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, 1998
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
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Number of shares of Common Stock, $.001 par value, outstanding
as of May 5, 1998 9,702,812
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AETRIUM INCORPORATED
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1998 (unaudited) and
December 31, 1997 3-4
Consolidated Statements of Income (unaudited) for the three
months ended March 31, 1998 and 1997 5
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 1998 and 1997 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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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------------- --------------------
(Unaudited) (Audited)
(in thousands, except share data)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $27,241 $27,584
Accounts receivable, net 15,816 12,709
Inventories 17,089 16,785
Deferred taxes 784 784
Other current assets 464 615
-------------------- --------------------
Total current assets 61,394 58,477
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Property and equipment:
Furniture and fixtures 1,383 1,351
Equipment 5,917 5,282
-------------------- --------------------
7,300 6,633
Less accumulated depreciation and
amortization (3,309) (2,990)
-------------------- --------------------
Property and equipment, net 3,991 3,643
Noncurrent deferred taxes 4,951 4,951
Intangible and other assets, net 3,736 3,823
-------------------- --------------------
Total assets $74,072 $70,894
==================== ====================
</TABLE>
See accompanying notes to the consolidated financial statements.
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AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------------- --------------------
(Unaudited) (Audited)
(in thousands, except share data)
<S> <C> <C>
Current liabilities:
Trade accounts payable 3,784 $2,611
Accrued compensation and commissions 2,317 2,250
Other accrued expenses 2,218 2,807
Income taxes payable 869 734
-------------------- --------------------
Total current liabilities 9,188 8,402
-------------------- --------------------
Shareholders' equity:
Common stock, $.001 par value; 16,000,000
shares authorized; 8,800,153 and 8,786,740
shares issued and outstanding, respectively 9 9
Additional paid-in capital 46,571 46,562
Retained earnings 18,304 15,921
-------------------- --------------------
Total shareholders' equity 64,884 62,492
-------------------- --------------------
Total liabilities and shareholders' equity $74,072 $70,894
==================== ====================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
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(in thousands, except per share data)
<S> <C> <C>
Net sales $20,481 $11,936
Cost of goods sold 10,198 5,818
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Gross profit 10,283 6,118
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Operating expenses:
Selling, general, and administrative 4,330 2,866
Research and development 2,949 1,978
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Total operating expenses 7,279 4,844
---------------------- -----------------
Income from operations 3,004 1,274
Other income, net 305 312
---------------------- -----------------
Income before income taxes 3,309 1,586
Provision for income taxes (926) (476)
---------------------- -----------------
Net income $2,383 $1,110
====================== =================
Net income per common share:
Basic $.27 $.13
Diluted $.27 $.13
Weighted average common shares outstanding:
Basic 8,791 8,460
Diluted 8,955 8,673
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
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(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $2,383 $1,110
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 406 208
Changes in assets and liabilities:
Accounts receivable, net (3,107) (1,913)
Inventories (304) (145)
Other current assets 151 (43)
Trade accounts payable 1,173 1,532
Accrued compensation and commissions 67 (70)
Other accrued expenses (89) (29)
Income taxes payable 268 157
-------------------- ---------------------
Net cash provided by operating activities 948 807
-------------------- ---------------------
Cash flows from investing activities:
Purchase of property and equipment (667) (92)
Purchase of technology (500) 0
-------------------- ---------------------
Net cash used in investing activities (1,167) (92)
-------------------- ---------------------
Cash flows from financing activities:
Net proceeds from issuance of common stock 220 151
Repurchase of common stock related to exercise of
stock options (344) (115)
-------------------- ---------------------
Net cash generated by (used in) financing activities (124) 36
-------------------- ---------------------
Net increase (decrease) in cash and cash equivalents (343) 751
Cash and cash equivalents at beginning of period 27,584 34,756
-------------------- ---------------------
Cash and cash equivalents at end of period $27,241 $35,507
==================== =====================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
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, 1997.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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(in thousands)
<S> <C> <C>
Purchased parts and completed subassemblies $9,168 $ 9,307
Work in process 5,354 5,488
Finished goods, primarily demonstration equipment 2,567 1,990
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Total $17,089 $16,785
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</TABLE>
3. NET INCOME PER COMMON SHARE
Basic net income per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period.
Diluted net income per share is computed by dividing net income by the
weighted-average number of common shares and common stock equivalent
shares outstanding during the period. Common stock equivalents include
stock options and warrants using the treasury stock method.
