Edgar Filing: ATRION CORP

atri_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended June 30, 2015

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from to

Commission File Number 0-10763

Atrion Corporation
(Exact Name of Registrant as Specified in its Charter)

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

One Allentown Parkway, Allen, 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. xYes oNo

Indicate by check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “accelerated filer.” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o

Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYesx No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Title of Each Class		Number of Shares Outstanding at July 15, 2015
Common stock, Par Value $0.10 per share		1,838,422

ATRION CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

PART I.	Page

Item 1. Financial Statements	2

Consolidated Statements of Income (Unaudited)	3
For the Three and Six months Ended
June 30, 2015 and 2014

Consolidated Statements of Comprehensive Income	4
(Unaudited)
For the Three and Six months Ended
June 30, 2015 and 2014

Consolidated Balance Sheets (Unaudited)	5
June 30, 2015 and December 31, 2014

Consolidated Statements of Cash Flows (Unaudited)	6
For the Six months Ended
June 30, 2015 and 2014

Consolidated Statement of Changes in Stockholders’	7
Equity (Unaudited)
June 30, 2015 and December 31, 2014

Notes to Consolidated Financial Statements (Unaudited)	8

Item 2. Management's Discussion and Analysis of	11
Financial Condition and Results of
Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk	15

Item 4. Controls and Procedures	15

PART II. Other Information	15

Item 1. Legal Proceedings	15

Item 1A. Risk Factors	15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 6. Exhibits	16

SIGNATURES
	18
Exhibit Index
	19

PART I

FINANCIAL INFORMATION

Item 1.Financial Statements

ATRION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands, except per share amounts)

Revenues	$	37,655		$	35,025		$	75,979		$	71,444
Cost of goods sold		18,871			17,616			38,671			36,647
Gross profit		18,784			17,409			37,308			34,797
Operating expenses:
Selling		1,682			1,616			3,203			3,201
General and administrative		4,313			4,386			8,271			8,314
Research and development		1,669			1,150			3,228			2,325
		7,664			7,152			14,702			13,840
Operating income		11,120			10,257			22,606			20,957

Interest income		328			364			505			664

Income before provision for income taxes		11,448			10,621			23,111			21,621
Provision for income taxes		(3,974	)		(3,739	)		(8,036	)		(7,539	)

Net income	$	7,474		$	6,882		$	15,075		$	14,082

Net income per basic share	$	4.04		$	3.51		$	8.10		$	7.14
Weighted average basic shares outstanding		1,850			1,960			1,862			1,971


Net income per diluted share	$	3.99		$	3.48		$	8.00		$	7.09
Weighted average diluted shares outstanding		1,872			1,977			1,884			1,987

Dividends per common share	$	0.75		$	0.64		$	1.50		$	1.28

The accompanying notes are an integral part of these statements.

ATRION CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
	(In thousands)

Net Income	$	7,474	$	6,882	$	15,075	$	14,082

Other Comprehensive Income: Unrealized income on investments, net of tax expense of $117, $0, $179 and $0		218		--		333		--

Comprehensive Income	$	7,692	$	6,882	$	15,408	$	14,082

The accompanying notes are an integral part of these statements.

ATRION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

Assets	June 30, 2015			December 31, 2014
	(in thousands)
Current assets:
Cash and cash equivalents	$	19,580		$	20,775
Short-term investments		44			3,084
Accounts receivable		21,248			16,962
Inventories		27,453			28,022
Prepaid expenses and other current assets		2,954			4,720
Deferred income taxes		573			573
		71,852			74,136

Long-term investments		11,974			21,760

Property, plant and equipment		146,511			142,171
Less accumulated depreciation and amortization		83,637			79,655
		62,874			62,516

Other assets and deferred charges:
Patents		2,319			2,538
Goodwill		9,730			9,730
Other		928			834
		12,977			13,102

Total assets	$	159,677		$	171,514
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	8,388		$	9,479
Accrued income and other taxes		340			457
		8,728			9,936

Line of credit		--			--

Other non-current liabilities		12,775			12,008

Stockholders’ equity:
Common stock, par value $0.10 per share; authorized 10,000 shares, issued 3,420 shares		342			342
Paid-in capital		35,129			33,940
Accumulated other comprehensive income/(loss)		88			(245	)
Retained earnings		208,977			196,706
Treasury shares,1,582 at June 30, 2015 and 1,507 at December 31, 2014, at cost		(106,362	)		(81,173	)
Total stockholders’ equity		138,174			149,570


Total liabilities and stockholders’ equity	$	159,677		$	171,514

The accompanying notes are an integral part of these statements.

