UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File No.
March 31, 1997 0-15443
THERAGENICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-1528626
------------------------ ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
5325 Oakbrook Parkway
Norcross, Georgia 30093
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 381-8338
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
As of May 9, 1997 the aggregate market value of the common stock of the
registrant held by non-affiliates of the registrant as determined by reference
to the closing price of Common Stock as reported on the Nasdaq National Market
System, was $256,360,054. As of May 9, 1997 the number of shares of common
stock, $.01 par value, outstanding was 14,144,003.
<PAGE>
THERAGENICS CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Page No.
Balance Sheets-December 31, 1996 and March 31, 1997
(unaudited)........................................ 3
Statements of Earnings for the Three Months Ended
March 31, 1996 and 1997 (unaudited)................ 5
Statements of Cash Flows for the Three Months Ended
March 31, 1996 and 1997 (unaudited)................ 6
Statements of Changes in Stockholders' Equity for
the Three Months Ended March 31, 1997 (unaudited).. 7
Notes to Financial Statements...................... 8
ITEM 2. MANAGEMENT'S DISCUSSI ON AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................ 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................... 14
SIGNATURE......................................................... 15
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
--------------------
THERAGENICS CORPORATION
BALANCE SHEETS
DECEMBER 31, 1996 AND MARCH 31, 1997
ASSETS
------
December 31, March 31,
1996 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 2,986,123 $ 3,306,140
Trade accounts receivable 2,258,936 2,744,667
Inventories 229,298 312,793
Prepaid expenses and other current assets 133,625 200,120
------------- ------------
TOTAL CURRENT ASSETS 5,607,982 6,563,720
PROPERTY AND EQUIPMENT
Building 3,333,728 3,333,728
Leasehold improvement 138,978 138,978
Machinery and equipment 11,522,064 14,565,702
Office furniture and equipment 65,057 65,057
------------- ------------
15,059,827 18,103,465
Less accumulated depreciation
and amortization (3,237,684) ( 3,583,918)
------------- -------------
11,822,143 14,519,547
------------- -------------
Land 525,372 525,372
Construction in progress (Note B) 5,238,056 5,580,206
------------- -------------
TOTAL PROPERTY & EQUIPMENT 17,585,571 20,625,125
OTHER ASSETS
Deferred tax asset 360,000 --
Patent Costs 80,685 78,473
Other 55,183 195,216
------------- -------------
TOTAL OTHER ASSETS 495,868 273,689
------------- -------------
TOTAL ASSETS $ 23,689,421 $ 27,462,534
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
BALANCE SHEETS
(Continued)
DECEMBER 31, 1996 AND MARCH 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31, March 31,
1996 1997
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long term debt $ 3,458,436 $ 5,626,267
Trade accounts payable 330,375 592,934
Accrued salaries, wages, and payroll taxes 459,421 162,950
Income taxes payable -- 69,568
Other current liabilities 56,677 170,758
------------- -------------
TOTAL CURRENT LIABILITIES 4,304,909 6,622,477
LONG TERM DEBT:
Long term debt -- --
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value,
50,000,000 share authorized;
11,814,278 and 11,843,503
shares had been issued as of
December 31, 1996 and March 31,
1997, respectively. (Note C) 118,143 118,435
Additional paid-in capital 17,616,560 17,962,819
Retained earnings 1,649,809 2,758,803
------------- -------------
TOTAL STOCKHOLDER'S EQUITY 19,384,512 20,840,057
------------- -------------
TOTAL LIABILITIES/STOCKHOLDER'S EQUITY $ 23,689,421 $ 27,462,534
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(Unaudited)
Three Months
Ended March 31
1996 1997
------------- -------------
<S> <C> <C>
REVENUES:
Sales........................ $ 2,697,034 $ 4,082,358
Licensing fee................ 101,322 25,000
-------------- -------------
2,798,356 4,107,358
COSTS & EXPENSES:
Cost of sales................. 753,623 1,145,361
Selling, general and
administrative.............. 692,772 1,185,128
Research and development...... 1,089 4,365
-------------- -------------
1,447,484 2,334,854
OTHER INCOME (EXPENSE):
Interest income............... 37,895 13,231
Interest expense.............. ( 3,089) ( 6,629)
Other......................... ( 7,973) 9,595
-------------- -------------
26,833 16,197
NET EARNINGS BEFORE
INCOME TAXES.................... $ 1,377,705 $ 1,788,701
Income tax expense............... 523,528 679,707
NET EARNINGS..................... $ 854,177 $ 1,108,994
============== =============
NET EARNINGS PER COMMON SHARE
(Note D)........................ $ .07 $ .09
============== =============
WEIGHTED AVERAGE SHARES 12,106,457 12,394,181
============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(Unaudited)
Three Months Ended March 31,
1996 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings...................................... $ 854,177 $ 1,108,994
