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, 1998 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 12, 1998, 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 $765,925,965. As of May 12, 1998 the number of shares of common
stock, $.005 par value, outstanding was 29,178,132.
<PAGE>
THERAGENICS CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS Page No.
Balance Sheets - December 31, 1997 and March 31, 1998
(unaudited)........................................................ 3
Statements of Earnings for the Three Months Ended
March 31, 1997 and 1998 (unaudited)................................ 5
Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1998 (unaudited)................................ 6
Statements of Changes in Stockholders' Equity for the
Three Months Ended March31, 1998 (unaudited)....................... 7
Notes to Financial Statements...................................... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................ 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................12
SIGNATURE....................................................................13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
THERAGENICS CORPORATION
BALANCE SHEETS
DECEMBER 31, 1997 AND MARCH 31, 1998
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 30,161,614 $ 24,201,105
Marketable Securities 8,391,807 8,391,807
Trade accounts receivable, less
allowance of $65,446 in 1997
and $84,480 at March 31, 1998. 2,925,390 3,580,036
Inventories 433,873 548,666
Prepaid expenses and other current assets 160,620 121,899
------------- ------------
TOTAL CURRENT ASSETS 42,073,304 36,843,513
PROPERTY AND EQUIPMENT
Building 3,333,728 3,333,728
Leasehold improvement 138,978 138,978
Machinery and equipment 14,698,623 14,986,600
Office furniture and equipment 66,464 95,400
-------------- ------------
18,237,793 18,554,706
Less accumulated depreciation
and amortization (4,695,669) ( 5,100,844)
13,542,124 13,453,862
Land 525,754 525,754
Construction in progress (Note B) 14,917,788 27,774,184
------------- ------------
TOTAL PROPERTY & EQUIPMENT 28,985,666 41,753,800
OTHER ASSETS
Patent costs 71,836 69,623
Other 9,503 9,251
------------- ------------
TOTAL OTHER ASSETS 81,339 78,874
TOTAL ASSETS $ 71,140,309 $ 78,676,187
============= ============
</TABLE>
<PAGE>
THERAGENICS CORPORATION
BALANCE SHEETS
(Continued)
DECEMBER 31, 1997 AND MARCH 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- ---------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Trade accounts payable 1,435,154 4,642,502
Accrued salaries, wages, and payroll taxes 689,610 356,416
Income taxes payable 845,364 1,881,522
Other current liabilities 137,097 296,230
----------- -----------
TOTAL CURRENT LIABILITIES 3,107,225 7,176,670
LONG TERM LIABILITIES:
Deferred income taxes 1,000,000 1,075,000
STOCKHOLDERS' EQUITY:
Common stock, $.005 par value,
50,000,000 share authorized; 29,075,682
and 29,091,812 shares had been issued
as of December 31, 1997 and March 31, 1998,
respectively. (Note C)
145,378 145,459
Additional paid-in capital 55,740,366 55,831,162
Retained earnings 11,147,340 14,447,896
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 67,033,084 70,424,517
------------ ------------
TOTAL LIABILITIES/
STOCKHOLDERS' EQUITY $71,140,309 $ 78,676,187
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THERAGENICS CORPORATION
STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31
1997 1998
<S> <C> <C>
------------- -----------
REVENUES:
Product sales................ $ 4,082,358 $ 15,962
Product sales - affiliate.... -- 8,239,985
Licensing fee................ 25,000 25,000
------------- -----------
4,107,358 8,280,947
COSTS & EXPENSES:
Cost of sales................ 1,145,361 2,188,435
Selling, general and
administrative............. 1,185,128 1,350,947
Research and development..... 4,365 41,411
------------- -----------
2,334,854 3,580,793
OTHER INCOME (EXPENSE):
Interest income.............. 13,231 450,712
Interest expense............. ( 6,629) ( 2,684)
Other........................ 9,595 8,937
------------- -----------
16,197 456,965
NET EARNINGS BEFORE
INCOME TAXES................. $ 1,788,701 $5,157,119
Income tax expense........... 679,707 1,856,563
NET EARNINGS.................. $ 1,108,994 $ 3,300,556
============= ===========
NET EARNINGS PER COMMON SHARE
(Note D)
Basic....................... $ .05 $ .11
============= ===========
Diluted..................... $ .04 $ .11
============= ===========
WEIGHTED AVERAGE SHARES
Basic....................... 23,671,706 29,087,936
============= ===========
Diluted..................... 24,762,704 30,352,859
============= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THERAGENICS CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1998
<S> <C> <C>
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings....................................... $ 1,108,994 $ 3,300,556
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Deferred income taxes............................ -- 75,000