ATRION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2015			2014
	(in thousands)
Cash flows from operating activities:
Net income	$	15,075		$	14,082
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,503			4,458
Deferred income taxes		524			(1,016	)
Stock-based compensation		1,054			1,129
Net change in accrued interest, premiums, and discounts
on investments		106			274
Other		17			30
		21,279			18,957

Changes in operating assets and liabilities:
Accounts receivable		(4,286	)		(2,243	)
Inventories		569			(942	)
Prepaid expenses		1,766			(885	)
Other non-current assets		(263	)		(52	)
Accounts payable and accrued liabilities		(1,091	)		1,183
Accrued income and other taxes		(117	)		(553	)
Other non-current liabilities		65			(226	)
		17,922			15,239

Cash flows from investing activities:
Property, plant and equipment additions		(4,658	)		(5,942	)
Purchase of investments		--			(19,375	)
Proceeds from maturities of investments		13,400			19,375
		8,742			(5,942	)

Cash flows from financing activities:
Shares tendered for employees’ withholding taxes on stock-based compensation		(155	)		(377	)
Tax benefit related to stock-based compensation		150			163
Purchase of treasury stock		(25,072	)		(11,608	)
Dividends paid		(2,782	)		(2,513	)
		(27,859	)		(14,335	)

Net change in cash and cash equivalents		(1,195	)		(5,038	)
Cash and cash equivalents at beginning of period		20,775			28,559
Cash and cash equivalents at end of period	$	19,580		$	23,521

Cash paid for:
Income taxes	$	5,138		$	9,685

The accompanying notes are an integral part of these financial statements.

ATRION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock					Treasury Stock
	Shares Outstanding			Amount		Shares		Amount			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balances, December 31, 2014		1,913		$	342		1,507	$	(81,173	)	$	33,940	$	(245	)	$	196,706		$	149,570

Net income																	15,075			15,075
Other comprehensive income														333						333
Tax benefit from stock-based compensation												150								150
Stock-based compensation transactions									37			1,039								1,076
Shares surrendered in stock transactions									(154	)										(154	)
Purchase of treasury stock		(75	)				75		(25,072	)										(25,072	)
Dividends																	(2,804	)		(2,804	)
Balances, June 30, 2015		1,838		$	342		1,582	$	(106,362	)	$	35,129	$	88		$	208,977		$	138,174

The accompanying notes are an integral part of these financial statements

ATRION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited consolidated financial statements of Atrion Corporation and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these statements include all adjustments necessary to present a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. Preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the financial statements and notes. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 ("2014 Form 10-K"). References herein to "Atrion," the "Company," "we," "our," and "us" refer to Atrion Corporation and its subsidiaries.

(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):

	June 30,		December 31,
	2015		2014
Raw materials	$	12,008	$	12,575
Work in process		6,612		5,600
Finished goods		8,833		9,847
Total inventories	$	27,453	$	28,022

(3) Income per share

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

	Three Months Ended June 30,				Six Months Ended June 30,
		2015		2014		2015		2014
	(in thousands, except per share amounts)

Net income	$	7,474	$	6,882	$	15,075	$	14,082
Weighted average basic shares outstanding		1,850		1,960		1,862		1,971
Add: Effect of dilutive securities		22		17		22		16
Weighted average diluted shares outstanding		1,872		1,977		1,884		1,987

Earnings per share:
Basic	$	4.04	$	3.51	$	8.10	$	7.14
Diluted	$	3.99	$	3.48	$	8.00	$	7.09

ATRION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Incremental shares from stock options and restricted stock units were included in the calculation of weighted average diluted shares outstanding using the treasury stock method. Dilutive securities representing 15 and 33 shares of common stock for the quarters ended June 30, 2015 and 2014, respectively, were excluded from the computation of weighted average diluted shares outstanding because their effect would have been anti-dilutive.

