SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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
Incorporation or Organization) Identification
Number)
Post Office Box 3869, Muscle Shoals, Alabama 35662-3869
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number,
including area code (205) 383-3631
Securities registered pursuant to Section 12(b) of the
Act: None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock (Par Value $0.10 Per Share)
(Title of Class)
Indicate by check mark 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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Estimated aggregate market value of the voting stock held
by nonaffiliates of the registrant
at February 28, 1997 $45,683,840
Number of shares of Common Stock outstanding
at February 28, 1997 3,215,654
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates
by reference the information from the Company's definitive
proxy statement relating to the 1997 annual meeting of
stockholders, to be filed with the Commission not later
than 120 days after the end of the fiscal year covered
by this report.
ATRION CORPORATION
FORM 10-K
ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1996
________
TABLE OF CONTENTS
Item Page
PART I . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Business. . . . . . . . . . . . . . . . . 3
Item 2. Properties. . . . . . . . . . . . . . . . 13
Item 3. Legal Proceedings . . . . . . . . . . . . 14
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . . . . 15
Executive Officers of the Company . . . . . . . . 15
PART II. . . . . . . . . . . . . . . . . . . . . . . . 17
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . 17
Item 6. Selected Financial Data . . . . . . . . . 18
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . 18
Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . 30
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. . . . . . . . . . 30
PART III . . . . . . . . . . . . . . . . . . . . . . . 31
Item 10. Directors and Executive Officers of
the Registrant. . . . . . . . . . . . . 31
Item 11. Executive Compensation . . . . . . . . . 31
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . 31
Item 13. Certain Relationships and Related
Transactions. . . . . . . . . . . . . . 32
PART IV. . . . . . . . . . . . . . . . . . . . . . . . 32
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K . . . . . . . . 32
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 37
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . 39
ATRION CORPORATION
FORM 10-K
ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1996
PART I
Item 1. Business
General
Atrion Corporation (Atrion or the Company) is a
diversified holding company which is comprised of two
business segments: (1) pipeline and energy services and
(2) medical products. The Company was incorporated in 1996
and is the successor to the former ATRION Corporation as a
result of a merger to change the state of incorporation of
ATRION Corporation from Alabama to Delaware. The
predecessor corporation, which was formerly known as
"AlaTenn Resources, Inc.," was incorporated in the state
of Alabama in 1982 in connection with a reorganization of
Alabama-Tennessee Natural Gas Company (Alabama-Tennessee),
which was founded in 1944 and which has been in operation
since 1950.
The Company's pipeline and energy services segment
includes four natural gas transmission companies, a
natural gas marketing company, and a company that
transports gaseous oxygen. The Company's medical products
segment consists of two subsidiaries, one of which, Atrion
Medical Products, Inc. (Atrion Medical Products), designs,
develops, manufactures, sells, and distributes medical
products and the other of which, Halkey-Roberts
Corporation (Halkey-Roberts), which was acquired by the
Company in 1996, designs, develops, manufactures and sells
proprietary medical device components and related
components, all of which are used to control the flow of
fluids and gases.
The Company's principal pipeline and energy services
subsidiaries are Alabama-Tennessee, Tennessee River
Intrastate Gas Company, Inc.(TRIGAS) and AlaTenn Energy
Marketing Company, Inc. (ATEMCO). Alabama-Tennessee is an
interstate natural gas pipeline company engaged in the
transportation of natural gas in the lower Tennessee
Valley. Its main pipeline extends from Selmer, Tennessee,
approximately 130 miles across northern Mississippi and
Alabama to Huntsville, Alabama. This system includes ap-
proximately 288 miles of pipeline and two compressor stat-
ions. Because it is engaged in the transportation of
natural gas in interstate commerce, Alabama-Tennessee is a
"natural gas company" as defined in the Natural Gas Act of
1938. As such, it is subject to the jurisdiction of the
Federal Energy Regulatory Commission (FERC), which
jurisdiction includes the power to determine
Alabama-Tennessee's maximum rates for the transportation of
natural gas for its customers as well as the power to
authorize the construction and operation of certain new
facilities.
TRIGAS operates a 38-mile, 10-inch intrastate pipeline
that extends from Barton, Alabama, to Courtland, Alabama
and a one mile 8-inch intrastate pipeline in Morgan
County, Alabama. These pipelines primarily serve two
large industrial customers with natural gas transportation
services.
ATEMCO, the Company's natural gas marketing subsidiary,
buys natural gas, primarily on the spot market, and sells
that natural gas to customers on the Company's interstate
and intrastate pipeline systems as well as to off-system
customers. As part of its services, ATEMCO evaluates
customers' supply requirements, locates natural gas
supplies and negotiates and manages contracts for those
customers. ATEMCO also arranges for the use of its
customers' excess gas storage and transportation rights by
other natural gas transporters through capacity release
transactions, generating savings for its customers.
Alabama-Tennessee, TRIGAS and ATEMCO contribute materially
to the Company's revenues and net income. As discussed
herein, on March 19, 1997, the Company entered into an
agreement to sell all of the stock of Alabama-Tennessee,
TRIGAS and ATEMCO to Midcoast Energy Resources, Inc.
See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Another subsidiary of the Company, AlaTenn Pipeline
Company Inc. (AlaTenn Pipeline), owns and operates a
22-mile high-pressure steel pipeline which
transports gaseous oxygen in north Alabama. Construction
of this pipeline was completed, and the pipeline became
operational, during the second quarter of 1996. AlaTenn
Pipeline is a party to a long-term contract with an
industrial gas producer to transport gaseous oxygen
through that pipeline to two of the Company's industrial
customers.
Atrion Medical Products is principally engaged in the
design, development, manufacturing, marketing, sale and
distribution of medical products. Its products are used
in ophthalmic, diagnostic and cardiovascular procedures
and are sold primarily to major health care companies
which market and distribute the products, in conjunction
with their name-brand products, to hospitals,
clinics, surgical centers, physicians and other health
care providers. While soft contact lens storage and
disinfection systems are its more mature ophthalmic
products. Atrion Medical Products continues to be a
leading manufacturer and supplier of such products.
Newer products include surgical procedure kits and a
single-patient verification device for eximer laser
refractive surgery. An inflation device used primarily
in percutaneous balloon angioplasty was introduced in 1996
after Atrion Medical Products received Food and Drug
Administration (FDA) 510(k) clearance to market the
product. Devices used to obtain blood samples for the
measurement of blood sugar and other devices to test
blood platelet function, which are manufactured by Atrion
Medical Products, are routinely used in diagnostic
procedures. During 1996, Atrion Medical Products also
began marketing its own name-brand products. The initial
line of name-brand products, called LacriCATH, is used
in a less-invasive surgical procedure for the treatment
of epiphora or excessive tearing of the eye. Marketing
of the LacriCATH products through the Company's direct
clinical sales specialists began in early 1996 following
acquisition of the product line in late 1995. Additional
Atrion Medical Products name-brand products are in
development and scheduled for 1997 market introduction.
Regardless of whether the product is intended for use by a
major health care company or for use as one of Atrion
Medical Products' branded products, the product development
process follows a well-defined and disciplined path.
Working models and prototypes are developed at an early
stage to provide market feedback or to begin laboratory and
clinical testing. Computer aided design software has been
integrated with the software to control multi-axis machining
centers to efficiently produce single or multiple prototypes.
When Atrion Medical Products develops a product for one of
its customers, it typically bears the full expense of the
product development and enters into a long-term contract that
allows the Company to retain exclusive world-wide manufacturing
rights. Atrion Medical Products holds more than 100 design and
use patents and it is EN46001 certified.
In May 1996, the Company expanded its medical products
segment when it purchased all of the outstanding capital
stock of HRC Acquisition Holding Corp., a Delaware
corporation, which, in turn, owned all of the outstanding
capital stock of Halkey-Roberts, pursuant to the terms of
a Stock Purchase Agreement, between Atrion and Fenway
Holdings, L.L.C. The Company paid Fenway a total of
$11,650,000 in cash, of which $10,000,000 was borrowed
under an existing revolving credit facility and $1,650,000
was obtained from the Company's general funds.
Halkey-Roberts designs, develops, manufactures and sells
proprietary medical device components and related components,
all of which are used to control the flow of fluids and gases.
Its valves and clamps are used in a wide variety of
hospital and outpatient care products such as foley
catheters, pressure cuffs, dialysis and blood collection
sets and drug delivery systems. Halkey-Roberts' fluid
control technology has also been applied to inflation
valves used in marine and aviation safety products.
Halkey-Roberts has recently introduced a new line of
needleless valves designed to eliminate the use of needles
by health care providers in many routine procedures.
These products use a patented design and proprietary
assembly technology. Working closely with its customers,
Halkey-Roberts has developed an innovative line of
products and is a leader in each of its major markets.
The Company's medical products are produced in two
facilities that both utilize plastic injection molding and
specialized assembly as their primary manufacturing
processes. Atrion Medical Products and Halkey-Roberts
operate under the FDA's Good Manufacturing Practices
and both are ISO 9001 certified. The Company's medical
products are used throughout the world and,
during 1996, more than 20% of the segment's
sales were shipped to international markets.
Unless the context otherwise requires, references to the
pipeline and energy services segment include
Alabama-Tennessee, ATEMCO, TRIGAS, AlaTenn Pipeline,
and all other pipeline and energy services companies
and references to the medical products segment include
Atrion Medical Products and Halkey-Roberts.
Revenues
During 1996, 1995 and 1994, the pipeline and energy
services segment accounted for 84%, 86% and 90%,
respectively, of the Company's total revenues. Of such
percentages, transportation revenues accounted for 9%,
17%, and 20%, respectively, and natural gas marketing
revenues accounted for 91%, 83% and 80%, respectively, of
the pipeline and energy services revenues during these
same periods. The medical products segment accounted for
16%, 14% and 10% of the Company's total revenues in 1996,
1995 and 1994, respectively. Revenues in the medical
products segment for 1994 reflect only results after the
acquisition of Atrion Medical Products. Halkey-Roberts'
revenues are included in the medical products segment
only for the period subsequent to the acquisition of
Halkey-Roberts in May 1996. The table below summarizes
total revenues for the Company's two business segments
and includes delivered volumes for the Company's pipeline
and energy services subsidiaries.
<TABLE>
<CAPTION>
1996
Revenue Volume
($000) (MMMBtu)
<S> <C> <C>
PIPELINE AND ENERGY SERVICES
Interstate pipelines 8,499 37,610
Intrastate pipelines 3,060 11,040
Total pipeline Transp. 11,559 48,650
Gas Marketing 104,073 36,842
Other Gas Transactions 1,701 360
105,774 37,202
Affiliated Transactions ( 2,724) (34,592)
114,609 51,260
MEDICAL PRODUCT 21,537 N/A
Affiliated transactions (169) N/A
21,368 N/A
TOTAL 135,977 51,260
<CAPTION>
1995
Revenue Volume
($000) (MMMBtu)
<S> <C> <C>
PIPELINE AND ENERGY
SERVICES
Interstate pipelines 9,669 37,021
Intrastate pipelines 2,533 9,340
Total pipeline Transp. 12,202 46,361
Gas Marketing 57,879 30,141
Other Gas Transactions 927 309
58,806 30,450
Affiliated Transactions ( 1,654) (26,099)
69,354 50,712
MEDICAL PRODUCTS 11,025 N/A
Affiliated transactions N/A N/A
11,025 N/A
TOTAL 80,379 50,712
<CAPTION>
1994
Revenue Volume
($000) (MMMBtu)
<S> <C> <C>
PIPELINE AND
ENERGY SERVICES
Interstate pipelines 8,764 32,637
Intrastate pipelines 2,656 9,461
Total pipeline Transp. 11,420 46,098
Gas Marketing 51,214 22,744
Other Gas Transactions 2,007 354
53,221 23,098
Affiliated Transactions ( 1,196) (20,280)
63,445 44,916
MEDICAL PRODUCTS 6,876 N/A
Affiliated transactions N/A N/A
6,876 N/A
TOTAL 70,321 44,916
</TABLE>
Gas marketing sales in 1996 totaled 36.8 million MMBtu of
natural gas, an increase of 6.7 million MMBtu from the
1995 volume of 30.1 million MMBtu. Related revenues
increased to $104.0 million in 1996, an increase of $46.2
million from 1995. These increases in volumes and
revenues resulted from increased sales to customers on the
Company's interstate pipeline system, attributable to
increased deliveries to two industrial customers and to
municipal customers due to growth in the municipalities.
In addition, natural gas prices increased approximately
58% in 1996 compared to 1995, further increasing revenues.
The increased volumes and related revenues were partially
offset by a decrease in off-system sales volumes of 2.2
million MMBtu or 48% compared to 1995 volumes. Gas
marketing sales in 1995 totaled 30.1 million MMBtu of
natural gas, an increase of 7.4 million MMBtu from the
1994 volume of 22.7 million MMBtu. Related revenues
increased to $57.9 million in 1995, an increase of $6.7
million from 1994. These increases in volumes and
revenues between 1995 and 1994 resulted from increased
sales to customers on the Company's interstate pipeline
system, primarily six industrial customers including three
of which were formerly served by the City of Decatur, and
increased off-system sales. The increase in volumes was
partially offset by a 12% decrease in natural gas prices
in 1995 compared with 1994. The Company's marketing
subsidiary sold approximately 72%, 56% and 47% of the
natural gas delivered on the Company's pipelines during
1996, 1995 and 1994, respectively.
Approximately 42% of the natural gas transported on the
Company's pipelines in 1996 was delivered to 17 municipal
customers (serving 30 communities) under contracts
expiring in late 1997 through 2003. The natural gas
pipeline subsidiaries currently serve most of the
communities in close proximity to their pipelines, which
extend from Selmer, Tennessee, to Huntsville, Alabama,
including portions of northeast Mississippi, the Shoals
area of northwest Alabama, and Athens, Decatur and
Huntsville, Alabama. The remaining 58% of the natural gas
transported on the Company's pipelines was delivered
directly to nine industrial users.
The transportation and sales of natural gas to municipal
customers are seasonal in nature and are strongly influ-
enced by weather conditions. Natural gas deliveries to
municipal customers on the pipeline system tend to be
higher in the winter months due to increased consumption
for residential heating. Natural gas deliveries during the
summer months decline as a result of lower residential
usage. Transportation and sales to industrial users are
not normally impacted by weather changes.
Revenues for the medical products segment in 1996, 1995
and 1994 totaled $21.4 million, $11.0 million and $6.9
million, respectively. The increase in revenues between
1996 and 1995 was the result of higher sales. In
addition, 1996 revenues include operating revenues of
Halkey-Roberts subsequent to its acquisition in May 1996
and revenues associated with the marketing and
distribution of LacriCATH which began in early 1996. The
increase in revenues in the medical products segment
between 1995 and 1994 is attributable to a full year's
operations in 1995 compared to only eight months of
operations in the prior year and also reflected, on a
comparable basis, higher sales volumes. The Company's
acquisitions of the two medical products subsidiaries were
recorded using the purchase method of accounting.
