Theragenics Corp. (TGX, Financial) filed Quarterly Report for the period ended 2009-04-05.
Theragenics Corporation a medical isotope and cancer treatment producer is a leader in the production and sales of implantable radiation devices used in the treatment of cancer. The company produces and sells TheraSeed based on the radioactive isotope palladium 103. TheraSeed is used primarily in the treatment of early stage prostate cancer. In the treatment TheraSeeds are implanted into the prostate in a one-time minimally invasive procedure. Theragenics Corp. has a market cap of $37.8 million; its shares were traded at around $1.13 with a P/E ratio of 10.3 and P/S ratio of 0.6.
Operating income in our surgical products segment included the results of NeedleTech subsequent to our acquisition on July 28, 2008. Accordingly, NeedleTech was included in our first quarter of 2009 results but not in the first quarter of 2008. Gross margins in our surgical products segment were 39% in 2009 compared to 47% in 2008. In the first quarter of 2009 gross margins were affected by higher than normal rework and scrap rates and by sales channel and product mix. Selling, general, and administrative (“SG&A”) expenses in our surgical products segment was 27% of revenue in 2009 compared to 31% in 2008. We gained efficiencies from the larger scale of the surgical business. This was partially offset by higher professional fees in the 2009 period mainly related to the goodwill impairment issues that were addressed early in 2009. We also incurred expenses in 2009 related to our program to standardize the information technology (“IT”) systems across all of our businesses and locations. Research and development (“R&D”) expenses increased $483,000 over 2008. We implemented a new R&D program in our surgical products business in the second half of 2008. This R&D program is intended to focus on product extensions, next generation products, and new products that are complementary to our current product lines. We expect to continue to invest in infrastructure and R&D during 2009, as investments are made to support anticipated future growth and to develop products to address growth opportunities in our surgical products business. Looking forward, our quarterly results are expected to be affected by the timing of these investments. In addition, prior to December 31, 2008, we estimated that our tradenames intangible assets had indeterminate lives and, accordingly, were not subject to amortization. At December 31, 2008, we determined that current facts and circumstances no longer supported an indefinite life for our tradenames intangible asset. We estimated that the remaining useful life of the recorded amount of our tradenames was 10 years and accordingly, we began to amortize tradenames over 10 years beginning in 2009. Amortization expense was $81,000 in the first quarter of 2009 and is expected to be $324,000 for the year ending December 31, 2009. Periods prior to this change will not be restated or retrospectively adjusted.
Interest expense decreased to $129,000 in the first quarter of 2009 from $146,000 in 2008. This decline was a result of lower interest rates on the outstanding borrowings under our credit facility. The 2008 period also included interest accretion from the contract termination liability associated with our Oak Ridge building. That building was sold in July 2008 and the related contract termination liability was eliminated. Interest on outstanding borrowings under our credit agreement is payable at LIBOR plus 1%, which had an effective rate of 1.5% at April 5, 2009. The effective rate at the end of the first quarter in 2008 was 4.1%. If interest rates had not declined, our interest expense would have been significantly higher in 2009 due to an additional $24.5 million of borrowings under our credit facility for the NeedleTech acquisition. Future levels of interest expense will be dependent on the level of outstanding borrowings and on changes in the underlying LIBOR rate. Such changes are impossible for us to predict, especially in the current economic environment. To date we have not hedged the interest costs related to our credit facility. We may hedge our interest rate risk in the future, depending on, among other things, the intermediate and long-term outlook for interest rates and the risks and costs associated with hedging such items.
We have a Credit Agreement with a financial institution that provides for revolving borrowings of up to $40.0 million, including a $5.0 million sub-limit for letters of credit. $32.0 million of borrowings was outstanding under the Credit Agreement as of April 5, 2009. Interest is payable quarterly at LIBOR plus 1% (effective rate of 1.5% at April 5, 2009). Letters of credit totaling $876,000, representing decommission funding required by the Georgia Department of Natural Resources, were outstanding under the Credit Agreement as of April 5, 2009. The Credit Agreement is unsecured, but provides for a lien to be established on substantially all of our assets (subject to certain exceptions) in the event certain events of default occur under the Credit Agreement. The Credit Agreement, as amended, contains representations and warranties, as well as affirmative, reporting and negative covenants, customary for financings of this type. Among other things, certain provisions of the Credit Agreement limit the incurrence of additional debt and require the maintenance of certain financial ratios. In addition, the Credit Agreement requires us to maintain $20 million of liquid assets, as defined in the credit facility. We were in compliance with these covenants as of April 5, 2009. Our Credit Agreement expires on October 31, 2009. See Credit Agreement below for more information.
Cash provided by operations was $1.3 million and $2.1 million during the first quarter of 2009 and 2008, respectively. Cash provided by operations consists of net earnings plus non-cash expenses such as depreciation, amortization, deferred income taxes and changes in balance sheet items such as accounts receivable, inventories, prepaid expenses and payables. The reduction in cash provided from operations in 2009 as compared to 2008 is primarily due to lower net earnings.
During 2008 we sold our Oak Ridge facility and generated an income tax loss. In the second quarter of 2009, the use of this income tax loss allowed us to recover $1.5 million of income taxes previously paid during 2008. The use of this loss also allowed us to reduce income taxes payable in the first quarter of 2009 by $515,000. At the end of the first quarter of 2009, remaining tax losses from the sale of our Oak Ri
Read the The complete Report
Theragenics Corporation a medical isotope and cancer treatment producer is a leader in the production and sales of implantable radiation devices used in the treatment of cancer. The company produces and sells TheraSeed based on the radioactive isotope palladium 103. TheraSeed is used primarily in the treatment of early stage prostate cancer. In the treatment TheraSeeds are implanted into the prostate in a one-time minimally invasive procedure. Theragenics Corp. has a market cap of $37.8 million; its shares were traded at around $1.13 with a P/E ratio of 10.3 and P/S ratio of 0.6.