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization.................... 217,565 348,446
Changes in assets and liabilities:
Accounts receivable.............................. ( 505,402) ( 485,731)
Inventories...................................... 38,393 ( 83,495)
Prepaid expenses and other current assets........ ( 105,622) ( 66,495)
Deferred tax asset............................... 519,510 360,000
Other assets..................................... ( 4,267) --
Trade accounts payable........................... 46,422 262,559
Accrued salaries, wages and payroll taxes........ ( 84,614) ( 296,471)
Income taxes payable............................. -- 69,568
Other current liabilities........................ 13,563 114,081
------------ -----------
Total Adjustments.............................. 135,548 222,462
------------ -----------
Net cash provided by
operating activities......................... 989,725 1,331,456
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and construction of property
and equipment................................... (1,804,059) (3,385,788)
------------ -----------
Net cash used by investing
activities.................................. (1,804,059) (3,385,788)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (repayment) of revolving line
of credit....................................... ( 123,959) 2,167,831
Exercise of stock options and warrants (net)...... 175,099 346,551
Debt issue costs.................................. -- ( 2,130)
Capital issue costs............................... -- ( 137,903)
----------- -----------
Net cash (used) provided by
financing activities....................... 51,140 2,374,349
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS............................ ( 763,194) 320,017
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD............................... 3,266,338 2,986,123
------------ -----------
CASH AND SHORT-TERM INVESTMENTS AT
END OF PERIOD..................................... $ 2,503,144 $ 3,306,140
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
Common Stock Additional
Number of Par Value Paid-in Retained
shares $.01 Capital Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996........ 11,814,278 $ 118,143 $17,616,560 $ 1,649,809 $19,384,512
Exercise of stock options........ 29,225 292 96,120 96,412
Income tax benefit from stock
options exercised............... 250,139 250,139
Net earnings for the period...... 1,108,994 1,108,994
BALANCE, March 31, 1997........... 11,843,503 $ 118,435 $17,962,819 $ 2,758,803 $20,840,057
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The interim financial statements included herein have been prepared by the
Company without audit. These statements reflect all adjustments which are, in
the opinion of management, necessary to present fairly the financial position as
of March 31, 1997, and the results of operations, cash flows, and changes in
shareholders equity for the three months ended March 31, 1997. All such
adjustments are of a normal recurring nature. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
The Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements and
notes be read in conjunction with the audited financial statements and notes for
the year ended December 31, 1996, included in the Form 10-K filed by the
Company.
NOTE B - CONSTRUCTION IN PROGRESS
The $5.6 million March 31, 1997 ending balance in this account represents
progress payments on Theragenics' most recent capacity expansion. This
expansion, which is expected to cost approximately $20 million, includes a
manufacturing facility, four cyclotrons and an administrative facility.
NOTE C - COMMON STOCK OFFERING
Subsequent to March 31, 1997 the Company successfully completed an underwritten
public offering of 2,300,000 shares of Common Stock. Net proceeds after
underwriting commissions were $32.3 million ($32,338,000). Final accounting for
additional public offering expenditures is not yet complete but represents
approximately $300,000 through the end of April.
NOTE D - NEW ACCOUNTING PRONOUNCEMENT
The FASB (Financial Accounting Standards Board) has issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share, which is effective
for financial statements issued after December 15, 1997. Early adoption of the
new standard is not permitted. The new standard eliminates primary and fully
diluted earnings per share and requires presentation of basic and diluted
earnings per share together with disclosure of how the per share amounts were
computed. The adoption of this new standard is not expected to have a material
impact on the disclosure of earnings per share in the financial statements.
NOTE E - HEDGING ACTIVITIES
The Company enters into foreign exchange forward contracts to hedge the price
risks associated with equipment purchase commitments denominated in foreign
currencies. These contracts reduce currency risk from exchange rate movements.
The company does not hold foreign exchange forward contracts for trading
purposes. Gains and losses are deferred and accounted for as part of the
underlying transaction. Deferred gains and losses were not significant at March
31, 1997.