(4) Investments

As of June 30, 2015, we held certain investments that are required to be measured for disclosure purposes at fair value on a recurring basis. These investments are considered Level 2 investments and are all considered to be held-to-maturity securities. We consider as current assets those investments which will mature in the next 12 months. The remaining investments are considered non-current assets. The amortized cost and fair value of our investments, and the related gross unrealized gains and losses, were as follows as of June 30, 2015 (in thousands):

			Gross Unrealized
	Cost		Gains		Losses			Fair Value
Short-term Investments:
Corporate bonds	$	44	$	--	$	--		$	44

Long-term Investments
Corporate bonds	$	7,963	$		$	(1,551	)	$	6,412

The above long-term corporate bonds represent investments in two issuers. These securities have experienced a decline in value since their acquisition dates in the fourth quarter of 2014. Most of this decline relates to a changed outlook for one issuer due to major economic declines in its industry. The change for the other issuer relates to increases in interest rates which resulted in a lower market price for that security. The total carrying value of these investments is reviewed quarterly for changes in circumstances or the occurrence of events that suggest our investment may not be recoverable. We currently expect full recovery of our amortized cost in these securities based on our assessment of the credit quality of the underlying collateral and credit support available to each of the issuers. Based on our evaluation of the creditworthiness of the issuers and because we do not intend to sell the investments, nor is it likely that we would be required to sell these investments before recovery of their amortized cost bases, which may be maturity, none of the unrealized losses are considered to be other than temporary.

At June 30, 2015, the length of time until maturity of these securities ranged from 40 to 55 months. None of the above investments have been in a loss position for more than twelve months.

ATRION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The cost and fair value of our investments that are being accounted for as available-for-sale securities, and the related gross unrealized gain reflected in accumulated other comprehensive income, were as follows as of the dates shown below (in thousands):

			Gross Unrealized
	Cost		Gains		Losses		Fair value
As of June 30, 2015:
Long-term Investments:
Equity investments	$	3,876	$	135	$	--	$	4,011

(5) Recent Accounting Pronouncements

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

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We develop and manufacture products primarily for medical applications. We market components to other equipment manufacturers for incorporation in their products and sell finished devices to physicians, hospitals, clinics and other treatment centers. Our medical products primarily serve the fluid delivery, cardiovascular, and ophthalmology markets. Our other medical and non-medical products include instrumentation and disposables used in dialysis and valves and inflation devices used in marine and aviation safety products.

Our products are used in a wide variety of applications by numerous customers. We encounter competition in all of our markets and compete primarily on the basis of product quality, price, engineering, customer service and delivery time.

Our strategy is to provide a broad selection of products in the areas of our expertise. Research and development efforts are focused on improving current products and developing highly-engineered products that meet customer needs and have the potential for broad market applications and significant sales. Proposed new products may be subject to regulatory clearance or approval prior to commercialization and the time period for introducing a new product to the marketplace can be unpredictable. We also focus on controlling costs by investing in modern manufacturing technologies and controlling purchasing processes. We have been successful in consistently generating cash from operations and have used that cash to reduce indebtedness, to fund capital expenditures, to repurchase stock and to pay dividends.

Our strategic objective is to further enhance our position in our served markets by:

●	Focusing on customer needs;
●	Expanding existing product lines and developing new products;
●	Manufacturing products to exacting quality standards; and
●	Preserving and fostering a collaborative and entrepreneurial culture.

For the three months ended June 30, 2015, we reported revenues of $37.7 million, operating income of $11.1 million and net income of $7.5 million, up 8 percent, 8 percent and 9 percent, respectively, from the three months ended June 30, 2014. For the six months ended June 30, 2015, we reported revenues of $75.9 million, operating income of $22.6 million and net income of $15.1 million, up 6 percent, 8 percent and 7 percent, respectively, from the six months ended June 30, 2014.

Results for the three months ended June 30, 2015

Consolidated net income totaled $7.5 million, or $4.04 per basic and $3.99 per diluted share, in the second quarter of 2015. This is compared with consolidated net income of $6.9 million, or $3.51 per basic and $3.48 per diluted share, in the second quarter of 2014. The income per basic share computations are based on weighted average basic shares outstanding of 1,850,000 in the 2015 period and 1,960,000 in the 2014 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,872,000 in the 2015 period and 1,977,000 in the 2014 period.

