-----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, QujVckTC0calnRMS7/r3/KcDyQH2/iGQuBi7fQsFeYQqnynj2Zaz/nQHzLiQgiks jMtG94zWUMcDGjhqB3l1Fg== 0000950144-99-010119.txt : 19990816 0000950144-99-010119.hdr.sgml : 19990816 ACCESSION NUMBER: 0000950144-99-010119 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: 99688214 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 JUNE 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 AUGUST 5, 1999 - --------------------------------------- ------------------------------- COMMON STOCK, PAR VALUE $0.10 PER SHARE 2,474,029 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 Six Months Ended June 30, 1999 and 1998 3 Consolidated Balance Sheets (Unaudited) June 30, 1999 and December 31, 1998 4-5 Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 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 ITEM 4. Submission of Matters to a Vote of Security Holders 12 ITEM 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14
1 3 PART I FINANCIAL INFORMATION 2 4 ATRION CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ----------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- ------- (In thousands, except (In thousands, except per share data) per share data) Revenues $ 12,737 $ 11,375 $ 24,318 $21,537 Cost of goods sold 7,527 6,740 14,483 13,167 -------- -------- -------- ------- Gross profit 5,210 4,635 9,835 8,370 -------- -------- -------- ------- Operating expenses: Selling expense 1,822 1,382 3,489 2,344 General and administrative 1,796 1,811 3,448 3,452 Research and development 679 736 1,379 1,289 -------- -------- -------- ------- 4,297 3,929 8,316 7,085 -------- -------- -------- ------- Operating income 913 706 1,519 1,285 -------- -------- -------- ------- Other income (expense): Interest income (expense), net (78) 137 (72) 330 Other income -- 12 10 40 -------- -------- -------- ------- (78) 149 (62) 370 -------- -------- -------- ------- Income from continuing operations before provision for income taxes 835 855 1,457 1,655 Provision for income taxes 215 318 444 620 -------- -------- -------- ------- Income from continuing operations 620 537 1,013 1,035 Gain on disposal of discontinued operations, net of income taxes 165 -- 165 -- -------- -------- -------- ------- Net income $ 785 $ 537 $ 1,178 $ 1,035 ======== ======== ======== ======= Earnings per basic share: Continuing operations $ 0.24 $ 0.17 $ 0.37 $ 0.32 Gain on disposal of discontinued operations 0.06 -- 0.06 -- -------- -------- -------- ------- $ 0.30 $ 0.17 $ 0.43 $ 0.32 ======== ======== ======== ======= Weighted average basic shares outstanding 2,582 3,202 2,750 3,218 ======== ======== ======== ======= Earnings per diluted share: Continuing operations $ 0.23 $ 0.17 $ 0.36 $ 0.32 Gain on disposal of discontinued operations 0.06 -- 0.06 -- -------- -------- -------- ------- $ 0.29 $ 0.17 $ 0.42 $ 0.32 ======== ======== ======== ======= Weighted average diluted shares outstanding 2,640 3,203 2,787 3,220 ======== ======== ======== =======
The accompanying notes are an integral part of these consolidated statements. 3 5 ATRION CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, DECEMBER 31, ASSETS 1999 1998 - ------ -------- ------------ (In thousands) Current assets: Cash and cash equivalents $ 101 $ 5,635 Accounts receivable 8,645 7,278 Inventories 9,960 8,568 Prepaid expenses and other 1,186 1,358 -------- ------------ 19,892 22,839 -------- ------------ Property, plant and equipment: Original cost 31,838 22,315 Less accumulated depreciation and amortization 6,340 4,921 -------- ------------ 25,498 17,394 -------- ------------ Deferred charges: Patents 3,468 3,620 Goodwill 13,687 13,986 Other 2,810 2,576 -------- ------------ 19,965 20,182 -------- ------------ $ 65,355 $ 60,415 ======== ============ (Continued)
The accompanying notes are an integral part of these Consolidated Balance Sheets. 4 6 ATRION CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 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 6,139 3,929 -------- ------------ 6,139 4,132 -------- ------------ Long-term debt, less current maturities 6,225 -- -------- ------------ Other noncurrent liabilities 7,048 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 47,999 46,821 Treasury shares, at cost (8,801) (4,188) -------- ------------ Total stockholders' equity 45,943 49,369 -------- ------------ $ 65,355 $ 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)