4. SUBSEQUENT EVENT
On April 1, 1998, the company acquired substantially all of the assets
and assumed certain liabilities of the Equipment Division of
privately-held WEB Technology, Inc. The Equipment Division's products
include a variety of equipment used in the semiconductor industry,
including burn-in board loaders/unloaders, acceleration test equipment,
gross leak detection equipment, and automation modules which are supplied
to other equipment manufacturers. The purchase price included $7.8
million in cash and 900,000 shares of the company's common stock valued
at approximately $15.3 million.
<PAGE>
AETRIUM INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES. Net sales were $20.5 million for the quarter ended
March 31, 1998, compared with $11.9 million for the comparable
1997 quarter, a 72% increase. Sales of test handlers, IC
automation modules, and spare parts increased significantly as
a result of improved industry conditions in early 1998 compared
with early 1997. Sales of pick and place test handlers were
particularly strong with significant sales gains at the No. St.
Paul and San Diego divisions. In addition, 1998 results include
the sales of Forward Systems Automation (FSA) ( acquired in
April 1997), and the Advantek Handler Division (acquired in
October 1997), both of which produce primarily pick and place
test handlers.
GROSS PROFIT. Gross profit was 50.2% of net sales for the
quarter ended March 31, 1998. This compares with 51.3% for the
quarter ended March 31, 1997. The decrease in the gross margin
is primarily attributable to the inclusion of results from the
recently acquired Advantek Handler Division and the significant
increase in the sales mix at the No. St. Paul and San Diego
divisions to 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 improved
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, 1998
were $4.3 million compared with $2.9 million for the comparable
quarter in 1997, a 51% increase. The increase in 1998 is
attributable to higher commissions expense on significantly
increased net sales as well as the inclusion of the results of
FSA and the Advantek Handler Division.
RESEARCH AND DEVELOPMENT. Research and development expenses
were $2.9 million for the quarter ended March 31, 1998 compared
with $2.0 million for the comparable period in 1997, a 49%
increase. The increase is attributable to the inclusion of the
results of FSA and the Advantek Handler Division in 1998.
Research and development expenses represented 14.4% and 16.6%
of net sales for the quarters ended March 31, 1998 and 1997
respectively. Over time, the company expects that research and
development expenses will average 13% to 15% of net sales.
OTHER INCOME, NET. Other income, net, which consists primarily
of interest income from the investment of excess funds,
amounted to $305,000 for the quarter ended March 31, 1998 which
was comparable to the $312,000 for the same period in 1997.
INCOME TAX EXPENSE. Income tax expense was provided for at an
effective rate of 28.0% for the quarter ended March 31, 1998
which was comparable to the rate used for fiscal year 1997
excluding the impact of non-recurring acquisition-related
charges. The effective tax rate compares 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.
<PAGE>
AETRIUM INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
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, 1998 or December
31, 1997.
The company had cash and cash equivalents of approximately
$27.2 million at March 31, 1998. On April 1, 1998 the company
disbursed approximately $7.3 million in connection with the
acquisition of the Equipment Division business of WEB
Technology, Inc. An additional $500,000 is expected to be paid
by June 30, 1998 subject to any post-closing adjustments to the
purchase price. The company believes its remaining cash
balances of approximately $19 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,
1997.
<PAGE>
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) Exh 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
None.
<PAGE>
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 12, 1998 By: /s/ Joseph C. Levesque
-----------------------
Joseph C. Levesque
Chairman of the Board, President, and
Chief Executive Officer
Date: May 12, 1998 By: /s/ Darnell L. Boehm
---------------
Darnell L. Boehm
Chief Financial Officer, Secretary, and
Director
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 27,241
<SECURITIES> 0
<RECEIVABLES> 15,816
<ALLOWANCES> 0
<INVENTORY> 17,089
<CURRENT-ASSETS> 61,394
<PP&E> 7,300
<DEPRECIATION> 3,309
<TOTAL-ASSETS> 74,072
<CURRENT-LIABILITIES> 9,188
<BONDS> 0
0
9
<COMMON> 0
<OTHER-SE> 64,875
<TOTAL-LIABILITY-AND-EQUITY> 74,072
<SALES> 20,481
<TOTAL-REVENUES> 20,481
<CGS> 10,198
<TOTAL-COSTS> 10,198
<OTHER-EXPENSES> 2,949
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,309
<INCOME-TAX> 926
<INCOME-CONTINUING> 2,383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,383
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