Consolidated revenues of $37.7 million for the second quarter of 2015 were 8 percent higher than revenues of $35.0 million for the second quarter of 2014. This increase was primarily attributable to higher sales volumes.

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

	Three Months ended June 30,
	2015		2014

Fluid Delivery	$	16,334	$	14,732
Cardiovascular		11,668		10,837
Ophthalmology		5,107		5,106
Other		4,546		4,350
Total	$	37,655	$	35,025

Cost of goods sold of $18.9 million for the second quarter of 2015 was $1.3 million higher than in the comparable 2014 period. The primary contributors to the increase in our cost of goods sold were increased sales, increased manufacturing support personnel costs, increased supplies, increased utilities and increased depreciation partially offset by the impact of continued cost improvement projects. Our cost of goods sold in the second quarter of 2015 was 50.1 percent of revenues compared with 50.3 percent of revenues in the second quarter of 2014.

Gross profit of $18.8 million in the second quarter of 2015 was $1.4 million, or 8 percent, higher than in the comparable 2014 period. Our gross profit percentage in the second quarter of 2015 was 49.9 percent of revenues compared with 49.7 percent of revenues in the second quarter of 2014. The increase in gross profit percentage in the 2015 period compared to the 2014 period was primarily related to a favorable product mix and the impact of continued cost improvement initiatives partially offset by increased manufacturing support costs mentioned above.

Our second quarter 2015 operating expenses of $7.7 million were $512,000 higher than the operating expenses for the second quarter of 2014. This increase was attributable to a $519,000 increase in Research and Development, or R&D, expenses and a $66,000 increase in Selling expenses along with a $73,000 decrease in General and Administrative, or G&A, expenses. The increase in R&D costs was primarily related to increased supplies and outside services. The increase in Selling expenses for the second quarter of 2015 was primarily related to increased promotion, advertising and miscellaneous expenses partially offset by reduced outside services and compensation. The decrease in G&A expenses for the second quarter of 2015 was principally attributable to decreased outside services and compensation partially offset by increased travel and amortization expense.

Operating income in the second quarter of 2015 increased $863,000 to $11.1 million, an 8 percent increase from our operating income in the quarter ended June 30, 2014. Operating income was 30 percent of revenues in the second quarter of 2015 and 29 percent of revenues in the second quarter of 2014.

Income tax expense for the second quarter of 2015 was $4.0 million compared to income tax expense of $3.7 million for the same period in the prior year. The effective tax rate for the second quarter of 2015 was 34.7 percent, compared with 35.2 percent for the second quarter of 2014. We expect the effective tax rate for the remainder of 2015 to be approximately 34.5 percent.

Results for the six months ended June 30, 2015

Consolidated net income totaled $15.1 million, or $8.10 per basic and $8.00 per diluted share, in the first six months of 2015. This is compared with consolidated net income of $14.1 million, or $7.14 per basic and $7.09 per diluted share, in the first six months of 2014. The income per basic share computations are based on weighted average basic shares outstanding of 1,862,000 in the 2015 period and 1,971,000 in the 2014 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 1,884,000 in the 2015 period and 1,987,000 in the 2014 period.

Consolidated revenues of $76.0 million for the first six months of 2015 were 6 percent higher than revenues of $71.4 million for the first six months of 2014. This increase was primarily attributable to higher sales volumes.

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

	Six Months ended June 30,
	2015		2014

Fluid Delivery	$	32,228	$	29,969
Cardiovascular		23,604		21,866
Ophthalmology		10,306		10,290
Other		9,841		9,319
Total	$	75,979	$	71,444

Cost of goods sold of $38.7 million for the first six months of 2015 was $2.0 million higher than in the comparable 2014 period. The primary contributors to the increase in our cost of goods sold were increased sales, increased manufacturing support personnel costs, increased supplies, utilities and increased travel partially offset by the impact of continued cost improvement projects and improved manufacturing efficiencies. Our cost of goods sold in the first six months of 2015 was 50.9 percent of revenues compared with 51.3 percent of revenues in the first six months of 2014.