Accordingly, only results from operations subsequent to
the acquisition dates of April 19, 1994 are reflected in
the Company's consolidated financial statements for 1994
and May 21, 1996 in the Company's consolidated financial
statements for 1996.
In 1996, 1995 and 1994, the Company spent approximately
$1.1 million, $1 million and $.5 million, respectively,
for research and development of new products or
improvements to existing medical product lines.
During 1996, the Company's three largest customers were
customers of the pipeline and energy services segment.
These industrial customers each accounted for more than
10% of the Company's revenues. Champion International
Corporation, Amoco Chemicals Corporation and Reynolds
Metals Company accounted for approximately 23%, 14% and
12%, respectively, of the Company's operating revenues.
For information regarding the revenue, operating income,
depreciation and amortization and identifiable assets
attributable to each operating segment, see Note 11 of
Notes to Consolidated Financial Statements.
Availability of Natural Gas Supply and Raw Materials
Alabama-Tennessee, TRIGAS and AlaTenn Pipeline are under
no obligation to provide a gas supply to their customers.
ATEMCO generally purchases natural gas on the spot market
but has contracted for longer-term supplies as required to
meet its commitments to its customers. In all cases in
which ATEMCO contracts for long-term supplies, matching
long-term sales contracts are also entered into that allow
ATEMCO to serve as a conduit between the producer and the
end-user of the natural gas without incurring the risk of
shortfalls in either the demand or supply. These spot
market and long-term arrangements should provide an
adequate supply of natural gas in 1997.
The Company's medical products subsidiaries purchase
various types of high-grade resins and other minor
components for their manufacturing processes from various
suppliers. The resin is a readily available material and,
while the Company is selective in its choice of suppliers,
it believes that there are no significant restrictions or
limitations on supply.
Competition
Except for natural gas deliveries to four municipal
customers and one industrial customer from other
intrastate pipelines, the Company's pipelines currently
are the only pipelines utilized by customers to access
upstream pipelines and supplies of natural gas. The
principal competitive fuels for industrial and commercial
purposes are coal and fuel oil. Electricity is the main
competition for residential uses.
Southern Natural Gas Company (Southern), a large
interstate pipeline subsidiary of Sonat, Inc., announced
plans in 1995 to construct a new natural gas pipeline to
serve the Huntsville and Decatur, Alabama areas.
Southern has filed an application with the FERC to build
a 110-mile pipeline from Tuscaloosa, Alabama, to north
Alabama to provide such service to the cities of Huntsville
and Decatur beginning on or after the fourth quarter of 1997.
The cities of Decatur and Huntsville, which accounted for
approximately 14% and 18%, respectively, of
Alabama-Tennessee's pipeline throughput in 1996, have
entered into 20-year contracts with Southern to provide
natural gas transportation services if such pipeline is
constructed. These contracts cover substantially all of
the current natural gas requirements of
Huntsville and Decatur. For further information regarding
the proposed service by Southern and the effect on Alabama-
Tennessee, see Item 3, "Legal Proceedings" and
Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
As a result of FERC Order No. 636 and the deregulation of
the natural gas industry, pipeline customers have the
opportunity to negotiate their own contracts with upstream
pipeline companies to bypass their current transportation
providers. One of the Company's smaller municipal
transportation customers recently notified the Company
that it intends to construct a pipeline to interconnect
with an upstream pipeline and thereby bypass the Company's
pipeline facilities. Any such bypasses could have an
adverse effect on the Company's pipeline and energy
services business segment. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results
of Operation."
ATEMCO identifies potential natural gas markets, contracts
for the sale of natural gas to these markets, contracts
for the purchase of natural gas from suppliers and
arranges for the transportation of the natural gas over
one or more pipeline systems. ATEMCO competes with a
large number of marketing companies, and its success is
highly dependent upon its ability to find and market
competitively priced natural gas.
Depending on the product and the nature of the project,
Atrion Medical Products and Halkey-Roberts compete on the
basis of their ability to provide engineering and design
expertise, quality, service, product and price. As such,
successful competitors must have technical strength,
responsiveness, and scale. The Company believes that
Atrion Medical Products' and Halkey-Roberts' expertise
and reputation for quality products have allowed it to
compete favorably with respect to each such
factor and to maintain long-term relationships with these
customers.
Atrion Medical Products is dependent on several major health
care companies for the majority of its sales. Also, since
its products are somewhat limited in number and normally
are only a component of the ultimate product sold by its
customers, Atrion Medical Products must continually be
attentive to the need to manufacture such products at
competitive prices and in compliance with strict
manufacturing standards. Depending on the product
and the nature of the project, Atrion Medical Products
competes on the basis of its ability to provide
engineering and design expertise as well as on the basis
of product and price. Also, as Atrion Medical Products
continues to expand its product lines, adding new products
and customers, dependency on a limited number of customers
is being reduced. The United States is the principal
market for the LacriCATH product. There is no direct
competition in the United States where both the product
and surgical procedure are patent protected. LacriCATH
products are marketed directly to ophthalmologists through
the Company's clinical sales specialists. Atrion Medical
Products frequently designs products for a customer, or
potential customer, at its own expense, prior to entering
into long-term development and manufacturing agreements
with that customer. While certain of Atrion Medical
Products' customers may internally design and develop
their own products, or out-source certain aspects of the
design and development processes, the Company is unaware
of any other companies who directly compete on the same
basis as Atrion Medical Products.
To the extent that each of its products is
sold to a single customer, Atrion Medical Products is
dependent on the ability of that customer to sell its
products, of which the products sold by Atrion
Medical Products are a component. Therefore, Atrion
Medical Products seeks to choose highly successful
companies with which to do business. This risk is
somewhat minimized by Atrion Medical Products'
ability to obtain long-term exclusive
manufacturing rights, while its customers have long-term
marketing rights. Name-brand products, such as the
LacriCATH line recently introduced, are marketed to a
much larger base of customers and are not dependent on a
single customer.
Halkey-Roberts competes in the medical products market and
in the market for inflation devices used in marine and
aviation equipment. Halkey-Roberts' products are sold to
many customers. No one customer or product accounts for
more than 10% of Halkey-Roberts' total sales. In the
medical products market, where it sells check valves
and medical clamps, Halkey-Roberts is a leading competitor
in both areas and shares these markets with only one other
major competitor in each area. In the inflation device
market, Halkey-Roberts is the dominant competitor in its
market areas. With the exception of one large company,
Halkey-Roberts'competitors in both of these markets
generate less than $50 million in annual revenues.
Regulation
Alabama-Tennessee operates an interstate pipeline and is
subject to the Natural Gas Pipeline Safety Act of 1968, as
amended, which regulates pipeline safety requirements, and
to the National Environmental Policy Act and other
environmental legislation. There is a continuing program
of inspection designed to keep all of its facilities in
compliance with environmental and pipeline safety require-
ments.
As an interstate natural gas pipeline company,
Alabama-Tennessee is subject to the jurisdiction of the FERC
(under the Natural Gas Act of 1938 and other federal
legislation) with respect to interstate transportation of
natural gas, certain rates and charges, construction of
new facilities, extension or abandonment of services and
facilities, accounts and records, depreciation and
amortization policies and certain other related matters.
Alabama-Tennessee holds certificates of public convenience
and necessity issued by the FERC authorizing it to
construct and operate all pipelines, facilities and
properties which it now operates and to transport natural
gas in interstate commerce in instances where such
certificates are required. As necessary,
Alabama-Tennessee files with the FERC applications for
changes in its transportation rates and charges which are
designed to allow it to recover its costs of providing such
services to its customers as well as a reasonable return on its
investment. These rates are normally allowed to become
effective, subject to refund, until such time as the FERC
determines the just and reasonable rates.
TRIGAS is subject to the jurisdiction of the Alabama
Public Service Commission (APSC). There are no material
proceedings before the APSC involving this subsidiary.
AlaTenn Pipeline is not regulated by the APSC.
The Company's pipeline facilities are subject to federal
safety guidelines as promulgated by the Department of
Transportation (D.O.T.). The pipeline facilities owned
and operated by the Company's subsidiaries are subject to
periodic inspection by the D.O.T. to ensure compliance
with these guidelines. Intrastate pipeline facilities
owned and operated by the Company's subsidiaries are also
inspected periodically by the appropriate state agencies
to verify compliance with applicable operational and
safety regulations.
Atrion Medical Products and Halkey-Roberts manufacture
medical products in accordance with Good Manufacturing
Practices as set forth in the Food, Drug and Cosmetic Act
of 1938. Atrion Medical Products' facilities are
registered with the FDA. The FDA does not establish or
regulate price levels for products manufactured by the
Company.
Additional regulatory information is contained in
Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
People
At December 31, 1996, the Company had 302 full-time
employees, 35 of whom are employed in the pipeline and
energy services segment. The remaining 267 employees are
employed in the medical products segment.
Employee relations are good and there has not been any
work stoppage due to labor disagreements. None of the
Company's employees is represented by any labor union.
Item 2. Properties
The headquarters of the Company and its pipeline and
energy services subsidiaries are located in a
Company-owned office building in Muscle Shoals,
Alabama. Atrion Medical Products owns a manufacturing
facility in Arab,Alabama and leases office space in
Birmingham, Alabama. Halkey-Roberts leases a
manufacturing facility in St.Petersburg, Florida
under a ten-year operating lease.
Alabama-Tennessee's pipeline system has approximately 288
miles of transmission pipeline and two compressor
stations. Its primary transmission pipeline extends from
an interconnection with TGP's pipeline near Selmer,
Tennessee approximately 130 miles eastward across northern
Mississippi and Alabama to Huntsville, Alabama. The system
interconnects with TGP's Kinder-Portland line near
Corinth, Mississippi and its Delta-Portland line near
Barton, Alabama. The system also interconnects with the
Columbia Gulf Transmission Pipeline near Corinth and with
the Texas Eastern Transmission Pipeline near Barton. Pipe
sizes range from 2-inch to 16-inch, including 74 miles of
12-inch, 97 miles of 10-inch, 48 miles of 8-inch, 51 miles
of 6-inch and 18 miles of various other diameters. These
transmission pipelines are located primarily on
rights-of-way held under easement, license or permit on
lands owned by others. None of these properties is subject
to any liens. The interstate pipeline system is certificated
by the FERC to deliver approximately 133,000 MMBtu per day of
natural gas to its customers.
TRIGAS's intrastate natural gas pipeline has 38 miles of
10-inch pipeline, extending from Barton, Alabama to
Courtland, Alabama, and 1 mile of 8-inch pipeline that
transports gas from an interconnect with the Company's
interstate pipeline to an end user near Decatur, Alabama.
AlaTenn Pipeline owns and operates a 22-mile high-pressure
steel pipeline that transports gaseous oxygen between
Decatur and Courtland, Alabama.
If the sale of Alabama-Tennessee, TRIGAS and ATEMCO as
discussed herein is consummated, the Company will no
longer own the office building in Muscle Shoals, Alabama,
Alabama-Tennessee's interstate pipeline system or TRIGAS's
intrastate pipeline system. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results
of Operations."
Atrion Medical Products' manufacturing facilities are
located on a 67-acre site in Arab, Alabama. In addition
to three office buildings which house administrative,
engineering and design operations, the manufacturing
facility, situated on the same location, contains
approximately 112,000 square feet of manufacturing space.
Halkey-Roberts has a long-term lease on a manufacturing
and administrative facility located on a 7-acre site in
St. Petersburg, Florida. The facility consists of
approximately 72,000 total square feet.
Item 3. Legal Proceedings
In addition to opposing Southern's application with the
FERC, on February 9, 1996, Alabama-Tennessee filed a
lawsuit in the Circuit Court of Jefferson County, Alabama
against Southern and the City of Huntsville asserting that
the firm transportation contract between Southern and
Huntsville violates Alabama's competitive bid law and
requesting that the contract be declared void. The
Circuit Court entered summary judgment for Southern and
Huntsville on August 20, 1996. Alabama-Tennessee's appeal
of that ruling is pending in the Supreme Court of Alabama.
See Item 1, "Business; Competition," and Item 7,
"Management's Discussion and Analysis of Financial
Condition and Results of Operation."
There were no other material pending legal proceedings to
which the Company or any of its subsidiaries was a party,
or of which any of their property was the subject, as of
December 31, 1996.
Item 4. Submission of Matters to a Vote of Security
Holders
None
Executive Officers of the Company
Name Age Title
Jerry A. Howard 54 Chairman of the Board,
President and Chief
Executive Officer of the
Company and of
Alabama-Tennessee Natural
Gas Company and Chairman
of the Board or President
of all other
subsidiaries
Jeffery Strickland 38 Vice-President and Chief
Financial Officer and
Secretary-Treasurer of
the Company and of
Alabama-Tennessee
Natural Gas Company and
Secretary-Treasurer of
certain other
subsidiaries
Gus Magrini 44 President and Secretary
of AlaTenn Energy
Marketing Company, Inc.
Richard Rabenau 55 President and Secretary
of Atrion Medical
Products, Inc.
Charles Gamble 56 President of Halkey-Roberts
Corporation
The persons who are identified as executive officers of the
Company currently serve as officers of the Company or of
Atrion Medical Products, Halkey-Roberts, ATEMCO or of both the
Company and Alabama-Tennessee. The officers of the Company,
Atrion Medical Products, Halkey-Roberts, Alabama-Tennessee
and ATEMCO are elected annually by the respective Boards of
Directors of the Company and its subsidiaries at the first
meeting of such Boards of Directors held after the annual
meetings of stockholders of such entities. Accordingly, the
terms of office of the current officers of the Company and
its subsidiaries will expire at the time such meetings of
the Board of Directors of the Company and its subsidiaries
are held, which is anticipated to be in May or June 1997.
There are no arrangements or understandings between any
officer and any other person pursuant to which the officer
was elected. There are no family relationships between any
of the executive officers or directors.
There have been no events under any bankruptcy act, no crim-
inal proceedings and no judgments or injunctions material to
the evaluation of the ability and integrity of any executive
officers during the past five years.
Brief Account of the Business Experience During the Past
Five Years
Except as noted below, the above listed executive officers
have served in the positions indicated above for more than
the past five years.
Mr. Howard has served as Chairman of the Board, President
and Chief Executive Officer of the Company and of
Alabama-Tennessee and Chairman of the Board and President of all
other subsidiaries, except for AlaTenn Energy Marketing
Company, Inc., Atrion Medical Products and Halkey-Roberts,
for more than five years. Mr. Howard also serves as
Chairman of the Board for AlaTenn Energy Marketing Company,
Inc. Mr. Howard has also served as Chairman of the Board of
Atrion Medical Products since April 1994 and of
Halkey-Roberts since May 1996.
Mr. Strickland has served as Vice President and Chief
Financial Officer and Secretary-Treasurer of the Company and
Alabama-Tennessee Natural Gas Company since February 1,
1997. Mr. Strickland served as Vice President-Corporate
Development of the Company from May 1992 to February 1997
and as Assistant Secretary and Assistant Treasurer of the
Company from May 1990 until February 1997. Mr. Strickland
served as Director of Planning of the Company from December
1988 until May 1992. Mr. Strickland served as Vice
President-Planning of Alabama-Tennessee from May 1992 and as
Director of Planning of Alabama-Tennessee prior to May 1992.
