I
tem 1. Financial
Statements
A
TRION CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
(in thousands,
except per share amounts)
|
|
|
|
|
|
Revenues
|
$
41,614
|
$
39,401
|
|
Cost
of goods sold
|
22,911
|
20,450
|
|
Gross
profit
|
18,703
|
18,951
|
|
Operating
expenses:
|
|
|
|
Selling
|
2,384
|
2,018
|
|
General
and administrative
|
4,187
|
4,229
|
|
Research
and development
|
1,095
|
1,338
|
|
|
7,666
|
7,585
|
|
Operating
income
|
11,037
|
11,366
|
|
|
|
|
|
Interest
and dividend income
|
582
|
313
|
|
Other
investment income/(losses)
|
211
|
(772
)
|
|
|
793
|
(459
)
|
|
|
|
|
|
Income
before provision for income taxes
|
11,830
|
10,907
|
|
Provision
for income taxes
|
(2,392
)
|
(2,420
)
|
|
|
|
|
|
Net
income
|
$
9,438
|
$
8,487
|
|
|
|
|
|
Net
income per basic share
|
$
5.09
|
$
4.58
|
|
Weighted
average basic shares outstanding
|
1,853
|
1,852
|
|
|
|
|
|
|
|
|
|
Net
income per diluted share
|
$
5.07
|
$
4.57
|
|
Weighted
average diluted shares outstanding
|
1,862
|
1,856
|
|
|
|
|
|
Dividends
per common share
|
$
1.35
|
$
1.20
|
The accompanying notes are an integral part of these
statements.
A
TRION CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
Cash and cash
equivalents
|
$
44,043
|
$
58,753
|
|
Short-term
investments
|
24,779
|
9,684
|
|
Accounts
receivable
|
21,240
|
17,014
|
|
Inventories
|
32,801
|
33,572
|
|
Prepaid expenses
and other current assets
|
1,803
|
3,242
|
|
|
124,666
|
122,265
|
|
|
|
|
|
Long-term
investments
|
27,466
|
21,048
|
|
|
|
|
|
Property, plant and
equipment
|
184,631
|
181,582
|
|
Less accumulated
depreciation and amortization
|
108,691
|
106,689
|
|
|
75,940
|
74,893
|
|
|
|
|
|
Other assets and
deferred charges:
|
|
|
|
Patents
|
1,629
|
1,659
|
|
Goodwill
|
9,730
|
9,730
|
|
Other
|
1,587
|
1,621
|
|
|
12,946
|
13,010
|
|
|
|
|
|
Total
assets
|
$
241,018
|
$
231,216
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable
and accrued liabilities
|
$
9,917
|
$
9,601
|
|
Accrued income and
other taxes
|
1,096
|
619
|
|
|
11,013
|
10,220
|
|
|
|
|
|
Line of
credit
|
--
|
--
|
|
|
|
|
|
Other non-current
liabilities
|
11,922
|
10,229
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
Common stock, par
value $0.10 per share; authorized10,000 shares, issued 3,420
shares
|
342
|
342
|
|
Paid-in
capital
|
50,772
|
50,391
|
|
Retained
earnings
|
298,690
|
291,761
|
|
Treasury
shares,1,567 at March 31, 2019 and 1,567 at December 31, 2018, at
cost
|
(131,721
)
|
(131,727
)
|
|
Total
stockholders’ equity
|
218,083
|
210,767
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
$
241,018
|
$
231,216
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
A
TRION CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three Months EndedMarch 31,
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
Net
income
|
$
9,438
|
$
8,487
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
and amortization
|
2,546
|
2,183
|
|
Deferred
income taxes
|
627
|
(138
)
|
|
Stock-based
compensation
|
380
|
316
|
|
Net change in
unrealized gains and losses on investments
|
(147
)
|
789
|
|
Net change in
accrued interest, premiums, and discounts
|
|
|
|
on
investments
|
184
|
(104
)
|
|
|
13,028
|
11,533
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(4,226
)
|
(3,528
)
|
|
Inventories
|
771
|
(553
)
|
|
Prepaid
expenses
|
1,439
|
1,135
|
|
Other
non-current assets
|
34
|
(252
)
|
|
Accounts
payable and accrued liabilities
|
316
|
(668
)
|
|
Accrued
income and other taxes
|
477
|
2,229
|
|
Other
non-current liabilities
|
1,066
|
470
|
|
|
12,905
|
10,366
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
Property,
plant and equipment additions
|
(3,563
)
|
(3,269
)
|
|
Purchase
of investments
|
(28,218
)
|
(25,521
)
|
|
Proceeds
from maturities of investments
|
6,667
|
10,691
|
|
|
(25,114
)
|
(18,099
)
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
Dividends
paid
|
(2,501
)
|
(2,222
)
|
|
|
(2,501
)
|
(2,222
)
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
