UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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THERAGENICS CORPORATION® |
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Delaware | 58-1528626 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
5203 Bristol Industrial Way Buford, Georgia | 30518 |
(Address of principal executive offices) | (Zip Code) |
1 |
Page No. | ||
PART I. FINANCIAL INFORMATION | ||
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) | ||
Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the three and six months ended June 30, 2013 and June 30, 2012 | 3 | |
Condensed Consolidated Balance Sheets – June 30, 2013 and December 31, 2012 | 4 | |
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and June 30, 2012 | 5 | |
Notes to Condensed Consolidated Financial Statements | 6 | |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 15 | |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 26 | |
ITEM 4. CONTROLS AND PROCEDURES | 26 | |
PART II. OTHER INFORMATION | 26 | |
ITEM 1. LEGAL PROCEEDINGS | 26 | |
ITEM 1A. RISK FACTORS | 27 | |
ITEM 6. EXHIBITS | 28 | |
SIGNATURES | 29 |
2 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
REVENUE | ||||||||||||||||
Product sales | $ | 19,625 | $ | 21,313 | $ | 38,837 | $ | 42,292 | ||||||||
License and fee income | 674 | 643 | 1,335 | 1,247 | ||||||||||||
20,299 | 21,956 | 40,172 | 43,539 | |||||||||||||
COST OF SALES | 12,530 | 13,942 | 25,378 | 26,916 | ||||||||||||
GROSS PROFIT | 7,769 | 8,014 | 14,794 | 16,623 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Selling, general and administrative | 6,141 | 5,378 | 11,819 | 11,279 | ||||||||||||
Amortization of purchased intangibles | 861 | 1,006 | 1,722 | 1,861 | ||||||||||||
Research and development | 272 | 312 | 552 | 589 | ||||||||||||
Medical device excise tax | 212 | — | 405 | — | ||||||||||||
Restructuring | 143 | — | 143 | — | ||||||||||||
Loss on sale of equipment | 9 | 3 | 5 | 3 | ||||||||||||
7,638 | 6,699 | 14,646 | 13,732 | |||||||||||||
EARNINGS FROM OPERATIONS | 131 | 1,315 | 148 | 2,891 | ||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest income | 24 | 36 | 51 | 74 | ||||||||||||
Interest expense | (137 | ) | (155 | ) | (273 | ) | (319 | ) | ||||||||
Other | 1 | 1 | 1 | 2 | ||||||||||||
(112 | ) | (118 | ) | (221 | ) | (243 | ) | |||||||||
EARNINGS (LOSS) BEFORE INCOME TAXES | 19 | 1,197 | (73 | ) | 2,648 | |||||||||||
Income tax expense (benefit) | 34 | 359 | (24 | ) | 876 | |||||||||||
NET EARNINGS (LOSS) | $ | (15 | ) | $ | 838 | $ | (49 | ) | $ | 1,772 | ||||||
EARNINGS PER SHARE: | ||||||||||||||||
Basic | $ | 0.00 | $ | 0.02 | $ | 0.00 | $ | 0.05 | ||||||||
Diluted | $ | 0.00 | $ | 0.02 | $ | 0.00 | $ | 0.05 | ||||||||
WEIGHTED AVERAGE SHARES: | ||||||||||||||||
Basic | 29,277 | 33,655 | 29,172 | 33,594 | ||||||||||||
Diluted | 29,277 | 34,204 | 29,172 | 34,099 | ||||||||||||
COMPREHENSIVE EARNINGS (LOSS) | ||||||||||||||||
Net earnings (loss) | $ | (15 | ) | $ | 838 | $ | (49 | ) | $ | 1,772 | ||||||
Other comprehensive earnings (loss), net of taxes | ||||||||||||||||
Reclassification adjustment for gain included in | ||||||||||||||||
net earnings | — | (1 | ) | — | (1 | ) | ||||||||||
Unrealized gain (loss) on securities arising during the period | (22 | ) | 48 | (22 | ) | 48 | ||||||||||
Total other comprehensive earnings (loss) | (22 | ) | 47 | (22 | ) | 47 | ||||||||||
Total comprehensive earnings (loss) | $ | (37 | ) | $ | 885 | $ | (71 | ) | $ | 1,819 |
3 |
June 30, 2013 (Unaudited) | December 31, 2012 | |||||||
ASSETS CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 16,852 | $ | 23,589 | ||||
Marketable securities | 20,319 | 11,319 | ||||||
Trade accounts receivable, less allowance of $491 in 2013 and $592 in 2012 | 10,284 | 8,946 | ||||||
Inventories | 14,963 | 15,382 | ||||||
Deferred income tax asset | 997 | 1,008 | ||||||
Refundable income taxes | — | 290 | ||||||
