UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  FORM
10-Q
 x
                    QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
quarterly period ended April 5, 2009
  or
 o
                    TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
transition period from __________ to __________
  Commission
File No. 0-15443
  THERAGENICS
CORPORATION®
 (Exact
name of registrant as specified in its charter)
 Delaware
                          
                          58-1528626(State
      or other jurisdiction of
                          
                          (I.R.S.
      Employerincorporation
      or organization)
                          
                          Identification
      Number)5203
      Bristol Industrial WayBuford,
      Georgia
                          
                          30518(Address
      of principal executive offices)
                          
                          (Zip
      Code)
  Registrant’s
telephone number, including area code: (770) 271-0233
  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 the filing requirements for at least the
past 90 days. YES x NO o
  Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). YES o NO o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 Large Accelerated
      Filer o
                Accelerated Filer
      x
                Non Accelerated
      Filer o
                Smaller Reporting
      Company o
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 YES o NO x
  As of May
5, 2009 the number of shares of $0.01 par value common stock outstanding was
33,454,872.
 1
  THERAGENICS
CORPORATION
  TABLE OF
CONTENTS
 Page
      No.PART
      I. FINANCIAL INFORMATIONITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)Condensed
      Consolidated Balance Sheets – April 5, 2009 and December 31,
      2008
                    
                    3Condensed
      Consolidated Statements of Earnings for the quarters ended April 5, 2009
      and March 30, 2008
                    
                    5Condensed
      Consolidated Statements of Cash Flows for the quarters ended April 5, 2009
      and March 30, 2008
                    
                    6Condensed
      Consolidated Statement of Shareholders’ Equity for the quarter ended April
      5, 2009
                    
                    7Notes
      to Condensed Consolidated Financial Statements
                    
                    8ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
                    
                    15ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
                    
                    22ITEM
      4. CONTROLS AND PROCEDURES
                    
                    22PART
      II. OTHER INFORMATIONITEM
      1. LEGAL PROCEEDINGS
                    
                    23ITEM
      1A. RISK FACTORS
                    
                    23ITEM
      6. EXHIBITS
                    
                    24SIGNATURES
                    
                    25
 2
  PART
I. FINANCIAL INFORMATION
  Item 1. Financial
Statements
  THERAGENICS
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (Amounts
in thousands, except per share data)
 April
      5,
                          2009
                          (Unaudited)
                        
                        
                        December
      31,
                          2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                        
                        $
                        41,347
                        
                        
                        $
                        39,088Marketable
      securities
                        
                        
                        —
                        
                        
                        
                        1,507Trade
      accounts receivable, less allowance of $469 in 2009 and $481 in
      2008
                        
                        
                        9,404
                        
                        
                        
                        8,532Inventories
                        
                        
                        11,539
                        
                        
                        
                        11,667Deferred
      income tax asset
                        
                        
                        1,750
                        
                        
                        
                        2,158Refundable
      income taxes
                        
                        
                        1,663
                        
                        
                        
                        1,504Prepaid
      expenses and other current assets
                        
                        
                        1,355
                        
                        
                        
                        1,129TOTAL
      CURRENT ASSETS
                        
                        
                        67,058
                        
                        
                        
                        65,585Property
      and equipment, net
                        
                        
                        29,735
                        
                        
                        
                        30,035Customer
      relationships, net
                        
                        
                        12,201
                        
                        
                        
                        12,742Other
      intangible assets, net
                        
                        
                        5,648
                        
                        
                        
                        5,978Other
      assets
                        
                        
                        79
                        
                        
                        
                        7917,928
                        
                        
                        
                        18,799TOTAL
      ASSETS
                        
                        $
                        114,721
                        
                        
                        $
                        114,419
  The
accompanying notes are an integral part of these statements.
 3
  THERAGENICS
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS – Continued
 (Amounts
in thousands, except per share data)
 April
      5,
                      2009
                      (Unaudited)
                    
                    
                    December
      31,
                      2008LIABILITIES
      & SHAREHOLDERS’ EQUITYCURRENT
      LIABILITIESTrade
      accounts payable
                    
                    $
                    2,010
                    
                    
                    $
                    1,437Accrued
      salaries, wages and payroll taxes
                    
                    
                    1,781
                    
                    
                    
                    1,968Short-term
      borrowings
                    
                    
                    32,000
                    
                    
                    
                    32,000Income
      taxes payable
                    
                    
                    99
                    
                    
                    
                    209Other
      current liabilities
                    
                    
                    1,082
                    
                    
                    
                    1,896TOTAL
      CURRENT LIABILITIES
                    
                    
                    36,972
                    
                    
                    
                    37,510LONG-TERM
      LIABILITIESDeferred
      income taxes
                    
                    
                    2,060
                    
                    
                    
                    2,006Decommissioning
      retirement liability
                    
                    
                    659
                    
                    
                    
                    646Other
      long-term liabilities
                    
                    
                    165
                    
                    
                    
                    147TOTAL
      LONG-TERM LIABILITIES
                    
                    
                    2,884
                    
                    
                    
                    2,799COMMITMENTS
      AND CONTINGENCIESSHAREHOLDERS’
      EQUITYCommon
      stock, authorized 100,000 shares of  $0.01 par value, issued and
      outstanding, 33,447 in 2009 and 33,243 in 2008
                    
                    
                    334
                    
                    
                    
                    332Additional
      paid-in capital
                    
                    
                    73,040
                    
                    
                    
                    72,894Retained
      earnings
                    
                    
                    1,491
                    
                    
                    
                    884TOTAL
      SHAREHOLDERS’ EQUITY
                    
                    
                    74,865
                    
                    
                    
                    74,110TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                    
                    $
                    114,721
                    
                    
                    $
                    114,419
  The
accompanying notes are an integral part of these statements.
 4
  THERAGENICS
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
 (UNAUDITED)
 (Amounts
in thousands, except per share data)
 Quarter
      EndedApril
      5,
                      2009
                    
                    
                    March
      30,
                      2008REVENUEProduct
      sales
                    
                    $
                    19,844
                    
                    
                    $
                    14,960License
      and fee income
                    
                    
                    233
                    
                    
                    
                    27520,077
                    
                    
                    
                    15,235COST
      OF SALES
                    
                    
                    11,370
                    
                    
                    
                    7,578GROSS
      PROFIT
                    
                    
                    8,707
                    
                    
                    
                    7,657OPERATING
      EXPENSESSelling,
      general and administrative
                    
                    
                    6,029
                    
                    
                    
                    4,803Amortization
      of purchased intangibles
                    
                    
                    871
                    
                    
                    
                    469Research
      and development
                    
                    
                    603
                    
                    
                    
                    133Loss
      on sale of equipment
                    
                    
                    —
                    
                    
                    
                    27,503
                    
                    
                    
                    5,407EARNINGS
      FROM OPERATIONS
                    
                    
                    1,204
                    
                    
                    
                    2,250OTHER
      INCOME/(EXPENSE)Interest
      income
                    
                    
                    11
                    
                    
                    
                    459Interest
      expense
                    
                    
                    (129
                    )
                    
                    
                    (146
                    )Other
                    
                    
                    (2
                    )
                    
                    
                    4(120
                    )
                    
                    
                    317EARNINGS
      BEFORE INCOME TAXES
                    
                    
                    1,084
                    
                    
                    
                    2,567Income
      tax expense
                    
                    
                    477
                    
                    
                    
                    931NET
      EARNINGS
                    
                    $
                    607
                    
                    
                    $
                    1,636EARNINGS
      PER SHARE:Basic
                    
                    $
                    0.02
                    
                    
                    $
                    0.05Diluted
                    
                    $
                    0.02
                    
                    
                    $
                    0.05WEIGHTED
      AVERAGE SHARESBasic
                    
                    
                    33,104
                    
                    
                    
                    33,162Diluted
                    
                    
                    33,133
                    
                    
                    