Highlight of Business Operations:
We acquired all of the outstanding common stock of NeedleTech on July 28, 2008. The total purchase price, including transaction costs, was approximately $44.1 million (net of cash, cash equivalents, and marketable securities acquired of approximately $5.8 million). We paid the purchase price in cash, including $24.5 million from borrowings under our $40 million credit facility.Operating income in our surgical products segment included the results of NeedleTech subsequent to our acquisition on July 28, 2008. Accordingly, NeedleTech was included in our first quarter of 2009 results but not in the first quarter of 2008. Gross margins in our surgical products segment were 39% in 2009 compared to 47% in 2008. In the first quarter of 2009 gross margins were affected by higher than normal rework and scrap rates and by sales channel and product mix. Selling, general, and administrative (“SG&A”) expenses in our surgical products segment was 27% of revenue in 2009 compared to 31% in 2008. We gained efficiencies from the larger scale of the surgical business. This was partially offset by higher professional fees in the 2009 period mainly related to the goodwill impairment issues that were addressed early in 2009. We also incurred expenses in 2009 related to our program to standardize the information technology (“IT”) systems across all of our businesses and locations. Research and development (“R&D”) expenses increased $483,000 over 2008. We implemented a new R&D program in our surgical products business in the second half of 2008. This R&D program is intended to focus on product extensions, next generation products, and new products that are complementary to our current product lines. We expect to continue to invest in infrastructure and R&D during 2009, as investments are made to support anticipated future growth and to develop products to address growth opportunities in our surgical products business. Looking forward, our quarterly results are expected to be affected by the timing of these investments. In addition, prior to December 31, 2008, we estimated that our tradenames intangible assets had indeterminate lives and, accordingly, were not subject to amortization. At December 31, 2008, we determined that current facts and circumstances no longer supported an indefinite life for our tradenames intangible asset. We estimated that the remaining useful life of the recorded amount of our tradenames was 10 years and accordingly, we began to amortize tradenames over 10 years beginning in 2009. Amortization expense was $81,000 in the first quarter of 2009 and is expected to be $324,000 for the year ending December 31, 2009. Periods prior to this change will not be restated or retrospectively adjusted.
Interest expense decreased to $129,000 in the first quarter of 2009 from $146,000 in 2008. This decline was a result of lower interest rates on the outstanding borrowings under our credit facility. The 2008 period also included interest accretion from the contract termination liability associated with our Oak Ridge building. That building was sold in July 2008 and the related contract termination liability was eliminated. Interest on outstanding borrowings under our credit agreement is payable at LIBOR plus 1%, which had an effective rate of 1.5% at April 5, 2009. The effective rate at the end of the first quarter in 2008 was 4.1%. If interest rates had not declined, our interest expense would have been significantly higher in 2009 due to an additional $24.5 million of borrowings under our credit facility for the NeedleTech acquisition. Future levels of interest expense will be dependent on the level of outstanding borrowings and on changes in the underlying LIBOR rate. Such changes are impossible for us to predict, especially in the current economic environment. To date we have not hedged the interest costs related to our credit facility. We may hedge our interest rate risk in the future, depending on, among other things, the intermediate and long-term outlook for interest rates and the risks and costs associated with hedging such items.
We have a Credit Agreement with a financial institution that provides for revolving borrowings of up to $40.0 million, including a $5.0 million sub-limit for letters of credit. $32.0 million of borrowings was outstanding under the Credit Agreement as of April 5, 2009. Interest is payable quarterly at LIBOR plus 1% (effective rate of 1.5% at April 5, 2009). Letters of credit totaling $876,000, representing decommission funding required by the Georgia Department of Natural Resources, were outstanding under the Credit Agreement as of April 5, 2009. The Credit Agreement is unsecured, but provides for a lien to be established on substantially all of our assets (subject to certain exceptions) in the event certain events of default occur under the Credit Agreement. The Credit Agreement, as amended, contains representations and warranties, as well as affirmative, reporting and negative covenants, customary for financings of this type. Among other things, certain provisions of the Credit Agreement limit the incurrence of additional debt and require the maintenance of certain financial ratios. In addition, the Credit Agreement requires us to maintain $20 million of liquid assets, as defined in the credit facility. We were in compliance with these covenants as of April 5, 2009. Our Credit Agreement expires on October 31, 2009. See Credit Agreement below for more information.
Cash provided by operations was $1.3 million and $2.1 million during the first quarter of 2009 and 2008, respectively. Cash provided by operations consists of net earnings plus non-cash expenses such as depreciation, amortization, deferred income taxes and changes in balance sheet items such as accounts receivable, inventories, prepaid expenses and payables. The reduction in cash provided from operations in 2009 as compared to 2008 is primarily due to lower net earnings.
During 2008 we sold our Oak Ridge facility and generated an income tax loss. In the second quarter of 2009, the use of this income tax loss allowed us to recover $1.5 million of income taxes previously paid during 2008. The use of this loss also allowed us to reduce income taxes payable in the first quarter of 2009 by $515,000. At the end of the first quarter of 2009, remaining tax losses from the sale of our Oak Ri
Read the The complete Report