Prepaid expenses and other current assets | 847 | 1,014 | ||||||
TOTAL CURRENT ASSETS | 64,262 | 61,548 | ||||||
Property and equipment, net | 31,785 | 32,370 | ||||||
Intangible assets, net | 9,230 | 11,020 | ||||||
Deferred income tax asset – long-term | 1,426 | 717 | ||||||
Other assets | 70 | 70 | ||||||
TOTAL ASSETS | $ | 106,773 | $ | 105,725 |
LIABILITIES & SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 1,932 | $ | 1,622 | ||||
Accrued salaries, wages and payroll taxes | 2,432 | 2,929 | ||||||
Income taxes payable | 91 | — | ||||||
Other current liabilities | 1,615 | 1,020 | ||||||
TOTAL CURRENT LIABILITIES | 6,070 | 5,571 | ||||||
Long-term borrowings | 22,000 | 22,000 | ||||||
Asset retirement obligations | 904 | 871 | ||||||
Other long-term liabilities | 274 | 356 | ||||||
TOTAL LIABILITIES | 29,248 | 28,798 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock, authorized 100,000 shares of $0.01 par value, issued 35,974 in 2013 and 34,829 in 2012 | 360 | 348 | ||||||
Additional paid-in capital | 76,365 | 75,708 | ||||||
Retained earnings | 11,183 | 11,232 | ||||||
Accumulated other comprehensive gain (loss) | (1 | ) | 21 | |||||
Common stock in treasury, at cost – 4,762 shares | (10,382 | ) | (10,382 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 77,525 | 76,927 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 106,773 | $ | 105,725 |
4 |
Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net earnings (loss) | $ | (49 | ) | $ | 1,772 | |||
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,978 | 4,120 | ||||||
Deferred income taxes | (698 | ) | (714 | ) | ||||
Provision for allowances | 181 | 59 | ||||||
Share-based compensation | 636 | 439 | ||||||
Change in fair value of interest rate swaps | — | (57 | ) | |||||
Decommissioning retirement liability | 33 | 32 | ||||||
Loss on sale of equipment | 5 | 3 | ||||||
Gain on sale of marketable securities | — | (1 | ) | |||||
Changes in assets and liabilities: | ||||||||
Trade accounts receivable | (1,289 | ) | (546 | ) | ||||
Inventories | 189 | (456 | ) | |||||
Prepaid expenses and other current assets | 167 | (147 | ) | |||||
Accounts payable | 310 | 195 | ||||||
Accrued salaries, wages and payroll taxes | (497 | ) | (451 | ) | ||||
Refundable income taxes net of income taxes payable | 381 | 461 | ||||||
Other current liabilities | 523 | (60 | ) | |||||
Other | (82 | ) | 286 | |||||
Net cash provided by operating activities | 3,788 | 4,935 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases and construction of property and equipment | (1,480 | ) | (982 | ) | ||||
Cash paid for acquisition of Core Oncology customer base | — | (4,755 | ) | |||||
Proceeds from sale of property and equipment | 12 | — | ||||||
Purchases of marketable securities | (15,827 | ) | (3,271 | ) | ||||
Maturities of marketable securities | 6,627 | 4,079 | ||||||
Proceeds from sales of marketable securities | 110 | 189 | ||||||
Net cash used by investing activities | (10,558 | ) | (4,740 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Repayment of borrowings | — | (1,667 | ) | |||||
Employee stock purchase plan | 33 | 36 | ||||||
Net cash provided by (used in) financing activities | 33 | (1,631 | ) | |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | $ | (6,737 | ) | $ | (1,436 | ) | ||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 23,589 | 29,553 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 16,852 | $ | 28,117 | ||||
SUPPLEMENTARY CASH FLOW DISCLOSURE: | ||||||||
Interest paid | $ | 233 | $ | 361 | ||||
Income taxes paid | $ | 317 | $ | 1,128 | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Assets acquired from the Core transaction | $ | — | $ | 4,582 | ||||
Liability for property and equipment acquired | $ | 72 | $ | 36 | ||||
5 |
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Total Amount Expected to be Incurred | Amount Incurred Three Months Ended June 30, 2013 | Amount Incurred Six Months Ended June 30, 2013 | |||||||||