                    33,286
  The
accompanying notes are an integral part of these statements.
 5
  THERAGENICS
CORPORATION AND SUBSIDIARY
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 (Amounts
in thousands)
 Quarter
      EndedApril
      5,
                      2009
                    
                    
                    March
      30,
                      2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      earnings
                    
                    $
                    607
                    
                    
                    $
                    1,636Adjustments
      to reconcile net earnings to net cash provided by operating
      activities:Depreciation
      and amortization
                    
                    
                    1,717
                    
                    
                    
                    1,180Deferred
      income taxes
                    
                    
                    462
                    
                    
                    
                    (17
                    )Provision
      for allowances
                    
                    
                    (47
                    )
                    
                    
                    (42
                    )Share
      based compensation
                    
                    
                    148
                    
                    
                    
                    218Contract
      termination liability
                    
                    
                    —
                    
                    
                    
                    (7
                    )Decommissioning
      retirement liability
                    
                    
                    13
                    
                    
                    
                    11Loss
      on sale of marketable securities
                    
                    
                    2
                    
                    
                    
                    —Loss
      on sale of equipment
                    
                    
                    —
                    
                    
                    
                    2Changes
      in assets and liabilities:Accounts
      receivable
                    
                    
                    (919
                    )
                    
                    
                    (54
                    )Inventories
                    
                    
                    222
                    
                    
                    
                    (642
                    )Prepaid
      expenses and other current assets
                    
                    
                    (226
                    )
                    
                    
                    (58
                    )Trade
      accounts payable
                    
                    
                    573
                    
                    
                    
                    272Accrued
      salaries, wages and payroll taxes
                    
                    
                    (187
                    )
                    
                    
                    (734
                    )Income
      taxes payable/refundable
                    
                    
                    (269
                    )
                    
                    
                    47Other
      current liabilities
                    
                    
                    (814
                    )
                    
                    
                    261Other
                    
                    
                    18
                    
                    
                    
                    29Net
      cash provided by operating activities
                    
                    
                    1,300
                    
                    
                    
                    2,102CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      and construction of property and equipment
                    
                    
                    (546
                    )
                    
                    
                    (510
                    )Purchases
      of marketable securities
                    
                    
                    —
                    
                    
                    
                    (8,000
                    )Maturities
      of marketable securities
                    
                    
                    500
                    
                    
                    
                    2,788Proceeds
      from sales of marketable securities
                    
                    
                    1,005
                    
                    
                    
                    10,167Net
      cash provided by investing activities
                    
                    
                    959
                    
                    
                    
                    4,445CASH
      FLOWS FROM FINANCING ACTIVITIESExercise
      of stock options and stock purchase plan
                    
                    
                    7
                    
                    
                    
                    6Retirement
      of common stock
                    
                    
                    (7
                    )Net
      cash provided by financing activities
                    
                    
                    —
                    
                    
                    
                    6NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                    
                    $
                    2,259
                    
                    
                    $
                    6,553CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                    
                    
                    39,088
                    
                    
                    
                    28,666CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                    
                    $
                    41,347
                    
                    
                    $
                    35,219SUPPLEMENTARY
      CASH FLOW DISCLOSURE:Interest
      paid
                    
                    $
                    203
                    
                    
                    $
                    156Income
      taxes paid
                    
                    $
                    285
                    
                    
                    $
                    904
  The
accompanying notes are an integral part of these statements.
 6
  THERAGENICS
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
 FOR
THE QUARTER ENDED APRIL 5, 2009
 (UNAUDITED)
 (Amounts
in thousands)
 Common
      StockNumber
                      of
                      Shares
                    
                    
                    Par
                      Value
                      Amount
                    
                    
                    Additional
                      Paid-in
                      Capital
                    
                    
                    Retained
                      Earnings
                    
                    
                    TotalBALANCE,
      December 31, 2008
                    
                    
                    33,243
                    
                    
                    $
                    332
                    
                    
                    $
                    72,894
                    
                    
                    $
                    884
                    
                    
                    $
                    74,110Employee
      stock purchase plan
                    
                    
                    6
                    
                    
                    
                    —
                    
                    
                    
                    7
                    
                    
                    
                    —
                    
                    
                    
                    7Issuance
      of restricted shares
                    
                    
                    141
                    
                    
                    
                    1
                    
                    
                    
                    (1
                    )
                    
                    
                    —
                    
                    
                    
                    —Issuance
      of common stock upon vesting of restricted units
                    
                    
                    64
                    
                    
                    
                    1
                    
                    
                    
                    (1
                    )
                    
                    
                    —
                    
                    
                    
                    —Retirement
      of common stock surrendered
                    
                    
                    (7
                    )
                    
                    
                    —
                    
                    
                    
                    (7
                    )
                    
                    
                    —
                    
                    
                    
                    (7
                    )Share
      based compensation
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    148
                    
                    
                    
                    —
                    
                    
                    
                    148Net
      earnings for the period
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    607
                    
                    
                    
                    607BALANCE,
      April 5, 2009
                    
                    
                    33,447
                    
                    
                    
                    334
                    
                    
                    
                    73,040
                    
                    
                    
                    1,491
                    
                    
                    