SIX MONTHS ENDED JUNE 30 ----------------------- 1999 1998 -------- -------- (In thousands) Cash flows from operating activities: Net income $ 1,178 $ 1,035 Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposal of discontinued operations (165) -- Depreciation and amortization 1,869 1,572 Deferred income taxes 146 242 Other (235) 107 -------- -------- 2,793 2,956 Change in current assets and liabilities: (Increase) in accounts receivable (1,367) (1,710) (Increase) in other current assets (1,220) (931) Increase in accounts payable 1,980 760 Increase (decrease) in other current liabilities 229 (526) -------- -------- Net cash provided by continuing operations 2,415 549 Net cash provided by (used in) discontinued operations 165 (168) -------- -------- 2,580 381 -------- -------- Cash flows from investing activities: Property, plant and equipment additions (9,523) (692) Acquisition of subsidiary -- (23,198) -------- -------- (9,523) (23,890) -------- -------- Cash flows from financing activities: Increase (decrease) in long-term indebtedness 6,022 (352) Issuance of common stock -- 20 Repurchase of common stock (4,613) (485) -------- -------- 1,409 (817) Net change in cash and cash equivalents (5,534) (24,326) Cash and cash equivalents at beginning of period 5,635 32,172 -------- -------- Cash and cash equivalents at end of period $ 101 $ 7,846 ======== ======== Cash paid for: Interest (net of capitalized amounts) $ 60 $ 15 Income taxes (net of refunds) $ 132 $ 44
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.
SIX MONTHS ENDED June 30, 1998 -------------------------------------- (in thousands, except per share data) Revenues $ 22,658 Income from continuing operations $ 1,058 Net income $ 1,058 Net income per basic and diluted share $ 0.33
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 JUNE 30, 1999 The Company's consolidated net income for the quarter ended June 30, 1999 was $785,000 or $.30 per basic and $.29 per diluted share, compared with $537,000, or $.17 per basic and diluted share, for the second quarter of 1998. Income from continuing operations for the second quarter of 1999 was $620,000, or $.24 per basic and $.23 per diluted share, compared with $537,000, or $.17 per basic and diluted share, for the second quarter of 1998. The earnings per basic share computations are based on weighted average basic shares outstanding of 2,582,342 in 1999 and 3,201,645 in 1998. The earnings per diluted share computations are based on weighted average diluted shares outstanding of 2,639,815 in 1999 and 3,202,623 in 1998. Consolidated revenues of $12.7 million for the second quarter of 1999 were $1.4 million or 12 percent higher than revenues for the second quarter of 1998. The increase in revenues in the second quarter of 1999 was a result of improved sales at all operations, including increased placements by the Company of its Myocardial Protection System ("MPS") units and higher sales of related disposables. Gross profit of $5.2 million in the second quarter of 1999 was $575,000 or 12 percent higher than that in the comparable 1998 period. The previously mentioned increased revenues were the primary contributors to this increase. The Company's second quarter 1999 operating expenses of $4.3 million were $368,000 higher than the operating expenses for the second quarter of 1998. This increase is primarily the result of increased costs associated with the development and marketing of the Company's 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 second quarter of 1999 totaled $913,000 compared with $706,000 in the second quarter of 1998. Net interest expense for the second quarter of 1999 was $78,000 compared with net interest income of $137,000 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 repurchase of outstanding common stock of the Company and purchases of automation equipment during the first six months of 1999. Tax credits attributable to the Company's research and development activities resulted in a lower effective income tax rate, and contributed to improved earnings, in the second quarter of 1999 as compared to the same period in 1998. The Company recorded a gain on the disposal of discontinued operations relating to the sale of its natural gas operations of $165,000, after tax, or $.06 per basic and diluted share, for the three months ended June 30,1999. Under the terms of the sale of its natural gas operations in 1997, certain annual contingent payments of up to $250,000 per year may be paid to the Company over an eight-year period beginning in 1999. The Company received the maximum amount of $250,000 for its first contingent payment in April 1999. There was no similar transaction during the same period of 1998. 