Mr. Magrini has served as President and Secretary of AlaTenn
Energy Marketing Company, Inc. since May 1993. From May
1992 until May 1993, Mr. Magrini served as
Vice-President-Customer Relations of Alabama-Tennessee.
Prior to that time, Mr. Magrini served as Vice President-Sales
and Supply of Alabama-Tennessee.
Mr. Rabenau has served as President and Secretary of Atrion
Medical Products since April 1994. From April 1990 until
April 1994, Mr. Rabenau served as President of the
predecessor company, named Ryder International Corporation
prior to the purchase of its assets by the Company.
Mr. Gamble has served as President of Halkey-Roberts since
May, 1989.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's common stock trades in the Nasdaq National
Market (Symbol ATRI). As of March 21, 1997, there were
approximately 2,900 stockholders in the Company, including
beneficial owners holding shares in nominee or "street"
name. The high and low closing prices as reported by Nasdaq
for each quarter of 1996 and 1995 are shown below along with
the quarterly cash dividends paid per share. The amounts
have been adjusted to give effect to a 3-for-2 stock split
effected in December 1996.
<TABLE>
<CAPTION>
1996
Quarter March June September December
Ended 31 30 30 31
<S> <C> <C> <C> <C>
High 14-2/3 17 17-1/6 20-1/2
Low 13-1/2 13-1/3 14-5/6 15-1/2
Dividends
per share .20 .20 .20 .20
<CAPTION>
1995
Quarter March June September December
Ended 31 30 30 31
High 13-1/6 13-1/2 14-2/3 14-2/3
Low 11 11-3/4 13-1/6 13-1/2
Dividends
per share .20 .20 .20 .20
</TABLE>
During each quarter of the last two years the Company
declared and paid a dividend of $0.20 per share. The
Company paid a dividend on March 1, 1997 and has
declared a dividend payable on June 1, 1997, each in
the amount of $0.20 per share; however, the quarterly
dividend will be reduced to $.10 per
share commencing with the dividend payable September 1,
1997. The payment of future dividends will be at the
discretion of the Board of Directors of the Company and will
depend upon, among other things, future earnings, results of
operations, capital requirements, the financial condition of
the Company and general business conditions. See Item 7,
"Management's Discussion and Analysis of Financial Condition
and Results of Operations."
As of December 31, 1996, the Company had repurchased,
through open market purchases, a total of 1,500 shares of
its common stock under its stock repurchase program which
was adopted on May 5, 1995.
Item 6. Selected Financial Data
See page 36 attached hereto and incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 will be achieved. Such
statements include, but are not limited to, the Company's
expectations regarding future expenses, liquidity and
capital resources, reductions in outstanding debt,
the impact of losses of customers or contracts and of
actions taken or to be taken to mitigate those losses,
the impact of sales of new products, compliance with
financial covenants and use of proceeds from the proposed
sale described herein. Forward looking statements contained
herein involve numerous risks and uncertainties that
could cause actual results to differ materially,
including, but not limited to the effect of
changing economic conditions, business conditions and growth
in the medical products industry, and accurately forecasting
capital expenditures. In addition, the Company's future
results of operations and financial conditions described in
the description of the Company's business, operations and
financial condition may be adversely impacted by various
factors. Assumptions relating to budgeting, marketing,
product development and other management decisions are
subjective in many respects and thus susceptible to
interpretations and periodic impact which may cause the
Company to alter its marketing, capital expenditures or
other budgets, which in turn may affect the Company's
financial position and results of operations.
General
The Company is a diversified holding company which is
comprised of two business segments: (1) pipeline and energy
services and (2) medical products.
The Company's pipeline and energy services are conducted by
Alabama-Tennessee, TRIGAS, ATEMCO and AlaTenn Pipeline.
Alabama-Tennessee operates an interstate natural gas
pipeline which provides natural gas transportation service
directly to eight industrial plants and 17 municipal gas
systems in the lower Tennessee Valley and is regulated by
the FERC. TRIGAS operates an intrastate natural gas pipeline
in northern Alabama and serves two industrial customers under
long-term contracts. ATEMCO is a natural gas marketing
company which provides various services to its customers,
including the sale of natural gas to customers both on and
off the Company's pipeline systems.
In 1996, AlaTenn Pipeline completed construction and began
operation of a 22-mile pipeline to transport gaseous oxygen,
under a long-term contract with a large industrial gas
supplier.
The Company's medical products business is conducted by
Atrion Medical Products and Halkey-Roberts. Atrion Medical
Products is principally engaged in the design, development,
manufacturing, marketing, sale and distribution of medical
products. Halkey-Roberts designs, develops, manufactures and
sells proprietary medical device components and related
components, all of which are used to control the flow of
fluids and gases.
Proposed Sale of Natural Gas Subsidiaries
As described in Note 13 of Notes to Consolidated Financial
Statements, the Company has entered into an agreement to
sell all of the shares of capital stock of Alabama-Tennessee,
ATEMCO and TRIGAS to Midcoast Energy Resources, Inc.,
subject to stockholder approval and the satisfaction of
certain other conditions, for approximately $39.4
million in cash, subject to certain post-closing adjustments
and contingent payments. Note 13 includes pro forma results
for years 1996, 1995 and 1994 assuming that the sale of such
subsidiaries had taken place as of December 31, 1996 and
restating the 1996, 1995 and 1994 consolidated financial
statements to reflect those subsidiaries as discontinued
operations. As reflected therein, 84%, 86% and 100% of the
Company's net income for 1996, 1995 and 1994, respectively,
were derived from those subsidiaries after adjustment to
reallocate to other Company subsidiaries certain corporate
overhead costs and interest expense.
Results of Operations
The Company's 1996 net income was $6.5 million or $2.03 per
share compared with $5.3 million or $1.68 per share in 1995
and with $4.7 million or $1.48 per share in 1994. Net
income in 1996 included a favorable adjustment of
approximately $300,000, or $.09 per share to a 1989
provision for estimated nonrecoverable take-or-pay expense.
Operating revenues were $136.0 million in 1996 compared with
$80.4 million in 1995 and $70.3 million in 1994. Pipeline
and energy segment revenues totaled $114.6 million in 1996,
increasing from $69.4 million in 1995 and $63.4 million in
1994. The increase in revenues in this segment in 1996 was
attributable to higher sales volumes by the Company's
natural gas marketing subsidiary, both to customers on the
Company's pipeline system and to off-system customers, as
well as a 58% increase in natural gas prices in 1996 as
compared to 1995. The increase in pipeline and energy
segment revenues in 1995 as compared to 1994 was also
attributable to higher sales volumes by this subsidiary,
offset somewhat by a decrease in natural gas prices in 1995
as compared to 1994. Sales volumes increased by 22% in 1996
compared with 1995 sales while 1995 sales increased by 33%
compared with 1994 levels. The increase in sales revenues
in this segment in 1996 resulted from a 35% increase in
sales on the Company's pipelines, offset by a slight
decline in off-system sales. The increase in sales in 1995
compared with 1994 resulted from a 27% increase in pipeline
sales as well as greater sales to off-system customers. As
described herein, the Company has entered into an agreement
to sell all of the stock of Alabama-Tennessee, TRIGAS and
ATEMCO, which contributed approximately $113.0 million in
revenues for the year ended December 31, 1996.
Revenues from the medical products segment totaled $21.4
million in 1996 an increase of $10.4 million above the 1995
level of $11.0 million and compared to $6.9 million for
1994. Halkey-Roberts, acquired by the Company in May 1996,
accounted for most of this increase in revenues between
1996 and 1995. The increase in revenues between 1995 and
1994 was attributable to the inclusion of a full year's
operations in the medical products segment in 1995 compared
to eight months in the prior year, but also reflected, on a
comparable basis, substantially higher sales volumes.
Atrion Medical Products and Halkey-Roberts were acquired by
the Company in April 19, 1994 and May 21, 1996,
respectively. Both acquisitions were recorded using the
purchase method of accounting. Accordingly, only results
from operations subsequent to their respective acquisition
dates are reflected in the Company's consolidated financial
statements.
As a result of lower natural gas costs and an improved
industrial economy, total natural gas deliveries on the
Company's pipeline systems have remained at high levels over
the past several years. Deliveries of natural gas on the
Company's pipelines totaled 48.1 million MMBtu in 1996
compared with 46.3 million MMBtu in 1995 and 42.1 million
MMBtu in 1994. This 4% increase in throughput between 1996
and 1995 occurred primarily on the Company's intrastate
pipeline and was due to temporary equipment failures at the
facilities of the pipeline's largest customer necessitating
higher levels of natural gas usage. Deliveries on the
Company's interstate pipeline in 1996 were up slightly over
1995. The 10% increase in throughput in 1995 compared to
1994 was due primarily to higher deliveries to industrial
customers, as well as to colder weather which resulted in
higher deliveries to municipal customers. The availability
of low-priced natural gas supplies during this period had a
favorable impact on the utilization of the Company's
pipelines and decreased the attractiveness of alternate
fuels. Some of the industrial customers directly or indi-
rectly served by the Company's pipelines have the capability
to use fuels other than natural gas, and these customers
generally switch from natural gas when it costs more than an
alternate fuel. In the event the sale of the stock of
Alabama-Tennessee, TRIGAS and ATEMCO is consummated,
the Company will have disposed of the facilities used
in the sale and transportation of natural gas.
The Company's cost of sales was $114.0 million in 1996
compared with $63.1 million in 1995 and $54.7 million in
1994. In 1996, the cost of purchased natural gas was
$100.9 million and the cost of sales for the medical
products segment was $13.1 million. In 1995, the cost of
purchased natural gas was $57.7 million and the cost of
sales for the medical products segment was $5.4 million. In
1994, the cost of purchased natural gas was $51.5 million
and the cost of sales for the medical products segment was
$3.2 million. The increase in purchased natural gas costs
and cost of sales for the medical products segment for 1996,
1995 and 1994 was consistent with the changes in revenues
discussed above.
Gross margins were $22.0 million in 1996 compared with $17.3
million in 1995 and $15.6 million in 1994. Pipeline and
energy segment margins of $13.6 million in 1996 increased by
$1.9 million compared with 1995 as the Company experienced
higher margins from both its natural gas marketing and
pipeline operations. Also contributing to this increase in
energy margins was revenue from the new gaseous oxygen
pipeline completed and placed in service by the Company in
April 1996. The $.2 million decline in margins in this
segment in 1995 as compared to 1994 was the result of
favorable one-time adjustments in 1994 at Alabama-Tennessee
and higher margins in 1994 at TRIGAS due to higher rates
resulting from temporary pricing adjustments, partially
offset by the favorable effect of higher throughput in 1995.
As described herein, the Company has entered into an
agreement to sell all of the stock of Alabama-Tennessee,
TRIGAS and ATEMCO, which contributed gross margins of
approximately $12.7 million for the year ended December 31,
1996.
Gross margins from the medical products segment increased by
$2.9 million in 1996 compared with 1995. This increase in
margins between years was primarily attributable to the
acquisition of Halkey-Roberts in May 1996. Margins at Atrion
Medical Products also increased as a result of higher sales
volumes, a more favorable product mix and lower unit costs.
Gross margins from the medical products segment increased by
$1.9 million in 1995 compared with 1994. Results for 1995
included a full year of medical products business compared
to only eight months in 1994, and on a comparable basis with
the prior year, included higher sales volumes, a more
favorable product mix and lower unit costs.
The Company anticipates that margins in the medical products
segment in 1997 and subsequent years will be adversely
affected as a result of the following developments: In late
1996, one of the Company's customers notified the Company
that it will discontinue purchases of a product in 1997.
The Company has, however, received orders to supply this
customer with the Company's product through the first half
of 1997 and may receive additional orders for later periods.
Sales of this product contributed net income of
approximately $785,000 in 1996. Another customer has
recently introduced a new product which is replacing a
product previously sold to that customer by the Company for
use in one geographic market. The loss of such sales is
being partially offset by the Company's sales of that
product to that customer for use in another geographic
market and by the Company's sales of other new products to
that customer, resulting in an estimated decline in net
income from the 1996 level of approximately $475,000 per
year. Late in the third quarter of 1996 a customer
terminated purchases of one of the Company's medical
products which accounted for $426,000 in net income in the
year ended December 31, 1996. The exclusive sales
agreement with that customer has been renegotiated to permit
the Company to sell that product to others. The Company is
now marketing this product in its current form and intends
to market redesigned versions of this product as well. In
response to the current and anticipated loss of revenues,
the Company has reduced annual operating costs and expects
to realize annual cost savings of approximately $200,000.
The Company has several new medical products which have
recently been introduced or which are in development and
which the Company currently plans to introduce in 1997 which
should help offset the reduction in net income described
above.
Operations and maintenance expenses were $10.8 million in
1996 compared with $7.9 million in 1995 and $7.1 million in
1994. This increase of $2.9 million between 1996 and 1995
included a $2.3 million increase in expenses in the medical
products segment, along with a $.5 million increase in the
pipeline and energy services segment. For 1996, 1995 and
1994, $5.2 million, $2.9 million and $2.0 million,
respectively, of total operations and maintenance expenses,
including an allocation of such expenses from affiliates,
were attributable to the medical products segment. Expenses
in the medical products segment in 1996 increased primarily
as a result of the acquisition of Halkey-Roberts by the
Company in May 1996 as well as a full year of expenses
related to the LacriCATH product line. Expenses in the
pipeline and energy services segment increased primarily as
a result of higher general and administrative costs.
Expenses in the medical products segment in 1995 increased
over 1994 by $.6 million, primarily due to the inclusion of
a full year of expenses in 1995 at Atrion Medical Products
as compared to a partial year in 1994. The $.1 million
decrease in operations and maintenance expenses for the
energy and pipeline segment in 1995 compared with 1994 was
due to the capitalization of expenses related to the
construction of a pipeline to transport gaseous oxygen to an
industrial customer. In the event the sale of the stock of
Alabama-Tennessee, TRIGAS and ATEMCO is consummated,
substantially all of the operations and maintenance expenses
attributable to the pipeline and energy segment, except for
certain corporate overhead expenses which have been allocated
to those subsidiaries, will be eliminated.
Operating income for 1996 was $9.3 million compared with
$7.8 million in 1995 and $7.1 million in 1994, of which $7.0
million, $5.8 million and $5.9 million for 1996, 1995 and
1994, respectively, was attributable to the pipeline and
energy services segment. The increase of $1.5 million
between 1996 and 1995 was attributable to a $1.2 million
increase in the pipeline and energy services segment and a
$.3 million increase in the medical products segment. The
increase in operating income for the pipeline and energy
services segment is consistent with the increase in margins
discussed above. The increase in operating income in the
medical products segment was due primarily to the
acquisition of Halkey-Roberts in May 1996, partially offset
by higher startup costs for the LacriCATH product line. In
1995, $2.0 million of operating income resulted from the
medical products segment as compared with $1.2 million in
1994. Higher sales and margins at Atrion Medical Products
in 1995 resulted in increased operating income from the
medical products segment, due in part to a full year of
Atrion Medical Products' business as compared to a partial
year in 1994. These higher sales and margins were partially
offset by start-up costs for the LacriCATH product line.