                    74,865
  The
accompanying notes are an integral part of these statements.
 7
  THERAGENICS
      CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAPRIL
      5, 2009(Unaudited)
  NOTE
A - BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
  The
unaudited interim condensed consolidated financial statements included herein
reflect the consolidated operations of Theragenics Corporation and its
wholly-owned subsidiaries. The terms “Company”, “we”, “us”, or “our” mean
Theragenics Corporation and all entities included in our consolidated financial
statements. All material intercompany accounts and transactions have been
eliminated in consolidation. These statements reflect all adjustments that are,
in our opinion, necessary to present fairly the consolidated financial position,
consolidated results of operations, consolidated cash flows and consolidated
changes in shareholders’ equity for the periods presented. All such adjustments
are of a normal recurring nature. Pursuant to the rules and regulations of the
Securities and Exchange Commission for reporting on Form 10-Q, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. These unaudited
condensed consolidated financial statements and notes should be read in
conjunction with the audited consolidated financial statements and notes for the
year ended December 31, 2008, included in the Form 10-K Annual Report filed by
us. The December 31, 2008 condensed consolidated balance sheet included herein
has been derived from the December 31, 2008 audited consolidated balance sheet
included in the aforementioned Form 10-K. The consolidated results of operations
for the periods ended April 5, 2009 are not necessarily indicative of the
results to be expected for a full year.
  We are a
medical device company serving the surgical products and cancer treatment
markets, operating in two business segments. Our surgical products business
consists of wound closure, vascular access, and specialty needle products. Wound
closure includes sutures, needles, and other surgical products. Vascular access
includes introducers, guidewires, and related products. Specialty needles
include coaxial, biopsy, spinal and disposable veress needles, access trocars,
and other needle based products. Our surgical products segment serves a number
of markets and applications, including among other areas, interventional
cardiology, interventional radiology, vascular surgery, orthopedics, plastic
surgery, dental surgery, urology, veterinary medicine, pain management,
endoscopy, and spinal surgery. Our brachytherapy business manufactures and
markets our premier product, the palladium-103 TheraSeed®device,
and I-Seed, an iodine-125 based device, which are used primarily in the
minimally invasive treatment of localized prostate cancer.
  On July
28, 2008, we completed the acquisition of NeedleTech Products, Inc.
(“NeedleTech”). NeedleTech is a manufacturer of specialty needles and related
medical devices, and a part of our surgical products segment. See Note C, Acquisition of NeedleTech Products,
Inc.
  NOTE
B – RECENTLY ISSUED ACCOUNTING STANDARDS
  In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, Fair Value
Measurements. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value in GAAP, and expands disclosures about fair value
measurements. SFAS No. 157 was effective for us on January 1, 2008. However, in
February 2008 the FASB released FASB Staff Position (“FSP”) No. FAS 157-2, Effective Date of FASB Statement
No. 157, which delayed the effective date of SFAS No. 157 for all
non-financial assets and non-financial liabilities, except those that are
recognized or disclosed in the financial statements at fair value at least
annually. This deferral of SFAS No. 157 primarily applied to our retirement
obligation related to future decommissioning costs, which uses fair value
measures to determine our liability. We adopted FSP SFAS No. 157-2 effective
January 1, 2009. The adoption did not have a material impact on our consolidated
financial statements.
  In April
2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3 (‘FSP FAS 142-3 “),
Determination of the Useful
Life of Intangible Assets. The intent of the FSP FAS 142-3 is to improve
the consistency between the useful life of a recognized intangible asset under
SFAS No. 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS No. 141R and other GAAP. We adopted FSP FAS 142-3
effective January 1, 2009. The adoption did not have a material impact on our
consolidated financial statements.
 8
  THERAGENICS
      CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAPRIL
      5, 2009(Unaudited)
  NOTE
C – ACQUISITION OF NEEDLETECH PRODUCTS, INC.
  We
acquired all of the outstanding common stock of NeedleTech on July 28, 2008. The
total purchase price, including transaction costs, was approximately $44.1
million (net of cash, cash equivalents, and marketable securities acquired with
an estimated fair value of approximately $5.8 million). We paid the purchase
price in cash, including $24.5 million from borrowings under our $40 million
credit facility. NeedleTech is a manufacturer of specialty needles and related
medical devices. NeedleTech’s current products include coaxial needles, biopsy
needles, access trocars, brachytherapy needles, guidewire introducer needles,
spinal needles, disposable veress needles, and other needle-based products. End
markets served include cardiology, orthopedics, pain management, endoscopy,
spinal surgery, urology, and veterinary medicine. This transaction further
diversifies our surgical products business and leverages our existing strengths
within these markets. The acquisition of NeedleTech is designed to forward our
stated strategy of becoming a diversified medical device manufacturer, increase
our breadth of offerings to existing customers, and expand our customer base of
large leading-edge original equipment manufacturers.
  We
accounted for the acquisition of NeedleTech under the purchase method of
accounting, in accordance with SFAS No. 141, Business Combinations.
Accordingly, the purchase price was allocated on a preliminary basis based on
the fair values of the assets acquired and liabilities assumed at the date of
acquisition, with the excess of the purchase price over the fair value of the
net assets acquired recorded as goodwill. Results of operations of NeedleTech
are included subsequent to the acquisition date.
  Pro Forma
Information
  The
following unaudited pro forma summary combines our results with those of
NeedleTech as if the acquisition had occurred at the beginning of the period
presented. This unaudited pro forma information is not intended to represent or
be indicative of our consolidated results of operations or financial condition
that would have been reported for the period presented had the acquisition been
completed at the beginning of the period presented, and should not be taken as
indicative of our future consolidated results of operations or financial
condition (in thousands, except per share data):
  Quarter
      EndedMarch
      30, 2008Revenue
                                      
                                      $
                                      19,687Net
      earnings
                                      
                                      $
                                      1,246Earnings
      per shareBasic
                                      
                                      $
                                      0.04Diluted
                                      
                                      $
                                      0.04
  Certain
pro forma adjustments have been made to reflect the impact of the purchase
transaction, primarily consisting of amortization of intangible assets with
determinate lives, reductions in interest income as a result of cash used in the
acquisition, increases in interest expense resulting from borrowings under our
credit facility and income taxes to reflect our effective tax rate for the
period. Pro forma net earnings include non-recurring pre-tax charges of $885,000
for amortization of the fair market value adjustments for inventory and
backlog.
  NOTE
D - INVENTORIES
  Inventories
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out (“FIFO”) or weighted average cost method, which
approximates FIFO. Market is replacement cost or net realizable value. We
estimate reserves for inventory obsolescence based on our judgment of future
realization. Inventories were comprised of the following (in
thousands):
 April
      5, 2009
                            
                            
                            December
      31, 2008Raw
      materials
                            
                            $
                            5,198
                            
                            
                            $
                            5,024Work
      in process
                            
                            
                            2,708
                            
                            
                            
                            3,054Finished
      goods
                            
                            
                            3,459
                            
                            
                            
                            3,488Spare
      parts and supplies
                            
                            
                            827
                            
                            
                            
                            84812,192
                            
                            
                            
                            12,414Allowance
      for obsolete inventory
                            
                            
                            (653
                            )
                            
                            
                            (747
                            )Inventories,
      net
                            
                            $
                            11,539
                            
                            
                            $
                            11,667
 9
  THERAGENICS
      CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAPRIL
      5, 2009(Unaudited)
  NOTE E - TRADENAMES
  Prior to
December 31, 2008, we estimated that our tradenames intangible assets had
indeterminate lives and, accordingly, were not subject to amortization.  At
December 31, 2008, we determined that current facts and circumstances no longer
supported an indefinite life for our tradenames intangible asset.  We
estimated that the remaining useful life of the recorded amount of our
tradenames was 10 years and accordingly, we began to amortize tradenames over 10
years beginning in 2009. Amortization expense was $81,000 in the first quarter
of 2009 and is expected to be $324,000 for the year ending December 31,
2009.  Periods prior to this change will not be restated or retrospectively
adjusted.
  NOTE F
– INCOME TAXES
  Our
effective income tax rate for the first quarter of 2009 and 2008 was
approximately 44% and 36%, respectively, which includes federal and state income
taxes. Our tax rate in the first quarter of 2009 was significantly higher than
our normal rates because of the non-cash write off of deferred income tax assets
related to certain restricted shares. Upon vesting of the restricted shares, the
tax deduction we receive is determined by the underlying value of the shares at
the vesting date. This value was less than the expense we were required to
record for financial reporting purposes under Statement of Financial Accounting
Standards 123R, “Share-Based
Payment” (“SFAS 123R”), requiring us to write off the deferred tax asset
associated with them in the first quarter. This income tax expense amount is not
related to the amount of pre-tax income and, accordingly, has a significant
effect on the tax rate. Under SFAS 123R, differences between deductible
temporary differences related to share based payments and the tax deduction that
would result based on the current fair value of our shares cannot be considered
in measuring the gross deferred tax asset or determining the need for a
valuation allowance recognized under SFAS 123R.
  NOTE
G – SHARE BASED COMPENSATION
  During
the quarter ended April 5, 2009, we granted 309,000 stock options and 141,000
shares of restricted stock to executive officers. The stock options and
restricted stock each vest ratably over four years. The exercise price of the
stock options is $0.93 per share, which is equal to the fair value of the
underlying common stock on the date of grant. The grant date fair value of the
stock options was $0.57 per share and was estimated using the Black-Scholes
options-pricing model using the following assumptions:
 Expected
      dividend yield
                                        