(14,710
)
|
(9,955
)
|
|
Cash
and cash equivalents at beginning of period
|
58,753
|
30,136
|
|
Cash
and cash equivalents at end of period
|
$
44,043
|
$
20,181
|
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
Income
taxes
|
$
56
|
$
24
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
A
TRION CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in Capital
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
|
Balances, January
1, 2018
|
1,836
|
$
342
|
1,584
|
$
(131,663
)
|
$
48,730
|
$
(1,215
)
|
$
268,194
|
$
184,388
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
8,487
|
8,487
|
|
Reclass
from adopting ASO 2016-01
|
|
|
|
|
|
1,215
|
(1,215
)
|
--
|
|
Stock-based
compensation transactions
|
|
|
|
5
|
314
|
|
|
319
|
|
Dividends
|
|
|
|
|
|
|
(2,226
)
|
(2,226
)
|
|
Balances, March 31,
2018
|
1,836
|
$
342
|
1,584
|
$
(131,658
)
|
$
49,044
|
$
0
|
$
273,240
|
$
190,968
|
|
Balances, January
1, 2019
|
1,853
|
$
342
|
1,567
|
$
(131,727
)
|
$
50,391
|
--
|
$
291,761
|
$
210,767
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
9,438
|
9,438
|
|
Stock-based
compensation transactions
|
|
|
|
6
|
381
|
|
|
387
|
|
Dividends
|
|
|
|
|
|
|
(2,509
)
|
(2,509
)
|
|
Balances, March 31,
2019
|
1,853
|
$
342
|
1,567
|
$
(131,721
)
|
$
50,772
|
--
|
$
298,690
|
$
218,083
|
The accompanying notes are an integral part of these financial
statements
A
TRION 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 normal and recurring
adjustments necessary to present a fair statement of our
consolidated results of operations, financial position and cash
flows. Operating results for any interim period are not necessarily
indicative of the results that may be expected for the full year.
Preparation of the Company’s financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions
that 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, 2018 ("2018 Form 10-K"). References herein
to "Atrion," the "Company," "we," "our," and "us" refer to Atrion
Corporation and its subsidiaries.
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):
|
|
|
|
|
|
|
|
|
Raw
materials
|
$
14,789
|
$
14,994
|
|
Work in
process
|
7,582
|
7,214
|
|
Finished
goods
|
10,430
|
11,364
|
|
Total
inventories
|
$
32,801
|
$
33,572
|
The
following is the computation for basic and diluted income per
share:
|
(1)
|
Three months
EndedMarch 31,
|
|
(2)
|
|
|
|
|
(in
thousands, except per share amounts)
|
|
Net
income
|
$
9,438
|
$
8,487
|
|
Weighted average
basic shares outstanding
|
1,853
|
1,852
|
|
Add: Effect of
dilutive securities
|
9
|
4
|
|
Weighted average
diluted shares outstanding
|
1,862
|
1,856
|
|
Earnings
per share:
|
|
|
|
Basic
|
$
5.09
|
$
4.58
|
|
Diluted
|
$
5.07
|
$
4.57
|
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
zero
and 1,200 shares of
common stock for the quarters ended March 31, 2019 and 2018,
respectively, were excluded from the computation of weighted
average diluted shares outstanding because their effect would have
been anti-dilutive.
As of
March 31, 2019, we held investments in commercial paper, bonds and
equity securities that are required to be measured for disclosure
purposes at fair value on a recurring basis. The commercial paper
and bonds are considered held-to-maturity and are recorded at
amortized cost in the accompanying consolidated balance sheet. The
equity securities and mutual funds are recorded at fair value in
the accompanying consolidated balance sheet. These investments are
considered Level 1 or Level 2 as detailed in the table below. We
consider as current assets those investments which will mature in
the next 12 months including interest receivable on the long-term
bonds. The remaining investments are considered non-current assets
including our investment in equity securities we intend to hold
longer than 12 months.
The fair values of these investments
were estimated using recently executed transactions and market
price quotations.