As described herein, the Company has entered into an
agreement to sell all of the stock of Alabama-Tennessee,
TRIGAS and ATEMCO, which contributed $6.7 million in
operating income for the year ended December 31, 1996.
Interest and other income amounted to $766,000 in 1996
compared with $753,000 in 1995 and $482,000 in 1994 . The
increase in other income was the result of a gain of
approximately $153,000 on the sale of the assets of a
distribution subsidiary, offset by a decrease in investment
income due to the use of cash reserves in the acquisition of
Halkey-Roberts. The increase in other income in 1995
compared with 1994 reflects higher miscellaneous tooling
sales at Atrion Medical Products, capitalized interest on
construction projects, income from a joint venture project
and higher earnings on investments, somewhat offset by a
decrease in interest income on the take-or-pay receivable
due from Alabama-Tennessee's customers.
Interest expense was $435,000 in 1996 compared with $193,000
in 1995 and $330,000 in 1994. The increase in 1996 is due
to higher borrowings under the Company's revolving loan
agreement to finance the acquisition of Halkey-Roberts. The
decrease in 1995 is due to lower borrowings under the
Company's revolving loan agreement as the loan to purchase
Atrion Medical Products in 1994 was paid off.
Income taxes were $3.7 million in 1996 compared with $3.0
million in 1995 and $2.6 million in 1994. Differences
between years reflect changes in pre-tax income between the
respective years.
In addition to the matters discussed above, certain of the
following factors will, and other of such factors may,
adversely affect the Company's results of operations in 1997
and thereafter, in the event the sale of the stock of
Alabama-Tennessee, TRIGAS and ATEMCO is not consummated:
The cities of Decatur and Huntsville, Alabama, which account
for 47% of Alabama-Tennessee's current total contracted
demand, have entered into 20-year contracts with Southern
Natural Gas Company (Southern), a wholly-owned subsidiary of
Sonat, Inc., for Southern to provide substantially all of
the cities' firm natural gas transportation requirements.
Service by Southern under the contracts is dependent upon
Southern's construction of a new 110-mile pipeline from
Tuscaloosa County, Alabama to northern Alabama. Southern
has announced that it is planning for the new pipeline to be
placed in service by late 1997. Approximately 93% of
Decatur's contract volume with Alabama-Tennessee expires on
November 1, 1997 and 86% of Huntsville's contract volume
expires on April 1, 1998. The balance of Decatur's and
Huntsville's contract volumes expire on November 1, 2000.
Southern cannot construct the pipeline until it receives a
final certificate of public convenience and necessity from
the FERC and obtains various other required permits. The
FERC has issued orders making preliminary determinations
that issuance of a certificate of public convenience and
necessity is in the public's interest and that the project
would not cause undue environmental harm. Alabama-Tennessee
has filed for rehearing of these orders at the FERC and
otherwise continues to oppose at the FERC the construction
of the pipeline. Based on the regulatory delays to date, the
Company believes that the pipeline will not be placed into
service at the time originally planned by Southern.
If Southern's proposed pipeline is constructed and Southern
begins providing service to the cities of Decatur and
Huntsville, the Company's management believes that the
adverse impact in 1998 and thereafter attributable to the
expiration of the contracts with Decatur and Huntsville
would be partially offset by Alabama-Tennessee's reduction
in operating costs, and could be further reduced by the
addition of new municipal and industrial customers and
increases in contract demand by existing municipal and
industrial customers. In an effort to mitigate the
anticipated loss of sales to Decatur and Huntsville,
Alabama-Tennessee has notified those customers that it will
not renew the contracts scheduled to expire on November 1,
1997 and April 1, 1998, and will put the 55,298 MMBtu of
capacity related to those contracts up for bidding over the
next several months.
For the twelve months ended December 31, 1996, the
contracts for these two customers accounted for
approximately $1.7 million of the Company's net income. With
the favorable impact of lower operating costs and the
replacement of a portion of the transportation revenues
associated with the expiring contracts, the Company's
management believes that the loss of these contracts will
not have a material adverse effect on net income in 1997,
but will result in a reduction in the Company's net income
from the 1996 level by approximately $300,000 in 1998,
$400,000 in each of 1999 and 2000, and $600,000 in each year
thereafter.
Contracts with two major industrial customers will expire on
August 31, 1997 and December 31, 1997. While these two
customers will continue to receive natural gas service from
the Company under other contracts, the net income under the
expiring contracts totaled $730,000 in 1996.
In late 1996 and early 1997, Alabama-Tennessee, in order to
maintain its market, discounted its transportation rates to
several of its larger customers. These discounts are
anticipated to reduce net income from the 1996 level by
amounts increasing from approximately $100,000 in 1997 to
approximately $300,000 in 2001 and thereafter for the
remaining terms of the contracts with those customers.
Also, one of the Company's municipal customers has indicated
that it plans to construct a pipeline directly to an
upstream pipeline, giving it the capability of by-passing
the Alabama-Tennessee system. While this municipality
has a contract with Alabama-Tennessee until the year 2000,
management of the Company anticipates that it will utilize
the new pipeline, once completed, to provide for the majority
of its transportation requirements. Transportation services
for this customer contributed approximately $100,000 to the
Company's net income in 1996.
TRIGAS maintains a long-term transportation contract with a
major industrial customer. This contract provides for a
reduction in the transportation rate at such time that the
cumulative deliveries through that pipeline exceed a
predetermined threshold. As a result of higher deliveries
over the past few years than originally contracted for, the
Company anticipates that the customer will cross over that
threshold in mid-2000, rather than at the expiration of the
initial term of the contract in late 2004. At the time of
such crossover, net income under that contract is
anticipated to decline by approximately $800,000 annually.
For information regarding a reduction in transportation
rates, see "Rate and Regulatory Matters" below.
Liquidity and Capital Resources
In January 1995, the Company entered into a new $20.0 million
revolving loan agreement to be utilized for the funding of
operations and for major capital projects or acquisitions,
subject to certain limitations and restrictions (see Note 4
of Notes to Consolidated Financial Statements). Indebtedness
under this line totaled $5.4 million at December 31, 1996.
There was no indebtedness under this agreement at December
31, 1995 and $.9 million in indebtedness under the previous
loan agreement as of December 31, 1994. The current term of
the revolving loan agreement expires on April 20, 1997;
however, the Company has the right to extend, and has
notified the lender of its intention to extend, the term
through April 19, 1998. Consummation of the proposed sale
of the stock of Alabama-Tennessee, TRIGAS and ATEMCO will
necessitate obtaining a waiver of certain covenants from the
lender or repayment of all outstanding indebtedness under
the revolving loan agreement.
As of December 31, 1996, the Company had cash and temporary
cash investments of $.1 million, compared with $2.8 million
and $.4 million at the end of 1995 and 1994, respectively.
The Company had long-term debt of $6.3 million as of
December 31, 1996 compared with $1.6 million as of December
31, 1995 and $2.7 million as of December 31, 1994. The
increase in long-term debt in 1996 was due to the borrowing
of funds to purchase Halkey-Roberts. The decrease in
long-term debt in 1995 was due to the repayment of debt under
the revolving loan agreement and the payment of the annual
installment on industrial revenue bonds at Atrion Medical
Products. The decrease in cash and increase in long-term
debt during 1994 was primarily due to the acquisition of the
business of Atrion Medical Products. In April 1994, the
Company purchased this business for $11.1 million in cash,
issued a promissory note in the principal amount of $1.0 and
assumed liabilities of $2.2 million.
Capital expenditures for plant and equipment totaled $2.6
million in 1996. Of this amount, $1.2 million was
attributable to the completion of a 22-mile gaseous oxygen
pipeline. In 1995, capital expenditures totaled $3.1
million, the majority of which was attributable to the
construction of the gaseous oxygen pipeline. In 1994,
capital expenditures for plant and equipment totaled
approximately $1.4 million, excluding the assets acquired in
the purchase of the Atrion Medical Products business. The
capital expenditures in 1994 were related to the improvement
of existing facilities and replacement of certain equipment
at Alabama-Tennessee. The primary items providing cash flow
in 1996 were earnings from operations and net take-or-pay
collections. The most significant uses of cash flow in 1996,
other than the acquisition of Halkey-Roberts and completion
of the gaseous oxygen pipeline, were other capital
expenditures of $1.4 million, payment of $2.5 million of
dividends on common shares and repayment of debt.
Based on settlements with its customers, Alabama-Tennessee
completed its recovery of take-or-pay payments during 1996
and has had no obligation to make take-or-pay payments since
1995. The Company has budgeted capital expenditures of
approximately $1.6 million in 1997 and $1.5 million in 1998.
The Company believes that existing cash and temporary cash
investments, cash flows from operations, borrowings
available under the Company's revolving loan agreement and
other equity or debt financing, which the Company believes
would be available, will be sufficient to fund operations,
potential projects and budgeted capital expenditures over
the next two years, whether or not the proposed sale of
the stock of Alabama-Tennessee, TRIGAS and ATEMCO
is consummated.
In the event that the proposed sale of the stock of
Alabama-Tennessee,TRIGAS and ATEMCO is consummated,
it is the Company's intent to use the net proceeds
to pay off existing debt under its revolving loan
agreement and to reinvest the remaining proceeds
in the medical products industry. Pending an
acquisition or business combination, the proceeds
from such sale will be invested as management
of the Company deems prudent, which may include,
but will not be limited to, certificates of deposit,
money-market accounts, bonds, United States
Government or municipal securities or other
short-term instruments.
Although the Company intends to acquire businesses or
product lines in the medical products industry, and has
identified certain companies in that industry with which the
Company may engage in discussions, the Company has no
commitments for any such acquisition and, accordingly,
stockholders have no basis on which to evaluate the possible
merits or risks of a target business's operations.
Moreover, the number of acquisitions which can be effected
with the net proceeds from the sale described herein is
limited, and it may be necessary for the Company to obtain
additional funds by incurring from time to time additional
short-term or long-term indebtedness or by issuing, in
public or private transactions, equity or debt securities.
The availability and terms of such financing will depend on
market and other conditions There can be no assurance that
additional financing will be available on terms acceptable
to the Company, nor can there be any assurance that any
such issuance of additional equity securities will occur
or as to the price at which such securities may be issued.
Any such issuance could be dilutive to the Company's
earnings per share and could adversely affect prices for,
or the liquidity of, the common stock of the Company.
In March 1997 the Company's Board of Directors determined
that the quarterly dividend will be paid at the rate of $.10
per share rather than at the current rate of $.20 per share
commencing with the dividend payable on September 1, 1997.
Impact of Inflation
The Company experiences the effects of inflation primarily
in the prices it pays for labor, materials and services.
Over the last three years, the Company has experienced the
effects of moderate inflation in these costs. At times the
Company has been able to offset a portion of these increased
costs by increasing the rates it charges for transportation
of natural gas and through cost escalators in certain sales
contracts in its medical products segment.
Rate and Regulatory Matters
In 1996, Alabama-Tennessee filed an amendment to its 1993
rate case settlement to implement a 6% reduction in its
transportation rates. This amendment was approved by the
FERC effective September 1, 1996.
Accounting Pronouncements
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of." This statement requires impairment losses on
long-lived assets to be recognized when an asset's book
value exceeds its expected future cash flows (undiscounted).
Adoption of this standard did not impact the Company's
financial position or results of operations.
In October 1995, the FASB issued Statement No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). This
statement is effective for transactions that are entered
into in fiscal years beginning after December 15, 1995.
SFAS 123 establishes a fair value-based method of accounting
for employee stock options. This method provides for a
compensation cost to be charged to results of operations at
the grant date. However, the statement allows companies to
continue to follow the accounting treatment prescribed by
Accounting Principles Board (APB) Opinion No. 25. APB
Opinion No. 25 generally requires compensation cost to be
recognized only for the excess of the quoted market price at
the grant date over the price that an employee must pay to
acquire the stock. Companies electing to continue with APB
Opinion No. 25 must make disclosure of net income as if SFAS
123 had been adopted. The Company has chosen to continue to
account for stock-based compensation using the intrinsic
value method prescribed in APB Opinion No. 25. Had
compensation cost for the Company's 1995 and 1996 grants of
stock-based compensation been recorded consistent with SFAS
123, the effects would not be material to the Company's net
income or net income per share.
The Company is subject to the provisions of Statement of
Financial Accounting Standards 71, "Accounting for the
Effects of Certain Types of Regulation." Regulatory assets
represent probable future revenue to the Company associated
with certain costs which will be recovered from customers
through the regulatory, or rate making process. The Company
had no material regulatory assets or liabilities on its
books as of December 31, 1996.
On March 11, 1997, the FASB issued Statement No. 128,
"Earnings Per Share." This statement is effective for
fiscal years ending after December 15, 1997. This statement
requires the restatement of earnings per share. Due to the
timing of the issuance of this pronouncement, the Company
has not quantified the effect of applying this new standard.
Other Matters
In addition to opposing Southern's application at the FERC
as described above, on February 9, 1996, Alabama-Tennessee
filed a lawsuit in Circuit Court in Alabama against Southern
and the City of Huntsville., asserting that the firm
transportation contract between Southern and Huntsville
violates Alabama's competitive bid law and requesting that
the contract be declared void. The Circuit Court entered
summary judgment for Southern and Huntsville on August 20,
1996. On October 2, 1996, Alabama-Tennessee's motion to
alter, amend or vacate judgement was denied, and on November
12, 1996, Alabama-Tennessee filed a notice of appeal to the
Supreme Court of Alabama seeking reversal of the Circuit
Court order.
Environmental matters have gained increased attention in
the natural gas pipeline and distribution industry over the
past few years. The Company believes that its properties and
operations in both the pipeline and energy services segment
as well as the medical products segment are in full
compliance with all applicable environmental statutes and
regulations. There are no administrative or judicial
proceedings arising under environmental statutes pending or
known to be contemplated by governmental agencies to which
the Company is a party.
Item 8. Financial Statements and Supplementary Data
Page
Report of independent public accountants 37
Consolidated balance sheets 38-39
Consolidated statements of income 40
Consolidated statements of cash flows 41
Notes to consolidated financial statements 42-57
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The information under the captions "Election of Directors"
and "Securities Ownership; Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's
definitive proxy statement relating to the 1997 annual
meeting of stockholders is incorporated herein by
reference.
Executive Officers
The information for this item relating to executive officers
of the Company is set forth on pages 14 and 15 of this
report.
Item 11. Executive Compensation
The information under the caption "Executive Compensation"
in the Company's definitive proxy statement relating to
the 1997 annual meeting of stockholders is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Security Ownership of Certain Beneficial Owners
The information under the caption "Securities Ownership;
Securities Ownership of Certain Beneficial Owners" in
the Company's definitive proxy statement relating
to the 1997 annual meeting of stockholders is incorporated
herein by reference.