                                        0.0%Expected
      volatility
                                        
                                        60.5%Risk-free
      interest rate
                                        
                                        2.7%Expected
      life
                                        
                                        7
      years
  Expected
stock price volatility is based on the historical volatility of our stock price
over the most recent period commensurate with the expected option life. When
determining the expected life of stock options, we classify options into groups
for employees where relatively homogeneous exercise behavior is expected. We
also consider the vesting period of the options, the length of time similar
grants have remained outstanding in the past, and the expected volatility of the
stock. These factors may cause the expected volatility and expected life of
options granted to differ from period to period.
  The
weighted average grant date fair value of the restricted shares issued was $0.93
per share, and was based on the fair value of the underlying common stock at the
grant date.
  Compensation
cost for the stock options and restricted stock is being recorded over the
requisite service period of the grants. As of April 5, 2009, there was
approximately $147,000 and $112,000 of unrecognized compensation cost related to
the stock options and restricted stock, respectively, granted in the first
quarter of 2009, which is each expected to be recognized over a weighted average
period of 2.5 years.
  NOTE
H - DISTRIBUTION AGREEMENT AND MAJOR CUSTOMERS
  Distribution
Agreement
  Our
brachytherapy seed business sells our TheraSeed® device
directly to health care providers and to third party distributors. Our primary
non-exclusive distribution agreement is with C. R. Bard (“Bard”) (the “Bard
Agreement”). The terms of the Bard Agreement provide for automatic one year
extensions of the term, unless either party gives notice of its intent not to
renew at least twelve months prior to the end of the current term. The current
terms expires December 31, 2010, and will be automatically extended for one
additional year unless either party gives notice of its intent not to extend by
December 31, 2009. The Bard Agreement gives Bard the non-exclusive right to
distribute the TheraSeed® device
in the U.S., Canada, and other international locations for the treatment of
prostate cancer and other solid localized cancerous tumors.
 10
  THERAGENICS
      CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAPRIL
      5, 2009(Unaudited)
  Major
Customers
  Sales to
Bard under the Bard Agreement represented approximately 45% of total
brachytherapy seed product revenue and approximately 15% of consolidated revenue
for the quarter ended April 5, 2009. For the quarter ended March 30, 2008, sales
to Bard under the Bard Agreement represented approximately 52% of brachytherapy
seed product revenue and 26% of consolidated revenue.
  Accounts
receivable from Bard under the Bard Agreement represented approximately 40% of
brachytherapy accounts receivable and 17% of consolidated accounts receivable at
April 5, 2009. At December 31, 2008, accounts receivable from Bard under the
Bard Agreement represented approximately 48% of brachytherapy accounts
receivable and 21% of consolidated accounts receivable.
  NOTE
I – FAIR VALUE
  In
accordance with the provisions of SFAS No. 157, we measure fair value as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants at the
measurement date. SFAS No. 157 establishes a three-level fair value
hierarchy that prioritizes the inputs used to measure fair value. This hierarchy
requires entities to maximize the use of observable inputs and minimize the use
of unobservable inputs. The three levels of inputs used to measure fair value
are as follows:
  •
      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.
  We had
the following assets measured at fair value on a recurring basis subject to the
disclosure requirements of SFAS No. 157 (in thousands):
 April
      5, 2009
                                            
                                            
                                            Quoted
      Prices
                                                in
      Active
                                                Markets
                                                (Level
      1)
                                            
                                            
                                            Significant
                                              Other
                                              Observable
                                              Inputs
                                              (Level
      2)
                                            
                                            
                                            Significant
                                              Unobservable
                                              Inputs
                                              (Level
      3)
                                            
                                            
                                            TotalMarketable
      securities
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
 December
      31, 2008Marketable
      securities
                                              
                                              $
                                              1,007
                                              
                                              
                                              $
                                              500
                                              
                                              
                                              $
                                              —
                                              
                                              
                                              $
                                              1,507
 11
  THERAGENICS
      CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAPRIL
      5, 2009(Unaudited)
  Effective
January 1, 2009, we adopted SFAS No. 157 for our asset retirement
obligations related to future decommissioning costs, in accordance with FSP SFAS
No. 157-2. We have no other non-financial assets or liabilities for which FSP
SFAS No. 157-2 would be applicable. This adoption did not have a material impact
on our financial position or results of operations.
  We record
an asset retirement obligation related to our future decommissioning costs
associated with certain of our equipment and buildings in accordance with SFAS
No. 143, Accounting for Asset
Retirement Obligations.SFAS No. 143 requires us to estimate the future
cost of asset retirement obligations, to discount that cost to its present
value, and to record a corresponding asset and liability in our consolidated
balance sheet. The values ultimately derived are based on many significant
estimates, including future decommissioning costs, inflation, cost of capital,
and market risk premiums. The nature of these estimates requires us to make
judgments based on historical experience and future expectations. We believe our
asset retirement obligation falls within Level 3 of the fair value hierarchy
because these estimates are internally developed and involve
unobservable inputs.
  Below is
a reconciliation of the change in our asset retirement obligation during the
first quarter of 2009:
  Balance
      at December 31, 2008
                          
                          $
                          646Accretion
      expense included in earnings
                          
                          
                          13Balance
      at April 5, 2009
                          
                          $
                          659
  NOTE
J - SEGMENT REPORTING
  Segment
Reporting
  We are a
medical device company serving the cancer treatment and surgical markets,
operating in two business segments. Our surgical products business consists of
wound closure and vascular access products. Wound closure includes sutures,
needles and other surgical products with applications in, among other areas,
urology, veterinary, cardiology, orthopedics, plastic surgery and dental.
Vascular access includes introducers and guidewires used in the interventional
radiology, interventional cardiology and vascular surgery markets. In our
brachytherapy seed business, we produce, market, and sell TheraSeed®, our
premier palladium-103 prostate cancer treatment device, I-Seed, our iodine-125
based prostate cancer treatment device, and related products and
services.
  In the
first quarter of 2009, we changed the manner in which we allocate the cost of
corporate activities to our business segments. Operating expenses associated
with corporate activities are now allocated based on the relative revenue of
each business segment. With the acquisition of NeedleTech in July 2008, the
continued integration of acquired companies, the implementation of our R&D
program for our surgical products segment, and the program to standardize our
information technology systems across all of our businesses, among other things,
we believe this method more accurately reflects the utilization of our corporate
resources. This is also the method we now utilize internally to review results
and allocate resources. Previously, we charged the significant portion of
expenses associated with corporate activities to the brachytherapy segment. We
have restated our segment results for the 2008 period to reflect this change in
the method of allocating corporate expenses. This change had no effect on our
consolidated results of operations previously reported for the 2008
period.
  12
 
 THERAGENICS
      CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAPRIL
      5, 2009(Unaudited)
  The
following tables provide certain information for these segments (in
thousands):
  Quarter
      EndedApril
      5,
                                    2009
                                  
                                  
                                  March
      30,
                                    2008RevenuesSurgical
      products
                                  
                                  $
                                  13,149
                                  
                                  
                                  $
                                  7,320Brachytherapy
      seed
                                  
                                  
                                  6,987
                                  
                                  
                                  
                                  7,966Intersegment
      eliminations
                                  
                                  
                                  (59
                                  )
                                  
                                  
                                  (51
                                  )$
                                  20,077
                                  
                                  
                                  $
                                  15,235Earnings
      from operationsSurgical
      products
                                  
                                  $
                                  79
                                  
                                  
                                  $
                                  575Brachytherapy
      seed
                                  
                                  
                                  1,118
                                  
                                  
                                  
                                  1,663Intersegment
      eliminations
                                  
                                  
                                  7
                                  
                                  
                                  
                                  12$
                                  1,204
                                  
                                  
                                  $
                                  2,250
 Capital
      expendituresSurgical
      products
                                            
                                            $
                                            291
                                            
                                            
                                            $
                                            80Brachytherapy
      seed
                                            
                                            
                                            255
                                            
                                            
                                            
                                            430$
                                            546
                                            
                                            
                                            $
                                            510Depreciation
      and amortizationSurgical
      products
                                            
                                            $
                                            1,206
                                            
                                            
                                            $
                                            638Brachytherapy
      seed
                                            
                                            
                                            511
                                            
                                            
                                            
                                            542$
                                            1,717
                                            
                                            
                                            $
                                            1,180
  We
evaluate business segment performance based on segment revenue and segment
earnings from operations. Earnings from operations by segment do not include
interest expense, interest income, other income and expense, or provisions for
income taxes. Intersegment eliminations are primarily for surgical products
segment sales transactions.
  Supplemental
information related to significant assets follows (in thousands):
  April
      5,
                                        2009
                                      
                                      
                                      December
      31,
                                        2008Identifiable assetsSurgical
      products
                                      
                                      $
                                      62,092
                                      
                                      
                                      $
                                      62,738Brachytherapy
      seed
                                      
                                      
                                      52,689
                                      
                                      
                                      