Severance costs | $ | 1,455 | $ | 143 | $ | 143 | |||||
Contract termination costs | 238 | — | — | ||||||||
Other exit costs | 91 | — | — | ||||||||
$ | 1,784 | $ | 143 | $ | 143 |
Severance Costs | Contract Termination Costs | Other Exit Costs | Total | |||||||||||||
Balance as of January 1, 2013 | $ | — | $ | — | $ | — | $ | — | ||||||||
Restructuring expenses | 143 | — | — | 143 | ||||||||||||
Balance as of June 30, 2013 | $ | 143 | $ | — | $ | — | $ | 143 | ||||||||
As presented in our Condensed Consolidated Balance Sheets: | June 30, 2013 | December 31, 2012 | ||||||
Accrued salaries, wages and payroll taxes | $ | 39 | $ | — | ||||
Other long-term liabilities | 104 | — | ||||||
$ | 143 | — |
● | Incremental expenses of $3.7 to $4.1 million, consisting primarily of severance related restructuring expenses and operational transition expenses. The operations at our Garland, Texas plant are scheduled to be transitioned out through December 2014 and, accordingly, these incremental expenses related to the restructuring will be recorded over the Restructuring Period. No significant non-cash charges are expected to be recorded related to this restructuring. |
● | Capital expenditures of approximately $2.5 to $2.7 million. We plan to purchase and own this new capital equipment located in Latin America at our independent suppliers’ facilities. We also plan to transfer the existing equipment from our Garland, Texas facility to our independent suppliers and to our facility in North Attleboro, Massachusetts. |
7 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Balance, beginning of the period | $ | — | $ | 6,833 | $ | — | $ | 7,667 | ||||||||
New contracts | — | — | — | — | ||||||||||||
Matured contracts | — | (6,833 | ) | — | (7,667 | ) | ||||||||||
Balance, end of the period | $ | — | $ | — | $ | — | $ | — |
Three Months Ended June 30, | Six Months Ended June 30, | Location of Loss (Gain) | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | Recognized in Income | ||||||||||||||
Periodic settlements | $ | — | $ | 29 | $ | — | $ | 60 | Interest expense | |||||||||
Change in fair value | $ | — | $ | (29 | ) | $ | — | $ | (57 | ) | Interest expense |
● | Level 1 – Quoted prices in active markets for identical assets or liabilities. |
● | Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
● | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
8 |
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||
June 30, 2013 | |||||||||||||||||
Money market funds | $ | 472 | $ | — | $ | — | $ | 472 | |||||||||
Marketable securities | 20,319 | — | — | 20,319 | |||||||||||||
Total assets | $ | 20,791 | $ | — | $ | — | $ | 20,791 | |||||||||
December 31, 2012 | |||||||||||||||||
Money market funds | $ | 477 | $ | — | $ | — | $ | 477 | |||||||||
Marketable securities | 11,319 | — | — | 11,319 | |||||||||||||
Total assets | $ | 11,796 | $ | — | $ | — | $ | 11,796 | |||||||||
June 30, 2013 | December 31, 2012 | |||||||
Raw materials | $ | 6,402 | $ | 6,806 | ||||
Work in process | 3,974 | 4,024 | ||||||
Finished goods | 4,637 | 4,344 | ||||||
Spare parts and supplies | 928 | 956 | ||||||
15,941 | 16,130 | |||||||
Allowance for obsolete inventory | (978 | ) | (748 | ) | ||||
Inventories, net | $ | 14,963 | $ | 15,382 |
9 |
Shares | Weighted average grant date fair value | |||||||
Non-vested at January 1, 2013 | 1,126 | $ | 1.57 | |||||
Granted | 1,120 | 1.53 | ||||||
Vested | (343 | ) | 1.55 | |||||
Forfeited | — | — | ||||||
Non-vested at June 30, 2013 | 1,903 | $ | 1.55 |
10 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues | ||||||||||||||||
Surgical products | $ | 14,680 | $ | 15,922 | $ | 29,163 | $ | 31,416 | ||||||||
Brachytherapy seed | 5,975 | 6,315 | 11,694 | 12,635 | ||||||||||||
Intersegment eliminations | (356 | ) | (281 | ) | (685 | ) | (512 | ) | ||||||||
$ | 20,299 | $ | 21,956 | $ | 40,172 | $ | 43,539 | |||||||||