Security Ownership of Management
The information under the caption "Securities Ownership;
Securities Ownership of Management" in the Company's
definitive proxy statement relating to the 1997 annual
meeting of stockholders is incorporated herein by
reference.
Changes in Control
The Company knows of no arrangements which may at a
subsequent date result in a change in control of the
Company.
Item 13. Certain Relationships and Related Transactions
None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on
Form 8-K
(a)(1) Financial Statements
See Item 8, "Financial Statements and Supplementary Data,"
and financial statement pages attached hereto.
(2) Financial Statement Schedules
All financial statement schedules have been omitted since
the required information is included in the consolidated
financial statements or the notes thereto, or is not
applicable or required.
(3) Exhibits (Numbered in accordance with Item 601
of Regulation S-K)
The following exhibits are filed as part of this 1996 Form
10-K Report. Those exhibits previously filed and
incorporated herein by reference are identified below by a
note reference to the previous filing.
Exhibit
Numbers Description
2a Stock Purchase Agreement dated February 17, 1990,
between AlaTenn Resources, Inc. and MEGA Natural
Gas Company, as amended by Letter Agreement dated
March 9, 1990 (1)
2b Agreement and Plan of Merger of Atrion Corporation,
a Delaware Corporation and Atrion Corporation, an
Alabama Corporation, dated January 2, 1997 (37)
3a Certificate of Incorporation of Atrion Corporation,
dated December 30, 1996 (38)
3b Bylaws of Atrion Corporation, a Delaware
Corporation (39)
4a Rights Agreement, dated as of February 1, 1990,
between AlaTenn Resources, Inc. and American Stock
Transfer & Trust Company, which includes the form
of Right Certificate as Exhibit A and the Summary
of Rights to Purchase Common Shares as Exhibit B
(4)
4b Credit Agreement in the amount of $20 million,
dated January 20, 1995 between AlaTenn Credit
Corporation and Compass Bank (34)]
4c Loan Modification Agreement and Amendment to
Loan Documents dated as of January 20, 1997 (5)
10a* Change in Control Agreement between AlaTenn Re-
sources, Inc. and Jerry A. Howard, dated October
23, 1987 and amendment dated March 11, 1988 (14)
10b* Change in Control Agreement between AlaTenn Re-
sources, Inc. and George G. Petty, dated October
23, 1987 and amendment dated March 11, 1988 (15)
10c Escrow Agreement dated December 27, 1989 by
Alabama-Tennessee Natural Gas Company and Third
National Bank In Nashville, as escrow agent and
Tennessee Gas Pipeline Company (18)
10d Gas Sales Contract between Alabama-Tennessee
Natural Gas Company and Tennessee Gas Pipeline
Company, dated August 1, 1989 (19)
10e Agreement for Purchase and Sale of Assets, dated
October 3, 1990, by and among Central Gas Company,
Tennessee River Development Company and the City of
Florence, Alabama (25)
10f First Amendment to Agreement for Purchase and Sale
of Assets, dated March 5, 1991, by and among
Central Gas Company, Tennessee River Development
Company and the City of Florence, Alabama (26)
10g Offer to Purchase, dated December 27, 1989 between
Oryx Energy Company and Alabama-Tennessee Natural
Gas Company (27)
10h Agreement of Sale, dated November 19, 1990 by and
among AlaTenn Resources, Inc., Triton Energy
Corporation and Pacific Basin Company (28)
10i* 1990 Stock Option Plan, adopted March 15, 1990 (20)
10j* Form of Incentive Stock Option Agreement (21)
10k* Restricted Shares Compensation Plan for Non-
Employee Directors, adopted May 6, 1991 (22)
10l* Alabama-Tennessee Natural Gas Company Non-Employee
Directors Deferral Plan (29)
10m* Alabama-Tennessee Natural Gas Company Supplemental
Executive Retirement Plan (30)
10n* Alabama-Tennessee Natural Gas Company Supplemental
Executive Thrift Plan (31)
10o Assets Purchase Agreement, dated April 19, 1994
between Ryder International Corporation, Frank and
Carolyn Ryder, RIC Acquisition Corporation and
AlaTenn Resources (32)
10p* 1994 Key Employee Stock Incentive Plan (33)
10q Stock Purchase Agreement, dated May 21, 1996
between Fenway Holdings, L.L.C. And Atrion
Corporation (40)
10r* Form of Incentive Stock Option Agreement under
the 1994 Key Employee Stock Incentive Plan (41)
21 Subsidiaries of Atrion Corporation as of December
31, 1996 (5)
23 Consent of Arthur Andersen LLP (5)
24 Powers of Attorney authorizing Jerry A. Howard and
Jeffery Strickland to sign the Atrion Corporation
Annual Report on Form 10-K for fiscal year ended
December 31, 1996 on behalf of certain directors of
the Company (5)
27 Financial Data Schedules (filed electronically
only) (5)
99 System map of Alabama-Tennessee Pipeline System(35)
Notes:
(1) Filed as Exhibit 2 to Form 8-K of AlaTenn
Resources, Inc. dated March 26, 1990
(2) Filed as Exhibit 3a to Form 10-K of AlaTenn
Resources, Inc. dated March 27, 1987
(3) Filed as Exhibit 3b to Form 10-Q of AlaTenn
Resources, Inc. dated May 14, 1987
(4) Filed as Exhibit 1 to Registration Statement on
Form 8-A of AlaTenn Resources, Inc. dated February
15, 1990.
(5) Filed herewith
(6) Filed as Exhibit 2 to Form 8-K of AlaTenn
Resources, Inc. dated October 28, 1986
(7) Filed as Exhibit 10b to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1989.
(8) Filed as Exhibit 10c to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1989.
(9) Filed as Exhibit 10d to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1989.
(10) Filed as Exhibit 10e to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1989.
(11) Filed as Exhibit 10f to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1989.
(12) Filed as Exhibit 10g to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1989.
(13) Filed as Exhibit A to the definitive Proxy
Statement of AlaTenn Resources, Inc. dated
March 25, 1983
(14) Filed as Exhibit 10c to Form 10-K of AlaTenn
Resources, Inc. dated March 29, 1988
(15) Filed as Exhibit 10d to Form 10-K of AlaTenn
Resources, Inc. dated March 29, 1988
(16) Filed as Exhibit 4b to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1990.
(17) Filed as Exhibit 4c to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1990.
(18) Filed as Exhibit 10k to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1990.
(19) Filed as Exhibit 10l to Form 10-K of AlaTenn
Resources, Inc. dated March 30, 1990.
(20) Filed as Appendix A to the Definitive Proxy
Statement of the Company dated April 6, 1990.
(21) Filed as Exhibit 4(d) to the Registration Statement
on Form S-8 of AlaTenn Resources, Inc., filed May
17, 1991 (File No. 33-40639).
(22) Filed as Appendix A to the Definitive Proxy
Statement of the Company dated March 29, 1991.
(23) Filed as Exhibit 4d to Form 10-K of AlaTenn
Resources, Inc., dated March 28, 1991.
(24) Filed as Exhibit 4e to Form 10-K of AlaTenn
Resources, Inc., dated March 28, 1991.
(25) Filed as Exhibit 10m to Form 10-K of AlaTenn
Resources, Inc., dated March 28, 1991.
(26) Filed as Exhibit 10n to Form 10-K of AlaTenn
Resources, Inc., dated March 28, 1991.
(27) Filed as Exhibit 10o to Form 10-K of AlaTenn
Resources, Inc., dated March 28, 1991.
(28) Filed as Exhibit 10p to Form 10-K of AlaTenn
Resources, Inc., dated March 28, 1991.
(29) Filed as Exhibit 10t to Form 10-K of AlaTenn
Resources, Inc., dated March 27, 1992.
(30) Filed as Exhibit 10u to Form 10-K of AlaTenn
Resources, Inc., dated March 26, 1993.
(31) Filed as Exhibit 10v to Form 10-K of AlaTenn
Resources, Inc., dated March 26, 1993.
(32) Filed as Exhibit 2 to Form 8-K of AlaTenn
Resources, Inc., dated May 2, 1994.
(33) Filed as Appendix A to the Definitive Proxy
Statement of the Company dated March 28, 1994.
(34) Filed as Exhibit 4f to Form 10-K of AlaTenn
Resources, Inc., dated March 30, 1995.
(35) Filed as Exhibit 99 to Form 10-K of AlaTenn
Resources, Inc., dated March 30, 1995.
(36) Filed as Exhibit 3a to Form 10-K of AlaTenn
Resources, Inc., dated March 30, 1995.
(37) Filed as Appendix A to the Definitive Proxy
Statement of the Company dated January 10, 1997.
(38) Filed as Appendix B to the Definitive Proxy
Statement of the Company dated January 10, 1997.
(39) Filed as Appendix C to the Definitive Proxy
Statement of the Company dated January 10, 1997.
(40) Filed as Exhibit 2 to Form 8-K of Atrion
Corporation, dated May 21, 1996.
(41) Filed as Exhibit 4d to the Registration Statement
on Form S-8 of AlaTenn Resources, Inc., filed
July 26, 1995 (File No. 33-61309).
* Management Contract or Compensatory Plan or Arrangement
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of
the year ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Jerry A. Howard
Jerry A. Howard
Chairman of the Board,
President and Chief
Executive Officer
Dated: March 27, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
Signature Capacity Date
<CAPTION>
(i) Principal Executive
Officer:
<S> <C> <C>
/s/ Jerry A. Howard Chairman of the Board, March 27, 1997
(Jerry A. Howard) President and Chief
Executive Officer
<CAPTION>
(ii) Principal Financial
Officer and Principal
Accounting Officer:
/s/ Jeffery Strickland Vice President and March 27, 1997
(Jeffery Strickland) Chief Financial Officer
and Secretary-Treasurer
<CAPTION>
(iii) Directors:
* Emile A. Battat Director March 27, 1997
(Emile A. Battat)
/s/ Jerry A. Howard Director March 27, 1997
(Jerry A. Howard)
* Richard O. Jacobson Director March 27, 1997
(Richard O. Jacobson)
* John H.P. Maley Director March 27, 1997
(John H.P. Maley)
* Jerome J. McGrath Director March 27, 1997
(Jerome J. McGrath)
* Hugh J. Morgan, Jr. Director March 27, 1997
(Hugh J. Morgan, Jr.)
* J. Kenneth Smith Director March 27, 1997
(J. Kenneth Smith)
* Roger F. Stebbing Director March 27, 1997
(Roger F. Stebbing)
* John P. Stupp, Jr. Director March 27, 1997
(John P. Stupp, Jr.)
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors of Atrion
Corporation:
We have audited the accompanying consolidated balance sheets
of Atrion Corporation (formerly AlaTenn Resources, Inc.) and
subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of income and cash flows for
each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Atrion Corporation and subsidiaries as of
December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Atlanta, Georgia
February 14, 1997 (except with respect to the matter
discussed in Note 13, as to which the date is March 19,
1997)
<TABLE>
PART II, ITEM 6
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ATRION CORPORATION
SELECTED FINANCIAL DATA
(In thousands except per share amounts)
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating revenues:
Industrial sales 81,477 $41,767 $40,688 $62,234 $56,825
Resale sales 18,353 10,942 8,506 49,132 45,734
Transportation 10,065 11,069 11,050 6,525 4,550
Natural gas
marketing 4,692 5,486 3,119 1,052 14,474
Dist. sales 21 90 82 79 68
Medical products 21,369 11,025 6,876 0 0
Total oper.
revenues 135,977 80,379 70,321 119,022 121,651
Income from
cont.oper. 6,477 5,340 4,690 6,767 4,665
Net income (1) 6,477 5,340 4,690 7,332 4,665
Total assets 63,251 48,506 43,737 42,653 42,766
Long-term debt
(incl.current
maturities) 7,016 1,812 2,885 0 0
Income from
cont. operat.
per share 2.03 1.68 1.48 2.14 1.49
Net income
per share (1) 2.03 1.68 1.48 2.32 1.49
Dividends
per share 0.80 0.80 0.80 0.80 0.79
Average shares
outstanding 3,189 3,175 3,170 3,162 3,141
(1) The 1993 amount includes income of $565,000 or $.18 per share
related to discontinued operations and $2.3 million or $.73 per
share attributable to a favorable revision of a provision recorded
in 1989 for estimated nonrecoverable take-or-pay expense.
</TABLE>
<TABLE>
PART II, ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ATRION CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<CAPTION>
Assets: 1996 1995
(In thousands)
<S> <C> <C>
Current Assets:
Cash and temporary cash $144 $ 2,811
investments
Accts rec.incl.$1,860 in 1995
of take-or-pay
settlement costs (Note 3) 19,154 13,890
Materials and supplies,
at average cost 516 689
Inventories 4,016 717
Prepaid expenses 493 288
24,323 18,395
Property, Plant and Equip:
Original cost 42,344 35,447
Less accum. dep. & amort. 16,935 15,725
25,409 19,722
Other Assets and Defrd.Chgs:
Patents, net of accum. amort.
of $1,184 and $745 in 1996 and
1995,respectively (Note 1) 5,066 5,505
Goodwill, net of accum.
amort. of $392 and $193 in
1996 and 1995,respectively
(Note 1) 6,198 2,652
Other 2,255 2,232
13,519 10,389
63,251 48,506
<CAPTION>
1996 1995
Liab. and Stockholders' (In thousands)
Equity
<S> <C> <C>
Current Liabilities:
Current maturities
of l-t debt (Note 4) 703 203
Accts.payable and
accrued liabilities 17,690 12,646
Accrued inc. and other
taxes 389 537
18,782 13,386
L-t Debt, less current
maturities (Note 4) 6,313 1,609
Other Liab.and Defrd. Credits:
Accum. defrd. income taxes
(Note 5) 2,309 1,559
Unamortized investment tax
credits (Note 5) 226 243
Other 1,203 1,739
3,738 3,541
Stockholders' Equity:
Common shares, par value
$0.10 per share; auth.
10,000,000 shares;
issued 3,420,000 shares
(Note 1) 342 228
Paid-in capital 6,204 6,078
Retained earnings (Note 7) 29,451 25,525
Treasury shares, 205,299 sh.
in 1996 and 241,374 shares in
1995, at cost (Note 6) (1,579) (1,861)
34,418 29,970
63,251 48,506
The accompanying notes are an integral part of
these consolidated balance sheets.
</TABLE>
<TABLE>
PART II, ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ATRION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(For the years ended December 31, 1996, 1995 and 1994)
<CAPTION>
1996 1995 1994
(In thousands, except
per share amounts)
<S> <C> <C> <C>
Operating Revenues $135,977 $ 80,379 $ 70,321
Cost of Goods Sold 113,995 63,082 54,728
Gross Margin 21,982 17,297 15,593
Other Oper.Exp.:
Operations 10,592 7,685 6,779
Maintenance 245 255 345
Dep. and amort. 1,433 1,191 976
Taxes other than
income taxes 361 355 360
12,631 9,486 8,460
Operating Income 9,351 7,811 7,133
Recovery of Estimated
Nonrecoverable Take-
or-Pay Exp. (Note 3) 473 0 0
Int.and Other Income 765 753 482
Interest Expense (435) (193) (330)
Inc.Before Inc.Taxes 10,154 8,371 7,285
Inc.Taxes (Note 5) (3,677) (3,031) (2,595)
Net Income 6,477 5,340 4,690
Earnings Per Share 2.03 1.68 1.48
Average Common
Shares Outstanding 3,189 3,175 3,170
The accompanying notes are an integral part
of these consolidated statements.