                                      51,731Corporate
      investment in subsidiaries
                                      
                                      
                                      111,439
                                      
                                      
                                      
                                      111,439Intersegment
      eliminations
                                      
                                      
                                      (111,499
                                      )
                                      
                                      
                                      (111,489
                                      )$
                                      114,721
                                      
                                      
                                      $
                                      114,419Customer relationships, netSurgical
      products
                                      
                                      $
                                      12,201
                                      
                                      
                                      $
                                      12,742Brachytherapy
      seed
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —$
                                      12,201
                                      
                                      
                                      $
                                      12,742Other intangible assets,
netSurgical
      products
                                      
                                      $
                                      5,647
                                      
                                      
                                      $
                                      5,977Brachytherapy
      seed
                                      
                                      
                                      1
                                      
                                      
                                      
                                      1$
                                      5,648
                                      
                                      
                                      $
                                      5,978
  13
  THERAGENICS
      CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAPRIL
      5, 2009(Unaudited)
  Information
regarding revenue by geographic regions follows (in thousands):
  Quarter
      EndedApril
      5,
                                2009
                              
                              
                              March
      30,
                                2008Product
      salesUnited
      States
                              
                              $
                              17,828
                              
                              
                              $
                              13,788Europe
                              
                              
                              1,764
                              
                              
                              
                              1,014Other
      foreign countries
                              
                              
                              252
                              
                              
                              
                              15819,844
                              
                              
                              
                              14,960License
      and fee incomeUnited
      States
                              
                              $
                              103
                              
                              
                              $
                              —Canada
                              
                              
                              130
                              
                              
                              
                              275233
                              
                              
                              
                              275$
                              20,077
                              
                              
                              $
                              15,235
 Foreign
sales are attributed to countries based on the location of the customer. The
license fees attributed to Canada are with Nordion, a Canadian based company,
for the license of our TheraSphere® product.
All other foreign sales are related to the surgical products segment. All of our
long-lived assets are located within the United States.
  NOTE K
– EARNINGS PER SHARE
  Basic
earnings per share represents net earnings divided by the weighted average
shares outstanding. Diluted earnings per share represents net earnings divided
by weighted average shares outstanding adjusted for the incremental dilution of
outstanding stock options and awards. A reconciliation of weighted average
common shares outstanding to weighted average common shares outstanding assuming
dilution for the periods presented follows (in thousands, except per share
data):
  Quarter
      endedApril
      5,
                                              2009
                                            
                                            
                                            March
      30,
                                              2008Net
      earnings
                                            
                                            $
                                            607
                                            
                                            
                                            $
                                            1,636Weighted
      average common shares outstanding
                                            
                                            
                                            33,104
                                            
                                            
                                            
                                            33,162Incremental
      common shares issuable under stock options and awards
                                            
                                            
                                            29
                                            
                                            
                                            
                                            124Weighted
      average common shares outstanding assuming dilution
                                            
                                            
                                            33,133
                                            
                                            
                                            
                                            33,286Earnings
      per shareBasic
                                            
                                            $
                                            0.02
                                            
                                            
                                            $
                                            0.05Diluted
                                            
                                            $
                                            0.02
                                            
                                            
                                            $
                                            0.05
  For the
quarters ended April 5, 2009 and March 30, 2008, potential common
stock from 1,640,617 and 1,619,000 stock options, respectively, were not
included in the diluted earnings per share calculation because their effect is
antidilutive.
  NOTE
L - COMMITMENTS
  We have
approximately $250,000 of contractual purchase commitments related to capital
equipment.
 14
 Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
  Theragenics
Corporation is a medical device company serving the surgical products and cancer
treatment markets, operating in two business segments. The terms “Company”,
“we”, “us”, or “our” mean Theragenics Corporation and all entities included in
our consolidated financial statements.
  Our
surgical products business consists of wound closure, vascular access, and
specialty needle products. Wound closure includes sutures, needles and other
surgical products. Vascular access includes introducers, guidewires, and related
products. Specialty needles include coaxial, biopsy, spinal and disposable
veress needles, access trocars, and other needle based products. This segment
serves a number of markets and applications, including among other areas,
interventional cardiology, interventional radiology, vascular surgery,
orthopedics, plastic surgery, dental surgery, urology, veterinary medicine, pain
management, endoscopy, and spinal surgery. Our surgical products business sells
our devices and components primarily to original equipment manufacturers
(“OEMs”) and to a network of distributors.
  In our
brachytherapy seed business, we produce, market and sell TheraSeed®, our
premier palladium-103 prostate cancer treatment device; I-Seed, our iodine-125
based prostate cancer treatment device; and other related products and services.
We are the world’s largest producer of palladium-103, the radioactive isotope
that supplies the therapeutic radiation for our TheraSeed® device.
Physicians, hospitals and other healthcare providers, primarily located in the
United States, utilize the TheraSeed® device.
The majority of TheraSeed® sales
are channeled through third-party distributors. We also maintain an in-house
sales force that sells our TheraSeed® and
I-Seed devices directly to physicians.
  We have
substantially diversified our operations and revenues in recent years. Prior to
2005, we operated one business segment, our brachytherapy seed business. Through
2002, our sole product was the palladium-103 TheraSeed® prostate
cancer treatment device. In 2003, we began to market an iodine-125 based I-Seed
prostate cancer treatment product. In May 2005, we expanded into the surgical
products business with the acquisition of CP Medical Corporation (“CP Medical”).
In August 2005, we restructured our brachytherapy seed business to sharpen our
focus on our two business segments and provide a more focused platform for
continued diversification. In August 2006, we acquired Galt Medical Corp.
(“Galt”); and in July 2008, we acquired NeedleTech Products, Inc.
(“NeedleTech”). CP Medical, Galt, and NeedleTech comprise our surgical products
business, which accounted for 65% of consolidated revenue for the three months
ended April 5, 2009. Prior to May 2005, the brachytherapy seed business
constituted 100% of our revenue.
  Acquisition
of NeedleTech Products
  We
acquired all of the outstanding common stock of NeedleTech on July 28, 2008. The
total purchase price, including transaction costs, was approximately $44.1
million (net of cash, cash equivalents, and marketable securities acquired of
approximately $5.8 million). We paid the purchase price in cash, including $24.5
million from borrowings under our $40 million credit facility.
  NeedleTech
is a manufacturer of specialty needles and related medical devices. Their
current products include coaxial needles, biopsy needles, access trocars,
brachytherapy needles, guidewire introducer needles, spinal needles, disposable
veress needles, and other needle-based products. End markets served include the
cardiology, orthopedics, pain management, endoscopy, spinal surgery, urology,
and veterinary medicine markets. We believe the acquisition of NeedleTech will
forward our stated strategy of becoming a diversified medical device
manufacturer, will increase our breadth of offerings to our existing customers
and will expand our customer base of large leading-edge OEMs. The results of
NeedleTech’s operations were included in our consolidated results subsequent to
acquisition.
  Results
of Operations
  Change
in segment reporting
  In the
first quarter of 2009, we changed the manner in which we allocate the cost of
corporate activities to our business segments. Operating expenses associated
with corporate activities are now allocated based on the relative revenue of
each business segment. With the acquisition of NeedleTech in July 2008, the
continued integration of acquired companies, the implementation of our R&D
program for our surgical products segment, and our program to standardize our
information technology systems across all of our businesses, among other things,
we believe this method more accurately reflects the utilization of corporate
resources. This is also the method we now utilize internally to review results
and allocate resources. Previously, we charged the significant portion of
expenses associated with corporate activities to the brachytherapy segment. We
have restated our segment results for the 2008 period to reflect this change in
the method of allocating corporate expenses. This change did not affect the
reported amounts of segment revenue. This change also had no effect on our
consolidated results of operations previously reported for the 2008
period.
 15
  Revenue
  Following
is a summary of revenue by segment (in thousands):
 Quarter
      Ended
                                                      