Earnings (loss) from operations | ||||||||||||||||
Surgical products | $ | (31 | ) | $ | 588 | $ | (366 | ) | $ | 787 | ||||||
Brachytherapy seed | 874 | 747 | 1,273 | 2,127 | ||||||||||||
Transaction expenses | (716 | ) | — | (716 | ) | — | ||||||||||
Intersegment eliminations | 4 | (20 | ) | (43 | ) | (23 | ) | |||||||||
$ | 131 | $ | 1,315 | $ | 148 | $ | 2,891 | |||||||||
Capital expenditures, excluding asset acquisition | ||||||||||||||||
Surgical products | $ | 821 | $ | 411 | $ | 1,233 | $ | 683 | ||||||||
Brachytherapy seed | 132 | 242 | 247 | 299 | ||||||||||||
$ | 953 | $ | 653 | $ | 1,480 | $ | 982 | |||||||||
Depreciation and amortization | ||||||||||||||||
Surgical products | $ | 1,207 | $ | 1,214 | $ | 2,443 | $ | 2,443 | ||||||||
Brachytherapy seed | 767 | 923 | 1,535 | 1,677 | ||||||||||||
$ | 1,974 | $ | 2,137 | $ | 3,978 | $ | 4,120 |
11 |
June 30, 2013 | December 31, 2012 | |||||||
Identifiable assets | ||||||||
Surgical products | $ | 70,284 | $ | 70,361 | ||||
Brachytherapy seed | 62,243 | 62,474 | ||||||
Corporate investment in subsidiaries | 111,439 | 111,439 | ||||||
Intersegment eliminations | (137,193 | ) | (138,549 | ) | ||||
$ | 106,773 | $ | 105,725 | |||||
Intangible assets | ||||||||
Surgical products | $ | 5,272 | $ | 6,644 | ||||
Brachytherapy seed | 3,958 | 4,376 | ||||||
$ | 9,230 | $ | 11,020 | |||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Product sales | ||||||||||||||||
United States | $ | 16,626 | $ | 17,876 | $ | 32,638 | $ | 36,824 | ||||||||
Europe | 1,956 | 2,285 | 4,159 | 3,794 | ||||||||||||
Other foreign countries | 1,043 | 1,152 | 2,040 | 1,674 | ||||||||||||
19,625 | 21,313 | 38,837 | 42,292 | |||||||||||||
License and fee income | ||||||||||||||||
United States | 276 | 258 | 544 | 505 | ||||||||||||
Canada | 398 | 385 | 791 | 742 | ||||||||||||
674 | 643 | 1,335 | 1,247 | |||||||||||||
$ | 20,299 | $ | 21,956 | $ | 40,172 | $ | 43,539 |
12 |
Three Months Ended June 30, | Six Months ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net earnings (loss) | $ | (15 | ) | $ | 838 | $ | (49 | ) | $ | 1,772 | ||||||
Weighted average common shares outstanding | 29,277 | 33,655 | 29,172 | 33,594 | ||||||||||||
Incremental common shares issuable under stock options and awards | — | 549 | — | 505 | ||||||||||||
Weighted average common shares outstanding assuming dilution | 29,277 | 34,204 | 29,172 | 34,099 | ||||||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.00 | $ | 0.02 | $ | 0.00 | $ | 0.05 | ||||||||
Diluted | $ | 0.00 | $ | 0.02 | $ | 0.00 | $ | 0.05 |
Diluted earnings per share does not include the effect of certain stock options and awards as their impact would be anti-dilutive. For both the three and six months ended June 30, 2013, approximately 3,227,000 stock options and awards were not included in the diluted earnings per share calculation because their effect is antidilutive. Approximately 978,000 stock options and awards for both the three and six months ended June 30, 2012 were not included in the diluted earnings per share calculation because their effect is antidilutive
On August 9, 2013, separate lawsuits styled as class actions were filed in Georgia and Delaware against the Company, its directors, Juniper Investment Company, LLC, and Juniper Acquisition Corporation. Both lawsuits allege that the Company’s Board of Directors breached its fiduciary responsibilities in connection with the merger agreement between the Company and Juniper Acquisition Corporation (see Note L), and that the acquisition price of $2.20 per share in cash is unfair to shareholders. The lawsuits seek to enjoin taking steps to proceed with the proposed merger, and seek other equitable relief and unspecified monetary damages. The Company believes these allegations to be without merit and intends to vigorously defend itself. However, at the present time we are unable to determine or predict the ultimate outcome of this litigation.
