UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File No. 000-22166
AETRIUM INCORPORATED
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1439182
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
2350 HELEN STREET, NO. ST. PAUL, MINNESOTA 55109
(Address of principal executive offices) (Zip Code)
(612) 770-2000
(Registrant's telephone number)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 ___
Number of shares of Common Stock, $.001 par value, outstanding
as of July 31, 1996 8,368,504
---------
AETRIUM INCORPORATED
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1996 (unaudited) and
December 31, 1995 3-4
Consolidated Statements of Income (unaudited) for the three
months and six months ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows (unaudited) for the six
months ended June 30, 1996 and 1995 6
Notes to unaudited consolidated financial statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-10
PART II. OTHER INFORMATION
Legal Proceedings 11
Changes in Securities 11
Defaults Upon Senior Securities 11
Submission of Matters to a Vote of Security Holders 11
Other Information 11
Exhibits and Reports on Form 8-K 11
SIGNATURES 12
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995
-------- --------
(Unaudited) (Audited)
(in thousands, except share data)
Current Assets:
Cash and cash equivalents $ 30,631 $ 35,291
Accounts receivable, net 10,444 10,442
Inventories 11,600 8,661
Deferred tax asset 904 904
Other current assets 157 440
-------- --------
Total current assets 53,736 55,738
-------- --------
Property and equipment:
Furniture and fixtures 858 517
Equipment 3,410 2,946
-------- --------
4,268 3,463
Less accumulated depreciation and
amortization (1,987) (1,865)
-------- --------
Property and equipment, net 2,281 1,598
-------- --------
Noncurrent deferred tax asset 2,704 2,704
Intangible and other assets, net 1,485 1,560
-------- --------
Total assets $ 60,206 $ 61,600
======== ========
See accompanying notes to the consolidated financial statements.
AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
1996 1995
------- -------
(Unaudited) (Audited)
(in thousands, except share data)
Current liabilities:
Acquisition related obligation $ 0 $ 7,507
Current portion of long-term debt 0 40
Trade accounts payable 2,163 1,732
Accrued compensation 1,311 996
Accrued commissions 479 831
Accrued taxes, other than income 147 131
Accrued warranty 600 585
Other accrued expenses 539 570
Income taxes payable 313 652
------- -------
Total current liabilities 5,552 13,044
------- -------
Long-term debt, less current portion 0 135
Shareholders' equity:
Common stock, $.001 par value; 16,000,000
shares authorized; 8,368,504 and 8,302,810
shares issued and outstanding, respectively 8 8
Additional paid-in capital 42,992 42,963
Retained earnings 11,654 5,450
------- -------
Total shareholders' equity 54,654 48,421
------- -------
Total liabilities and shareholders' equity $60,206 $61,600
======= =======
See accompanying notes to the consolidated financial statements.
AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 17,271 $ 10,665 $ 34,320 $ 19,006
Cost of goods sold 7,454 4,459 14,940 8,035
-------- -------- -------- --------
Gross profit 9,817 6,206 19,380 10,971
-------- -------- -------- --------
Operating expenses:
Selling, general, and administrative 3,435 3,056 6,933 5,282
Research and development 1,931 1,075 3,851 2,103
-------- -------- -------- --------
Total operating expenses 5,366 4,131 10,784 7,385
-------- -------- -------- --------
Income from operations 4,451 2,075 8,596 3,586
Other income, net 261 79 529 157
-------- -------- -------- --------
Income before income taxes 4,712 2,154 9,125 3,743
Provision for income taxes (1,509) (646) (2,921) (1,123)
-------- -------- -------- --------
Net income $ 3,203 $ 1,508 $ 6,204 $ 2,620
======== ======== ======== ========
Net income per common share $ .37 $ .21 $ .72 $ .37
======== ======== ======== ========
Weighted average common and
common equivalent shares
outstanding 8,622 7,152 8,602 7,071
======== ======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
1996 1995
-------- --------
(in thousands)
Cash flows from operating activities:
Net income $ 6,204 $ 2,620
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 529 427
Deferred tax provision 0 258
Changes in assets and liabilities:
Accounts receivable, net (2) (695)
Inventories (2,939) (1,035)
Other current assets 283 (115)
Intangible and other assets 2 50
Trade accounts payable 431 552
Accrued compensation 315 (24)
Accrued commissions (352) 99
Accrued taxes, other than income 16 9
Accrued warranty 15 (108)
Other accrued expenses (251) (220)
Income taxes payable 288 243
-------- --------
Net cash provided by operating activities 4,539 2,061
-------- --------
Cash flows from investing activities:
Purchase of assets of EJ Systems, Inc, net
of cash acquired (7,287) 0
Purchase of property and equipment (1,139) (105)
-------- --------
Net cash used in investing activities (8,426) (105)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock 50 183
Repurchase of common stock related to exercise of
stock options (648) (268)
Principal payments on debt (175) 0
-------- --------
Net cash used in financing activities (773) (85)
-------- --------
Net increase (decrease) in cash and cash equivalents (4,660) 1,871
Cash and cash equivalents at beginning of period 35,291 9,189
======== ========
Cash and cash equivalents at end of period $ 30,631 $ 11,060
======== ========
See accompanying notes to the consolidated financial statements.