The amortized cost and fair value of our
investments, and the related gross unrealized gains and losses,
were as follows as of the dates shown below (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of March 31, 2019:
|
|
|
|
|
|
|
Money
Market
|
1
|
7,811
|
$
--
|
$
--
|
$
7,811
|
|
Commercial
paper
|
2
|
22,717
|
$
2
|
$
--
|
$
22,719
|
|
Bonds
|
2
|
36,886
|
$
--
|
$
(179
)
|
$
36,707
|
|
Mutual
funds
|
1
|
924
|
$
--
|
$
(16
)
|
$
908
|
|
Equity
investments
|
2
|
5,675
|
$
--
|
$
(2,706
)
|
$
2,969
|
|
|
|
|
|
|
|
|
As
of December 31, 2018:
|
|
|
|
|
|
|
Money
Market
|
1
|
12,319
|
$
--
|
$
--
|
$
12,319
|
|
Commercial
paper
|
2
|
4,393
|
$
--
|
$
--
|
$
4,393
|
|
Bonds
|
2
|
25,921
|
$
--
|
$
(321
)
|
$
25,600
|
|
Mutual
funds
|
1
|
795
|
$
--
|
$
(121
)
|
$
674
|
|
Equity
investments
|
2
|
5,675
|
$
--
|
$
(2,814
)
|
$
2,861
|
The
above long-term bonds represent investments in various issuers at
March 31, 2019. The unrealized losses in these investments relate
to a rise in interest rates which resulted in a lower market price
for these securities.
The
commercial paper has maturities from less than a month to 5.5
months. The bonds have maturities from less than a month to 26.5
months.
Purchased
patents and license fees paid for the use of other entities’
patents are amortized over the useful life of the patent or
license. The following tables provide information regarding patents
and licenses (dollars in thousands):
|
|
|
Weighted Average
Original Life (years)
|
|
|
Weighted Average
Original Life (years)
|
|
|
|
15.67
|
$
13,840
|
$
12,211
|
15.67
|
$
13,840
|
$
12,181
|
Aggregate
amortization expense for patents and licenses was $30,000 in each
of the three months ended March 31, 2019 and 2018.
Estimated future
amortization expense for each of the years set forth below ending
December 31 is as follows (in thousands):
|
2020
|
$
119
|
|
2021
|
$
119
|
|
2022
|
$
117
|
|
2023
|
$
113
|
|
2024
|
$
113
|
We
recognize revenue when performance obligations under the terms of a
contract with our customer are satisfied. This occurs with the
transfer of control of our products to customers when products are
shipped. Revenue is measured as the amount of consideration we
expect to receive in exchange for transferring products or
services. Sales and other taxes we may collect concurrent with
revenue-producing activities are excluded from
revenue.
A
summary of revenues by geographic area, based on shipping
destination, for the first quarter of 2019 and 2018 is as follows
(in thousands):
|
|
|
|
|
United
States
|
$
26,989
|
$
24,607
|
|
Germany
|
2,164
|
2,671
|
|
Other countries
less than 5% of revenues
|
12,461
|
12,123
|
|
Total
|
$
41,614
|
$
39,401
|
A
summary of revenues by product line for first quarter in each of
2019 and 2018 is as follows (in thousands):
|
|
|
|
|
Fluid
Delivery
|
$
18,161
|
$
18,800
|
|
Cardiovascular
|
15,420
|
13,210
|
|
Ophthalmology
|
2,283
|
2,785
|
|
Other
|
5,750
|
4,606
|
|
Total
|
$
41,614
|
$
39,401
|
The
vast majority (98%) of our revenue is driven by a purchase order
(our “contract”) and recognized at a single point in
time when the performance obligation of the product being shipped
is satisfied, rather than recognized over time, and is presented as
a receivable on the balance sheet. Payment is typically due within
30 days.
We
maintain an allowance for doubtful accounts to reflect estimated
losses resulting from the failure of customers to make required
payments. On an ongoing basis, the collectability of accounts
receivable is assessed based upon historical collection trends,
current economic factors and the assessment of the collectability
of specific accounts. An account is written off when it is
determined the receivable will not be collected. Historically, bad
debt has been immaterial.
We have
elected to recognize the cost of shipping as an expense in cost of
sales when control over the product has transferred to the
customer.
We do
not make any material accruals for product returns and warranty
obligations because our returns and warranty obligations have been
very low due to our focus on quality control.
We do
not disclose the value of unsatisfied performance obligations for
contracts for which we recognize revenue at the amount for which we
have the right to invoice. We believe that the complexity added to
our disclosures by the inclusion of a large amount of insignificant
detail in attempting to disclose information about immaterial
contracts would potentially obscure more useful and important
information.
(7)
Recent
Accounting Pronouncements
ASU 2016-02, Leases
On
February 25, 2016 the FASB issued ASU 2016-02, Leases (ASC
842). We early-adopted this standard as of January 1, 2018.