8 10 The Company believes that based on recent trends and certain standing orders, revenues, cost of goods sold and gross profit for the third and fourth quarters of 1999, will be higher than comparable 1998 periods. The Company also anticipates that its effective income tax rate for the third and fourth quarters of 1999 will be lower than in the comparable 1998 periods and that 1999 earnings per share from continuing operations will significantly exceed the 1998 level. RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1999 The Company's consolidated net income for the six-month period ended June 30, 1999 was $1.2 million, or $.43 per basic and $.42 per diluted share, compared with $1.0 million, or $.32 per basic and diluted share, for the first six months of 1998. Income from continuing operations for the first six months of 1999 was $1.0 million, or $.37 per basic and $.36 per diluted share, compared with $1.0 million, or $.32 per basic and diluted share. The earnings per basic share computations are based on weighted average basic shares outstanding of 2,750,266 in 1999 and 3,217,939 in 1998. The earnings per diluted share computations are based on weighted average diluted shares outstanding of 2,787,270 in 1999 and 3,220,152 in 1998. Consolidated revenues of $24.3 million for the six months ended June 30, 1999 were $2.8 million or 13 percent higher than revenues for the six months ended June 30, 1998. All operations realized increased revenues for the first six 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 six 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 six full months in the current-year period compared with the inclusion of the Quest Medical operations in the prior year period for the five months subsequent to its acquisition in January 1998. Gross profit of $9.8 million for the first six months of 1999 was $1.5 million or 18 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 six-month period in 1999 compared to five months in the 1998 period. The gross profit percentage for the first six months of 1999 of 40.4 percent is higher than the gross profit percentage in the same period of 1998 of 38.9 percent due to the inclusion of Quest Medical for the full six months in 1999 compared to five 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 $8.3 million for the first six months of 1999 were $1.2 million higher than operating expenses for the first six 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 six 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 six full months in the current year period compared with the inclusion of the Quest Medical operations in the prior year period for the five months subsequent to its acquisition in January 1998. Operating income in the six months ended June 30, 1999 totaled $1.5 million compared with $1.3 million in the same period of 1998. 9 11 Net interest expense for the six months ended June 30, 1999 was $72,000 compared with net interest income of $330,000 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 repurchase of outstanding common stock of the Company and purchases of automation equipment during the first six months of 1999. Tax credits attributable to the Company's research and development activities resulted in a lower effective income tax rate, and contributed to improved earnings, in the first six months of 1999 as compared to the six months ended June 30, 1998. As was discussed above, the Company recorded a gain on the disposal of discontinued operations relating to the sale of its natural gas operations of $165,000, after tax, or $.06 per basic and diluted share, for the six months ended June 30,1999. There was no similar transaction during the same period of 1998. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1999, the Company had cash and cash equivalents of $101,000 compared with $5.6 million at December 31, 1998. The decrease in cash and cash equivalents from December 31, 1998 to June 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 $6.2 million of long-term debt, borrowed under its $20 million revolving loan facility, at June 30, 1999 compared with no long-term debt at December 31, 1998. This increase in long-term debt from December 31, 1998 to June 30, 1999 was primarily attributable to the above mentioned facility purchase, the repurchase of outstanding common stock of the Company and purchases of automation equipment. The term of the $20 million revolving loan facility has been extended until May 20, 2001. 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 for at least the next two years. 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 systems are Year 2000 compliant. The Company has contacted its major suppliers, as well as certain other suppliers, to determine whether they are Year 2000 compliant and, where not, would monitoring their progress. 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 10 12 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. 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. The Company is in the process of completing a contingency plan to address failures that may occur. 