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, 1997
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, 1997 8,476,579
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AETRIUM INCORPORATED
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1997 (unaudited) and
December 31, 1996 3-4
Consolidated Statements of Income (unaudited) for the three
months ended March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 1997 and 1996 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
AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1997 1996
-------- --------
(Unaudited) (Audited)
(in thousands, except share data)
Current Assets:
Cash and cash equivalents $ 35,507 $ 34,756
Short term investments 1,028 1,028
Accounts receivable, net 9,945 8,032
Inventories 10,477 10,332
Deferred taxes 1,009 1,009
Other current assets 398 355
-------- --------
Total current assets 58,364 55,512
-------- --------
Property and equipment:
Furniture and fixtures 852 852
Equipment 3,775 3,683
-------- --------
4,627 4,535
Less accumulated depreciation and
amortization (2,447) (2,276)
-------- --------
Property and equipment, net 2,180 2,259
Noncurrent deferred taxes 2,519 2,519
Intangible and other assets, net 1,391 1,428
-------- --------
Total assets $ 64,454 $ 61,718
======== ========
See accompanying notes to the consolidated financial statements.
AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
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<CAPTION>
March 31, December 31,
1997 1996
------- -------
(Unaudited) (Audited)
(in thousands, except share data)
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Current liabilities:
Trade accounts payable 2,573 1,041
Accrued compensation and commissions 1,445 1,515
Other accrued expenses 1,153 1,182
Income taxes payable 56 0
------- -------
Total current liabilities 5,227 3,738
------- -------
Shareholders' equity:
Common stock, $.001 par value; 16,000,000
shares authorized; 8,471,904 and 8,449,420
shares issued and outstanding, respectively 8 8
Additional paid-in capital 43,417 43,280
Retained earnings 15,802 14,692
------- -------
Total shareholders' equity 59,227 57,980
------- -------
Total liabilities and shareholders' equity $64,454 $61,718
======= =======
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See accompanying notes to the consolidated financial statements.
AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended March 31,
1997 1996
-------- --------
(in thousands, except per share data)
Net sales $ 11,936 $ 17,049
Cost of goods sold 5,818 7,486
-------- --------
Gross profit 6,118 9,563
-------- --------
Operating expenses:
Selling, general, and administrative 2,866 3,498
Research and development 1,978 1,920
-------- --------
Total operating expenses 4,844 5,418
-------- --------
Income from operations 1,274 4,145
Other income, net 312 268
-------- --------
Income before income taxes 1,586 4,413
Provision for income taxes (476) (1,412)
-------- --------
Net income $ 1,110 $ 3,001
======== ========
Net income per common share $ .13 $ .35
======== ========
Weighted average common and
common equivalent shares
outstanding 8,673 8,582
======== ========
See accompanying notes to the consolidated financial statements.
AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three months ended March 31,
1997 1996
-------- --------
(in thousands)
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Cash flows from operating activities:
Net income $ 1,110 $ 3,001
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 208 316
Changes in assets and liabilities:
Accounts receivable, net (1,913) (1,011)
Inventories (145) (1,420)
Other current assets (43) 187
Intangible and other assets 0 (1)
Trade accounts payable 1,532 1,486
Accrued compensation and commissions (70) 88
Other accrued expenses (29) (42)
Income taxes payable 157 839
-------- --------
Net cash provided by operating activities 807 3,443
-------- --------
Cash flows from investing activities:
Payment of acquisition related indebtedness 0 (7,287)
Purchase of property and equipment (92) (850)
-------- --------
Net cash used in investing activities (92) (8,137)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock 151 6
Repurchase of common stock related to exercise of
stock options (115) (309)
Principal payments on debt 0 (175)
-------- --------
Net cash generated by (used in) financing activities 36 (478)
-------- --------
Net increase (decrease) in cash and cash equivalents 751 (5,172)
Cash and cash equivalents at beginning of period 34,756 35,291
======== ========
Cash and cash equivalents at end of period $ 35,507 $ 30,119
======== ========
</TABLE>
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-K for the year ended December
31, 1996.