Additionally, from time to time we may be a party to claims that arise in the ordinary course of business, none of which, in our view, is expected to have a material adverse effect on our consolidated financial position or results of operations.
13 |
14 |
15 |
● | Incremental expenses of $3.7 to $4.1 million, consisting primarily of severance related restructuring expenses and operational transition expenses. The operations at our Garland, Texas plant are scheduled to be transitioned out through December 2014 and, accordingly, these incremental expenses related to the restructuring will be recorded over the Restructuring Period. No significant non-cash charges are expected to be recorded related to this restructuring. |
● | Capital expenditures of approximately $2.5 to $2.7 million. We plan to purchase and own this new capital equipment located in Latin America at our independent suppliers’ facilities. We also plan to transfer the existing equipment from our Garland, Texas facility to our independent suppliers and to our facility in North Attleboro, Massachusetts. |
● | Subsequent to completion of the restructuring in 2014, our net operating savings are expected to be $3.3 to $3.6 million annually. |
● | As noted above, expenses related to the restructuring will be incurred in 2013 and 2014. However, we also expect some cost reductions as the restructuring is implemented. We expect cost savings totaling approximately $2.3 to $2.6 million during 2013 and 2014. |
16 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2013 | 2012 | Change ($) | 2013 | 2012 | Change ($) | |||||||||||||||||||
Revenues by segment: | ||||||||||||||||||||||||
Surgical products | ||||||||||||||||||||||||
Product sales | $ | 14,654 | $ | 15,885 | $ | (1,231 | ) | $ | 29,119 | $ | 31,368 | $ | (2,249 | ) | ||||||||||
License and fee income | 26 | 37 | (11 | ) | 44 | 48 | (4 | ) | ||||||||||||||||
Total surgical products | 14,680 | 15,922 | (1,242 | ) | 29,163 | 31,416 | (2,253 | ) | ||||||||||||||||
Brachytherapy seed | ||||||||||||||||||||||||
Product sales | 5,327 | 5,709 | (382 | ) | 10,403 | 11,436 | (1,033 | ) | ||||||||||||||||
License and fee income | 648 | 606 | 42 | 1,291 | 1,199 | 92 | ||||||||||||||||||
Total brachytherapy seed | 5,975 | 6,315 | (340 | ) | 11,694 | 12,635 | (941 | ) | ||||||||||||||||
Intersegment eliminations | (356 | ) | (281 | ) | (75 | ) | (685 | ) | (512 | ) | (173 | ) | ||||||||||||
Consolidated | ||||||||||||||||||||||||
Product sales | 19,625 | 21,313 | (1,688 | ) | 38,837 | 42,292 | (3,455 | ) | ||||||||||||||||
License and fee income | 674 | 643 | 31 | 1,335 | 1,247 | 88 | ||||||||||||||||||
Total consolidated | $ | 20,299 | $ | 21,956 | $ | (1,657 | ) | $ | 40,172 | $ | 43,539 | $ | (3,367 | ) |
17 |
18 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2013 | 2012 | Change ($) | 2013 | 2012 | Change ($) | |||||||||||||||||||
Surgical products | $ | (31 | ) | $ | 588 | $ | (619 | ) | $ | (366 | ) | $ | 787 | $ | (1,153 | ) | ||||||||
Brachytherapy seed | 874 | 747 | 127 | 1,273 | 2,127 | (854 | ) | |||||||||||||||||
Transaction expenses | (716 | ) | — | (716 | ) | (716 | ) | — | (716 | ) | ||||||||||||||
Intersegment eliminations | 4 | (20 | ) | 24 | (43 | ) | (23 | ) | (20 | ) | ||||||||||||||
Consolidated | $ | 131 | $ | 1,315 | $ | (1,184 | ) | $ | 148 | $ | 2,891 | $ | (2,743 | ) |
19 |
Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | |||||||
Medical device tax (a) | $ | 137 | $ | 272 | ||||
Restructuring expenses (b) | 143 | 143 | ||||||
Operational transition expenses (c) | 157 | 250 | ||||||
Non-restructuring related severance (d) | 204 | 204 |
(a) | 2.3% medical device excise tax imposed upon certain sales of taxable medical devices starting January 1, 2013. |
(b) | Restructuring expenses, severance related, associated with the closing of the Galt Medical facility in Garland, Texas. |
(c) | Operational expenses, such as training and duplicate labor, to transition the Galt operations to Latin America and/or our NeedleTech facility. |
(d) | Severance expenses not related to the restructuring. |
● | incremental expenses and capital expenditures related to the restructuring of our vascular access manufacturing operations, cost reductions and improvements to profitability resulting from the restructuring, and timing of the restructuring, |
● | ordering patterns of our larger OEM and distributor customers, |
● | ability to replace lost customers, |
● | costs incurred to address significant changes in demand, |
● | continued investments in infrastructure, R&D, products, and companies as we make investments to support anticipated future growth and to develop products to address growth opportunities, |
● | changes in product mix and sales channels, with sales through OEM channels generally carrying a relatively lower gross profit margin and sales through distributor channels generally carrying a somewhat higher gross profit margin, |