                                                      
                                                      Increase
      (decrease)April
      5,
                                                        2009
                                                      
                                                      
                                                      March
      30,
                                                        2008
                                                      
                                                      
                                                      $
                                                      
                                                      
                                                      %Revenues:Surgical
      products and fees
                                                      
                                                      $
                                                      13,149
                                                      
                                                      
                                                      $
                                                      7,320
                                                      
                                                      
                                                      $
                                                      5,829
                                                      
                                                      
                                                      
                                                      79.6
                                                      %Brachytherapy
      seed
                                                      
                                                      
                                                      6,987
                                                      
                                                      
                                                      
                                                      7,966
                                                      
                                                      
                                                      
                                                      (979
                                                      )
                                                      
                                                      
                                                      (12.3
                                                      )%Intersegment
      eliminations
                                                      
                                                      
                                                      (59
                                                      )
                                                      
                                                      
                                                      (51
                                                      )
                                                      
                                                      
                                                      (8
                                                      )
                                                      
                                                      
                                                      15.7
                                                      %Consolidated
                                                      
                                                      $
                                                      20,077
                                                      
                                                      
                                                      $
                                                      15,235
                                                      
                                                      
                                                      $
                                                      4,842
                                                      
                                                      
                                                      
                                                      31.8
                                                      %
  Revenue
in our surgical products business increased 80% over 2008 as a result of our
NeedleTech acquisition, organic growth, and expanded programs for existing
customers. On a pro forma basis, as if the NeedleTech acquisition had occurred
on January 1, 2008, revenue in our surgical products segment would have
increased 12% over the first quarter of 2008. All major product lines in our
surgical products segment realized organic growth. A significant portion of the
products in our surgical business is sold to OEMs and a network of distributors.
Ordering patterns of these customers vary and are difficult to predict.
Accordingly, surgical products revenue is subject to fluctuation, especially on
a quarter-to-quarter basis. In addition, the volatility and disruptions in the
U.S. and global economies and credit markets, and other uncertainties due to the
economic slowdown have had an effect on our surgical product revenue. As general
economic conditions worsened in the fourth quarter of 2008, scheduled shipping
dates for our open orders during the fourth quarter were farther out than we
historically experienced. We believe the lengthening lead times were, at least
in part, reflect our customers’ response to efforts by hospitals to reduce
inventories and conserve cash. Our shipments and revenue in the first quarter of
2009 benefited, at least in part, from those open orders being filled. We did
not experience a similar delay in requested shipping dates during the first
quarter of 2009. We do not know whether this indicates a return to our
historical lead times. Looking forward, we expect that the difficult economic
climate and macroeconomic uncertainties generally will continue to affect our
surgical products business at least through 2009 and into 2010, and perhaps make
the fluctuations in our results even more volatile from period to
period.
  Brachytherapy
product sales decreased 12% compared to 2008. We believe that the industry wide
decline in prostate brachytherapy procedure volume experienced in 2008 continued
in 2009. Some newer forms of treatment have increased their market share,
especially those with Medicare reimbursement levels that are higher than
reimbursement levels for brachytherapy. These newer forms of alternative
treatments include Intensity Modulated Radiation Therapy (“IMRT”) and robotic
surgery. Our revenues also continue to be affected by the performance of our
main distributor. Sales to this distributor declined 25% in the first quarter of
2009 compared with 2008. We also maintain our own internal brachytherapy sales
force that sells TheraSeed®and
I-Seed directly to hospitals and physicians. Our direct sales declined only 5%
in 2009. Revenue from direct sales was 50% of total brachytherapy segment
revenue in the first quarter of 2009 and 47% in 2008. In addition to treatment
options that enjoy favorable reimbursement rates, we believe brachytherapy seed
revenue is also affected by disruptive pricing from other brachytherapy
providers and uncertainties surrounding reimbursement. The average selling price
of the TheraSeed® device
sold directly to hospitals and physicians during the first quarter of 2009 was
comparable to the 2008 period.
  We have
two non-exclusive distribution agreements in place for the distribution of the
TheraSeed® device.
The primary distribution agreement is with C. R. Bard (“Bard”), which is
effective through December 31, 2010 (the “Bard Agreement”). Sales to Bard under
the Bard Agreement represented approximately 45% and 52% of brachytherapy
product revenue in the first quarter of 2009 and 2008, respectively, and 15% and
26% of consolidated revenue in the first quarter of 2009 and 2008, respectively.
The terms of the Bard Agreement provide for automatic one-year extensions of the
term, unless either party gives notice of its intent not to renew at least
twelve months prior to the end of the current term. The current term expires on
December 31, 2010 and will be automatically extended for one additional year
unless either party gives notice of its intent not to extend by December 31,
2009. We also have a non-exclusive distribution agreement in place with a second
distributor, though revenue generated from the second distributor was not
material.
 16
  We
believe that Medicare reimbursement policies have affected the brachytherapy
market and will continue to affect the brachytherapy market. During 2007
Medicare continued to reimburse for brachytherapy seeds under the “charges
adjusted to costs” methodology, which is based on the actual invoiced cost of
the seeds and which we sometimes refer to as a “pass-through” methodology. In
December 2007, Congress enacted the Medicare, Medicaid and SCHIP Extension Act
of 2007, which extended the existing cost-based reimbursement methodology
through June 30, 2008. On July 15, 2008, the Medicare Improvements for Patients
and Providers Act of 2008 (the “2008 Act”) was enacted into law. The 2008 Act
extends Medicare’s long standing cost-based reimbursement methodology for
brachytherapy seeds administered in the hospital outpatient setting through
December 31, 2009, ensuring that the Medicare program does not implement
potentially restrictive caps on reimbursement during this period. The 2008 Act
was retroactive to July 1, 2008. The potential for fixed Medicare reimbursement
rates after the expiration of the 2008 Act and other factors can be expected to
lead to continued pricing pressure from hospitals and other health care
providers. Any of these factors could have an adverse effect on brachytherapy
revenue.
  Operating
income and costs and expenses
  Following
is a summary of operating income by segment (in thousands):
 Quarter
      Ended
                                                    
                                                    
                                                    DecreaseApril
      5,
                                                      2009
                                                    
                                                    
                                                    March
      30,
                                                      2008
                                                    
                                                    
                                                    $
                                                    
                                                    
                                                    %Operating
      incomeSurgical
      products
                                                    
                                                    $
                                                    79
                                                    
                                                    
                                                    $
                                                    575
                                                    
                                                    
                                                    $
                                                    (496
                                                    )
                                                    
                                                    
                                                    (86.3
                                                    %)Brachytherapy
      seed
                                                    
                                                    
                                                    1,118
                                                    
                                                    
                                                    
                                                    1,663
                                                    
                                                    
                                                    
                                                    (545
                                                    )
                                                    
                                                    
                                                    (32.82
                                                    %)Intersegment
      eliminations
                                                    
                                                    
                                                    7
                                                    
                                                    
                                                    
                                                    12
                                                    
                                                    
                                                    
                                                    (5
                                                    )
                                                    
                                                    
                                                    (41.7
                                                    %)Consolidated
                                                    
                                                    $
                                                    1,204
                                                    
                                                    
                                                    $
                                                    2,250
                                                    
                                                    
                                                    $
                                                    (1,046
                                                    )
                                                    