In July 2018, we adopted the practical expedient in ASU 2018-11 -
Leases: Targeted Improvements which allows lessors to combine lease
and non-lease components into a single performance obligation. The
impact of these changes on our consolidated financial statements
was not material.
ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities.
In
January 2016, the FASB issued ASU 2016-01,
Financial Instruments - Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities
. The main objective of this update is
to enhance the reporting model for financial instruments in order
to provide users of financial statements with more decision-useful
information. Changes to the previous guidance primarily affect the
accounting for equity investments, financial liabilities under the
fair value option, and the presentation and disclosure requirements
for financial instruments. The primary impact of this change for us
relates to our available-for-sale equity investment and resulted in
unrecognized gains and losses from this investment being reflected
in our income statement beginning in 2018. We adopted ASU
2016-01 as of January 1, 2018, applying the update by means of a
cumulative-effect adjustment to the balance sheet by reclassifying
the balance of our Accumulated Other Comprehensive Loss in the
shareholders’ equity section of the balance sheet to Retained
Earnings. The balance reclassified of $1,215,000 was a result
of prior-period unrealized losses from our equity investment. In
the first quarter of 2018 we recorded an unrealized loss on our
equity investment of $778,000 as a result of a drop in the market
value of this investment during the quarter. This loss is reflected
in other investment income (loss) in our income statement. This
change in accounting is expected to create greater volatility in
our investment income each quarter in the future.
From
time to time, new accounting pronouncements applicable to us are
issued by the FASB, or other standards setting bodies, which we
will adopt as of the specified effective date. Unless otherwise
discussed, we believe the impact of recently issued standards that
are not yet effective will not have a material impact on our
consolidated financial statements upon adoption.
I
tem
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 serve niche markets with
meaningful sales potential. Proposed new products may be subject to
regulatory clearance or approval prior to commercialization and the
time period for introducing a new product to the marketplace can be
unpredictable. We also focus on controlling costs by investing in
modern manufacturing technologies and controlling purchasing
processes. We have been successful in consistently generating cash
from operations and have used that cash to reduce and payoff
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 March 31, 2019, we reported revenues of $41.6
million, operating income of $11.0 million and net income of $9.4
million, up 6 percent, down 3 percent and up 11 percent,
respectively, from the three months ended March 31,
2018.
Results
for the three months ended March 31, 2019
Consolidated net
income totaled $9.4 million, or $5.09 per basic and $5.07 per
diluted share, in the first quarter of 2019. This is compared with
consolidated net income of $8.5 million, or $4.58 per basic and
$4.57 per diluted share, in the first quarter of 2018. The income
per basic share computations are based on weighted average basic
shares outstanding of 1,853,000 in the 2019 period and 1,852,000 in
the 2018 period. The income per diluted share computations are
based on weighted average diluted shares outstanding of 1,862,000
in the 2019 period and 1,856,000 in the 2018 period.
Consolidated
revenues of $41.6 million for the first quarter of 2019 were 6
percent higher than revenues of $39.4 million for the first quarter
of 2018.
Revenues
by product line were as follows (in thousands):
|
|
Three Months endedMarch 31,
|
|
|
|
|
|
|
|
|
|
Fluid
Delivery
|
$
18,161
|
$
18,800
|
|
Cardiovascular
|
15,420
|
13,210
|
|
Ophthalmology
|
2,283
|
2,785
|
|
Other
|
5,750
|
4,606
|
|
Total
|
$
41,614
|
$
39,401
|
Cost of
goods sold of $22.9 million for the first quarter of 2019 was 12
percent higher than cost of goods sold of $20.5 million for the
first quarter of 2018 primarily due to higher sales volumes and a
less favorable product sales mix partially offset by the impact of
continued cost improvement projects. Our cost of goods sold in the
first quarter of 2019 was 55.1 percent of revenues compared with
51.9 percent of revenues in the first quarter of 2018.
Gross
profit of $18.7 million in the first quarter of 2019 was $248,000,
or 1 percent, lower than in the comparable 2018 period. Our gross
profit percentage in the first quarter of 2019 was 44.9 percent of
revenues compared with 48.1 percent of revenues in the first
quarter of 2018. The decrease in gross profit percentage in the
2019 period compared to the 2018 period was primarily related to
the less favorable product sales mix partially offset by cost
improvement projects mentioned above.
Our
first quarter 2019 operating expenses of $7.7 million were $81,000
higher than the operating expenses for the first quarter of 2018.
