Theragenics Corporation (TGX)
Q2 2010 Earnings Call Transcript
August 10, 2010 11:00 am ET
Christine Jacobs – Chairman, President and CEO
Frank Tarallo – CFO and Treasurer
Joseph Munda – Sidoti & Company
Brett Rice – Janney Montgomery Scott
Previous Statements by TGX
» Theragenics Corp. Q1 2010 Earnings Call Transcript
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Greetings, and welcome to the Theragenics Corporation second quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Christine Jacobs, chairman and chief executive officer for Theragenics Corporation. Thank you. Ms. Jacobs, you may begin.
Thank you all, and thank you, Jackie. Good morning. And welcome to our second quarter 2010 conference call. We appreciate the fact that you joined us today. And in just a few minutes, I'll provide some comments for the quarter and overall outlook for the second half of the year. But first Frank Tarallo, our chief financial officer, is going to provide a review of the financial results. Frank?
Thank you, Chris. This morning, we released our consolidated financial results for the second quarter of 2010. If you did not receive this news release or if you would like to be added to either our fax or email distribution list, please contact Investor Relations at 800-998-8479 or 770-271-0233.
Before I begin my review, please be aware that some comments made during this conference call may contain forward-looking statements, involving risks and uncertainties regarding our operations and future results. Please see our press release issued today and our filings with the Securities and Exchange Commission, including, without limitation, the company's Form 10-K and Forms 10-Q, which identifies specific factors that may cause the actual results or events to differ materially from those described in the forward looking statements.
Now onto our results, our consolidated revenue was $20.8 million in the second quarter of 2010 and $41.1 million for the first half of this year. These amounts are both records for us.
Profitability was down in 2010, compared to the 2009 periods. EPS in the second quarter of 2010 was $0.02 per share, compared to $0.04 in '09. For the first half of this year, EPS was $0.03 per share, compared to $0.06 in the first half of last year. Yet, while EPS was down compared to last year, the second quarter of 2010 was a significant improvement over this year's first quarter. And we're pleased with the results.
Let me review our segment operating results. Revenue in our surgical product segment was $14.9 million in the second quarter and $29.5 million for the first half of this year. This represents organic growth of 9% in the quarter and 10% for the first half of 2010, compared to last year.
Operating income in our surgical business was $388,000 in the second quarter, compared to $804,000 in 2009. For the first half of this year, we incurred a $2,000 operating loss, compared to operating income of $883,000 last year.
The declining profitability compared with 2009 was primarily due to two items. First, in the 2010 periods, we had lower gross profit margins on sales than in the 2009 periods. However, our second quarter margins this year of 39% showed strong improvements over the 33% we experienced in the first quarter of 2010. Second, we incurred litigation expenses related to the lawsuit that we initiated earlier this year totaling $221,000 in the second quarter and $572,000 in the first half of 2010. This lawsuit was launched to enforce certain non-compete agreements and protect trade secrets related to our wound closure platform.
One item that did not significantly affect operating income in the second quarter of 2010, but will affect results next quarter is the move to our new specialty needle manufacturing facility. Construction on this facility was completed in July. Construction is on budget and ahead of schedule. We actually commenced moving to the new facility late in June incurring $137,000 of moving-related expenses in the second quarter.
Looking forward, the significant portion of the move is expected to be performed and completed in the third quarter. Moving-related expenses in the third quarter are expected to be in the range of $500,000 to $700,000. These one-time expenses will obviously have a significant impact on our profitability in the third quarter and second half of this year.
Moving to our brachytherapy business, revenue declined 9% in the quarter and 13% for the first half of the year, compared to 2009. We believe our decline in revenue is reflective of the overall decline in procedures being experienced in the US brachytherapy market. The decline in our revenues was partially offset by the addition of Core Oncology as a new distributor this year. We spoke about this new agreement last quarter. Sales at Core represented 13% of our brachytherapy product sales in both the second quarter and first half of 2010.
Last month, we announced the addition of Oncura, a unit of GE Healthcare, as another new TheraSeed distributor. The addition of Oncura as a TheraSeed distributor is expected to add incremental revenue for us. Due to the fixed nature of our manufacturing costs, incremental TheraSeed revenue is a healthy contributor to profits and cash flow. However, we do not expect sales to Oncura to be material in 2010.