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 revenues, cost of sales, gross profit, effective tax rate for the third and fourth quarters 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; changes in product mix; 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 13 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 The Company held its 1999 Annual Meeting of Stockholders ("Annual Meeting") on June 14, 1999 at the offices of Halkey-Roberts Corporation, a Company subsidiary. At such meeting, the Company's stockholders ratified the Board of Director's appointment of Arthur Andersen LLP as independent accountants with 2,284,502 shares voted for ratification, 25,941 voted against and 8,852 abstentions. The voting with respect to the nominees for election as directors was as follows: NOMINEE VOTES FOR VOTES WITHHELD ------- --------- -------------- Emile A. Battat 2,263,858 55,437 John H. P. Maley 2,263,858 55,437 The terms of the following directors continued after the meeting: Roger F. Stebbing, John P. Stupp, Jr., Richard O. Jacobson, Jerome J. McGrath and Hugh J. Morgan, Jr. For information relating to the settlement between the Company and The Atrion Stockholder Committee which resulted in termination of a proxy contest in connection with the Annual Meeting, see the Company's Schedule 14A Information, Definitive Additional Materials, filed with the Securities and Exchange Commission on May 17, 1999. 12 14 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10i* Atrion Corporation 1998 Outside Directors Stock Option Plan (As Amended and Restated Effective August 12, 1999) (1) 10k* Amendments to Atrion Corporation 1997 Stock Incentive Plan (1) 27 Financial Data Schedules (filed electronically only) (b) No reports on Form 8-K have been filed during the quarter ended June 30, 1999. - --------------------- (1) Filed herewith 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: August 13, 1999 /s/ Emile A. Battat ----------------------------------- Emile A. Battat Chairman, President and Chief Executive Officer Date: August 13, 1999 /s/ Jeffery Strickland ----------------------------------- Jeffery Strickland Vice President and Chief Financial Officer 14 EX-10.I 2 1998 OUTSIDE DIRECTORS STOCK OPTION PLAN 1 Exhibit 10i ATRION CORPORATION 1998 OUTSIDE DIRECTORS STOCK OPTION PLAN (As Amended And Restated Effective August 12, 1999) ARTICLE 1 - ESTABLISHMENT, PURPOSE AND DURATION 1.1 Establishment of the Plan. Atrion Corporation, a Delaware Corporation (the "Company"), hereby establishes a compensation plan to be known as the "Atrion Corporation 1998 Outside Directors Stock Option Plan" (the "Plan"), as set forth herein. 1.2 Purpose of the Plan. The purpose of the Plan is to promote the interests of the Company by providing incentives, which are linked directly to increases in stockholder value, to attract qualified persons who are not employees of the Company to serve, and continue their service, as members of the Company's Board of Directors (the "Board"). 1.3 Duration of the Plan. The Plan shall be effective on January 21, 1998, the date of its adoption by the Board (the "Effective Date"), subject to approval by the Company's stockholders within twelve (12) months thereafter, such approval to be by stockholder vote sufficient to satisfy the requirements of The Nasdaq Stock Market, and shall remain in effect, subject to the right of the Board to amend or terminate the Plan at any time in accordance with the provisions hereof, until all shares of common stock of the Company ("Shares") subject to the Plan shall have been purchased in accordance with the provisions hereof or the Options to which such Shares are subject shall have been surrendered before exercise or shall have lapsed. ARTICLE 2 - DEFINITIONS Whenever used in the Plan, the following capitalized terms shall have the meanings set forth below: 2.1 "Board" means the Board of Directors of the Company. 2.2 "Chairman" means the Chairman of the Board of the Company. 2.3 "Code" means the Internal Revenue Code of 1986, as amended from time to time, and references thereto shall include the applicable Treasury regulations thereunder. 2.4 "Common Stock" means the ten cent ($0.10) par value common stock of the Company. 2.5 "Committee" means the committee described in Section 3.1 hereof. 2 2.6 "Company" means Atrion Corporation, a Delaware corporation, and any successor as provided in Article 11 hereof. 2.7 "Disability" means physical or mental inability to perform the normal duties of service as a member of the Board as determined by a physician selected by the Committee after an examination of such Optionee; provided, that if such Optionee fails or refuses to cooperate in such examination the determination of his Disability shall be made by the Committee in its sole discretion. 2.8 "Effective Date" means the date described in Section 1.3 hereof. 