion of the Board. 19 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ATRION CORPORATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 231 0 8,658 0 9,533 19,469 33,029 7,159 65,124 5,205 5,981 0 0 342 46,255 65,124 37,759 37,759 22,662 22,662 12,629 0 147 2,331 663 1,668 165 0 0 1,833 0.69 0.68
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