● | continued pricing pressure from customers, |
● | the medical device tax under the PPACA, |
● | potential changes in the 510(k) application process and other changes in FDA and governmental regulations, |
● | the implementation and efficiencies to be gained from our corporate-wide ERP system, |
● | manufacturing outsourcing activities, |
● | the increasing scale of our surgical products business, and |
● | trends of consumers making fewer visits to doctors’ offices and the effect on demand for medical devices. |
20 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Interest paid or accrued, including loan fees | $ | 137 | $ | 193 | $ | 273 | $ | 393 | ||||||||
Fair value adjustment | — | (29 | ) | — | (57 | ) | ||||||||||
Interest capitalized | — | (9 | ) | — | (17 | ) | ||||||||||
Total interest expense | $ | 137 | $ | 155 | $ | 273 | $ | 319 |
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● | the ability to achieve manufacturing or administrative efficiencies, including gross margin benefits from our manufacturing processes and supply chain programs or in connection with the integration of acquired businesses; |
● | the ability to implement the restructuring of our vascular access manufacturing operations within our cost estimates and timetable; realize the expected net savings from the restructuring; our ability to retain customers and market share during the restructuring period; and the ability of the independent suppliers to manufacture our products in accordance with our quality specifications and in the quantities we require; |
● | the effects of negative publicity concerning our products, which could result in product withdrawals or decreased product demand and which could reduce market or governmental acceptance of our products; | ||
● | the reduction in the number of procedures using our devices caused by customers’ cost-containment pressures or preferences for alternate therapies; |
● | the ability to implement, and realize the benefits of, our plans to invest in our business, including our plans for new product development; |
● | internal factors, such as retention of key employees; |
● | damage to a facility where our products are manufactured or from which they are distributed, which could render us unable to manufacture or distribute one or more products and may require us to reduce the output of products at the damaged facility thereby making it difficult to meet product shipping targets; |
● | the potential impairment of our intangible assets resulting from insufficient cash flow generated from such assets specifically, or our business more broadly, so as to not allow us to justify the carrying value of the assets; |
● | the ability to obtain appropriate levels of product liability insurance on reasonable terms; |
● | the trend of consolidation in the medical device industry as well as among our customers, resulting in potentially greater pricing pressures and more significant and complex contracts than in the past; |
● | development of new products or technologies by competitors having superior performance compared to our current products or products under development which could negatively impact sales of our products or render one or more of our products obsolete; |
● | technological advances, patents and registrations obtained by competitors that would have the effect of excluding us from new market segments or preventing us from selling a product or including key features in our products; |
24 |
● | attempts by competitors to gain market share through aggressive marketing programs; |
● | reprocessing by third-party reprocessors of our products designed and labeled for single use; | ||
● | the ability to obtain regulatory approval for products on a timely basis and to launch products on a timely basis within cost estimates; |
● | lengthy and costly regulatory approval processes, which may result in lost market opportunities and/or delayed product launches; |
● | the suspension or revocation of authority to manufacture, market or distribute existing products; |
● | the imposition of additional or different regulatory requirements, such as those affecting manufacturing and labeling; |
● | performance, efficacy, quality or safety concerns for existing products, whether scientifically justified or not, that may lead to product discontinuations, product withdrawals, recalls, field corrections, regulatory enforcement actions, litigation or declining sales; | ||
● | FDA inspections resulting in Form-483 notices and/or warning letters identifying deficiencies in our manufacturing practices and/or quality systems; warning letters identifying violations of FDA regulations that could result in product holds, recalls, restrictions on future clearances by the FDA and/or civil penalties; |