                                                    
                                                    (46.5
                                                    %)
  Operating
income in our surgical products segment included the results of NeedleTech
subsequent to our acquisition on July 28, 2008. Accordingly, NeedleTech was
included in our first quarter of 2009 results but not in the first quarter of
2008. Gross margins in our surgical products segment were 39% in 2009 compared
to 47% in 2008. In the first quarter of 2009 gross margins were affected by
higher than normal rework and scrap rates and by sales channel and product mix.
Selling, general, and administrative (“SG&A”) expenses in our surgical
products segment was 27% of revenue in 2009 compared to 31% in 2008. We gained
efficiencies from the larger scale of the surgical business. This was partially
offset by higher professional fees in the 2009 period mainly related to the
goodwill impairment issues that were addressed early in 2009. We also incurred
expenses in 2009 related to our program to standardize the information
technology (“IT”) systems across all of our businesses and locations. Research
and development (“R&D”) expenses increased $483,000 over 2008. We
implemented a new R&D program in our surgical products business in the
second half of 2008. This R&D program is intended to focus on product
extensions, next generation products, and new products that are complementary to
our current product lines. We expect to continue to invest in infrastructure and
R&D during 2009, as investments are made to support anticipated future
growth and to develop products to address growth opportunities in our surgical
products business. Looking forward, our quarterly results are expected to be
affected by the timing of these investments. In addition, prior to
December 31, 2008, we estimated that our tradenames intangible assets had
indeterminate lives and, accordingly, were not subject to amortization.  At
December 31, 2008, we determined that current facts and circumstances no longer
supported an indefinite life for our tradenames intangible asset.  We
estimated that the remaining useful life of the recorded amount of our
tradenames was 10 years and accordingly, we began to amortize tradenames over 10
years beginning in 2009. Amortization expense was $81,000 in the first quarter
of 2009 and is expected to be $324,000 for the year ending December 31,
2009.  Periods prior to this change will not be restated or retrospectively
adjusted.
  Operating
income in our brachytherapy business decreased $545,000 from the first quarter
of 2008. The decline in operating income is primarily a result of lower
revenues. Manufacturing related expenses in our brachytherapy business tend to
be fixed in nature. Accordingly, even modest declines in revenue have a negative
impact on operating income. Gross margins and operating income in our
brachytherapy seed business are expected to continue to be highly dependent on
sales levels due to this high fixed cost component. Professional fees and IT
related expenses increased during 2009, similar to our surgical products
segment. Partially offsetting the lower revenue and these increased operating
expenses was a decrease in SG&A expenses from the elimination of maintenance
and carrying costs related to our Oak Ridge facility, which we sold in July
2008.
  17
  Other
income/expense
  Interest
income decreased to $11,000 in the first quarter of 2009 from $459,000 in 2008
due to significantly lower yields on our investment portfolio. Due to the
uncertainties and risks inherent in the current investment and credit markets,
our investment portfolio in 2009 is much more conservatively invested than it
was last year. All of our investments are currently held in banks, U.S.
Treasury Bills or highly rated money market accounts. Looking forward, we may
invest our funds in higher yielding investments if those investments meet the
conservative criteria established by our investment policies and the
macroeconomic outlook becomes clearer. In addition, we had fewer funds invested
in 2009. A portion of our
available funds in the first quarter of 2008 were utilized in our NeedleTech
acquisition in July 2008. Finally, funds available for investment have and will
continue to be utilized for our current and future expansion programs and
strategic opportunities for growth and diversification. As funds continue to be
used for these programs and activities, and as interest rates continue to
change, we expect interest income to fluctuate accordingly.
 Interest
expense decreased to $129,000 in the first quarter of 2009 from $146,000 in
2008. This decline was a result of lower interest rates on the outstanding
borrowings under our credit facility. The 2008 period also included interest
accretion from the contract termination liability associated with our Oak Ridge
building. That building was sold in July 2008 and the related contract
termination liability was eliminated. Interest on outstanding borrowings under
our credit agreement is payable at LIBOR plus 1%, which had an effective rate of
1.5% at April 5, 2009. The effective rate at the end of the first quarter in
2008 was 4.1%. If interest rates had not declined, our interest expense would
have been significantly higher in 2009 due to an additional $24.5 million of
borrowings under our credit facility for the NeedleTech acquisition. Future
levels of interest expense will be dependent on the level of outstanding
borrowings and on changes in the underlying LIBOR rate. Such changes are
impossible for us to predict, especially in the current economic environment. To
date we have not hedged the interest costs related to our credit facility. We
may hedge our interest rate risk in the future, depending on, among other
things, the intermediate and long-term outlook for interest rates and the risks
and costs associated with hedging such items.
  Our
current credit facility expires in October 2009. We are actively pursuing a
replacement or renewal credit facility. Should we be successful in renewing or
replacing our current credit facility, future interest expense will also be
impacted by any new terms, increases or decreases in the effective interest rate
on borrowings, and any future borrowings to support expansion programs and
strategic opportunities for growth and diversification. Due to the current
economic environment and severe difficulties in the credit markets, any new or
replacement credit facility is likely to be on less favorable terms than our
current credit facility.
  Income
tax expense
  Our
effective income tax rate for the first quarter of 2009 and 2008 was
approximately 44% and 36%, respectively, which includes federal and state income
taxes. Our tax rate in the first quarter of 2009 was significantly higher than
our normal rates because of the non-cash write off of deferred income tax assets
related to certain share based compensation. Upon vesting
of restricted shares, the tax deduction we receive is determined by the
underlying value of the shares at the vesting date. In the first quarter of
2009, this value was less than the expense we were required to record for
financial reporting purposes under Statement of Financial Accounting Standards
123R, “Share-Based
Payment” (“SFAS 123R”), requiring us to write off the deferred tax asset
associated with them. This income tax expense amount is not related to the
amount of pre-tax income and, accordingly, has a significant effect on the tax
rate. Under SFAS 123R, differences between deductible temporary differences
related to share based payments and the tax deduction that would result based on
the current fair value of our shares cannot be considered in measuring the gross
deferred tax asset or determining the need for a valuation allowance recognized
under SFAS 123R. In other words, prior to the vesting of these restricted
shares, we cannot provide a valuation allowance for this deferred tax asset or
otherwise write this asset off, even though we believe that all or a
portion of the asset will not ultimately be realized. This circumstance may
continue to cause fluctuations in our effective income tax rate for financial
reporting purposes.
  18
  Critical
Accounting Policies and Estimates
  The
preparation of financial statements requires us to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The SEC defines “critical accounting policies” as those that
require application of our most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effect of matters that
are inherently uncertain and may change in subsequent periods. Our significant
accounting policies are more fully described in the notes to our consolidated
financial statements included in our Form 10-K for the year ended December 31,
2008. Certain accounting policies, as more fully described under “Critical Accounting Policies and
Estimates” included in the Management’s Discussion and Analysis of our
2008 Form 10-K, are those which we believe are most critical in fully
understanding and evaluating our reported financial results, and are areas in
which our judgment in selecting an available alternative might produce a
materially different result. There have been no significant changes to our
critical accounting policies since December 31, 2008.
  New
Accounting Pronouncements
  In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, Fair Value
Measurements. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value in GAAP, and expands disclosures about fair value
measurements. SFAS No. 157 was effective for us on January 1, 2008. However, in
February 2008 the FASB released FASB Staff Position (“FSP”) No. FAS 157-2, Effective Date of FASB Statement
No. 157, which delayed the effective date of SFAS No. 157 for all
non-financial assets and non-financial liabilities, except those that are
recognized or disclosed in the financial statements at fair value at least
annually. This deferral of SFAS No. 157 primarily applied to our retirement
obligation related to future decommissioning costs, which uses fair value
measures to determine our liability. We adopted FSP SFAS No. 157-2 effective
January 1, 2009. The adoption did not have a material impact on our consolidated
financial statements.
  In April
2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3 (“FSP FAS 142-3”),
Determination of the Useful
Life of Intangible Assets. The intent of the FSP FAS 142-3 is to improve
the consistency between the useful life of a recognized intangible asset under
SFAS No. 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS No. 141R and other GAAP. We adopted FSP FAS 142-3
effective January 1, 2009. The adoption did not have a material impact on our
consolidated financial statements. In connection with our year-end review of
tradename impairment though, we determined that current facts and circumstances
no longer supported an indefinite life. We estimated that the remaining useful
life of the tradenames was ten years and accordingly, we started amortizing our
tradenames over ten years in 2009. Amortization expense was $81,000 higher in
the first quarter of 2009 and is expected to be $324,000 higher for the entire
year of 2009 than it would have been if tradenames were not subject to
amortization.
  Liquidity
and Capital Resources
  We had
cash and cash equivalents of $41.3 million at April 5, 2009, compared to $39.1
million at December 31, 2008. The aggregate increase in cash and cash
equivalents was primarily the result of cash generated from operations,
partially offset by capital expenditures.
  We have a
Credit Agreement with a financial institution that provides for revolving
borrowings of up to $40.0 million, including a $5.0 million sub-limit for
letters of credit. $32.0 million of borrowings was outstanding under the Credit
Agreement as of April 5, 2009. Interest is payable quarterly at LIBOR plus 1%
(effective rate of 1.5% at April 5, 2009). Letters of credit totaling $876,000,
representing decommission funding required by the Georgia Department of Natural
Resources, were outstanding under the Credit Agreement as of April 5, 2009. The
Credit Agreement is unsecured, but provides for a lien to be established on
substantially all of our assets (subject to certain exceptions) in the event
certain events of default occur under the Credit Agreement. The Credit
Agreement, as amended, contains representations and warranties, as well as
affirmative, reporting and negative covenants, customary for financings of this
type. Among other things, certain provisions of the Credit Agreement limit the
incurrence of additional debt and require the maintenance of certain financial
ratios. In addition, the Credit Agreement requires us to maintain $20 million of
liquid assets, as defined in the credit facility. We were in compliance with
these covenants as of April 5, 2009. Our Credit Agreement expires on October 31,
2009. See Credit Agreementbelow for more information.
  Cash
provided by operations was $1.3 million and $2.1 million during the first
quarter of 2009 and 2008, respectively. Cash provided by operations consists of
net earnings plus non-cash expenses such as depreciation, amortization, deferred
income taxes and changes in balance sheet items such as accounts receivable,
inventories, prepaid expenses and payables. The reduction in cash provided from
operations in 2009 as compared to 2008 is primarily due to lower net
earnings.
  During
2008 we sold our Oak Ridge facility and generated an income tax loss. In the
second quarter of 2009, the use of this income tax loss allowed us to recover
$1.5 million of income taxes previously paid during 2008. The use of this loss
also allowed us to reduce income taxes payable in the first quarter of 2009 by
$515,000. At the end of the first quarter of 2009, remaining tax losses from the
sale of our Oak Ridge facility are not material.
  19
  Capital
expenditures totaled $546,000 and $510,000 during the first quarter of 2009 and
2008, respectively. The expenditures were primarily to support continued growth
and capacity in the surgical products business. We expect our capital
expenditures to increase in 2009 as we continue our investments to support
growth in the surgical products segment and maintain the brachytherapy segment.
Capital expenditures are also expected to increase during 2009 as a result of
our strategic initiative to standardize the information technology systems
across all of our businesses and locations. In our surgical products business we
expect to move one of our manufacturing operations to a larger leased facility
during 2009. These programs, along with our capital expenditures in the normal
course, could increase our capital expenditure level to as much as $5.0 million
in 2009.
  Cash
provided/used by financing activities was not material in the first quarter of
2009 or 2008.
  Research
and development (R&D) expenses were $603,000 in the first quarter of 2009,
compared to $133,000 in 2008. This increase is a result of the R&D program
we initiated in our surgical products segment in the second half of 2008. This
R&D program is intended to focus on product extensions, next generation
products, and new products that are complementary to our current product lines.
We expect to continue to use cash in 2009 to support growth in the surgical
products segment, especially for this R&D program. This new R&D effort
may increase our R&D expenses to as much as $3.5 million in 2009, depending
on the opportunities. We may also continue to use cash for increased marketing
and TheraSeed®support
activities, and in the pursuit of additional diversification efforts such as
product development and the purchase of technologies, products or companies. We
believe that current cash and investment balances combined with cash from future
operations will be sufficient to meet our current short-term anticipated working
capital and capital expenditure requirements. However, continued disruption and
instability in the U.S. and global financial markets and worldwide economies may
hinder our ability to take advantage of opportunities for long-term growth in
our businesses. In the event additional financing becomes necessary, we may
choose to raise those funds through other means of financing as
appropriate.
  Credit
Agreement
  Our $40
million Credit Agreement expires on October 31, 2009. We are actively seeking to
replace or renew this Credit Agreement. However, U.S. and global market and
economic conditions continue to be disruptive and volatile. The disruption has
been particularly acute in the financial sector and conditions
have continued to deteriorate in 2009. Financial institutions in particular
have encountered severe difficulties, political influences and other pressures
in the current economic environment. Although we believe these recent events
have not materially affected our liquidity, the cost and availability of funds
has been adversely affected by, among other things, general economic conditions,
illiquid credit markets, and conditions in the banking industry. Continued
disruption in the capital markets could adversely affect our ability to renew or
replace this Credit Agreement. Any new or replacement facility will likely be
under terms that are not as favorable as the current Credit Agreement. The
negative impact of recent and continuing adverse changes in the economy and
credit markets generally or our inability to obtain financing on favorable
terms, if at all, may have a material adverse effect on our results of
operations and business.
  Medicare
Developments
  The
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “2003
Act”), which went into effect on January 1, 2004, contained brachytherapy
provisions requiring Medicare to reimburse hospital outpatient
departments for each brachytherapy seed/source furnished between January 1,
2004 to December 31, 2006 based on the hospital’s costs for each patient
(calculated from the hospital’s charges adjusted by the hospital’s specific
cost-to-charge ratio). The 2003 Act also directed the U.S. Government
Accountability Office (“GAO”) to conduct a study examining future payment
policies for brachytherapy seeds. The GAO published its report on July 25, 2006,
concluding that the Centers for Medicare & Medicaid Services (“CMS”), the
regulatory body that sets Medicare reimbursement policies, could establish
separate prospective payment rates effective in 2007 for palladium-103
brachytherapy seeds/sources (such as TheraSeed®) and
iodine-125 seeds/sources using Medicare’s hospital outpatient data.
  20