2. INVENTORIES
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Inventories consist of the following:
March 31, December 31,
1997 1996
------- -------
(in thousands)
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Purchased parts and completed subassemblies $ 6,947 $ 7,330
Work in process 1,967 2,105
Finished goods, primarily demonstration equipment 1,563 897
------- -------
Total $10,477 $10,332
======= =======
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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 - RELATED INDEBTEDNESS
Effective December 29, 1995, the company acquired substantially all of
the assets and assumed certain liabilities of EJ Systems, Inc., a
manufacturer of environmental test products. The purchase price included
$7,287,323 of cash which was paid in January 1996.
5. SUBSEQUENT EVENT
On April 1, 1997, the company acquired substantially all of the assets
and assumed certain liabilities of Forward Systems Automation Inc., a
manufacturer of equipment for the semiconductor and electronic component
industries. The purchase price included $4 million in cash and 186,000
shares of Aetrium common stock valued at approximately $2.5 million.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NET SALES. Net sales were $11.9 million for the quarter ended
March 31, 1997, compared with $17.0 million for the comparable
1996 quarter, a 30% decrease. Sales of test handlers,
reliability test equipment, and spare parts decreased
substantially due to a general slowdown in the semiconductor
industry. These decreases were offset somewhat by increasing
sales of automation modules and environmental test equipment.
GROSS PROFIT. Gross profit was 51.3% of net sales for the
quarter ended March 31, 1997. This compares with 56.1% for the
quarter ended March 31, 1996. Gross profit margins for test
handlers, which represent a substantial portion of the
consolidated revenues, declined in the quarter ended March 31,
1997 compared with the same quarter in 1996, due to lower
volume and a shift in product mix to relatively more
pick-and-place test handlers, which tend to have lower margins
than gravity-feed test handlers. The decline in test handler
margins was partially offset by improving margins for
environmental test products manufactured at the Lawrence
Division.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses for the quarter ended March 31, 1997
were $2.9 million compared with $3.5 million for the comparable
quarter in 1996. The decrease in 1997 expense is primarily
attributable to lower commissions expense due to lower revenue
levels.
RESEARCH AND DEVELOPMENT. Research and development expenses
were $2.0 million for the quarter ended March 31, 1997 or
slightly higher than the $1.9 million for the comparable period
in 1996. Research and development expenses represented 16.6%
and 11.3% of net sales for the quarters ended March 31, 1997
and 1996 respectively. The increase in 1997 reflects continued
funding of development activities at 1996 levels despite the
lower revenue levels.
OTHER INCOME, NET. Other income, net, amounted to $312,000 for
the quarter ended March 31, 1997 compared with $268,000 for the
comparable quarter in 1996. The increase is attributable to
increased interest income earned on higher invested cash
balances.
INCOME TAX EXPENSE. Income tax expense was provided for at an
effective rate of 30.0% and 32.0% of pretax income for the
quarters ended March 31, 1997 and 1996 respectively. The
decrease in the rate results from the reinstatement of the
federal research tax credit in mid-1996. 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 research tax credits as well as
the implementation of various tax planning strategies,
including the investment of excess funds in tax exempt
instruments.
FINANCIAL CONDITION, 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, 1997 or December
31, 1996.
On April 1, 1997 the company disbursed $4.0 million in
connection with the acquisition of the business of Forward
Systems Automation Inc. The company believes its remaining cash
and short term investments of approximately $32.5 million,
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.
FINANCIAL CONDITION, BUSINESS RISKS AND UNCERTAINTIES
A number of risks and uncertainties exist which could impact
the company's future operating results. These uncertainties
include, but are not limited to, general economic conditions,
competition, changes in rates of capital spending by
semiconductor manufacturers, the company's success in
developing new products and technologies, market acceptance of
new products, risks and unanticipated costs associated with
integrating acquired businesses, and other factors, including
those set forth in the company's SEC filings, including its
current report on Form 10-K for the year ended December 31,
1996.
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) 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: May 9, 1997 By: /s/ Joseph C. Levesque
-----------------------
Joseph C. Levesque
Chairman of the Board, President, and
Chief Executive Officer
Date: May 9, 1997 By: /s/ Darnell L. Boehm
---------------------
Darnell L. Boehm
Chief Financial Officer, Secretary, and
Director
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