Theragenics Corp. (TGX)
Q4 2008 Earnings Call
February 19, 2009 11:00 AM ET
M. Christine Jacobs - Chairman, Chief Executive Officer and President
Frank J. Tarallo - Chief Financial Officer and Treasurer
William Johns - Smith Barney
Brett Reiss - Janney Montgomery Scott
Previous Statements by TGX
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Miss Christine Jacobs, you may begin your conference.
M. Christine Jacobs
Thank you, Connie. Good morning and welcome to Theragenics fourth quarter and year end 2008 conference call. In a few minutes I'll provide my comments, but first I'd like to turn it over to Frank Tarallo, our Chief Financial Officer for a recap of the financial results. Frank?
Frank J. Tarallo
Thank you, Chris and good morning everybody. This morning, we release our consolidated financial results for the fourth quarter and year ended December 31, 2008. If you did not receive this news release or if you would like to be added to either our fax or e-mail distribution list, please contact our Investor Relations department 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 our Form 10-K and Forms 10-Q which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.
Also, please note that in this call, we will refer to certain non-GAAP financial measures. Non-GAAP financial measures are not intended to be used in place of GAAP reported results. But we do believe certain non-GAAP financial information is helpful in understanding our operations.
Please see our press release issued this morning for more information on the use of non-GAAP financial measures and a reconciliation of GAAP reported amounts to the non-GAAP measures.
Now on to our results. We acquired NeedleTech Products on July 28, 2008. Our fourth quarter and year-end results include the results of NeedleTech subsequent to this acquisition.
Consolidated revenue for the quarter was $18.1 million, an increase of 19% over last year. For the year, revenue was $67.4 million, the highest annual revenue in our history and an increase of 8% over 2007. The increases over 2007 were due to the inclusion of NeedleTech. We also had organic growth in the surgical products business offset by decline in the brachytherapy business.
Before I discuss earnings per share, I want to comment on the significant impairment charge we recorded in the fourth quarter. Last week on February 11, we announced that we expected to write-off all or substantially all of our goodwill and a portion of other intangible assets. Our impairment charge of $70.4 million did in fact include all of our goodwill, which totals 67.9 million. It also included impairment of $2.5 million of our trade names intangible assets. Net of tax, the impairment charge we recorded was $62.9 million.
The goodwill was previously recorded mainly in connection with our acquisitions in the surgical products business. The decline in our share price in the fourth quarter, and into the beginning of 2009 was the primary driver of this impairment charge. Our market capitalization, which is determined by share price, was less than the value of our net assets. When this circumstance exists for an extended period of time, Generally Accepted Accounting Principles are such that goodwill impairment charges are inevitable, regardless of the outlook for the business.
Chris will comment further on this. But in light of the current market dynamics, I think it is fair to say that impairment charges for goodwill have become fairly common place.
I'd like to emphasize two important points here. First, these impairments charges are non-cash, and do not affect our liquidity, cash flows from operating activities or future operations.
Second, the impairment charges have no effect on our $40 million credit facility or our compliance with the financial covenants in that credit facility.
Now on to EPS. Our loss including impairment charges was $1.89 per share in the fourth quarter and $1.77per share for the year. Excluding impairment charges, earnings per share was $0.01 in the fourth quarter compared with $0.03 last year. For the year, EPS excluding impairment charges was $0.13 compared to $0.17 in 2007. The NeedleTech acquisition diluted 2008 EPS by $0.01 in the fourth quarter and $0.02 in the year.
Turning to segment results. Fourth quarter revenue in our surgical products business increased 56% over last year. For the year, surgical products revenue increased 34%. The 2008 periods include the results of NeedleTech, subsequent to acquisition. So, on a pro forma basis, as if we included NeedleTech results for the entire period in both years, our surgical products revenue decreased 3% in the quarter, and increased 7% for the year.
While our surgical business is always affected by the ordering patterns of our larger OEM and dealer customers, revenue in the fourth quarter was also affected by the general economic slowdown and recession.