Theragenics reports consolidated revenue of $20.8M for second-quarter 2010

Theragenics CorporationAug 10 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 second quarter ended June 30, 2010. The terms "Company", "we", "us", or "our" mean Theragenics Corporation and all entities included in our consolidated financial statements.

“We delivered 9% organic revenue growth in our surgical products business in the second quarter, and gross margins in this business improved from the first quarter of 2010”

Highlights

• At June 30, 2010 we had cash, cash equivalents and marketable securities of $39.6 million and outstanding borrowings under our credit agreement of $28.7 million for a net positive cash position of $10.9 million.
• In July we announced a new supply and reseller agreement in our brachytherapy business, with Oncura, a unit of GE Healthcare. This follows the new supply and reseller agreement announced earlier this year with Core Oncology.
• Capital expenditures were $4.3 million in the second quarter and $7.0 million during the first half of the year, primarily reflecting our investments in our new specialty needle manufacturing facility and our corporate-wide information technology ("IT") initiative. We expect our rate of capital expenditures to decline in the second half of 2010 as construction on our new needle manufacturing plant was completed in July.
• We began to move into our new specialty needle manufacturing facility late in the second quarter of 2010. Moving related expenses recorded in the second quarter of 2010 totaled $137,000. Additional moving related expenses of $500,000 to $700,000 are expected to be incurred in the third quarter of 2010.
• We continued our initiative to update and standardize our IT systems and infrastructure across all of our businesses. During the first quarter of 2010 we implemented our new Enterprise Resource Planning ("ERP") system at two of our business units. We expect to complete the implementation of the ERP system at our remaining business units over the next year.
• Our legal action to enforce certain non-compete agreements with the former owner of CP Medical and to protect our trade secrets related to that business continued in the second quarter of 2010. Legal costs related to this action totaled $221,000 in the second quarter and $572,000 in the first half of the year.

Consolidated Results

Consolidated revenue for the second quarter was $20.8 million compared to $20.2 million in 2009. For the first half of 2010, consolidated revenue was $41.1 million, compared to $40.3 million in 2009.

Net income for the second quarter was $782,000, or $0.02 per share, compared to $1.3 million or $0.04 per share in 2009. For the first half of 2010, net income was $926,000, or $0.03 per share compared to $1.9 million or $0.06 per share in 2009. The operating results for each of our business segments are discussed below.

Segment Results

Surgical Products Segment

Revenue in our surgical products segment was $14.9 million for the second quarter of 2010 and $29.5 million for the six-month period, representing organic growth of 9% for the quarter and 10% for the first half of the year. Operating income in surgical products was $388,000 in second quarter of 2010, compared to operating income of $804,000 in 2009. For the first half of 2010, we incurred an operating loss of $2,000 compared to operating income of $883,000 in the first half of 2009. Our gross profit margins for 2010 continued to be lower than the 2009 periods although our margins in the second quarter of 2010 improved over our margins in the first quarter. Also affecting our 2010 results as compared to 2009 were the legal fees incurred related to our lawsuit to enforce certain non-compete agreements with the former owner of CP Medical and to protect our trade secrets. Those legal fees totaled $221,000 in the second quarter and $572,000 in the first half of 2010. This action continues to be in the discovery phase.

Brachytherapy Seed Segment

Revenue in our brachytherapy segment declined 9% in second quarter and 13% in the first six months of 2010. Operating income was $1.1 million in the second quarter 2010 compared to $1.4 million in the second quarter 2009 and $2.1 million in the first half of 2010 compared to $2.5 million in 2009.

"We delivered 9% organic revenue growth in our surgical products business in the second quarter, and gross margins in this business improved from the first quarter of 2010," stated M. Christine Jacobs, Chairman and CEO. "Customer behavior continues to be difficult to predict, and we expect the remainder of 2010 to continue to be a challenge. Construction of our new needle manufacturing facility was completed in July. We commenced our move into the new facility in late June and expect the move to be completed during the third quarter. While the expenses related to this move will erode profitability in the third quarter, they are not expected to continue into 2011."

Ms. Jacobs continued, "Our brachytherapy business continued to suffer from an industry wide decline in procedures. Our agreement with Core Oncology, announced in January, has offset some of this decline in 2010. Our new agreement with Oncura, a unit of GE Healthcare, is also expected to contribute to our brachytherapy results going forward. However, we expect our brachytherapy business to continue to experience difficulties from, among other things, reimbursement uncertainties and favorable reimbursement for competing technologies."

Ms. Jacobs concluded, "We have new capacity and capabilities coming on line in our surgical products business. Customer demand and opportunities continue. We expect to continue to make modest investments in our surgical products business to support revenue growth. Our brachytherapy business continues to generate profits and cash flow despite the pressures in that marketplace. We believe longer-term opportunities exist in this industry. Our company's fundamentals remain solid and our long-term outlook remains strong."

Tables I and II to this press release contain condensed consolidated statements of operations and balance sheets. Segment information, including revenue and operating income by segment is summarized in Table III. Table IV includes a reconciliation of GAAP reported net earnings to net earnings before interest, taxes, depreciation, amortization and share-based compensation (Adjusted EBITDA).