form10q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

x
Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended June 30, 2008
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from    to

Commission File Number 0-10763

Atrion Corporation
(Exact Name of Registrant as Specified in its Charter)

Delaware
 
63-0821819
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)

One Allentown Parkway, Allen, Texas  75002
(Address of Principal Executive Offices)   (Zip Code)

(972) 390-9800
(Registrant’s Telephone Number, Including Area Code)

Indicate by check 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.               x Yes                 o No

Indicate by check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “accelerated filer.” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
 
Large accelerated filer  o Accelerated filer  x Non-accelerated filer  o Smaller reporting company  o
 
Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
         o   Yes                          x   No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 
Title of Each Class
 
Number of Shares Outstanding at
July 30, 2008
Common stock, Par Value $0.10 per share
 
1,967,285
 


 
 

 

ATRION CORPORATION AND SUBSIDIARIES


TABLE OF CONTENTS


2
     
Item 1.
 
     
 
3
     
 
4
     
 
5
     
 
6
     
Item 2.
8
     
Item 3.
12
     
Item 4.
13
     
PART II.   Other Information
14
     
Item 1.
14
     
Item 1A.
14
     
Item 4.
14
     
Item 6.
14
     
15

1


PART I


FINANCIAL INFORMATION

2


Item 1.  Financial Statements

ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 

   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2008
   
2007
   
2008
   
2007
 
   
(in thousands, except per share amounts)
 
Revenues
  $ 24,242     $ 23,199     $ 48,844     $ 46,237  
Cost of goods sold
    13,137       12,880       27,059       26,258  
Gross profit
    11,105       10,319       21,785       19,979  
                                 
Operating expenses:
                               
Selling
    1,646       1,672       3,345       3,323  
General and administrative
    2,505       2,471       5,245       5,088  
Research and development
    823       750       1,610       1,405  
      4,974       4,893       10,200       9,816  
Operating income
    6,131       5,426       11,585       10,163  
                                 
Other income:
                               
Interest income
    49       10       85       20  
Interest expense
    --       (77 )     --       (218 )
Other income (expense), net
    1       --       1       --  
      50       (67 )     86       (198 )
Income before provision for income taxes
    6,181       5,359       11,671       9,965  
Provision for income taxes
    (2,046 )     (1,741 )     (3,880 )     (3,210 )
                                 
Net income
  $ 4,135     $ 3,618     $ 7,791     $ 6,755  
                                 
Income per basic share
  $ 2.11     $ 1.92     $ 4.00     $ 3.60  
Weighted average basic shares outstanding
    1,956       1,883       1,946       1,878  
                                 
Income per diluted share
  $ 2.06     $ 1.83     $ 3.89     $ 3.42  
Weighted average diluted shares outstanding
    2,005       1,978       2,004       1,977  
                                 
Dividends per common share
  $ 0.24     $ 0.20     $ 0.48     $ 0.40  
 
The accompanying notes are an integral part of these statements.
 
 
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
   
June 30,
   
December 31,
 
Assets
 
2008
   
2007
 
   
(in thousands, except per share amounts)
 
Current assets:
           
Cash and cash equivalents
  $ 7,803     $ 3,531  
Accounts receivable
    12,116       9,601  
Inventories
    20,231       17,387  
Prepaid expenses
    1,167       1,483  
Other
    607       607  
      41,924       32,609  
                 
                 
Property, plant and equipment
    92,819       89,736  
Less accumulated depreciation and amortization
    38,187       35,686  
      54,632       54,050  
                 
Other assets and deferred charges:
               
Patents
    1,853       2,011  
Goodwill
    9,730       9,730  
Other
    1,102       913  
      12,685       12,654  
                 
    $ 109,241     $ 99,313  
                 
                 
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable and accrued liabilities
  $ 6,473     $ 6,349  
Accrued income and other taxes
    1,862       515  
      8,335       6,864  
                 