</TABLE>
<TABLE>
PART II, ITEM 8
FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
ATRION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(For the years ended
December 31, 1996, 1995 and 1994)
<CAPTION>
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Cash Flows From Oper.
Activities (excl.the
effects of acquisitions):
Net income $6,477 $5,340 $4,690
Adj.to reconcile net inc.
to net cash
provided by oper.
activities:
Depr.and amort. 2,074 1,978 1,120
Defrd.income taxes 840 260 (125)
Net take-or-pay
recoveries (Note 3) 1,238 1,735 1,128
Other ( 516) 163 121
10,113 9,476 6,934
Changes in current assets
and liab.(excl.the
effects of
acquisitions):
(Incr.) decr.
in accts. rec. (4,751) (3,615) 3,142
Incr. in other current
assets (317) (110) (1,757)
Incr.(decr.) in
accts. pay. 3,572 3,376 (3,125)
(Decr.) incr. in other
current liabilities (138) (123) 585
8,479 9,004 5,779
Cash Flows From
Investing Activities:
Purchase of subsidiary
companies (Note 2) (11,650) 0 (11,124)
Sale of subsidiary
assets (Note 2) 69 0 0
Property, plant and
equipment additions (2,589) (3,080) (1,390)
(14,170) (3,080) (12,514)
Cash Flows From
Financing Activities:
Net incr.(decr.) in
long term indebtedness 5,167 (1,073) 870
Issuance of common
shares 408 60 80
Cash dividends paid (2,551) (2,540) (2,536)
3,024 (3,553) (1,586)
Net (decr.) incr.
in cash and
temporary cash invest. (2,667) 2,371 (8,321)
Cash and temp. cash
investments, beg.
of yr. 2,811 440 8,761
Cash and temporary cash
investments, end of yr. 144 2,811 440
Cash paid for:
Interest (net of
capitalized amounts 425 207 315
Inc. taxes (net of
refunds 3,506 2,931 2,742
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Atrion Corporation is a diversified holding company which
provides pipeline and energy services to the lower Tennessee
Valley area and provides products for the medical and health
care industry. Atrion Corporation was incorporated in 1996
and is successor to the former ATRION Corporation as a result
of a merger to change the state of incorporation of ATRION
Corporation from Alabama to Delaware. The predecessor
corporation was formerly known as "AlaTenn Resources, Inc.
The Company is primarily engaged in two lines of business: (1)
pipeline and energy services - natural gas transmission and
marketing and (2) medical products - designing, developing,
manufacturing, and marketing innovative products for the
medical and health care industry.
Stock Split
On November 7, 1996, the Board of Directors authorized a
three-for-two stock split to be effected in the form of a
stock dividend of one share for every two shares of common
stock outstanding. The stock dividend was paid on December 2,
1996 to stockholders of record on November 20, 1996. All
references in the consolidated financial statements referring
to shares, share prices, per share amounts and stock plans
have been adjusted retroactively for the three-for-two stock
split.
Principles of Consolidation
The consolidated financial statements include the accounts of
Atrion Corporation and its subsidiaries (the Company). All
significant intercompany transactions and balances have been
eliminated in consolidation.
Property, Plant and Equipment
Property, plant and equipment are stated at original cost.
The cost of additions to property, plant and equipment
includes direct labor and material, allocable overheads and,
in the case of natural gas pipeline plant, an allowance for
the estimated cost of funds used during construction (AFUDC).
Such provisions for AFUDC are not reflected separately in the
accompanying consolidated statements of income as the amounts
are not material. Maintenance and repairs, including the cost
of renewals of minor items of property, are charged
principally to expense as incurred. Replacements of property
(exclusive of minor items or property) are charged to the
appropriate property accounts. Upon retirement of a natural
gas pipeline plant asset, its cost is charged to accumulated
depreciation together with the cost of removal, less salvage
value. The following table represents a summary of property,
plant and equipment as of December 31, 1996 and 1995 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Pipelines and related
facilities $29,845 $28,744
Manufacturing facilities
and equip. 7,690 2,205
Land 490 460
Buildings 4,319 4,038
Total $42,344 $35,447
</TABLE>
Depreciation and Amortization
Depreciation on pipeline plant is calculated using the
composite rate method, which approximated an average
depreciation rate of 2.0% in 1996, 2.1% in 1995 and 2.0% in
1994. Depreciation on facilities and equipment is calculated
on a straight-line basis over the useful lives of the assets
which range from 3 to 10 years. Goodwill is being amortized
at a rate of 4% per year, and patents are being amortized over
the remaining lives of the individual patents.
Operating Revenue
The Company recognizes revenues from natural gas sales and
transportation service in the period the service is provided.
Provision is made for possible refund of revenues collected
which are subject to future rate decisions. Revenues from the
sale of medical products are recognized on an accrual basis at
the time of sale.
Income Taxes
The Company's deferred income taxes reflect the impact of
temporary differences between amounts of assets and
liabilities for financial reporting purposes and such amounts
as measured by tax laws. These temporary differences are
determined in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes"
(Note 5). Investment tax credits are deferred and amortized
to income over the lives of the related assets (Note 5).
Inventory
Inventories are stated at lower of cost or market. Cost is
determined by using the first-in, first-out method.
Inventories at December 31 consisted of the following (in
thousands):
<TABLE>
1996 1995
<S> <C> <C>
Raw Materials $2,617 $362
Work-in-Process 177 109
Finished Goods 918 246
Natural gas 304 0
$4,016 $717
</TABLE>
Research and Development Costs
Research and development costs of $1.1 million, $1.0 million
and $0.5 million in 1996, 1995 and 1994, respectively, were
expensed as incurred.
Goodwill and Patents
Goodwill represents the excess of cost over the fair market
value of tangible and identifiable intangible net assets.
Values assigned to patents were agreed to at the time of
acquisition between selling and acquiring parties. The
Company reviews its intangible assets for impairment at each
balance sheet date or whenever events or changes in
circumstances indicate that the carrying amount of an asset
should be assessed.
Temporary Cash Investments
Temporary cash investments are highly liquid securities with
original maturities of 90 days or less. For purposes of the
consolidated statements of cash flows, temporary cash
investments are considered cash equivalents.
Financial Presentation
Certain prior year amounts have been reclassified to conform
with current year presentation.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
2. Acquisitions, Dispositions and Mergers of Assets and
Subsidiaries
Acquisition of Halkey-Roberts Corporation
On May 21, 1996, the Company acquired Halkey-Roberts
Corporation (Halkey-Roberts), a company that designs,
develops, manufactures and sells proprietary medical
device components and related components, all of which
are used to control the flow of fluids and gases,
from Fenway Partners, Inc., a New York-based
private investment firm. The Company purchased all of the
outstanding stock of Halkey-Roberts for $11.65 million in
cash, including post closing adjustments. Halkey-Roberts is
based in St. Petersburg, Florida. To purchase Halkey-
Roberts, the Company used available cash and borrowings
on a revolving loan agreement with a regional bank. As of
year end, the Company's remaining indebtedness associated with
this acquisition was $5.0 million. The acquisition was
recorded 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 assets acquired of
$3.7 million was recorded as goodwill and is being amortized
over 25 years. Only results from operations subsequent to the
acquisition date are reflected in the accompanying
consolidated financial statements.
On May 21, 1996, Halkey-Roberts leased the land, building and
building improvements in St. Petersburg, Florida which serve
as Halkey-Roberts' headquarters and manufacturing facility
from HRC Properties, Inc., an affiliate of Fenway, under a
ten-year lease. The lease provides for monthly payments
including certain lease payment escalators and provides for
certain termination, sublease and assignment rights. The
Company has guaranteed Halkey-Roberts' payment and performance
obligations under the lease. The lease is being accounted for
as an operating lease and the annual rental expense is
$332,000.
The following table presents unaudited consolidated selected
financial data on a pro forma basis assuming the purchase of
Halkey-Roberts had occurred as of January 1, 1996 and 1995.
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 periods
presented or of future results.
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
1996 1995
(Unaudited)
(In thousands)
<S> <C> <C>
Operating Revenues $142,040 $94,966
Net Income 6,718 5,745
Net Income Per Share 2.10 1.80
</TABLE>
Acquisition of Ryder International
On April 19, 1994, the Company, through a wholly-owned
subsidiary, purchased the business of Ryder International
Corporation by acquiring certain of its operating assets and
assuming substantially all of its liabilities. The company
paid to Ryder International Corporation $11.1 million in cash,
issued a promissory note in the principal amount of $1.0
million and assumed liabilities totaling $2.2 million. The
acquisition was recorded using the purchase method of
accounting. Accordingly, the purchase price was allocated to
the assets and liabilities acquired based on their estimated
fair values at the date of acquisition. The excess of the
consideration paid over the estimated fair value of the
identifiable assets acquired of $2.4 million was recorded as
goodwill and is being amortized over 25 years. Only results
from operations subsequent to the acquisition date are
reflected in the accompanying consolidated financial
statements. Following the closing, the name of the Company's
subsidiary was changed to Ryder International Corporation.
On October 27, 1995, the Company, through a new subsidiary,
Atrion Medical Products, Inc., purchased exclusive worldwide
marketing and manufacturing rights to a patented product for
treating excessive tearing of the eye. The Company acquired
licensing rights to the product under a licensing agreement
with the product's inventor. The company paid $425,000 and
assumed certain liabilities in connection with the acquisition
of the product and licensing rights. The line of products,
call LacriCATH , provides a minimally invasive procedure for
clearing obstructions in the nasolacrimal duct.
Disposition of Assets
During 1996, the Company sold the assets of one of its natural
gas distribution companies, Hardin County Gas Company.
A pre-tax gain of approximately $153,000 was recognized and is
included in other income. Prior to the end of 1996, the
Company dissolved Hardin County Gas Company as well as another
inactive subsidiary, North Mississippi Natural Gas
Corporation.
Merger of Assets
During 1996, the Company merged two medical products
subsidiaries, Atrion Medical Products, Inc. and Ryder
International Corporation, and changed the name of the
surviving corporation to Atrion Medical Products, Inc. In
1996, AlaTenn Pipeline Company, Inc. and Vulcan Oil and Gas
Company, were merged with AlaTenn Pipeline Company, Inc.
continuing as the surviving corporation.
3. Regulatory and Rate Matters
The Company's interstate natural gas pipeline subsidiary,
Alabama-Tennessee Natural Gas Company (Alabama-Tennessee), is
regulated by the Federal Energy Regulatory Commission (FERC).
The FERC establishes the maximum and minimum transportation
rates that Alabama-Tennessee is permitted to charge its
customers. The Company's intrastate natural gas pipeline
subsidiary, Tennessee River Intrastate Gas Company, Inc.
(TRIGAS), is regulated by the Alabama Public Service
Commission (APSC). The rates to TRIGAS transportation
customers are determined by negotiated contracts which were
approved by the APSC.
On April 1, 1993, Alabama-Tennessee increased its
jurisdictional rates from rates that had been in effect since
April 1990. This rate increase was agreed to in an
uncontested settlement with Alabama-Tennessee's customers
which the FERC approved on December 30, 1993. That agreement
was amended in September 1996 to eliminate the requirement
that Alabama-Tennessee file a new rate case in September 1996.
As part of that agreement, Alabama-Tennessee reduced its rates
by 6% effective September 1, 1996.
During the 1980s and early 1990s, many interstate natural gas
pipelines incurred significant take-or-pay liabilities owed to
natural gas producers. Alabama-Tennessee and the other
subsidiaries of the Company did not incur any direct
take-or-pay obligations to natural gas suppliers or producers.
However, through various orders issued during the period from
1988 to 1992, the FERC allowed Tennessee Gas Pipeline Company
(TGP) to pass on to its customers, including
Alabama-Tennessee, certain buyout and buydown costs.
The portion of this take-or-pay obligation, which
Alabama-Tennessee owed to TGP under various
FERC-approved orders, including interest,
totaled $23 million, all of which was paid by
Alabama-Tennessee during the period from 1988 through 1995.
In 1991, Alabama-Tennessee reached a settlement with its
customers which provided for the recovery of a portion of the
take-or-pay costs billed to it by TGP over a five-year period.
During 1996, Alabama-Tennessee received the final $1.9 million
of take-or-pay accounts receivable from its customers.
Alabama-Tennessee also made a final adjustment to its estimate
for non-recoverable take-or-pay expense recorded in 1989,
which resulted in pre-tax income of $473,000.
4. Long-Term Debt and Other Borrowings
Long-term debt as of December 31 consisted of the following
(in thousands):
<TABLE>
1996 1995
<S> <C> <C>
Revolving credit agreement $5,388 $ 0
Industrial revenue bonds 628 812
Notes payable 1,000 1,000
7,016 1,812
Less amounts due in
one year 703 203
$6,313 $1,609
</TABLE>
The Company has a $20 million revolving credit agreement with
a regional bank. Under this agreement there is a $10 million
unsecured revolving facility and a $10 million revolving
facility which must be secured at the time it is used. The
revolving credit agreement bears interest at 90-day LIBOR plus
one percent. At December 31, 1996 and 1995, 90-day LIBOR was
5.5625% and 5.2650%, respectively. The term of the agreement
has been extended through April 20, 1997 and the Company has
the right to extend the term through April 19, 1998. At any
time during the term of the agreement, the Company may convert
any or all outstanding amounts, under either facility, to a
secured term loan with a minimum maturity of two years. The
Company's ability to borrow funds under the secured and
unsecured credit facilities is contingent on meeting certain
covenants in the loan agreement. At December 31, 1996, the
Company was in compliance with all covenants. At December 31,
1996, the Company had $5.4 million in borrowings under the
revolving loan commitment of which $5.0 million relates to the
secured revolving facility and is secured by the assets of
Atrion Medical Products and Halkey-Roberts.
The industrial revenue bonds are due and payable in
semi-annual installments of $101,500. Such bonds bear
interest at 70% of the prime rate with a minimum rate
of 6%, and are secured by Atrion Medical Products'
land, buildings and equipment, and by a Company guaranty.
In April 1994, Atrion Medical Products executed a
promissory note, guaranteed by the
Company, for $1.0 million to the former owner of the
business. The note is due in four quarterly installments,
beginning July 1, 1997. Interest is paid quarterly at 6% on
the unpaid balance.