<PAGE>
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Revenues - Revenues for the quarter ended March 31, 1997 were up 47% or
$1,309,002 higher than the first quarter of 1996. This increase was attributable
to the increase in sales of TheraSeed(R), an implantable radiation device
predominantly used in the treatment of prostate cancer. Marketing efforts along
with increased patient awareness of prostate cancer treatment options have
contributed to the continued sales acceleration. Concurrently the Company's
ability to deliver volume increases in production was facilitated through
additional cyclotron capacity in the first quarter. Partially offsetting this
increase in TheraSeed(R) sales was a $75,000 decrease in a TheraSphere(R)
licensing fee because of a change in the method of recording this fee. In 1997
this $100,000 fee was amortized over the entire year thereby recognizing $25,000
per quarter. In 1996 this fee was recognized as revenue in the period received
which was the first quarter.
Cost and Expenses - First quarter 1996 cost of sales increased almost 52% or
$391,738 over the same period last year reflecting the 47% increase in sales for
the same period. The Company's fixed cost base increased as depreciation and
other fixed expenses associated with a cyclotron were added. This increase
served to depress margins because, as is typical, the first months of new
cyclotron production represent the lowest utilization of a new cyclotron's
production capacity. In other words, a large portion of the expenses associated
with running a cyclotron impact the income statement immediately while the other
side of the equation, sales growth, does not occur immediately.
Selling, General & Administrative ("S,G&A") expenses for the first quarter of
1997 increased 71% or $492,356 over S,G&A expenses for the first quarter of
1996. Compensation and related expenses increased by approximately $212,000 as
employees were added and compensation levels were brought in line with the
marketplace in an effort to retain and attract qualified employees and
directors. Marketing expenses increased by almost $60,000 due to the creation of
new programs and the expansion of existing programs. Legal and other
professional fees increased by approximately $153,000 primarily as a result of
negotiations on the sales and marketing agreement with the Johnson & Johnson
subsidiary, Indigo Medical Inc. However, due to the nature of the negotiations,
these expenses should be non-recurring. Insurance premiums and property taxes
increased by almost $32,000 reflecting the higher asset values of the Company to
be insured and taxed. Other S,G&A expenses increased a net of approximately
$35,000 in response to the volume increase of workload associated with increased
sales.
Other income and expense for the first quarter of this year was approximately
$11,000 less than for the same period last year. This decline was primarily
due to lower cash balances yielding less interest income partially offset by
higher other income.
The Company's income tax rate for both quarters was estimated to be 38%.
On February 24, 1997, the Company announced that it had signed a letter of
intent with Indigo Medical Inc., a Johnson & Johnson subsidiary, stating the
intent to grant to Indigo the exclusive worldwide right to market and sell
TheraSeed(R) for the treatment of prostate cancer. Both Theragenics and Indigo
continue to work toward a June 1, 1997 goal for the signing of a definitive
agreement. Management believes that provided a final agreement is reached; i)
margins will be depressed in the short term because the TheraSeed(R) transfer
price to Indigo will be less than the current market price for TheraSeed(R), ii)
Indigo in the longer run will be able to increase sales beyond that which
Theragenics could accomplish on its own, iii) Theragenics will be able to avoid
making the large investment in building a sales and marketing organization that
would be necessary if Theragenics were to try to market TheraSeed(R)
independently and iv) Theragenics will be able to generate higher sales and
profits than it could independently. The Company has announced a price increase
effective May 19, 1997. The anticipated impact of this price increase is not
believed to be significant since Theragenics will only realize the higher price
for the short period of time from May 19, 1997 until the agreement with Indigo
goes into effect. No assurance can be given that the Company and Indigo will
enter into a definitive agreement or that it will have the anticipated impact on
the Company.
Liquidy and Capital Resources
The Company had cash, cash equivalents and short-term investments of $3.3
million on March 31, 1997 compared to $3.0 million on December 31, 1996.
Operations generated $1.3 million in cash as net earnings accounted for $1.1
million which was bolstered to $1.8 as the cash shielding impacts of
depreciation ($348,000) and tax loss carryforward ($360,000) were included.
Credit was increased in trade payables, taxes payable and other liabilities
generating and additional $446,000. This was offset by a growth in account
receivables, (-$486,000), payment of accrued bonuses and 401K contributions
(-$296,000),and the net addition of inventories and other current assets
(-$150,000).
During the first quarter of 1997, the Company used $3.4 million for progress
payments on the Company's current capacity expansion project. This project,
which management expects to cost approximately $20 million, includes a
manufacturing facility, four cyclotrons and an administrative facility. Spending
to date on the project has been approximately $5.4 million.