Line of credit
    --       --  
                 
Other non-current liabilities
    7,150       7,007  
                 
Stockholders’ equity:
               
Common shares, par value $0.10 per share; authorized 10,000 shares, issued 3,420 shares
   
342
     
342
 
Paid-in capital
    18,674       15,790  
Accumulated other comprehensive loss
    (486 )     (486 )
Retained earnings
    110,865       104,021  
Treasury shares,1,453 at June 30, 2008 and 1,509 at December 31, 2007, at cost
   
(35,639
)     (34,225 )
Total stockholders’ equity
    93,756       85,442  
                 
                 
    $ 109,241     $ 99,313  
 
The accompanying notes are an integral part of these financial statements.
 
 
ATRION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
   
Six months Ended
June 30,
 
   
2008
   
2007
 
 
  (In thousands)  
Cash flows from operating activities:
           
Net income
  $ 7,791     $ 6,755  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    3,054       2,637  
Deferred income taxes
    242       333  
Stock-based compensation
    327       131  
Other
    37       35  
      11,451       9,891  
                 
Changes in operating assets and liabilities:
               
Accounts receivable
    (2,515 )     (1,026 )
Inventories
    (2,844 )     140  
Prepaid expenses
    316       303  
Other non-current assets
    (189 )     (35 )
Accounts payable and current liabilities
    125       294  
Accrued income and other taxes
    1,347       572  
Other non-current liabilities
    (98 )     118  
      7,593       10,257  
                 
Cash flows from investing activities:
               
Property, plant and equipment additions
    (3,515 )     (3,758 )
                 
Cash flows from financing activities:
               
Line of credit advances
    --       13,826  
Line of credit repayments
    --       (20,525 )
Exercise of stock options
    525       499  
Shares tendered for employees’ taxes on stock option exercises
    (870 )     (47 )
Tax benefit related to stock options
    1,481       456  
Dividends paid
    (942 )     (756 )
      194       (6,547 )
                 
Net change in cash and cash equivalents
    4,272       (48 )
Cash and cash equivalents at beginning of period
    3,531       333  
Cash and cash equivalents at end of period
  $ 7,803     $ 285  
                 
                 
Cash paid for:
               
Interest (net of capitalization)
  $ --     $ 258  
Income taxes
  $ 261     $ 1,220  

The accompanying notes are an integral part of these financial statements.
 
  ATRION CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (Unaudited)


(1)
Basis of Presentation
In the opinion of management, all adjustments necessary for a fair presentation of results of operations for the periods presented have been included in the accompanying unaudited consolidated financial statements of Atrion Corporation and its subsidiaries (the “Company”). Such adjustments consist of normal recurring items. The accompanying financial statements have been prepared in accordance with the instructions to Form 10-Q and include the information and notes required by such instructions. Accordingly, the consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the Company’s 2007 Annual Report on Form 10-K.


(2)
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by using the first-in, first-out method. The following table details the major components of inventories (in thousands):

   
June 30,
2008
   
December 31,
2007
 
Raw materials
  $ 8,384     $ 7,452  
Work in process
    5,378       4,513  
Finished goods
    6,469       5,422  
Total inventories
  $ 20,231     $ 17,387  

(3)
Income per share
The following is the computation for basic and diluted income per share:

(1)
 
Three months ended
June 30,
   
Six months ended
June 30,
 
(2)
 
2008
   
2007
   
2008
   
2007
 
(3)
 
(in thousands, except per share amounts)
 
Net income
  $ 4,135     $ 3,618     $ 7,791     $ 6,755  
                                 
Weighted average basic shares outstanding
    1,956       1,883       1,946       1,878  
Add:  Effect of dilutive securities
    49       95       58       99  
Weighted average diluted shares outstanding
    2,005       1,978       2,004       1,977  
                                 
Earnings per share:
                               
Basic
  $ 2.11     $ 1.92     $ 4.00     $ 3.60  
Diluted
  $ 2.06     $ 1.83     $ 3.89     $ 3.42  

Outstanding options, restricted stock, and deferred stock units that were not included in the diluted income per share calculation because their effect would be anti-dilutive totaled 20,336 for the three-month and the six-month periods ended June 30, 2008, respectively, and none for the same periods in 2007.