The aggregate maturities of long-term debt for the next five
years and thereafter, are as follows:
1997 1998 1999 2000 Total
(In thousands)
$703 $703 $203 $5,407 $7,016
On December 31, 1996, the estimated fair value of long-term
debt described above was approximately the same as the
carrying amount of such debt on the consolidating balance
sheet. The fair value was calculated in accordance with the
requirements of SFAS No. 107, "Disclosures About the Fair
Value of Financial instruments," and was estimated by
discounting the future cash flows using rates currently
available to the Company for debt instruments with similar
terms and remaining maturities.
5. Income Taxes
The items comprising income tax expense are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Current
- - Federal $2,604 $2,729 $2,563
- - State 246 260 260
2,850 2,989 2,823
Deferred
- - Federal 775 27 (207)
- - State 64 28 (7)
839 55 (214)
Investment
tax credits (12) (13) (14)
Total income
tax expense 3,677 3,031 2,595
</TABLE>
Temporary differences and carryforwards which gave rise to a
significant portion of deferred tax assets and liabilities as
of December 31, 1996 and 1995 are as follows:
<TABLE>
1996 1995
(In thousands)
<S> <C> <C>
Deferred tax assets :
Deferred investment tax
credits 82 88
Provisions for refunds 130 120
Benefit plans 476 406
Other, net 426 414
Total deferred tax
assets 1,114 1,028
Deferred tax
liabilities:
Depreciation and basis
differences 2,862 2,069
Pensions 142 138
Other, net 419 380
Total deferred tax
liabilities 3,423 2,587
</TABLE>
Total income tax expense differs from the amount which would
be provided by applying the statutory federal income tax rate
to pretax earnings as illustrated below:
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Income tax expense
at statutory
Federal income tax rate 3,452 2,846 2,477
Increase (decrease)
resulting from:
State income taxes 205 190 166
Tax exempt interest 0 0 (46)
Other, net 20 (5) (2)
Total income tax expense 3,677 3,031 2,595
</TABLE>
6. Common Stock
The Company utilized 36,075 and 6,900 treasury shares in 1996
and 1995, respectively, to make distributions under its
Restricted Shares Compensation Plan for Non-Employee Directors
and its 1994 Stock Incentive Plan (see Note 10). On May 4,
1995, the Board of Directors of the Company authorized a
program under which the Company may repurchase up to 100,000
shares of its common stock in open-market or negotiated
transactions at such times and at such prices as management
may from time to time decide. The Company repurchased 1500
shares of common stock in 1995 and no shares of common stock
in 1996 under the stock repurchase program. On November 7,
1996, the Board of Directors of the Company approved a
three-for-two stock split to be effected in the form of a stock
dividend of one share for every two shares of common stock
outstanding. Cash was paid in lieu of fractional shares. The
split increased the number of shares of common stock issued to
3.4 million. At December 31, 1996 there were 205,299 shares
of common stock being held in treasury and the cost of the
shares is shown as a reduction in stockholders' equity in the
Consolidated Balance Sheets. Per share information has been
restated to reflect the split for all periods presented.
The Company has adopted a Common Share Purchase Rights Plan
which is intended to protect the interests of stockholders in
the event of a hostile attempt to take over the Company. The
Rights, which are not presently exercisable and do not have
any voting powers, represent the right of the Company's
stockholders to purchase at a substantial discount, upon the
occurrence of certain events, shares of common stock of the
Company or of an acquiring company involved in a business
combination with the Company.
7. Retained Earnings
The following is a recap of changes in consolidated retained
earnings for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Balance, beginning of
year 25,525 22,725 20,571
Net income for the year 6,477 5,340 4,690
Cash dividends, $0.80 per
share (2,551) (2,540) (2,536)
Balance, end of year 29,451 25,525 22,725
</TABLE>
8. Revenues From Major Customers
In 1996, approximately $31.9 million (23.5%), $18.8 million
(13.8%) and $16.4 million (12.1%) of the Company's operating
revenues were attributable to three natural gas customers.
In 1995, approximately $20.0 million (24.8%) and $10.0 million
(12.4%) of the Company's operating revenues were attributable
to two natural gas customers.
In 1994, approximately $23.0 million (32.4%) and $8.8 million
(12.4%) of the Company's operating revenues were attributable
to two natural gas customers.
9. Employee Retirement and Benefit Plans
A noncontributory retirement plan is maintained for certain
employees of the Company. The plan provides benefits based on
years of service and other factors. The Company's funding
policy is to make the annual contributions required by
applicable regulations and recommended by its actuary.
Net pension income for 1996, 1995 and 1994 included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Service cost $151 $112 $139
Interest cost 305 287 277
Actual (return) loss
on assets (633) (919) 66
Net amortization and
deferral 168 509 (492)
Net periodic pension
income (9) (11) (10)
</TABLE>
The following schedule sets forth the plan's funded status as
of December 31, 1996 and 1995 and the amounts recognized in
the Company's Consolidated Balance Sheets during those years:
<TABLE>
1996 1995
(In thousands)
<S> <C> <C>
Actuarial present value of
benefit obligation
Vested 3,485 3,353
Nonvested 55 17
Accumulated benefit obligation 3,540 3,370
Projected benefit obligation (4,314) (4,123)
Plan assets at fair value 5,583 5,263
Plan assets in excess of
projected benefit obligation 1,269 1,140
Unrecognized net gain (335) (156)
Unrecognized net assets at
date of initial adoption (498) (558)
Prepaid pension asset 436 426
</TABLE>
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation
shown above was 7.25% in both 1996 and 1995. The rate of
increase in future compensation levels used in determining the
actuarial present value of the projected benefit obligation
shown above was 6% in both 1996 and 1995. The expected
long-term rate of return on assets was 8% in both years. At
December 31, 1996, plan assets were invested approximately 40%
in fixed income securities, 6% in cash and cash equivalents
and 54% in equity securities.
Effective July 1, 1992, the Company adopted a nonqualified
Supplemental Executive Retirement Plan (SERP) which provides
additional pension benefits to certain executive officers of
the Company. Expense recognized in connection with the SERP in
1996, 1995 and 1994 was $78,000, $69,000 and $50,000,
respectively.
The Company also sponsors defined contribution plans for its
employees of certain of its subsidiaries. Each participant
may contribute certain amounts of eligible compensation. The
Company makes a matching contribution to the plans. The
Company's contribution under these plans was $375,000 in 1996,
$245,000 in 1995 and $166,000 in 1994.
The Company also provides certain contributory postretirement
health care and life insurance benefits to full-time employees
of Alabama-Tennessee. The Company's commitment towards the
cost of these postretirement health care benefits in the year
2000 and later is capped based on the levels provided in 1999.
Alabama-Tennessee has established a VEBA trust to fund these
expenses. The expected long-term rate of return on plan
assets was 8.0% as of December 31, 1996, 1995 and 1994. The
investment income of the trust is subject to federal income
tax.
The following schedule presents the plan's funded status
reconciled with amounts recognized in the Company's
consolidated balance sheet as of December 31, 1996 and 1995:
<TABLE>
1996 1995
(In thousands)
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees (263) (365)
Fully eligible active plan
participants (47) (140)
Other active plan
participants (111) (175)
TOTAL (421) (680)
Plan Assets 294 202
Accumulated post retirement
benefit obligation in
excess of plan assets (127) (478)
Unrecognized net(gain)loss (289) 25
Unrecognized transition
obligation 442 470
Accrued postretirement
benefit cost 26 17
</TABLE>
As of December 31, 1996 and 1995, net periodic postretirement
benefit cost included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Service Cost 18 13 15
Interest cost 49 49 44
Actual (return) loss
on plan assets (24) (27) 3
Amortization of
transition obligation
over 20 years 28 28 28
Net amortization and
deferral 9 19 (9)
Net periodic
postretirement benefit
cost 80 82 81
</TABLE>
The assumed rate of increase in the per capita cost of covered
health care benefits for pre-age 65 plan participants is 8.5%
for 1997 and is assumed to decrease gradually to 5.0% by 2004
and then remain level. For post-age 64 participants, the rate
is 8.5% for 1997 and is assumed to decrease gradually to 5.0%
by 2004 and then remain level. Increasing the assumed health
care cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit
obligation as of December 31, 1996 by $300 but would not
impact the aggregate of the service and interest cost
components of net periodic postretirement benefit cost.
The discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at December 31,
1996 and 1995 and 8.5% at December 31, 1994.
10. Stock Option Plan
During 1994, the stockholders of the Company approved the
adoption of the Company's 1994 Key Employee Stock Incentive
Plan (the 1994 Stock Incentive Plan). The 1994 Stock
Incentive Plan provides for the grant to key employees of
incentive and nonqualified options and restricted shares up to
157,500 shares of common stock. The purchase price of the
shares under option must be at least equal to the fair market
value of such shares on the date of grant. The options granted
become exercisable no earlier than six months and one day
after date of grant and expire ten years after date of grant.
The purchase price, if any, to be paid for restricted shares
is fixed by the Compensation Committee of the Board of
Directors of the Company. During 1990, the stockholders of
the Company approved the adoption of the Company's 1990 Stock
Option Plan, which provided for the grant to key employees of
incentive and nonqualified options to purchase shares of
common stock of the Company.
Option transactions, adjusted for the three-for-two stock
split, for the years 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Shares Price Per
Share
<S> <C> <C>
Options outstanding at
December 31, 1993 111,000 $6.75-16.08
Granted in 1994 56,025 $11.67-14.50
Exercised in 1994 0 $9.92-13.33
Options outstanding at
December 31, 1994 167,025 $6.75-16.08
Granted in 1995 66,150 $12.00
Expired in 1995 (2,250) $15.17
Exercised in 1995 (2,700) $6.75-11.67
Options outstanding at
December 31, 1995 228,225 $6.75-16.08
Granted in 1996 32,550 $13.83-17.00
Expired in 1996 (900) $11.67
Exercised in 1996 (31,875) $6.75-17.00
Options outstanding at
December 31, 1996 228,000 $6.75-17.00
</TABLE>
As of December 31, 1996, 101,400 of the above-listed shares
are exercisable and there remained 5,550 shares for which
options may be granted in the future under the 1994 Stock
Incentive Plan.
11. Segment Information
The Company classifies its continuing operations into two
industry segments, which are described in Management's
Discussion and Analysis of Financial Condition and Results of
Operations. Summarized financial information for these
segments is as follows:
<TABLE>
<CAPTION>
SEGMENT
Pipeline
& Energy Medical
Services Products Consolid.
<S> <C> <C> <C>
Revenue
- -1996 114,608 21,369 135,977
- -1995 69,354 11,025 80,379
- -1994 63,445 6,876 70,321
Operating Income
- -1996 6,988 2,363 9,351
- -1995 5,762 2,049 7,811
- -1994 5,899 1,234 7,133
Depr. and Amort.
- -1996 637 796 1,433
- -1995 588 603 1,191
- -1994 567 409 976
Identif. Assets
- -1996 34,447 28,804 63,251
- -1995 32,994 15,512 48,506
- -1994 28,216 15,521 43,737
</TABLE>
12. Quarterly Financial Data (Unaudited)
Quarterly financial data for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Qtr. Oper. Oper. Net Earnings
Ended Revenue Income Income Per Share
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
3/31/96 $41,322 $3,023 $2,099 $0.66
6/30/96 29,589 2,155 1,447 0.46
9/30/96 29,058 2,349 1,759 0.55
12/31/96 36,008 1,824 1,172 0.36
3/31/95 22,474 2,301 1,531 0.48
6/30/95 16,349 1,831 1,261 0.40
9/30/95 18,134 1,862 1,254 0.39
12/31/95 23,422 1,817 1,294 0.41
</TABLE>
13. Subsequent Event (Unaudited)
On March 19, 1997, the Company entered into a definitive
agreement to sell 100% of the common stock of Alabama
Tennessee Natural Gas Company, Inc., AlaTenn Energy Marketing
Company, Inc., and Tennessee River Interstate Gas Company,
Inc. to Midcoast Energy Resources, Inc. These subsidiaries
conduct substantially all of the Company's natural gas
operations. In connection with this sale, the Company will
receive approximately $39.4 million in cash, subject to
certain post-closing adjustments. It is anticipated that the
cash proceeds from this transaction will be used to reduce
long-term debt and fund future acquisitions. A net gain on
the sale of these subsidiaries, estimated at approximately $17
million, will be recognized upon completion of the sale. This
sale is subject to certain conditions, including the receipt
of stockholder approval. Accordingly, the consolidated
financial statements of the Company and the related Notes to
Consolidated Financial Statements have not been adjusted and
restated to reflect the natural gas operations as a
discontinued operation. Summarized unaudited pro forma
results of operations of continuing and discontinued
operations are as follows (in thousands except per share
amounts):
<TABLE>
<CAPTION>
For the year ended Dec.31,
1996 1995 1994
<S> <C> <C> <C>
Income from continuing
operations before
income taxes 1,629 1,191 (222)
Income tax expense
(benefit) 586 426 (80)
Income from continuing
operations 1,044 765 (142)
Earnings (loss)
per share
of common stock from
cont.operations .33 .24 (.04)
Income from discontinued
operations, net of
applicable
income tax expense of
$3,092, $2,605 and
$2,675 in 1996,
1995 and 1994,
respectively 5,433 4,575 4,832
Earnings per share of
common stock from
discontinued
operations 1.70 1.44 1.52
Net income 6,477 5,340 4,690
Net income per share
of common stock 2.03 1.68 1.48
</TABLE>
The pro forma net assets of the natural gas operations are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
As of December 31,
1996 1995
<S> <C> <C>
Current assets 16,123 12,999
Plant and equip.,net 12,715 13,060
Other assets 1,460 1,477
Current liab. (15,091) (10,733)
Other liab. (2,683) (2,986)
Net assets of
discontinued oper. 12,524 13,817
</TABLE>
The pro forma amounts reflect management's estimate of the
summarized results of operations of the Company and the
summarized net assets of its natural gas operations assuming
the transaction described above was completed on December 31,
1996 and the financial statements were adjusted and restated
in accordance with Accounting Principles Board Opinion No. 30
"Reporting the results of operations--reporting the effects of
disposal of a segment of business, and extraordinary, unusual
and infrequent occurring events and transactions". The
amounts above reflect a reallocation of certain corporate
overheads to continuing operations which were previously
allocated to the discontinued operations. The amounts above
do not reflect allocation of any interest expense from the
Company to the discontinued operations.
EXHIBIT INDEX
Exhibit Description
4c Loan Modification Agreement
and Amendment to Loan
Documents dated as of
January 20, 1997 (5)
21 Subsidiaries of Atrion
Corporation as of December 31, 1996
23 Consent of Arthur Andersen & Co.
24 Powers of Attorney
authorizing Jerry A. Howard
and Jeffery Strickland to
sign the Atrion Corporation
Annual Report on Form 10-K
for fiscal year ended
December 31, 1996 on behalf
of certain directors of the
Company
27 Financial Data Schedules
(filed electronically only)
EXHIBIT 4c
LOAN MODIFICATION AGREEMENT AND
AMENDMENT TO LOAN DOCUMENTS
THIS LOAN MODIFICATION AGREEMENT AND AMENDMENT TO LOAN
DOCUMENTS (this "Agreement") is being entered into as of the
20th day of January, 1997, by and between COMPASS BANK, an
Alabama state banking corporation ("Bank") and ALATENN
CREDIT CORP., a corporation (the "Borrower") and ATRION
CORPORATION, a corporation formerly known as "AlaTenn
Resources, Inc." (the "Guarantor").
