Theragenics CEO Discusses Q2 2011 Results - Earnings Call Transcript

Theragenics Corp. ( TGX)

Q2 2011 Earnings Conference Call

August 11, 2011 11:00 AM ET

Executives

Christine Jacobs – Chairman and CEO

Frank Tarallo – CFO

Analysts

Brett Reiss – Janney Montomery Scott

Joe Munda – Sidoti & Company

Presentation

Operator

Greetings. And welcome to the Theragenics Corporation Second Quarter 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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 Christine Jacobs, Chairman and CEO of Theragenics. Thank you, Ms. Jacobs. You may begin.

Christine Jacobs

Thank you, Claudia. Good morning. And welcome to our Theragenics second quarter 2011 conference call. Thank you for joining us today. In just a few minutes, I’ll provide some comments on the quarter but first I’m going to ask Frank Tarallo, our Chief Financial Officer to provide the review of the financials. Frank?

Frank Tarallo

Thank you, Chris. This morning we released our consolidated financial results for second quarter of 2011. If you did not receive this new release or if you 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 actual results or events to differ materially from those described in the forward-looking statements.

Now onto our results, our consolidated revenue was a record $21.5 million in the second quarter, a 4% increase over 2010. In the first half of this year, consolidated revenue was $41.8 million, another record for us. This was a 2% increase over last year. EPS was $0.04 in the quarter double the $0.02 from 2010. For the first half of this year EPS was $0.05, compared of $0.03 last year.

Let me move now to our segment results, where we had a couple of more records. Revenue in our surgical products segment was $15.5 million in the second quarter, an increase of 4% over last year and a record quarterly revenue for our surgical business. For the first half of 2011, revenue was $29.9 million, a six month record and an increase of 1% over last year.

Operating income in our surgical business was $498,000 in the second quarter, compared to $388,000 last year. For the first half of 2011, operating income was $307,000, compared to a loss of $2,000 in the first half of 2010.

Our gross profit margin on sales in the second quarter was 36% in the surgical business, compared to 39% last year. We did see improvements in margins from Q1 of this year when we had a gross margin of 34%.

Turning to our Brachytherapy business, second quarter revenue was $6.3 million, a 5% increase over last year. This is the fourth consecutive quarter of year-over-year revenue growth in our Brachy business. It’s also our highest quarterly Brachy revenue in two years. For the first half of this year, Brachy revenue was $12.2 million, an increase of 3% over 2010.

Operating income in our Brachytherapy business remained healthy at $1.5 million in the second quarter, compared to $1.1 million last year. For the first half of 2011, operating income was $2.6 million, compared to $2.1 million last year.

Bad debt expenses related to Core Oncology reduced operating income by $215,000 in the first half of 2011, there were no bad debt expenses related to Core in the second quarter of 2011. Last year in 2010, bad debt expenses related to Core totaled $500,000 in both the second quarter and first half of the year.

Returning to consolidated results, our capital expenditures were $1.3 million in the first half of 2011, consisting primarily of expenditures for our new ERP system. We continue to expect total CapEx to be $2.5 million to $3.5 million for the entire year in 2011.

Adjusted EBITDA was $4 million in the second quarter and $6.8 million for the first half of the year. The $4 million in Q2 was our best quarterly adjusted EBITDA in two years.

Cash flow from operations was $3.1 million in the second quarter and $3.4 million for the first half of the year. We ended the quarter with $41 million in cash, cash equivalents and marketable securities. We have $25.3 million outstanding under our credit agreement resulting in a net positive position of $15.7 million.

That wraps up my comments and I’d now like to turn the call back over to Chris.

Christine Jacobs

Thank you, Frank, and welcome back again. I’ve started last quarter’s conference call by saying that the first quarter of 2011 was a world win. This quarter could simply be described as more of the same with record revenues grown on top.

Let me begin with surgical products. Revenue increased 4% over last year’s second quarter. Last quarter, we reported to you that a couple of our larger customers did not order at the same pace as they did over the previous year, especially in the wound closure platform. We saw those customers come back in Q2 and our wound closure revenues were up over last year, as was the revenue in our specialty needle platform.

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