Depreciation and amortization.................... 348,446 407,388
Changes in assets and liabilities:
Accounts receivable.............................. ( 485,731) ( 654,646)
Inventories...................................... ( 83,495) ( 114,793)
Prepaid expenses and other current assets........ ( 66,495) 38,721
Deferred tax asset............................... 360,000 --
Other assets..................................... -- 252
Trade accounts payable........................... 262,559 3,207,348
Accrued salaries, wages and payroll taxes........ ( 296,471) ( 333,194)
Income taxes payable............................. 69,568 1,036,158
Other current liabilities........................ 114,081 159,133
----------- -----------
Total Adjustments............................. 222,462 3,821,367
----------- -----------
Net cash provided by
operating activities........................ 1,331,456 7,121,923
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and construction of property
and equipment.................................. (3,385,788) (13,173,309)
----------- -----------
Net cash used by investing
activities.................................. (3,385,788) (13,173,309)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (repayment) of revolving line
of credit....................................... 2,167,831 --
Exercise of stock options and warrants (net)...... 346,551 90,877
Debt issue costs.................................. ( 2,130) --
Capital issue costs............................... ( 137,903) --
------------ -----------
Net cash (used) provided by
financing activities........................ 2,374,349 90,877
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS............................ 320,017 ( 5,960,509)
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD............................... 2,986,123 30,161,614
------------ -----------
CASH AND SHORT-TERM INVESTMENTS AT
END OF PERIOD..................................... $ 3,306,140 $24,201,105
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THERAGENICS CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
Number of Par Value Paid-in Retained
shares $.005 Capital Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997........ 29,075,682 $ 145,378 $55,740,366 $11,147,340 $67,033,084
Exercise of stock options........ 16,130 81 35,572 35,653
Income tax benefit from stock
options exercised............... 55,224 55,224
Net earnings for the period......
3,300,556 3,300,556
BALANCE, March 31, 1998........... 29,091,812 $ 145,459 $55,831,162 $14,447,896 $70,424,517
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(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, 1998, and the results of operations, cash flows, and changes in
shareholders equity for the three months ended March 31, 1997 and 1998. 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, 1997, included in the Form 10-K filed by the
Company.
NOTE B - CONSTRUCTION IN PROGRESS
The $27.8 million March 31, 1998 ending balance in this account primarily
represents progress payments on Theragenics' most recent capacity expansion
projects. The expansion projects, which are expected to cost approximately $58
million, include a manufacturing facility and four cyclotrons for the Phase I
project and six cyclotrons with supporting facilities and an administrative
facility for the Phase II expansion project.
NOTE C - STOCK SPLIT
On March 16, 1998, the Company announced a two-for-one stock split
effected in the form of a 100% stock dividend payable on April 15, 1998 to
shareholders of record at the close of business on March 31, 1998. All share and
per share amounts have been restated for all periods presented to give effect to
the stock split.
<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, 1998 were up 100% or
$4,173,589 higher than the first quarter of 1997. This increase was attributable
to the increase in sales of TheraSeed(R), an implantable radiation device
predominantly used in the treatment of prostate cancer. The Company's ability to
deliver production volume increases, facilitated through additional cyclotron
and assembly capacity, represented the primary driver for revenue growth for the
first quarter of 1998 compared to the first quarter of 1997. Marketing efforts
along with increased patient awareness of prostate cancer treatment options have
contributed to the continued sales acceleration.
Cost and Expenses - First quarter 1998 cost of sales increased almost 91% or
$1,043,074 over the same period last year reflecting the 100% increase in sales
for the same period. As a percent of sales, cost of product sales actually
decreased slightly in the first quarter of 1998 to 26.4% from 27.9% in the same
period of 1997 as a result of economies of scale. The Company's fixed cost base
increased as depreciation and other fixed expenses associated with cyclotron
number four were experienced for the entire first quarter of 1998 as opposed to
only part of the same period of 1997. Compensation and related expenses
associated with product sales increased 100% by approximately $375,000.
