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 March 31, 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 April 30, 1996 8,358,588
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AETRIUM INCORPORATED
INDEX
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PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1996 (unaudited) and
December 31, 1995 3-4
Consolidated Statements of Income (unaudited) for the three
months ended March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 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 8-9
PART II. OTHER INFORMATION
Legal Proceedings 10
Changes in Securities 10
Defaults Upon Senior Securities 10
Submission of Matters to a Vote of Security Holders 10
Other Information 10
Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
-------------------- --------------------
(Unaudited) (Audited)
(in thousands, except share data)
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Current Assets:
Cash and cash equivalents $30,119 $35,291
Accounts receivable, net 11,453 10,442
Inventories 10,081 8,661
Deferred tax asset 904 904
Other current assets 253 440
-------------------- --------------------
Total current assets 52,810 55,738
-------------------- --------------------
Property and equipment:
Furniture and fixtures 727 517
Equipment 3,252 2,946
-------------------- --------------------
3,979 3,463
Less accumulated depreciation and
amortization (1,811) (1,865)
-------------------- --------------------
Property and equipment, net 2,168 1,598
Noncurrent deferred tax asset 2,704 2,704
Intangible and other assets, net 1,525 1,560
-------------------- --------------------
Total assets $59,207 $61,600
==================== ====================
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See accompanying notes to the consolidated financial statements.
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AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
1996 1995
-------------------- --------------------
(Unaudited) (Audited)
(in thousands, except share data)
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Current liabilities:
Acquisition related obligation $ 0 $ 7,507
Current portion of long-term debt 0 40
Trade accounts payable 3,218 1,732
Accrued compensation 1,294 996
Accrued commissions 621 831
Accrued taxes, other than income 266 131
Accrued warranty 570 585
Other accrued expenses 628 570
Income taxes payable 1,210 652
-------------------- --------------------
Total current liabilities 7,807 13,044
-------------------- --------------------
Long-term debt, less current portion 0 135
Shareholders' equity:
Common stock, $.001 par value; 16,000,000
shares authorized; 8,328,882 and 8,302,810
shares issued and outstanding, respectively 8 8
Additional paid-in capital 42,941 42,963
Retained earnings 8,451 5,450
-------------------- --------------------
Total shareholders' equity 51,400 48,421
-------------------- --------------------
Total liabilities and shareholders' equity $59,207 $61,600
==================== ====================
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See accompanying notes to the consolidated financial statements.
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AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended March 31,
1996 1995
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(in thousands, except per share data)
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Net sales $17,049 $8,341
Cost of goods sold 7,486 3,576
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Gross profit 9,563 4,765
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Operating expenses:
Selling, general, and administrative 3,498 2,226
Research and development 1,920 1,028
-------------- ----------------
Total operating expenses 5,418 3,254
-------------- ----------------
Income from operations 4,145 1,511
Other income, net 268 78
-------------- ----------------
Income before income taxes 4,413 1,589
Provision for income taxes (1,412) (477)
-------------- ----------------
Net income $3,001 $1,112
============== ================
Net income per common share $.35 $.16
============== ================
Weighted average common and
common equivalent shares
outstanding 8,582 6,990
============== ================
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See accompanying notes to the consolidated financial statements.