2.9 "Fair Market Value" as of any date means the closing sales price of a Share on such date as reported by (i) any national securities exchange on which the Shares are actively traded or (ii) The Nasdaq Stock Market or, if no Shares are traded on such exchange or system on such date, then on the next preceding date on which any Shares were traded on such exchange or system. 2.10 "Option" means an option to purchase Shares from the Company granted pursuant to Article 5 hereof which does not meet the requirements of Section 422 of the Code. 2.11 "Option Price" means the price at which a Share may be purchased by an Optionee pursuant to the exercise of an Option. 2.12 "Optionee" means an Outside Director who has been granted an Option which is outstanding hereunder. 2.13 "Outside Director" means any person who is a member of the Board, including the Chairman, who is not an employee of the Company or any Subsidiary. 2.14 "Plan" means the Atrion Corporation 1998 Outside Directors Stock Option Plan. 2.15 "Shares" means the shares of Common Stock of the Company. 2.16 "Stock Option Agreement" means a written agreement between the Company and an Optionee setting forth the terms and provisions applicable to an Option granted by the Company to such Optionee hereunder. 2.17 "Subsidiary" means any corporation, partnership, joint venture, affiliate or other entity of which a majority of the voting stock or power is beneficially owned, directly or indirectly, by the Company. ARTICLE 3 - ADMINISTRATION 3.1 Authority of Board or Committee. This Plan shall be administered by the Board or by a committee appointed by the Board (the "Committee"). In the event the Board fails to appoint or refrains from appointing a Committee, the Board shall have all power and 3 authority to administer this Plan. In such event, the word "Committee" wherever used herein shall be deemed to mean the Board. The Committee shall, subject to the provisions of the Plan, have the power to construe this Plan, to determine all questions hereunder, and to adopt and amend such rules and regulations for the administration of this Plan as it may deem desirable. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to this Plan or any option granted under it. 3.2 Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company, its directors and their estates and beneficiaries. ARTICLE 4 - SHARES SUBJECT TO PLAN 4.1 Available Shares. The total number of Shares for which Options may be granted under this Plan shall not exceed 270,000 Shares, subject to adjustment in accordance with Section 4.2 hereof. Shares subject to this Plan are authorized but unissued Common Stock or Common Stock that was once issued and subsequently reacquired by the Company. If any Options granted under this Plan are surrendered before exercise or lapse without exercise, in whole or in part, the Shares subject to such grant shall not again be available for the grant of Options under this Plan. 4.2 Adjustments in Shares. In the event of any change in corporate capitalization, such as a stock dividend or stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code) or any partial or complete liquidation of the Company, an appropriate adjustment shall be made in the number and class of Shares reserved under the Plan, in the number, class and Option Price of Shares subject to the unexercised portion of outstanding Options granted under the Plan, and the number of Shares that are to be subject to, and are to be included in, each future grant of Options to be made in accordance with Section 5.1 hereof, as may be necessary to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any Option shall always be a whole number. ARTICLE 5 - OPTIONS 5.1 Annual Grants; Option Price. On each of February 1, 1998 and February 1, 1999, each person who is then serving as a member of the Board and is an Outside Director, other than the Chairman, shall be granted automatically, without any action by the Committee, an Option to purchase Ten Thousand (10,000) Shares, subject to adjustment in accordance with Section 4.2 of this Plan, and the person who is then serving as Chairman, if he is an Outside Director, shall be granted automatically, without any action by the Committee, an Option to purchase Twenty Thousand (20,000) Shares, subject to adjustment in accordance with Section 4.2 of this Plan. The Option Price shall equal the Fair Market Value of the Common Stock as of the date of grant. 4 5.2 Vesting. Each Option granted hereunder shall vest, and thereby become exercisable, in four (4) equal quarterly installments on the May 1, August 1, November 1 and February 1 next succeeding the date on which such Option is granted; provided, however, that for each such installment to vest the Optionee shall then be serving as an Outside Director on the vesting date for such installment. 5.3 Period of Option. Unless sooner terminated in accordance with the provisions of Section 5.4 below, each Option shall expire on the date which is ten (10) years after the date on which the Option is granted. 