AETRIUM INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL REPORTING
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments necessary to present fairly
the financial position, results of operations, and changes in cash flows
for the interim periods presented.
Certain footnote information has been condensed or omitted from these
financial statements. Therefore, these financial statements should be
read in conjunction with the consolidated financial statements and
accompanying footnotes included in Form 10-KSB for the year ended
December 31, 1995.
2. INVENTORIES
Inventories consist of the following:
June 30, December 31,
1996 1995
------- -------
(in thousands)
Purchased parts and completed subassemblies $ 6,430 $ 4,051
Work in process 3,673 3,181
Finished goods, primarily demonstration equipment 1,497 1,429
------- -------
Total $11,600 $ 8,661
======= =======
3. NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income by the
weighted average number of shares of common stock and common stock
equivalent shares outstanding during each period. Common stock
equivalents include stock options and warrants using the treasury stock
method.
4. ACQUISITION
On January 16, 1996 pursuant to an Asset Purchase Agreement dated
December 29, 1995, the company completed the acquisition of substantially
all of the assets of EJ Systems, Inc., a manufacturer of burn-in test
equipment. The purchase price totaled $7,507,323 including $7,287,323 of
cash and $220,000 of acquisition related costs.
AETRIUM INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
NET SALES. Net sales were $34.3 million for the six months ended
June 30, 1996 compared with $19.0 million for the comparable
period in 1995, an 81% increase. Equipment revenues increased
substantially across all product lines, including test handlers,
Versatus automation modules and reliability/burn-in test systems.
GROSS PROFIT. Gross profit margins as a percentage of sales for
the Minnesota and California-based business units increased in the
six months ended June 30, 1996 compared with the same period in
1995 due to price increases, continued efficiency improvements and
a favorable product mix. These margin improvements were offset by
lower margin shipments from the EJ Systems operation (acquired in
December 1995), resulting in a gross profit of 56.5% of net sales
for the six months ended June 30, 1996 compared with 57.7% for the
six months ended June 30, 1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses were $6.9 million for the six months ended
June 30, 1996 compared with $5.3 million for the comparable period
in 1995. The increase in 1996 is primarily attributable to
expenses associated with the recently acquired EJ Systems
business, increased expenses related to additional sales/service
personnel and commissions to support the substantially increased
revenue level, and higher incentive compensation based on overall
company performance. As a percentage of net sales, these expenses
decreased from 27.8% to 20.2% for the six month periods in 1995
and 1996 respectively, primarily because fixed selling, general
and administrative expenses were lower as a percentage of net
sales as net sales increased.
RESEARCH AND DEVELOPMENT. Research and development expenses for
the six months ended June 30, 1996 were $3.9 million compared with
$2.1 million for the six months ended June 30, 1995, an increase
of 83%. This increase is attributable to the inclusion of EJ
operations in Massachusetts in 1996 and increased development
activity at both the Minnesota and California locations. These
expenses represented 11.2% of net sales for the six month period
ended June 30, 1996 compared with 11.1% of net sales for the same
period in 1995. Over time, the Company expects that development
spending will generally approximate 12% of net sales.
OTHER INCOME, NET. Other income, net, amounted to $529,000 for the
six months ended June 30, 1996 compared with $157,000 for the
comparable period in 1995. The increase is attributable to
increased interest income earned on higher invested cash balances
resulting from the proceeds of a stock offering completed in
November 1995.
INCOME TAX EXPENSE. Income tax expense was provided for at an
effective rate of 32.0% and 30.0% of pretax income for the six
months ended June 30, 1996 and 1995 respectively. The increase in
the rate results primarily from the expiration of the federal
research and development tax credit in 1995. The effective tax
rates compare favorably with the Federal and state statutory rates
primarily due to benefits associated with the company's Foreign
Sales Corporation and the implementation of various tax planning
strategies, including the investment of excess funds in tax exempt
instruments.