Compensation levels were brought in line with the marketplace and benefits were
enhanced in an effort to retain and attract qualified employees. The Company
will continue to strive to offer competitive compensation and benefits in order
to attract and retain qualified employees required by our expected growth.
Selling, General & Administrative ("S,G&A") expenses for the first quarter of
1998 increased 14% or $165,819 over S,G&A expenses for the first quarter of
1997. Legal and other professional fees increased primarily as a result of legal
action initiated by the Company claiming trade secret misappropriation by a
small company founded by former employees. Other S,G&A expenses increased as
compensation and related expenses, office equipment purchases and upgrades,
and general supplies and expenses grew in response to the the volume increase
of workload associated with increased sales. These increases were offset
by S,G&A expenses associated with sales and marketing in the first quarter
of 1998 which actually decreased to one third of the total sales and
marketing expenses experienced in the same period in 1997. This was
achieved as the Company has been able to reduce its investments in its sales and
marketing organization due to the sales and marketing agreement entered into
with Indigo Medical, Inc., a subsidiary of Johnson & Johnson.
<PAGE>
Research and development expenses increased approximately $37,000 as a result of
efforts to improve proprietary production processes. Management may choose to
accelerate efforts in this area in the future when and if appropriate
opportunities are realized.
Other income and expense for the first quarter of this year was approximately
$440,000 more than the same period last year. This increase was primarily due to
interest income generated by higher cash balances secured through the secondary
stock offering completed in April, 1997. These funds have been and will continue
to be used to fund the Company's current and future expansion programs. As these
funds are utilized for expansion, management expects other income to return to
levels consistent with historical amounts.
Liquidy and Capital Resources
The Company had cash, cash equivalents and short-term investments of $24.2
million on March 31, 1998 compared to $30.2 million on December 31, 1997.
Operations generated $7.1 million in cash as net earnings accounted for $3.3
million of this number. Other items included in the increased cash provided by
operating activities include an increase of approximately $3.0 million in trade
accounts payable due to payables associated with construction of the new
manufacturing facility. Additional supplements include higher income taxes
payable ($1.0 million) due to an increase in taxable income and depreciation
($.4 million). These increases in cash were partially offset by an increase in
receivables reflecting higher sales and a decrease in accrued salaries
reflecting the payment of bonuses.
During the first quarter of 1998, the Company used $12.9 million for progress
payments on the Company's current capacity expansion projects. Phase I of the
expansion project, which management expects to cost approximately $28 million,
includes a manufacturing facility and four cyclotrons. The project is expected
to be completed by year-end. Spending to date on the project has been
approximately $22 million. Spending to date of approximately $5.5 million
(approximately $3.0 million for the first quarter) occurred for an additional
project including six additional cyclotrons and supporting facilities which is
currently under way. Also, construction of an administrative facility at this
same site is expected to begin by late second to early third quarter. These two
projects are expected to total approximately $30 million. Less than $.5 million
has been spent on other capital projects.
<PAGE>
Net cash provided by financing activities of approximately $90.9 thousand
represents additional paid-in capital from the exercise of stock options.
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.
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,
expansion plans 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) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
No reports on For 8-K were filed during the quarter ended
March 31, 1998.
<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 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> $24,201,105
<SECURITIES> 8,391,807
<RECEIVABLES> 3,664,516
<ALLOWANCES> 84,480
<INVENTORY> 548,666
<CURRENT-ASSETS> 121,899
<PP&E> 46,854,644
<DEPRECIATION> 5,100,844
<TOTAL-ASSETS> 78,676,187
<CURRENT-LIABILITIES> 7,176,670
<BONDS> 0
0
0
<COMMON> 145,459
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 78,676,187
<SALES> 8,255,947
<TOTAL-REVENUES> 8,280,947
<CGS> 2,188,435
<TOTAL-COSTS> 3,580,793
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,936
<INCOME-PRETAX> 5,157,119
<INCOME-TAX> 1,856,563
<INCOME-CONTINUING> 3,300,556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,330,556
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