● | the failure to obtain, limitations on the use of, or the loss of, patent and other intellectual property rights, and the failure of efforts to protect our intellectual property rights against infringement and legal challenges that can increase our costs; |
● | difficulties obtaining necessary components or raw materials used in our products and/or price increases from our suppliers of critical components or raw materials; |
● | customers that may limit the number of manufacturers or vendors from which they will purchase products, which can result in our inability to sell products to or contract with large hospital systems, integrated delivery networks or group purchasing organizations; | ||
● | the impact of continued healthcare cost containment; |
● | new laws and judicial decisions related to healthcare availability, healthcare reform, payment for healthcare products and services or the marketing and distribution of products, including legislative or administrative reforms to the United States Medicare and Medicaid systems or other United States or international reimbursement systems in a manner that would significantly reduce or eliminate reimbursements for procedures that use our products; |
● | changes in the FDA and/or foreign regulatory approval processes that may delay or prevent the approval of new products and result in lost market opportunity; |
● | the impact of more vigorous compliance and enforcement activities affecting the healthcare industry in general or the company in particular; |
● | changes in the tax laws affecting our business, such as the medical device tax; |
● | changes in the environmental laws or standards affecting our business; |
● | changes in laws that could require facility upgrades or process changes and could affect production rates and output; |
● | compliance costs and potential penalties and remediation obligations in connection with environmental laws, including regulations regarding air emissions, waste water discharges and solid waste; | ||
● | disputes over legal proceedings; |
● | product liability claims; |
● | claims asserting securities law violations; |
● | claims asserting, and/or subpoenas seeking information regarding, violations of law in connection with federal and/or state healthcare programs; |
● | derivative shareholder actions; |
● | claims and subpoenas asserting antitrust violations; | ||
● | environmental claims, including risks relating to accidental contamination or injury from the use of hazardous materials in our manufacturing, sterilization and research activities and the potential for us to be held liable for any resulting damages; |
● | commercial disputes, including disputes over distribution agreements, license agreements, manufacturing/supply agreements, development/research agreements, acquisition or sale agreements, and insurance policies; | ||
● | domestic and international business conditions; |
● | political or economic instability in foreign countries; |
● | interest rates; |
● | changes in the rate of inflation; |
● | instability of global financial markets and economies; and | ||
● | other factors beyond our control, including catastrophes, both natural and man-made, earthquakes, floods, fires, explosions, acts of terrorism or war. |
25 |
On August 9, 2013, separate lawsuits styled as class actions were filed in Georgia and Delaware against the Company, its directors, Juniper Investment Company, LLC, and Juniper Acquisition Corporation. Both lawsuits allege that the Company’s Board of Directors breached its fiduciary responsibilities in connection with the merger agreement between the Company and Juniper Acquisition Corporation (see “Merger Agreement” above), and that the acquisition price of $2.20 per share in cash is unfair to shareholders. The lawsuits seek to enjoin taking steps to proceed with the proposed merger, and seek other equitable relief and unspecified monetary damages.The Company believes these allegations to be without merit and intends to vigorously defend itself. However, at the present time we are unable to determine or predict the ultimate outcome of this litigation.
From time to time, we are subject to certain legal proceedings and claims in the ordinary course of business. We currently are not aware of any such legal proceedings or claims that we believe will have, individually or in aggregate, a material adverse effect on our business, financial condition, or operating results.
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Exhibit No. | Title | |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Chief Executive Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | XBRL Taxomony Extension Definition Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |
28 |
REGISTRANT: | |||
THERAGENICS CORPORATION | |||
Date: August 13, 2013 | By: | /s/ M. Christine Jacobs | |
M. Christine Jacobs | |||
Chief Executive Officer | |||
Date: August 13, 2013 | By: | /s/ Francis J. Tarallo | |
Francis J. Tarallo | |||
Chief Financial Officer |