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
NET SALES. Net sales were $17.3 million for the quarter ended June
30, 1996 compared with $10.7 million for the comparable 1995
quarter, a 62% increase. Sales of test handlers, Versatus
automation modules and reliability/burn-in test equipment
increased substantially.
GROSS PROFIT. Gross profit was 56.8% of net sales for the quarter
ended June 30, 1996. This compares with 58.2% for the quarter
ended June 30, 1995. Gross profit margins for the California and
Minnesota-based product lines improved in the quarter ended June
30, 1996 compared with the same quarter in 1995 as a result of
increased volume, continued efficiency improvements and favorable
product mix. These margin improvements were offset by lower margin
shipments from the EJ Systems operation acquired in December 1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses for the quarter ended June 30, 1996 were
$3.4 million compared with $3.1 million for the comparable quarter
in 1995. The increase in 1996 is primarily attributable to
expenses associated with the recently acquired EJ Systems business
and increased commission expense related to the higher revenue
level.
RESEARCH AND DEVELOPMENT. Research and development expenses were
$1.9 million for the quarter ended June 30, 1996 compared with
$1.1 million for the comparable period in 1995. The increase is
attributable to the inclusion of the EJ Systems operation in 1996
and increased development activity at both the Minnesota and
California facilities.
OTHER INCOME, NET. Other income, net, amounted to $261,000 for the
quarter ended June 30, 1996 compared with $79,000 for the
comparable quarter in 1995. The increase is attributable to
increased interest income earned on higher invested cash balances
resulting from the proceeds of a stock offering completed in
November 1995.
INCOME TAX EXPENSE. Income tax expense was provided for at an
effective rate of 32.0% and 30.0% of pretax income for the quarter
ended June 30, 1996 and 1995 respectively. As indicated above, the
higher tax rate in 1996 is attributable to the expiration of the
federal research and development credit in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The company has a $5.0 million line of credit agreement with
Harris Trust and Savings Bank in Chicago, Illinois. Borrowings
under this agreement are secured by receivables, inventories and
general intangibles. Borrowing is limited to a percentage of
eligible receivables and inventories. There were no line of credit
advances outstanding as of June 30, 1996 or December 31, 1995.
The company believes its existing cash balances of $30.6 million
at June 30, 1996 funds generated from operations and borrowings
available under its credit facility will be sufficient to meet
capital expenditure and working capital needs for at least 24
months. The company may acquire other companies, product lines or
technologies that are complementary to the company's business, and
the company's working capital needs may change as a result of such
acquisitions.
AETRIUM INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None which the company believes will have a material
adverse impact on its financial condition or results of
operations.
Item 2. Changes in Securities
None.
Item 3. Defaults on Senior Securities
None.
Item 4. Submissions of Matters to a Vote of Security Holders
On May 14, 1996 the Company held it's Annual Shareholder
Meeting at which the following matters were voted upon.
1. The shareholders elected the following individuals to
serve as members of the Board of Directors:
Votes For Votes Withheld
Joseph C. Levesque 7,285,396 99,871
Darnell L. Boehm 7,285,396 99,871
Terrence W. Glarner 7,285,396 99,871
Andrew J. Greenshields 7,285,296 99,971
Douglas L. Hemer 7,284,225 101,042
2. The shareholders also approved certain amendments to the
Company's 1993 Stock Incentive Plan.
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld
<S> <C> <C> <C>
Amendments to 1993
Stock Incentive Plan 4,161,374 991,642 2,232,251
</TABLE>
Withheld votes include 2,167,358 broker nonvotes.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exh 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
None.
AETRIUM INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AETRIUM INCORPORATED
(Registrant)
Date: August 13, 1996 By: /s/ Joseph C. Levesque
Joseph C. Levesque
Chairman of the Board, President,
and Chief Executive Officer
Date: August 13, 1996 By: /s/ Darnell L. Boehm
Darnell L. Boehm
Chief Financial Officer,
Secretary, and Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 30,631
<SECURITIES> 0
<RECEIVABLES> 10,444
<ALLOWANCES> 0
<INVENTORY> 11,600
<CURRENT-ASSETS> 53,736
<PP&E> 4,268
<DEPRECIATION> 1,987
<TOTAL-ASSETS> 60,206
<CURRENT-LIABILITIES> 5,552
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 54,646
<TOTAL-LIABILITY-AND-EQUITY> 60,206
<SALES> 34,320
<TOTAL-REVENUES> 34,320
<CGS> 14,940
<TOTAL-COSTS> 14,940
<OTHER-EXPENSES> 3,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,125
<INCOME-TAX> 2,921
<INCOME-CONTINUING> 6,204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,204
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
