Atrion Reports Third Quarter Results Diluted EPS Increased by 20% ALLEN, Texas--(BUSINESS WIRE)

Atrion Reports Third Quarter Results

Diluted EPS Increased by 20%

ALLEN, Texas--(BUSINESS WIRE)--Nov. 6, 2006--Atrion Corporation

(Nasdaq/NM:ATRI) announced today that for the third quarter of 2006

diluted earnings per share were up 20% compared to the results of the

third quarter of 2005. Revenues in the third quarter increased by 5%

from the same prior-year period.

Commenting on the Company's results, Emile A. Battat, Chairman and

CEO, said, "We are very pleased that the efforts of the last two years

to plan, construct, and relocate our Florida operations were

successfully accomplished. We are gratified that the three-month

staged transition of our manufacturing operations was completed as

planned. We are delighted with our new world-class facility, and look

forward to taking advantage of the opportunities to enhance quality,

increase efficiency, automate assembly processes, and expand

Mr. Battat added, "During the third quarter we expensed the cost

of the move and certain equipment and supplies relating to the move.

In addition, beginning in September we began depreciating the new

facility, and expensing the related interest and higher utility costs.

These charges and expenses, the majority of which were one-time items,

adversely impacted our pretax income from continuing operations by

approximately $400,000. Including these expenses, our pretax income

for the quarter was essentially unchanged compared with that of the

same period last year. Without these expenses, our pretax income from

continuing operations for the quarter would have been 14% higher than

in the same period last year. We anticipate that higher charges for

depreciation, property tax and utilities associated with our new

facility will add about $1.0 million to operating expenses annually as

compared to operating costs, including rent, at the old facility. In

addition, our interest expense over at least the next four quarters

will be higher than in the comparable quarters in the one-year period

ended September 30, 2006 as a result of increased borrowings under our

line of credit to partially fund the cost of the new facility. By the

end of next year, we anticipate that growth in income from increased

revenues will more than make up for these additional costs, leading to

significant contributions to the bottom line in 2008 and subsequent

Comparing other results for the third quarter of 2006 to the third

quarter of 2005, Mr. Battat added, "Revenues from fluid delivery and

cardiovascular products, which represent a growing majority of our

total sales, were up 15%. On the other hand, revenues from ophthalmic

products were down 14% reflecting the slow recovery experienced by

certain customers in the sale of their specific products and related

kitting business. We anticipate that revenues from this line of

products will return to normal levels in the fourth quarter of this

year." Mr. Battat further stated that: "a recent review of our R&D tax

credits for 2005 and prior-year tax returns showed that we were

entitled to higher credits than we had claimed. Primarily as a result

of this adjustment, our tax rate for the quarter fell to 14% from 28%

in the third quarter of 2005. Assuming that Congress extends the

provisions for R&D tax credits, our tax rate for the fourth quarter is

anticipated to approximate 26% compared to 29% in the same period last

Atrion's revenues for the quarter ended September 30, 2006 were

$19,290,000 compared with $18,338,000 for the same period in 2005. On

a diluted per share basis, net income for the period increased to

$1.38 as compared to $1.15 in the same quarter of last year.

Revenues for the first nine months of 2006 increased 8% to

$59,641,000 from $55,085,000 for the same period in 2005. Net income

for the first nine months of 2006 was $3.99 per diluted share versus

$3.56 in 2005, a 12% increase, with gains from discontinued operations

of $.08 per share in 2006 and $.09 in 2005.

Atrion Corporation designs, develops, manufactures, sells and

distributes products and components primarily to medical markets

The statements in this press release that are forward-looking are

based upon current expectations and actual results or future events

may differ materially. Such statements include, but are not limited

to, Atrion's expectations regarding the increase in annual operating

expenses, the increase in interest expense, increased revenues in the

future, growth in income from increased revenues offsetting additional

cost from the new facility and leading to significant contributions to

net income in 2008 and subsequent years, revenues from ophthalmic

products returning to normal levels in the fourth quarter of 2006 and

the Company's tax rate for the fourth quarter of 2006. Words such as

"expects," "believes," "anticipates," "intends," "will," and "should"

and variations of such words and similar expressions are intended to

identify such forward-looking statements. These statements involve

risks and uncertainties. The following are some of the factors that

could cause actual results or future events to differ materially from

those expressed in or underlying our forward-looking statements:

changing economic, market and business conditions; acts of war or

terrorism; the effects of governmental regulation; competition and new

technologies; slower-than-anticipated introduction of new products or

implementation of marketing strategies; the Company's ability to

protect its intellectual property; changes in the prices of raw

materials; changes in product mix; and intellectual property and

product liability claims and product recalls. The foregoing list of

factors is not exclusive, and other factors are set forth in the

Company's filings with the SEC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

Three Months Ended Nine Months Ended

September 30, September 30,

------------------- -----------------

---------- -------- -------- --------

Revenues $19,290 $18,338 $59,641 $55,085

Cost of goods sold 11,803 11,377 36,033 33,297

---------- -------- -------- --------

Gross profit 7,487 6,961 23,608 21,788

Operating expenses 4,301 3,850 13,244 12,127

---------- -------- -------- --------

Operating income 3,186 3,111 10,364 9,661