Gross profit of $37.3 million in the first six months of 2015 was $2.5 million, or 7 percent, higher than in the comparable 2014 period. Our gross profit percentage in the first six months of 2015 was 49.1 percent of revenues compared with 48.7 percent of revenues in the first six months of 2014. The increase in gross profit percentage in the 2015 period compared to the 2014 period was primarily related to a favorable product mix, the impact of continued cost improvement initiatives and improved manufacturing efficiencies partially offset by increased manufacturing costs mentioned above.

Our first six months 2015 operating expenses of $14.7 million were $862,000 higher than the operating expenses for the first six months of 2014. This increase was comprised of a $903,000 increase in R&D expenses, a $2,000 increase in Selling expenses and a $43,000 decrease in G&A expenses. The increase in R&D costs was primarily related to increased outside services, compensation and supplies. The decrease in G&A expenses for the first six months of 2015 was principally attributable to decreased outside services partially offset by increased travel and amortization expense.

Operating income in the first six months of 2015 increased $1.6 million to $22.6 million, an 8 percent increase from our operating income in the six months ended June 30, 2014. Operating income was 30 percent of revenues in the first six months of 2015 and 29 percent of revenues in the first six months of 2014.

Income tax expense for the first six months of 2015 was $8.0 million compared to income tax expense of $7.5 million for the same period in the prior year. The effective tax rate for the first six months of 2015 was 34.7 percent, compared with 34.9 percent for the first six months of 2014.

Liquidity and Capital Resources

We have a $40.0 million revolving credit facility with a money center bank that can be utilized for the funding of operations and for major capital projects or acquisitions, subject to certain limitations and restrictions. Borrowings under the credit facility bear interest that is payable monthly at 30-day, 60-day or 90-day LIBOR, as selected by us, plus one percent. Effective June 11, 2015, our revolving credit facility was amended to extend the date until which the lender is obligated to make advances under the revolving line of credit to October 1, 2021 and, assuming an event of default is not then existing, we can convert outstanding advances under the revolving line of credit to term loans with a term of up to two years. We had no outstanding borrowings under our credit facility at June 30, 2015 or at December 31, 2014. The credit facility contains various restrictive covenants, none of which is expected to impact our liquidity or capital resources. At June 30, 2015, we were in compliance with all financial covenants. We believe that the bank providing the credit facility is highly-rated and that the entire $40.0 million under the credit facility is currently available to us. If that bank were unable to provide such funds, we believe that such inability would not impact our ability to fund operations.

At June 30, 2015, we had a total of $31.6 million in cash and cash equivalents, short-term investments and long-term investments, a decrease of $14.0 million from December 31, 2014. The principal contributor to this decrease was the purchase of treasury stock partially offset by operating results.

Cash flows from operating activities of $17.9 million for the six months ended June 30, 2015 were primarily comprised of net income plus the net effect of non-cash expenses. During the first six months of 2015, we expended $4.6 million for the addition of property and equipment, $25.1 million for treasury stock and $2.8 million for dividends. During the same period, maturities of investments generated $13.4 million.

At June 30, 2015, we had working capital of $63.1 million, including $19.6 million in cash and cash equivalents and $44,000 in short-term investments. The $1.1 million decrease in working capital during the first six months of 2015 was primarily related to decreases in cash and cash equivalents, short-term investments and prepaid expenses. This decrease was partially offset by increases in accounts receivable and decreases in accounts payable and accrued liabilities. The net decrease in cash and short-term investments was primarily related to purchases of treasury stock. The decrease in prepaid expenses was primarily attributable to federal income tax payments. The increase in accounts receivable was primarily related to increased revenues for the second quarter of 2015. The decrease in accounts payable was primarily attributable to payments made during this year on 2014 purchases of capital equipment.

We believe that our $31.6 million in cash, cash equivalents, short-term investments and long-term investments, along with cash flows from operations and available borrowings of up to $40.0 million under our credit facility, will be sufficient to fund our cash requirements for at least the foreseeable future. We believe that our strong financial position would allow us to access equity or debt financing should that be necessary. Additionally, we believe that our cash and cash equivalents, short-term investments and long-term investments, as a whole, will continue to increase during the remainder of 2015.

