Theragenics reports highest quarterly consolidated revenue of $20.3 million

Theragenics Corporation^® (NYSE: TGX), a medical device company serving the surgical products and prostate cancer treatment markets, today announced consolidated financial results for the first quarter ended March 31, 2010. The terms "Company", "we", "us", or "our" mean Theragenics Corporation and all entities included in our consolidated financial statements.

“During the first quarter, we initiated legal action against the former owner of CP Medical to enforce our non-compete agreement and to protect our trade secrets”

Highlights

• We recorded consolidated revenue of $20.3 million, our highest quarterly revenue ever.
• We achieved 11% organic revenue growth in our surgical products business compared to first quarter 2009.
• Net earnings for the quarter were $144,000, or $0.00 per share, compared to net earnings of $607,000, or $0.02 per share in 2009.
• Adjusted EBITDA for the quarter was $2.6 million and cash flow from operations was $1.3 million.
• Completed the quarter with cash and cash equivalents of $43.0 million and outstanding borrowings under our credit agreement of $29.5 million for a net positive cash position of $13.5 million.
• Construction on our new specialty needle manufacturing plant continued. We expect to complete construction and move into the new facility later this year.
• We continued our initiative to update and standardize our information technology ("IT") systems and infrastructure across all of our businesses. During the first quarter, 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.
• Capital expenditures were $2.8 million in the quarter, primarily reflecting our investments in our new specialty needle manufacturing facility and our corporate-wide IT initiative.
• We initiated 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. Legal costs related to this action totaled $351,000 in the first quarter.

Consolidated Results

Consolidated revenue for the quarter was $20.3 million, our highest quarterly revenue ever, compared to $20.1 million in 2009. We had 11% organic growth in our surgical products business, offset by a decline in our brachytherapy business.

Net income for the quarter was $144,000, or $0.00 per share, compared to $607,000 or $0.02 per share in 2009. The operating results for each of our business segments are discussed below. Non-operating items that affected our 2010 results include a $103,000 non-cash charge related to a fair value adjustment to our interest rate swaps (included in interest expense), and a $90,000 non-cash charge to write off deferred tax assets (included in income tax expense) related to certain stock compensation items. The non-cash write-off of the deferred tax assets resulted in an income tax rate of 61%.

Segment Results

Surgical Products Segment

Revenue in our surgical products segment was $14.6 million in the first quarter of 2010, representing organic growth of 11% over 2009. We incurred an operating loss of $390,000 in our surgical products segment in the first quarter of 2010, compared to operating income of $79,000 in 2009. The primary items affecting our 2010 results included lower gross margins on sales as compared to 2009. We also incurred $351,000 of legal expenses related to a lawsuit we initiated to enforce certain non-compete agreements with the former owner of CP Medical and to protect our trade secrets.

Brachytherapy Seed Segment

Revenue in our brachytherapy segment was $5.9 million in the first quarter of 2010, a decline of 16% from 2009. Operating income was $1.1 million in the first quarter of 2010 and 2009. The decline in revenue was offset by a decline in operating expenses.

"We delivered 11% organic revenue growth in our surgical products business," stated M. Christine Jacobs, Chairman and CEO. "The economic environment around this sector appears more difficult than in 2009. Customer behavior is uncertain and difficult to predict. These factors affected our profitability in the first quarter. We experienced backlogs, choppy ordering patterns and additional labor to meet demand in already cramped facilities. We expect 2010 to be challenging for this sector."

"During the first quarter, we initiated legal action against the former owner of CP Medical to enforce our non-compete agreement and to protect our trade secrets," continued Ms. Jacobs. "We have always taken any legal steps necessary to protect the assets of our Company, and this is no exception. We will continue to vigorously protect our business and our assets."

Ms. Jacobs continued, "Our brachytherapy business continued to suffer from what we believe is an industry-wide decline in procedures. Uncertainty surrounding reimbursement, along with favorable reimbursement policies for competing technologies continue to negatively impact this industry. Our new agreement with Core Oncology offset some of the decline. However, we expect continued difficulties in this business in 2010."

Ms. Jacobs concluded, "Despite current and continued economic uncertainties, we believe the long-term fundamental outlook for our surgical products business remains strong. Customer demand and opportunities continue. New capacity is needed as soon as practicable and margin pressure from additional labor and customer behavior will continue to be closely monitored. We expect to continue to make modest investments in our surgical products business that support revenue growth now and in the future. Our brachytherapy business continues to generate profits and cash flow. Our fundamentals, balance sheet and prospects remain strong."