6


ATRION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(4)
Pension Benefits
The components of net periodic pension cost for the Atrion Corporation Cash Balance Plan (the “Plan”) are as follows (in thousands):

   
Three Months ended
June 30,
   
Six Months ended
June 30,
 
   
2008
   
2007
   
2008
   
2007
 
Service cost
  $ --     $ 65     $ --     $ 130  
Interest cost
    56       80       112       160  
Expected return on assets
    (55 )     (123 )     (110 )     (246 )
Prior service cost amortization
    --       (9 )     --       (18 )
Actuarial loss
    8       15       16       30  
                                 
Net periodic pension cost
  $ 9     $ 28     $ 18     $ 56  

In September 2007, the Company terminated the Plan. Participants accrued pension benefits through December 31, 2007, but will not accrue any additional benefits under the Plan after that date. However, participants will continue to earn interest credits on their account balances until the Plan has settled all its obligations with respect to termination. The Company believes that the Plan is adequately funded to cover its settlement obligations. The final payout for the Plan termination will likely occur in early 2009 after all regulatory approvals are received.

(5)
Recent Accounting Pronouncements

In May 2008, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 162, “The Hierarchy of Generally Accepted Accounting Principles (GAAP)” (SFAS 162). The purpose of the new standard is to provide a consistent framework for determining what accounting principles should be used when preparing U.S. GAAP financial statements. Previous guidance did not properly rank the accounting literature. The new standard is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company expects that the adoption of SFAS 162 will not have a material effect on the Company’s financial statements.

From time to time, new accounting pronouncements applicable to the Company are issued by the FASB or other standards setting bodies, which the Company will adopt as of the specified effective date. Unless otherwise discussed, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.

7


Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company designs, develops, manufactures, sells and distributes products and components, primarily for the medical and healthcare industry. The Company markets components to other equipment manufacturers for incorporation in their products and sells finished devices to physicians, hospitals, clinics and other treatment centers. The Company’s medical products primarily serve the fluid delivery, cardiovascular, and ophthalmology markets. The Company’s other medical and non-medical products include instrumentation and disposables used in dialysis, contract manufacturing and valves and inflation devices used in marine and aviation safety products.
 
The Company's products are used in a wide variety of applications by numerous customers. The Company encounters competition in all of its markets and competes primarily on the basis of product quality, price, engineering, customer service and delivery time.
 
The Company's strategy is to provide a broad selection of products in the areas of its expertise. Research and development efforts are focused on improving current products and developing highly-engineered products that meet customer needs and have the potential for broad market applications and significant sales. Proposed new products may be subject to regulatory clearance or approval prior to commercialization and the time period for introducing a new product to the marketplace can be unpredictable. The Company also focuses on controlling costs by investing in modern manufacturing technologies and controlling purchasing processes. The Company has been successful in consistently generating cash from operations and has used that cash to reduce indebtedness, to fund capital expenditures, to repurchase stock and to pay dividends.
 
The Company's strategic objective is to further enhance its position in its served markets by:
 
 
·
Focusing on customer needs;
 
·
Expanding existing product lines and developing new products;
 
·
Maintaining a culture of controlling cost; and
 
·
Preserving and fostering a collaborative, entrepreneurial management structure.

For the three months ended June 30, 2008, the Company reported revenues of $24.2 million, operating income of $6.1 million and net income of $4.1 million, up 4 percent, 13 percent and 14 percent, respectively, from the three months ended June 30, 2007. For the six months ended June 30, 2008, the Company reported revenues of $48.8 million, operating income of $11.6 million and net income of $7.8 million, up 6 percent, 14 percent and 15 percent, respectively, from the six months ended June 30, 2007.