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AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1996 1995
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(in thousands)
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Cash flows from operating activities:
Net income $3,001 $1,112
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 316 124
Deferred tax provision 0 103
Changes in assets and liabilities:
Accounts receivable, net (1,011) 769
Inventories (1,420) (588)
Other current assets 187 (1)
Intangible and other assets (1) 0
Trade accounts payable 1,486 494
Accrued compensation 298 (163)
Accrued commissions (210) (226)
Accrued taxes, other than income 135 (63)
Accrued warranty (15) (73)
Other accrued expenses (162) (172)
Income taxes payable 839 141
-------------------- --------------------
Net cash provided by operating activities 3,443 1,457
-------------------- --------------------
Cash flows from investing activities:
Purchase of assets of EJ Systems, Inc, net
of cash acquired (7,287) 0
Purchase of property and equipment (850) (29)
-------------------- --------------------
Net cash used in investing activities (8,137) (29)
-------------------- --------------------
Cash flows from financing activities:
Net proceeds from issuance of common stock 6 34
Repurchase of common stock related to exercise of
stock options (309) (114)
Principal payments on debt (175) 0
-------------------- --------------------
Net cash used in financing activities (478) (80)
-------------------- --------------------
Net increase (decrease) in cash and cash equivalents (5,172) 1,348
Cash and cash equivalents at beginning of period 35,291 9,189
==================== ====================
Cash and cash equivalents at end of period $30,119 $10,537
==================== ====================
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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
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Inventories consist of the following:
March 31, December 31,
1996 1995
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(in thousands)
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Purchased parts and completed subassemblies $ 5,418 $ 4,051
Work in process 3,486 3,181
Finished goods, primarily demonstration equipment 1,177 1,429
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Total $10,081 $ 8,661
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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 the 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
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net Sales. Net sales were $17.0 million for the quarter ended
March 31, 1996, compared with $8.3 million for the comparable
1995 quarter, a 104% increase. Sales increased substantially
across all product lines including IC handling equipment,
Versatus automation modules, and Sienna reliability testing
equipment. In addition, sales for the first quarter of 1996
included the revenues of the EJ Systems product line which was
acquired in December 1995.
Gross Profit. Gross profit was 56.1% of net sales for the
quarter ended March 31, 1996. This compares with 57.1% for the
quarter ended March 31, 1995. Gross profit margins for the
Minnesota and California-based product lines improved in the
quarter ended March 31, 1996 compared with the same quarter in
1995 as a result of increase volume, continued efficiency
improvements and favorable product mix. These margin
improvements were offset by lower margin shipments from the
recently acquired EJ Systems operation in Massachusetts.
Research and Development. Research and development expenses
were $1.9 million for the quarter ended March 31, 1996 compared
with $1.0 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. Research and
development expenses represented 11.3% and 12.3% of net sales
for the quarters ended March 31, 1996 and 1995 respectively.
Over time, the company expects that research and development
spending will generally approximate 12% of net sales.
Selling, General and Administrative. Selling, general and
administrative expenses for the quarter ended March 31, 1996
were $3.5 million compared with $2.2 million for the comparable
quarter in 1995. The increase in 1996 is 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 26.7% to
20.5% for the comparable quarters primarily because fixed
selling, general and administrative expenses were substantially
lower as a percentage of net sales as net sales increased.
Other Income, net. Other income, net, amounted to $268,000 for
the quarter ended March 31, 1996 compared with $78,000 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 March 31, 1996 and 1995 respectively. The
increase in the rate results 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.
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 March 31, 1996 or December
31, 1995.
The company believes its existing cash balances of $30.1
million at March 31, 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
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On January 31, 1996, the company filed a Form 8-K relating
to the purchase of substantially all of the assets of EJ
Systems, Inc. ("EJ Systems"), on January 16, 1996 pursuant
to an Asset Purchase Agreement which was executed on
December 29, 1995. On March 29, 1996, the company filed an
amendment to the Form 8-K on Form 8-K/A that contained (i)
audited historical financial statements of EJ Systems for
the years ended December 31, 1994 and 1993, (ii) unaudited
historical financial statements of EJ Systems for the nine
months ended September 30, 1995, and 1994, and (iii) pro
forma consolidated financial statements as of September 30,
1995, for the year ended December 31, 1994, and for the
nine months ended September 30, 1995.
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: May 13, 1996 By: /s/ Joseph C. Levesque
-----------------------
Joseph C. Levesque
Chairman of the Board, President, and
Chief Executive Officer
Date: May 13, 1996 By: /s/ Darnell L. Boehm
---------------------
Darnell L. Boehm
Chief Financial Officer, Secretary, and
Director
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<PERIOD-END> MAR-31-1996
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