This increase was attributable to a $366,000 increase in Selling
expenses partially offset by a $42,000 decrease in General and
Administrative, or G&A, expenses and a $243,000 decrease in
Research and Development, or R&D, expenses. The increase in
Selling expenses was principally attributable to increased
commissions, compensation, outside services, trade show expenses
and travel costs. The decrease in G&A expenses for the first
quarter of 2019 was principally attributable to decreased outside
services partially offset by increased travel and information
technology costs. The decrease in R&D expenses was primarily
related to decreased outside services and decreased materials and
supplies costs partially offset by increased travel
costs.
Operating income in
the first quarter of 2019 decreased $329,000 to $11.0 million, a 3
percent decrease compared to our operating income in the quarter
ended March 31, 2018. Operating income was 27 percent of revenues
for the first quarter of 2019 and 29 percent of revenues for the
first quarter of 2018.
Interest and
dividend income in the first quarter of 2019 was $582,000, compared
with $313,000 for the same period in the prior year. Increased
levels of investment and increased interest rates were the primary
reasons for the increase.
Other
investment income in the first quarter of 2019 was $211,000
compared with an investment loss of $772,000 in the first quarter
of 2018. We adopted ASU 2016-01 as of January 1, 2018 (see Note 6).
For the first quarter of 2018 we recorded an unrealized loss on an
equity investment of $778,000 as a result of a drop in the market
value of this investment during the quarter.
Income
tax expense was $2.4 million for the first quarter in each of 2019
and 2018. The effective tax rate for the first quarter of 2019 was
20.2 percent, compared with 22.2 percent for the first quarter of
2018. We expect the effective tax rate for the remainder of 2019 to
be approximately 20.0 percent.
Liquidity
and Capital Resources
As of
March 31, 2019, we had a $75.0 million revolving credit facility
with a money center bank pursuant to which the lender is obligated
to make advances until February 28, 2022. We had no outstanding
borrowings under our credit facility at March 31, 2019. Our ability
to borrow funds under the credit agreement from time to time is
contingent on meeting certain covenants in the loan agreement, the
most restrictive of which is the ratio of total debt to earnings
before interest, income tax, depreciation and amortization. At
March 31, 2019, we were in compliance with all financial
covenants
At
March 31, 2019, we had a total of $96.3 million in cash and cash
equivalents, short-term investments and long-term investments, an
increase of $6.8 million from December 31, 2018. The principal
contributor to this increase was operating results.
Cash
flows from operating activities of $12.9 million for the three
months ended March 31, 2019 were primarily comprised of net income
plus the net effect of non-cash expenses, decreases in prepaid
expenses and increases in other non-current liabilities partially
offset by increases in accounts receivable. During the first three
months of 2019, we expended $3.6 million for the addition of
property and equipment, $28.2 million for the purchase of
investments and $2.5 million for dividends.
During the same period, maturities
of investments generated $6.7 million in cash.
At
March 31, 2019, we had working capital of $113.7 million, including
$44.0 million in cash and cash equivalents and $24.8 million in
short-term investments. The $1.6 million increase in working
capital during the first three months of 2019 was primarily related
to an increase in accounts receivable. This increase was partially
offset by decreases in prepaid expenses and inventories and
increases in accounts payable, accrued liabilities and accrued
income and other taxes. The increase in accounts receivable was
primarily related to increased revenues for the first quarter of
2019 as compared to the fourth quarter of 2018. The increases in
accounts payable and accrued liabilities are primarily related to
the timing of payments for replenishment of inventories and
operating expenses. The increases in accrued income and other taxes
are primarily related to accrued federal and state income taxes
relating to operating results.
We
believe that our $96.3 million in cash, cash equivalents,
short-term investments and long-term investments, along with cash
flows from operations and available borrowings of up to $75.0
million under our credit facility, will be sufficient to fund our
cash requirements for at least the foreseeable future, including
the costs associated with the planned expansion of one of our
manufacturing facilities. We believe that our strong financial
position would allow us to access equity or debt financing should
that be necessary. Additionally, we believe that our cash and cash
equivalents, short-term investments and long-term investments, as a
whole, will continue to increase during the remainder of
2019
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 2019, our ability to fund our cash
requirements for the foreseeable future with our current assets,
long-term investments, cash flow and borrowings under the credit
facility, our access to equity and debt financing, and the increase
in cash, cash equivalents, and investments during the remainder of
2019. 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. The forward-looking statements in this Quarterly Report
on Form 10-Q are made as of the date hereof, and we do not
undertake any obligation, and disclaim any duty, to supplement,
update or revise such statements, whether as a result of subsequent
events, changed expectations or otherwise, except as required by
applicable law.