Results for the three months ended June 30, 2008

Consolidated net income totaled $4.1 million, or $2.11 per basic and $2.06 per diluted share, in the second quarter of 2008. This is compared with consolidated net income of $3.6 million, or $1.92 per basic and $1.83 per diluted share, in the second quarter of 2007. The income per basic share computations are based on weighted average basic shares outstanding of 1,955,749 in the 2008 period and 1,883,120 in the 2007 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 2,004,924 in the 2008 period and 1,977,871 in the 2007 period.

8


Consolidated revenues of $24.2 million for the second quarter of 2008 were 4 percent higher than revenues of $23.2 million for the second quarter of 2007. These increases were generally attributable to higher sales volumes.

Revenues by product line were as follows (in thousands):

   
Three Months ended
June 30,
 
   
2008
   
2007
 
             
Fluid Delivery
  $ 8,648     $ 7,533  
Cardiovascular
    7,116       6,009  
Ophthalmology
    3,588       4,863  
Other
    4,890       4,794  
Total
  $ 24,242     $ 23,199  

Cost of goods sold of $13.1 million for the second quarter of 2008 was 2 percent higher than in the comparable 2007 period. Increased sales volume and increased manufacturing overhead costs were the primary contributors to the increase in cost of goods sold for the second quarter of 2008.

Gross profit of $11.1 million in the second quarter of 2008 was $786,000, or 8 percent, higher than in the comparable 2007 period. The Company’s gross profit percentage in the second quarter of 2008 was 45.8 percent of revenues compared with 44.5 percent of revenues in the second quarter of 2007. The increase in gross profit percentage in the 2008 period compared to the 2007 period was primarily related to improved product mix and improved manufacturing efficiencies.

The Company’s second quarter 2008 operating expenses of $5.0 million were $81,000 higher than the operating expenses for the second quarter of 2007. This increase was comprised of a $34,000 increase in General and Administrative (G&A) expenses and a $73,000 increase in Research and Development (R&D) expenses partially offset by a $26,000 decrease in selling (Selling) expenses. The increase in G&A expenses for the second quarter of 2008 was principally attributable to increased compensation and benefit costs, and outside services. The increase in R&D costs was primarily related to prototype expenses, new product testing costs and increased compensation partially offset by decreased outside services. The decrease in Selling expenses for the second quarter of 2008 was primarily related to decreased promotion and advertising expenses. Operating income in the second quarter of 2008 increased $705,000, to $6.1 million, a 13 percent increase over operating income in the quarter ended June 30, 2007. Operating income was 25.3 percent of revenues in the second quarter of 2008 compared to 23.4 percent of revenues in the second quarter of 2007. The previously mentioned increase in gross profit partially offset by the increase in operating expenses were the major contributors to the operating income improvement in the second quarter of 2008.

9


The Company had no interest expense for the second quarter of 2008 due to the retirement of outstanding debt in the third quarter of 2007. Interest expense was $77,000 for the 2007 period and was attributable to borrowings related to a new Company facility. Income tax expense for the second quarter of 2008 was $2.0 million compared to income tax expense of $1.7 million for the same period in the prior year. The effective tax rate for the second quarter of 2008 was 33.1 percent compared with 32.5 percent for the second quarter of 2007. The higher effective income tax rate for the second quarter of 2008 is primarily a result of benefits from tax incentives for R&D expenditures being a smaller percentage of taxable income in 2008 than in 2007.


Results for the six months ended June 30, 2008

Consolidated net income totaled $7.8 million, or $4.00 per basic and $3.89 per diluted share, in the first six months of 2008. This is compared with consolidated net income of $6.8 million, or $3.60 per basic and $3.42 per diluted share, in the first six months of 2007. The income per basic share computations are based on weighted average basic shares outstanding of 1,946,258 in the 2008 period and 1,877,763 in the 2007 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 2,004,006 in the 2008 period and 1,976,502 in the 2007 period.