Forward-Looking Statements

Statements in this Management’s Discussion and Analysis and elsewhere in this Quarterly Report on Form 10-Q that are forward looking are based upon current expectations, and actual results or future events may differ materially. Therefore, the inclusion of such forward-looking information should not be regarded as a representation by us that our objectives or plans will be achieved. Such statements include, but are not limited to, our effective tax rate for the remainder of 2015, our ability to fund our cash requirements for the foreseeable future with our current assets, long-term investments, cash flow and borrowings under the credit facility, the impact that the inability of the bank providing the credit facility to provide funds thereunder would have on our ability to fund operations, our access to equity and debt financing, and the increase in cash, cash equivalents, and investments in the remainder of 2015. Words such as “expects,” “believes,” “anticipates,” “intends,” “should,” “plans,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements contained herein involve numerous risks and uncertainties, and there are a number of factors that could cause actual results or future events to differ materially, including, but not limited to, the following: changing economic, market and business conditions; acts of war or terrorism; the effects of governmental regulation; the impact of competition and new technologies; slower-than-anticipated introduction of new products or implementation of marketing strategies; implementation of new manufacturing processes or implementation of new information systems; our ability to protect our intellectual property; changes in the prices of raw materials; changes in product mix; intellectual property and product liability claims and product recalls; the ability to attract and retain qualified personnel; and the loss of, or any material reduction in sales to, any significant customers. In addition, assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic review which may cause us to alter our marketing, capital expenditures or other budgets, which in turn may affect our results of operations and financial condition.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

For the quarter ended June 30, 2015, we did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in our 2014 Form 10-K.

Item 4.

Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2015. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting for the quarter ended June 30, 2015 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in claims or litigation that arise in the normal course of business. We are not currently a party to any legal proceedings, which, if decided adversely, would have a material adverse effect on our business, financial condition, or results of operations.

Item 1A. Risk Factors

There were no material changes to the risk factors disclosed in our 2014 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below sets forth information with respect to our purchases of our common stock during each of the three months in the period ended June 30, 2015.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
4/1/2015 through 4/30/2015		-		-		-		3,869
5/1/2015 through 5/31/2015		24,897	$	331.00		4,279		249,590
6/1/2015 through 6/30/2015		-		-		-		249,590
Total		24,897	$	331.00		4,279		249,590

(1)

On August 16, 2011, our Board of Directors approved a stock repurchase program pursuant to which we could repurchase up to 200,000 shares of our common stock from time to time in open market or privately-negotiated transactions. By May 21, 2015, we had repurchased the 200,000 shares of our common stock authorized under the program approved in 2011. On May 21, 2015, our Board of Directors approved a new stock repurchase program pursuant to which we can repurchase up to 250,000 shares of our common stock from time to time in open market or privately-negotiated transactions. Our new stock repurchase program has no expiration date but may be terminated by our Board of Directors at any time.

Item 6. Exhibits

Exhibit

Number

Description

10.1

Seventh Amendment to Line of Credit Promissory Note dated as of June 11, 2015 among Atrion Corporation, Atrion Medical Products, Inc., Halkey-Roberts Corporation, Quest Medical, Inc., AlaTenn Pipeline Company, LLC, Atrion Leasing Company, LLC and Wells Fargo Bank, National Association.

10.2

Seventh Amendment to Loan and Security Agreement dated as of June 11, 2015 among Atrion Corporation, Atrion Medical Products, Inc., Halkey-Roberts Corporation, Quest Medical, Inc., AlaTenn Pipeline Company, LLC, Atrion Leasing Company, LLC and Wells Fargo Bank, National Association.

31.1

Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer

31.2

Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer

32.1

Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002

32.2

Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Atrion Corporation (Registrant)

Date: August 4, 2015	By:	/s/ David A. Battat
		David A. Battat
		President and Chief Executive Officer



Date: August 4, 2015	By:	/s/ Jeffery Strickland
		Jeffery Strickland
		Vice President and Chief Financial Officer
		(Principal Accounting andFinancial Officer)

Exhibit Index

Exhibit

Number

Description

10.1

10.2

31.1

Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer

31.2

Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer

32.1

Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002

32.2

Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document