During the quarter the Company utilized an additional $2.2 million from its bank
credit facility to bring the total outstanding against this $11.0 million credit
facility to $5.6 million. The exercise of stock options provided $347,000. The
initiation of a secondary offering in the first quarter used $138,000.
Subsequent to March 31, 1997, the Company completed a secondary offering of
2,300,000 shares of common stock (see "Note C" in the Notes to the Financial
Statements) generating approximately $32.0 million in net proceeds to the
Company.
The previously mentioned letter of intent between Theragenics and Indigo
provides for the purchase of $5.0 million of the common stock of Theragenics at
prevailing market prices upon the signing of a definitive agreement.
Management believes that the Company's current cash balances, financing
arrangements and anticipated cash flow from operations are adequate to meet the
financing needs of the Company through 1998. In the event additional financing
becomes necessary, management may choose to raise those funds through other
forms of financing as appropriate.
<PAGE>
Other Matters
Adoption of Stockholder Rights Plan
On February 14, 1997, the Company's Board of Directors adopted a Stockholder
Rights Plan (the "Rights Plan"). The Rights Plan contains provisions to protect
the Company's stockholders in the event of an unsolicited offer to acquire the
Company. Pursuant to the Rights Plan, the Board of Directors declared and paid a
dividend of one share purchase right (a "Right") for each outstanding share of
Common Stock held of record as of February 28, 1997. The Rights will be
represented by, and traded together with, the Common Stock and will expire on
February 2007. Prior to the time the rights become exercisable, the Board of
Directors may redeem the Rights at a redemption price of $.01 per Right. The
description and terms of the Rights are set forth in a Rights Agreement dated as
of February 17, 1997 by and between The Company and SunTrust Bank, Atlanta, as
Rights Agent.
This document contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 including, without
limitation, statements regarding possible benefits associated with the possible
alliance with Indigo Medical Inc., future costs of sales, S,G&A expenses and the
sufficiency of the Company's liquidity and capital resources. From time to time,
the Company may also make other forward-looking statements relating to such
matters as well as anticipated financial performance, business prospects,
technological developments, research and development activities and similar
matters. These forward-looking statements are subject to certain risks,
uncertainties and other factors which could cause actual results to differ
materially from those anticipated, including risks associated with the
management of growth, government regulation of the therapeutic radiological
pharmaceutical and device business, dependence on health care professionals, and
competition from conventional and newly developed methods of treating localized
cancer.
<PAGE>
PART II - OTHER INFORMATION
Item 6.- Exhibits and Reports on Form 8-K
(a) None
(b) Reports on Form 8-K.
The Company filed a Report on Form 8-K dated January 13, 1997
reporting that the Company had entered into four agreements dated December 27,
1996, each for the purchase of a cyclotron from Ion Beam Applications s.a., the
manufacturer of Theragenics' current four cyclotrons. The filing also reported
that in an agreement with NationsBank dated December 7, 1996, the Company had
secured an $11 million revolving credit facility.
An amendment to the above referenced Report on Form 8-K was filed
on March 25, 1997. This filing reflects incorporation of Securities and Exchange
Commission requests pertaining to the confidential portions of the initial
Reoort on Form 8-K.
The Company filed a Report on Form 8-K dated March 26, 1997
announcing the Annual Meeting of Stockholders to held on June 6, 1997 at
10: A.M., at the Gwinnett Civic & Cultural Center, Sugarloaf Parkway, Duluth,
Georgia 30136.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRANT:
THERAGENICS CORPORATION
By: /s/ M. Christine Jacobs
----------------------------
M. Christine Jacobs
President
/s/ Bruce W. Smith
----------------------------
Bruce W. Smith
Treasurer and
Chief Financial Officer
Dated: May 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> $ 3,306,140
<SECURITIES> 0
<RECEIVABLES> 2,750,667
<ALLOWANCES> 6,000
<INVENTORY> 312,793
<CURRENT-ASSETS> 6,563,720
<PP&E> 24,209,043
<DEPRECIATION> 3,583,918
<TOTAL-ASSETS> 27,462,534
<CURRENT-LIABILITIES> 6,622,477
<BONDS> 0
0
0
<COMMON> 118,435
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 27,462,534
<SALES> 4,107,358
<TOTAL-REVENUES> 4,107,358
<CGS> 1,145,361
<TOTAL-COSTS> 2,234,854
<OTHER-EXPENSES> 16,197
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,629
<INCOME-PRETAX> 1,788,701
<INCOME-TAX> 679,707
<INCOME-CONTINUING> 1,108,994
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,108,994
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