Consolidated revenues of $48.8 million for the first six months of 2008 were 6 percent higher than revenues of $46.2 million for the first six months of 2007. These increases were generally attributable to higher sales volumes.

Revenues by product line were as follows (in thousands):

   
Six Months ended
June 30,
 
   
2008
   
2007
 
             
Fluid Delivery
  $ 16,896     $ 14,747  
Cardiovascular
    14,584       12,061  
Ophthalmology
    7,368       9,517  
Other
    9,996       9,912  
Total
  $ 48,844     $ 46,237  

Cost of goods sold of $27.1 million for the first six months of 2008 was 3 percent higher than in the comparable 2007 period. Increased sales volume and increased manufacturing overhead costs were the primary contributors to the increase in cost of goods sold for the first six months of 2008.

Gross profit of $21.8 million in the first six months of 2008 was $1.8 million, or 9 percent, higher than in the comparable 2007 period. The Company’s gross profit percentage in the first six months of 2008 was 44.6 percent of revenues compared with 43.2 percent of revenues in the first six months of 2007. The increase in gross profit percentage in the 2008 period compared to the 2007 period was primarily related to improved product mix and improved manufacturing efficiencies.

10


The Company’s first six months 2008 operating expenses of $10.2 million were $384,000 higher than the operating expenses for the first six months of 2007. This increase was comprised of a $22,000 increase in Selling expenses, a $157,000 increase in G&A expenses and a $205,000 increase in R&D expenses. The increase in Selling expenses for the first six months of 2008 was primarily related to travel-related expenses. The increase in G&A expenses for the first six months of 2008 was principally attributable to increased compensation and benefits costs. The increase in R&D costs was primarily related to prototype expenses, new product testing costs and increased compensation and outside services. Operating income in the first six months of 2008 increased $1.4 million to $11.6 million, a 14 percent increase over operating income in the six months ended June 30, 2007. Operating income was 23.7 percent of revenues in the first six months of 2008 compared to 22.0 percent of revenues in the first six months of 2007. The previously mentioned increase in gross profit partially offset by the increase in operating expenses were the major contributors to the operating income improvement in the first six months of 2008.

The Company had no interest expense for the first six months of 2008 due to the retirement of outstanding debt in the third quarter of 2007. Interest expense was $218,000 for the 2007 period and was attributable to borrowings related to a new Company facility. Income tax expense for the first six months of 2008 was $3.9 million compared to income tax expense of $3.2 million for the same period in the prior year. The effective tax rate for the first six months of 2008 was 33.2 percent compared with 32.2 percent for the first six months of 2007. The higher effective income tax rate for the first six months of 2008 is primarily a result of benefits from tax incentives for R&D expenditures being a smaller percentage of taxable income in 2008 than in 2007.

Liquidity and Capital Resources
At June 30, 2008, the Company had cash and cash equivalents of $7.8 million compared with $3.5 million at December 31, 2007. The Company had no outstanding borrowings under its $25.0 million revolving credit facility (“Credit Facility”) at June 30, 2008 and December 31, 2007. The Credit Facility, which expires November 12, 2009, and may be extended under certain circumstances, contains various restrictive covenants, none of which is expected to impact the Company’s liquidity or capital resources. At June 30, 2008, the Company was in compliance with all financial covenants.

As of June 30, 2008, the Company had working capital of $33.6 million, including $7.8 million in cash and cash equivalents. The $7.8 million increase in working capital during the first six months of 2008 was primarily related to increases in cash, accounts receivable, and inventories partially offset by increases in accrued income and other taxes. The increase in accounts receivable during the first six months of 2008 was primarily related to the increase in revenues for the second quarter of 2008 as compared to the fourth quarter of 2007. The change in inventories is related to increased stocking levels necessary to support current operations. In addition, the Company began a program to purchase critical raw material in large volumes to hedge against future price increases and take advantage of volume discounts. The increase in accrued income and other taxes is primarily related to federal income taxes and local property taxes. Cash flows from operating activities generated $7.6 million for the six months ended June 30, 2008 as compared to $10.3 million for the six months ended June 30, 2007. The 2008 decrease was primarily attributable to increased inventory and accounts receivable as compared to the 2007 period. During the first six months of 2008, the Company expended $3.5 million for the addition of property and equipment. During the first six months of 2008, stock option activities generated $1.1 million of cash and the Company paid dividends of $942,000.