5.4 Termination of Outside Directorship. In the event an Optionee ceases to be an Outside Director for any reason other than death or Disability, such Optionee shall have the right to exercise his Options at any time within six (6) months, or in the case of an Optionee who has then served as a member of the Board of Directors of the Company or any of its predecessors for at least twenty (20) years, within eighteen (18) months, after the date on which he ceased to be an Outside Director to the extent of the full number of Shares he was entitled to purchase on exercise of the Options on the date of cessation, subject to the condition that no Option shall be exercisable after the expiration of the term of the Option as provided in Section 5.3 above. In the event Optionee ceases to be an Outside Director by reason of Optionee's death or Disability, such Options may be exercised at any time within twelve (12) months, or in the case of an Optionee who has then served as a member of the Board of Directors of the Company or any of its predecessors for at least twenty (20) years, within eighteen (18) months, after the date on which he ceased to be an Outside Director by Optionee or Optionee's legal representative, in the case of Disability, or by Optionee's heir or legatee or the personal representative, administrator or executor of Optionee's estate, in the case of death, to the extent of the full number of Shares the Optionee was entitled to purchase on exercise of the Option on the date of cessation, subject to the condition that no Option shall be exercisable after the term of the Option as provided in Section 5.3 above. 5.5 Non-Transferability of Option. No Option shall be transferable by an Optionee except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, and during Optionee's lifetime his Options shall be exercisable only by Optionee or the transferee of the Option pursuant to a qualified domestic relations order, except as otherwise specifically provided in Section 5.4 above in the case of Optionee's Disability. 5.6 Exercise of Options. The Shares subject to an Option may be purchased in such installments and on such exercise dates as shall be set forth in the Plan or the Stock Option Agreement. Any Shares not purchased on the applicable exercise date may be purchased thereafter at any time prior to the final expiration of the Option, subject to the 5 provisions of Section 5.4 above. In no event shall any Option be exercised, in whole or in part, after its expiration date. 5.7 Payment. Options shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price upon exercise of any Option shall be payable to the Company: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the aggregate Option Price, or (c) by a combination of (a) and (b). The Committee also may allow cashless exercise or payment by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Optionee, in the Optionee's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option. 5.8 Restrictions on Transferability. The Committee may impose such restrictions on the transfer of Shares acquired pursuant to the exercise of an Option granted under this Plan as it may deem advisable including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which the Common Stock is then listed or traded and under any state securities laws applicable to such Shares. 5.9 Stock Option Agreements. Each Option granted shall be evidenced by a Stock Option Agreement that shall specify the Option Price, the term of the Option, the number of Shares subject to such Option and such other provisions as the Committee shall determine which are not inconsistent with the provisions of the Plan. ARTICLE 6 - LIMITATION OF RIGHTS 6.1 No Right to Continue as a Director. Neither the Plan nor any action taken pursuant to the Plan shall confer upon any Outside Director any right to continue as a director of the Company for any period of time or at any particular rate of compensation. 6.2 No Stockholder Rights. An Optionee shall have no rights as a stockholder with respect to the Shares subject to Options until the date of issuance to such Optionee of the stock certificate following the exercise of the Option therefor. ARTICLE 7 - BENEFICIARY DESIGNATIONS Each Optionee may, from time to time, designate any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Optionee, shall be in a form prescribed by the Company, and will be effective only when filed by the Optionee in writing with the Company during the Optionee's lifetime. In the absence of any such 6 designation, benefits remaining unpaid at the Optionee's death shall be paid to the Optionee's estate. ARTICLE 8 - AMENDMENT, MODIFICATION AND TERMINATION The Board may at any time, and from time to time, alter, amend, discontinue, suspend or terminate the Plan in whole or in part; provided, however, that no amendment or modification made without stockholder approval may (i) increase the number of Shares subject to the Plan (except as provided in Section 4.2 hereof), (ii) materially modify the requirements as to eligibility to receive Options under the Plan or (iii) materially increase benefits accruing to Outside Directors hereunder and no termination, amendment, or modification of the Plan shall adversely affect in any material way any Option previously granted under the Plan without the written consent of the Optionee holding such Option. ARTICLE 9 - WITHHOLDING 9.