P R E A M B L E
The Borrower is the maker of a certain $10,000,000.00
Master Revolving Promissory Note (Facility 1) dated as of
January 20, 1995 (as amended, the "Facility 1 Note") and a
certain $10,000,000 Master Revolving Promissory Note
(Facility 2) dated as of January 20, 1995 (as amended, the
"Facility 2 Note", or together with the Facility 1 Note, the
"Notes"), which together evidence a certain $20,000,000.00
loan from the Bank to the Borrower (the "Loan"). The Loan
was extended pursuant to a certain Credit Agreement by and
between the Bank and the Borrower dated as of January 20,
1995 (as amended, the "Credit Agreement"), and is secured
by, among other things, that certain Collateral Assignment
and Pledge of Master Promissory Notes from Borrower to Bank
dated as of January 20, 1995 and is guaranteed by the
Guarantor. The Bank and the Borrower have agreed to renew
and modify the Loan, and to amend the documents and
instruments evidencing, securing, relating to, guaranteeing
or executed or delivered in connection with the Loan
(collectively, as heretofore amended, the "Loan Documents").
A G R E M E N T
NOW, THEREFORE, in consideration of the premises, the
mutual agreements of the parties as set forth herein, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and to induce
Bank to renew and modify the Loan, the parties, intending to
be legally bound hereby, agree as follows:
A. Modification of Loan. The maturity date of the
Loan shall be extended to April 20, 1997.
B. Amendment of Credit Agreement. The Credit
Agreement shall be and the same hereby is amended as
follows:
(i) By revising Section 5.13 thereof to read in its
entirety as follows:
5.13 Liens (Negative Pledge). The
Borrower will not create, incur or
suffer to exist, nor shall Borrower
allow any member of the Group to
create, incur or suffer to exist, any
Lien in, of or upon any of their
Properties except for Permitted Liens
and except for margin stock (as defined
in Regulation U of the Federal Reserve
Board) owned by Borrower or any Group
member.
(ii) By revising Section 5.2 to read in its entirety
as follows:
5.2 Use of Proceeds. The Borrower
will, and will cause each member of the
Group to, use the proceeds of the
Advances only for corporate purposes of
the Group. The Borrower will not, nor
will it permit any member of the Group
to, use any of the proceeds of the
Advances, except for up to
$5,000,000.00 of the proceeds of
Facility 1, to purchase or carry any
"margin stock" (as defined in
Regulation U of the Federal Reserve
Board).
(iii) By adding a new Section 5.2A which
shall read in its entirety as follows:
"5.2A Right of First Refusal. Lender
shall have and is hereby granted a
right of first refusal on any loan or
financial arrangement contemplated by
Borrower or any Group member which
would provide financing secured by any
margin stock (as defined by the Federal
Reserve Board) owned by Borrower or any
Group member or by a Permitted Lien of
the type described in Paragraph (g) of
the definition thereof set forth in
Article I hereof, on the same terms and
conditions as offered by any reputable
financial institution in any bona fide
written commitment delivered to
Borrower; provided, however, that
Lender shall have no obligation to make
any such financing available to
Borrower or any Group member. Borrower
shall notify Lender in writing within
five (5) business days of its receipt
of any such commitment from another
financial institution, accompanied by a
copy of such commitment. Lender shall
within twenty (20) business days of its
receipt of such notice and commitment,
advise Borrower whether Lender will
make financing available to Lender on
the terms and conditions contained in
the commitment. In the event that
Lender fails to reply within such
twenty (20) business day period or, if
before the expiration of such period,
Lender shall notify Borrower of
Lender's election not to make such
financing available, Borrower shall be
entitled to proceed to close such
financing with such other financial
institution; provided, however, that
Borrower's entering into such financing
with such other financial institution
does not otherwise violate any of the
other terms of this Agreement.
(iv) By adding a new Section 5.16A which shall read in
its entirety as follows:
5.16A Funded Debt. The Borrower shall
not, nor will it permit any member of
the Group to, incur or be liable in any
manner for any Indebtedness, obligation
or liability in excess of an aggregate
of $1,000,000.00 to any one or more
financial institutions or other lenders
other than existing Indebtedness
reflected on the financial statements
of the Group as at September 30, 1996,
and the Indebtedness to Bank under
Facility 1 and Facility 2 hereunder and
Indebtedness secured by Permitted Liens
of the types described in paragraphs
(g) and (h) of the definition thereof
set forth in Article I hereof.
(v) By deleting from Section 5.14A the amount
"$27,110,000" and inserting in place thereof the
amount "$29,297,000."
(vi) By deleting from Section 5.14 thereof the amount
"$10,000,000" and inserting in place thereof the
amount "$13,197,000."
(vii) By adding a new Section 5.16B which shall
read in its entirety as follows:
5.16B Minimum Annual Increase in Net
Worth. The Group's Consolidated Net
Worth (as defined under Section 5.14A
above) in each fiscal year, beginning
with fiscal year 1997, shall increase
by $1,000,000 over the Group's
Consolidated Net Worth for the
immediately preceding fiscal year.
(viii) By deleting from Section 2.12 thereof the
words "10 business days" and inserting in
place thereof the words "20 business days."
C. Amendment of Notes. The Notes shall be and the
same hereby are amended by changing the maturity dates
thereof to April 20, 1997.
D. Effect on Loan Documents. Each of the Loan
Documents shall be deemed amended as set forth hereinabove
and to the extent necessary to carry out the intent of this
Agreement. Without limiting the generality of the
foregoing, each reference in the Loan Documents to the
"Notes", the "Credit Agreement", or any other "Loan
Documents" shall be deemed to be references to said docu-
ments, as amended hereby. Except as is expressly set forth
herein, all of the Loan Documents shall remain in full force
and effect in accordance with their respective terms and
shall continue to evidence, secure, guarantee or relate to,
as the case may be, the Loan.
E. Representations and Warranties. Each
representation and warranty contained in the Loan Documents
is hereby reaffirmed as of the date hereof. The Borrower
hereby represents, warrants and certifies to Bank that no
Event of Default nor any condition or event that with notice
or lapse of time or both would constitute an Event of
Default, has occurred and is continuing under any of the
Loan Documents or the Loan, and that Borrower has no offsets
or claims against Bank arising under, related to, or
connected with the Loan, the Credit Agreement or any of the
other Loan Documents.
F. Additional Documentation; Expenses. Borrower
shall provide to Bank a certified resolution of the Borrower
properly authorizing the transactions contemplated hereby
and the execution of this Agreement and all other documents
and instruments being executed in connection herewith and
all other documents and instruments required by Bank, all in
form and substance satisfactory to Bank. Borrower shall pay
any recording and all other expenses incurred by Bank and
Borrower in connection with the modification of the Loan and
any other transactions contemplated hereby, including
without limitation, title or other insurance premiums,
survey costs, legal expenses, recording fees and taxes.
G. Execution by Guarantor. Guarantor has executed
this Agreement to evidence its consent to the modification
and amendments as described herein, and to acknowledge the
continuing effect of its Guaranty and the obligations conta-
ined therein.
IN WITNESS WHEREOF, the undersigned have caused this
instrument to be duly executed as of the date first set
forth above.
BORROWER:
ALATENN CREDIT CORP.
By: /s/ Jerry A. Howard
Jerry A. Howard
Its: President
By: /s/ Jeffery Strickland
Jeffery Strickland
Its: Secretary
GUARANTOR:
ATRION CORPORATION
(f/k/a ALATENN RESOURCES, Inc.)
By: /s/ Jerry A. Howard
Jerry A. Howard
Its: President
BANK:
COMPASS BANK
By: /s/ Robert Broadway
Robert Broadway
Its: Commercial Loan Officer
Exhibit (21)
<TABLE>
Subsidiaries of Atrion Corporation
as of December 31, 1996
<CAPTION>
State of
Subsidiary Incorporation Ownership
<S> <C> <C>
Alabama-Tennessee Natural
Gas Company Alabama 100%
Central Gas Company Alabama 100%
Tennessee River Development
Company Alabama 100%
AlaTenn Energy Marketing
Company Alabama 100%
Tennessee River Intrastate
Gas Company Alabama 100%
AlaTenn Credit Corp. Alabama 100%
AlaTenn Pipeline Company Alabama 100%
Atrion Medical Products Alabama 100%
Halkey-Roberts Corporation Florida 100%
</TABLE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the incorporation of our reports dated February 14, 1997
(except with respect to the matter discussed in Note 13,
as to which the date is March 19, 1997) included in this
Form 10-K into Atrion Corporation's previously filed
Registration Statement (File No. 33-40639).
Atlanta, Georgia
March 27, 1997
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned,
Jerome J. McGrath, who is a director of Atrion Corporation, does
hereby appoint Jerry A. Howard and Jeffery Strickland, or
either of them, to be his true and lawful attorney to
execute in his name (whether on behalf of Atrion
Corporation, or as a director of Atrion Corporation) the
annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on SEC Form 10-K for the
year ended December 31, 1996, any and all amendments to
such Form 10-K, and any and all other instruments and
documents to be filed with the Securities and Exchange
Commission relating to such Form 10-K, and the undersigned
does hereby ratify, confirm and approve all that such
attorney shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name
hereto this 12th day of March, 1997.
/s/ Jerome J. McGrath
Jerome J. McGrath
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned,
J. Kenneth Smith, who is a director of Atrion Corporation, does
hereby appoint Jerry A. Howard and Jeffery Strickland, or
either of them, to be his true and lawful attorney to
execute in his name (whether on behalf of Atrion
Corporation, or as a director of Atrion Corporation) the
annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on SEC Form 10-K for the
year ended December 31, 1994, any and all amendments to
such Form 10-K, and any and all other instruments and
documents to be filed with the Securities and Exchange
Commission relating to such Form 10-K, and the undersigned
does hereby ratify, confirm and approve all that such
attorney shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name
hereto this 18th day of March, 1997.
/s/ J. Kenneth Smith
J. Kenneth Smith
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned,
John P. Stupp, Jr., who is a director of Atrion Corporation,
does hereby appoint Jerry A. Howard and Jeffery
Strickland, or either of them, to be his true and lawful
attorney to execute in his name (whether on behalf of
Atrion Corporation, or as a director of Atrion
Corporation) the annual report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, on SEC Form
10-K for the year ended December 31, 1996, any and all
amendments to such Form 10-K, and any and all other
instruments and documents to be filed with the Securities
and Exchange Commission relating to such Form 10-K, and
the undersigned does hereby ratify, confirm and approve
all that such attorney shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name
hereto this 12th day of March, 1997.
/s/ John P. Stupp, Jr.
John P. Stupp, Jr.
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned,
Hugh Morgan, Jr., who is a director of Atrion Corporation, does
hereby appoint Jerry A. Howard and Jeffery Strickland, or
either of them, to be his true and lawful attorney to
execute in his name (whether on behalf of Atrion
Corporation, or as a director of Atrion Corporation) the
annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on SEC Form 10-K for the
year ended December 31, 1996, any and all amendments to
such Form 10-K, and any and all other instruments and
documents to be filed with the Securities and Exchange
Commission relating to such Form 10-K, and the undersigned
does hereby ratify, confirm and approve all that such
attorney shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name
hereto this 12th day of March, 1997.
/s/ Hugh J. Morgan, Jr.
Hugh J. Morgan, Jr.
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned,
Emile A. Battat, who is a director of Atrion Corporation, does
hereby appoint Jerry A. Howard and Jeffery Strickland, or
either of them, to be his true and lawful attorney to
execute in his name (whether on behalf of Atrion
Corporation, or as a director of Atrion Corporation) the
annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on SEC Form 10-K for the
year ended December 31, 1996, any and all amendments to
such Form 10-K, and any and all other instruments and
documents to be filed with the Securities and Exchange
Commission relating to such Form 10-K, and the undersigned
does hereby ratify, confirm and approve all that such
attorney shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name
hereto this 12th day of March, 1997.
/s/ Emile A. Battat
Emile A. Battat
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned,
Richard O. Jacobson, who is a director of Atrion Corporation,
does hereby appoint Jerry A. Howard and Jeffery
Strickland, or either of them, to be his true and lawful
attorney to execute in his name (whether on behalf of
Atrion Corporation, or as a director of Atrion
Corporation) the annual report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, on SEC Form
10-K for the year ended December 31, 1996, any and all
amendments to such Form 10-K, and any and all other
instruments and documents to be filed with the Securities
and Exchange Commission relating to such Form 10-K, and
the undersigned does hereby ratify, confirm and approve
all that such attorney shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name
hereto this 18th day of March, 1997.
/s/ Richard O. Jacobson
Richard O. Jacobson
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned,
Roger F. Stebbing, who is a director of Atrion Corporation, does
hereby appoint Jerry A. Howard and Jeffery Strickland, or
either of them, to be his true and lawful attorney to
execute in his name (whether on behalf of Atrion
Corporation, or as a director of Atrion Corporation) the
annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on SEC Form 10-K for the
year ended December 31, 1996, any and all amendments to
such Form 10-K, and any and all other instruments and
documents to be filed with the Securities and Exchange
Commission relating to such Form 10-K, and the undersigned
does hereby ratify, confirm and approve all that such
attorney shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name
hereto this 12th day of March, 1997.
/s/ Roger F. Stebbing
Roger F. Stebbing
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned,
John H. P. Maley, who is a director of Atrion Corporation, does
hereby appoint Jerry A. Howard and Jeffery Strickland, or
either of them, to be his true and lawful attorney to
execute in his name (whether on behalf of Atrion
Corporation, or as a director of Atrion Corporation) the
annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on SEC Form 10-K for the
year ended December 31, 1996, any and all amendments to
such Form 10-K, and any and all other instruments and
documents to be filed with the Securities and Exchange
Commission relating to such Form 10-K, and the undersigned
does hereby ratify, confirm and approve all that such
attorney shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name
hereto this 12th day of March, 1997.
/s/ John H. P. Maley
John H. P. Maley
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 144
<SECURITIES> 0
<RECEIVABLES> 19,154
<ALLOWANCES> 0
<INVENTORY> 4,016
<CURRENT-ASSETS> 24,323
<PP&E> 42,344
<DEPRECIATION> 16,935
<TOTAL-ASSETS> 63,251
<CURRENT-LIABILITIES> 18,782
<BONDS> 6,313
0
0
<COMMON> 342
<OTHER-SE> 34,076
<TOTAL-LIABILITY-AND-EQUITY> 63,251
<SALES> 135,977
<TOTAL-REVENUES> 135,977
<CGS> 113,995
<TOTAL-COSTS> 113,995
<OTHER-EXPENSES> 12,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 435
<INCOME-PRETAX> 10,154
<INCOME-TAX> 3,677
<INCOME-CONTINUING> 6,477
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,477
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 2.03
</TABLE>