11


The Company believes that its existing cash and cash equivalents, cash flows from operations, borrowings available under the Company’s credit facility, supplemented, if necessary, with equity or debt financing, which the Company believes would be available, will be sufficient to fund the Company’s cash requirements for the foreseeable future.

Forward-Looking Statements
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 would be achieved. Such statements include, but are not limited to, the Company’s expectations regarding future liquidity and capital resources. Words such as “anticipates,” “believes,” “expects,” “estimated” and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements contained herein involve numerous risks and uncertainties, and there are a number of factors that could cause actual results or future events to differ materially, including, but not limited to, the following: changing economic, market and business conditions; acts of war or terrorism; the effects of governmental regulation; the impact of competition and new technologies; slower-than-anticipated introduction of new products or implementation of marketing strategies; implementation of new manufacturing processes or implementation of new information systems; the Company’s ability to protect its intellectual property; changes in the prices of raw materials; changes in product mix; intellectual property and product  liability claims and product recalls; the ability to attract and retain qualified personnel; and the loss of, or any material reduction in sales to, any significant customers. In addition, assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic review which may cause the Company to alter its marketing, capital expenditures or other budgets, which in turn may affect the Company’s results of operations and financial condition.

Quantitative and Qualitative Disclosures About Market Risk

For the quarter ended June 30, 2008, the Company did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in the Company’s 2007 Annual Report on Form 10-K.

12


Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and its Chief Financial Officer, evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2008. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective. There were no changes in the Company’s internal control over financial reporting for the quarter ended June 30, 2008 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

13


PART II

OTHER INFORMATION

Legal Proceedings

From time to time, the Company may be involved in claims or litigation that arise in the normal course of business. The Company is not currently a party to any legal proceedings, which, if decided adversely, would have a material adverse effect on the Company’s business, financial condition, or results of operations.

Risk Factors

There were no material changes to Risk Factors disclosed in our annual report on Form 10-K for the year ended December 31, 2007.

Submission of Matters to a Vote of Security Holders

The Company held its 2008 Annual Meeting of Stockholders on May 9, 2008 at its offices in Allen, Texas. At such meeting, the Company’s stockholders ratified the appointment of Grant Thornton LLP as independent accountants with 1,753,436 shares voted for ratification, 6,790 voted against, 15,197 abstentions and zero broker non-votes. The voting with respect to the nominees for election as directors was as follows:

Nominee
Votes For
Votes Withheld
Emile A. Battat
1,716,449
58,975
Ronald N. Spaulding
1,366,343
409,081

The terms of the following directors continued after the meeting: Roger F. Stebbing, John P. Stupp, Jr., and Hugh J. Morgan, Jr.

Exhibits and Reports on Form 8-K

(a)
Exhibits
     
 
2006 Equity Incentive Plan (As last amended on May 9, 2008)
     
 
Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer
     
 
Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer
     
 
Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002
     
 
Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002
     
(b)
Reports on Form 8-K

On May 8, 2008, the Company filed a report on Form 8-K with the SEC regarding the public dissemination of a press release announcing its financial results for the first quarter ended March 31, 2008 (Item 12).

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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.


Atrion Corporation
(Registrant)


Date:  August 8, 2008
/s/ Emile A. Battat
 
Emile A. Battat
 
Chairman and
 
Chief Executive Officer
   
   
Date:  August 8, 2008
/s/ Jeffery Strickland
 
Jeffery Strickland
 
Vice President and
 
Chief Financial Officer
 

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