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require an Optionee to remit to the Company, an amount sufficient to satisfy federal, state and local taxes (including the Optionee's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of this Plan. 9.2 Share Withholding. With respect to withholding required upon the exercise of Options, Optionee may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date as of which the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing, signed by the Optionee, and subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. ARTICLE 10 - INDEMNIFICATION Each person who is or shall have been a member of the Committee shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company's approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to defend the same before he undertakes to defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. 7 ARTICLE 11 - SUCCESSORS All obligations of the Company under the Plan with respect to Options granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business or assets of the Company. ARTICLE 12 - MISCELLANEOUS 12.1 Gender and Number. Whenever the context so requires, the singular shall include the plural and the plural shall include the singular and the gender of any pronoun shall include the other gender. 12.2 Severability. The invalidity of this Plan with respect to one or more persons shall not affect the rights and obligations of any other person hereunder in any manner whatsoever. The invalidity of one or more provisions of this Plan shall not affect the validity of any other provision of this Plan in any manner whatsoever. 12.3 Requirements of Law. The granting of Options and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 12.4 Securities Laws Compliance. Transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 12.5 Governing Law. This Plan shall be construed according to the laws of the State of Delaware. EX-10.K 3 AMENDMENT TO 1997 STOCK INCENTIVE PLAN 1 Exhibit 10k AMENDMENTS TO ATRION CORPORATION 1997 STOCK INCENTIVE PLAN Section 10.2 of the Atrion Corporation 1997 Stock Incentive Plan was amended by the Board of Directors of Atrion Corporation, effective March 15, 1999, by adding the following proviso at the end of the first sentence of said Section 10.2: ; provided, however, that the grants to be made to Outside Directors on July 10, 1999 shall be omitted. Section 10.4 of the Atrion Corporation 1997 Stock Incentive Plan was amended by the Board of Directors of Atrion Corporation, effective June 14, 1999, to read as follows: 10.4 Duration. Each Option granted to an Outside Director shall expire on the first to occur of (i) the tenth anniversary of the date of grant of the Option, (ii) six (6) months, or in the case of an Outside Director who has then served as a director of the Company or any predecessor of the Company for at least twenty (20) years, eighteen (18) months, after the date the Outside Director ceases to be a Director other than as a result of the death of the Outside Director; or (iii) one (1) year, or in the case of an Outside Director who has then served as a director of the Company or any predecessor of the Company for at least twenty (20) years, eighteen (18) months, after the Outside Director ceases to be a Director by reason of the death of the Outside Director, in which event the Option may be exercised during such period by the executor or administrator of the Outside Director's estate, by the person or persons to whom the Outside Director's rights under the Option shall pass by the Outside Director's will or laws of descent and distribution or by the Outside Director's designated beneficiary. The Committee may not provide for an extended exercise period beyond the periods set forth in this Article 10. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ATRION CORPORATION FOR THE SIX MONTHS ENDED JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 101 0 8,645 0 9,960 19,892 31,838 6,340 65,355 6,139 6,225 0 0 342 45,601 65,355 24,318 24,318 14,483 14,483 8,316 0 72 1,457 444 1,013 165 0 0 1,178 0.43 0.42
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