Theragenics announces record $18.7M consolidated revenue for fourth-quarter 2009

Theragenics CorporationFeb 11 2010

Theragenics Corporation (NYSE: TGX), a medical device company serving the surgical products and prostate cancer treatment markets, today announced consolidated financial results for the fourth quarter and year ended December 31, 2009. Consolidated results include the results of NeedleTech Products, Inc. (“NeedleTech”) subsequent to its acquisition by Theragenics on July 28, 2008. The terms "Company", "we", "us", or "our" mean Theragenics Corporation and all entities included in our consolidated financial statements.

“We delivered the highest annual revenue in our 29 year history”

Highlights

• Recorded consolidated revenue of $18.7 million in the fourth quarter and $78.3 million for the full year.
• Achieved 17% organic revenue growth in our surgical products business for the fourth quarter and 10% pro forma organic growth for the year, compared to 2008.
• EPS for the quarter was $0.01, compared to a loss of $1.89 per share in 2008. Excluding 2008 impairment charges, EPS was $0.01 in the fourth quarter of 2008.
• EPS for the year was $0.09, compared to a loss of $1.77 per share in 2008. Excluding 2008 impairment charges, EPS was $0.13 for 2008.
• Completed the year with cash and cash equivalent of $45.3 million and outstanding borrowings under our credit agreement of $30.3 million for a net positive cash position of $15.0 million.
• Adjusted EBITDA was $13.1 million and cash flow from operations was $11.6 million for 2009.
• In early 2010, we announced a supply and reseller agreement with Core Oncology for our brachytherapy segment. Core is a recognized leader in the brachytherapy industry. We expect Core to represent at least 10% of our brachytherapy segment revenue in 2010.
• Research and Development (“R&D”) expenses increased $860,000 over 2008. This reflects investments to support future growth in the surgical products segment, a strategic initiative that was launched in late 2008.
• Continued our initiative to update and standardize our information technology (“IT”) systems and infrastructure across all of our businesses.
• Purchased a larger facility for increased capacity in our specialty needle manufacturing. We expect to complete improvements and move to this new facility in 2010.
• Capital expenditures were $5.0 million in 2009, reflecting our investments in manufacturing capacity for our surgical products business and in corporate wide IT.

Consolidated Results

Consolidated revenue for the quarter was $18.7 million, an increase of 3% over fourth quarter 2008. For the year, consolidated revenue was $78.3 million, an increase of 16% over 2008. Our 2009 results include the results of NeedleTech for the entire year. In 2008, NeedleTech results were included subsequent to acquisition in July 2008. On a pro forma basis, as if NeedleTech was included in the pre-acquisition period in 2008, our consolidated revenue increased 1% in 2009 compared to 2008.

Net income for the fourth quarter of 2009 was $398,000 or $0.01 per share compared to a net loss of $62.5 million, or a net loss of $1.89 per share in 2008. In the fourth quarter of 2008 we recorded impairment charges primarily for goodwill of $62.9 million, net of tax. Excluding 2008 impairment charges, net earnings were $401,000 or $0.01 per share in fourth quarter of 2008. For the year ended December 31, 2009, net income was $3.1 million or $0.09 per share compared to a net loss of $58.5 million or a net loss of $1.77 per share in 2008. Excluding 2008 impairment charges, net earnings were $4.3 million or $0.13 per share for the year ended December 31, 2008. We had a number of items (other than the 2008 impairment charges) affecting comparability between the periods, including the following:

• Non-cash charges related to the NeedleTech acquisition of $295,000 in the fourth quarter of 2008 and $885,000 for the year ended December 31, 2008 did not recur in 2009.
• Consolidated R&D expenses, including expenses related to our new R&D group implemented in late 2008, increased by $860,000 in 2009 compared to 2008.
• Interest income in the 2009 periods declined $134,000 in the fourth quarter and $1.0 million for the year, compared to the 2008 periods. This is primarily a result of the significant decline in returns on our investments in cash, cash equivalents and marketable securities.

Segment Results

In 2009 we changed the manner in which we allocate the cost of corporate activities to our business segments. Operating expenses associated with corporate activities are now allocated based on the relative revenue of each business segment. With the continued integration of our acquired companies and the launch of the surgical products R&D program, we believe this method more accurately reflects the utilization of corporate resources. This is also the method we now use internally to review results and allocate resources. Previously, a large portion of expenses associated with corporate activities was charged to the brachytherapy segment. Segment results for the 2008 periods have been restated to reflect this change in the method of allocating corporate expenses. This change had no effect on the consolidated results of operations previously reported for the 2008 periods.

Surgical Products Segment

Revenue in our surgical products segment was $13.5 million in the fourth quarter of 2009, an increase of 17% over 2008. Results from our 2008 acquisition of NeedleTech were included in the full quarterly period for both 2009 and 2008. For the year, revenue in our surgical products segment was $53.7 million in 2009, an increase of 38% over 2008. On a pro forma basis, as if NeedleTech was included in the pre-acquisition period in 2008, our surgical products revenue increased 10% in the year ended December 31, 2009 compared to 2008. Operating income in the surgical products segment for the fourth quarter of 2009 was $158,000, compared to a loss (excluding impairment charges) of $534,000 in 2008. For the year, operating income was $1.7 million in 2009 compared to operating income of $1.2 million (excluding impairment charges) in 2008. Other than the 2008 impairment charges, items that affected comparability of the periods included non-cash charges related to the NeedleTech acquisition totaling $295,000 in the fourth quarter of 2008 and $885,000 for the year ended December 31, 2008. These charges did not recur in 2009. In addition, R&D expenses in our surgical products segment increased by $927,000 in 2009 over 2008. This is primarily a result of the R&D program implemented in our surgical products business late in 2008. Our surgical products segment also absorbed a larger portion of our corporate overhead in the 2009 periods.

Brachytherapy Seed Segment

Revenue in our brachytherapy segment declined 19% in the fourth quarter and 13% for the year compared to 2008. Operating income was $632,000 in the fourth quarter of 2009 compared to $1.6 million in 2008 (excluding impairment charges). For the year ended December 31, 2009, operating income was $4.1 million compared to $5.8 million in 2008 (excluding impairment charges). The decline in revenue in the 2009 periods was partially offset by a decline in operating expenses, including the elimination of carrying costs of the Oak Ridge facility, which was sold in July 2008. Our brachytherapy segment also benefited from absorbing a smaller portion of our corporate overhead in the 2009 periods.

“We delivered the highest annual revenue in our 29 year history,” stated M. Christine Jacobs, Chairman and CEO. “Our surgical products segment achieved 17% organic growth in the fourth quarter and 10% pro forma organic growth for the year. We think this is an exceptional result, especially given the overall economy in which we have been operating. Our brachytherapy business continues to be profitable and deliver positive cash flows, even as we continue to be affected by the industry-wide decline in procedures. We announced our new agreement with Core Oncology in early January. While Core is also affected by the industry slow down in brachytherapy, this agreement provides a new source of revenue for us and a reliable palladium supply for Core.”

Ms. Jacobs concluded, “We achieved record revenues along with solid earnings and operating cash flow in one of the most challenging environments in generations. Our surgical products platform is coming together nicely. We are sharing strengths, producing results and solidifying future prospects. Our brachytherapy business is a pillar of strength in an embattled industry, and we are starting the new year off with new opportunities. Earlier in the year we obtained a new credit agreement in a very difficult credit market. We think our strategy has delivered. In many ways, 2009 has been our best year ever.”