Although
subsequently superceded by Congress, CMS posted a final rule on November 1, 2006
with fixed prospective payment rates for brachytherapy seeds for Medicare’s
hospital outpatient prospective payment system (“OPPS”) that would have applied
to calendar year 2007. The use of prospective payment rates would have fixed the
per seed rate at which Medicare would have reimbursed hospitals in 2007. We
believed that CMS’ approach to determining the fixed prospective reimbursement
rate for brachytherapy seeds was fundamentally flawed. For example, CMS did not
stratify cost data on differing seed configurations, such as loose versus
“stranded” seeds. Accordingly, we continued to work with policy makers in an
effort to rectify the shortcomings we believed to be contained in the new CMS
rule.
  In
December 2006, Congress enacted the Tax Relief and Health Care Act of 2006 (the
“2006 Act”), which extended and refined the Medicare safeguards initially
enacted by Congress in 2003 for brachytherapy seeds administered in the hospital
outpatient setting. The 2006 Act’s provisions on brachytherapy superceded the
final rule published by CMS on November 1, 2006 by extending the existing
“charges adjusted to cost” reimbursement policies (which we sometimes refer to
as a “pass-through” methodology) for brachytherapy seeds through the end of
2007, ensuring that the Medicare program would not implement potentially
restrictive caps on reimbursement during that period. In addition, the
legislation recognized that prostate cancer patients must have meaningful access
to stranded brachytherapy seeds, which increasingly are used in clinical
practice to further enhance the safety and efficacy of treatment. The 2006 Act
also established a permanent requirement for Medicare to use separate codes for
the reimbursement of stranded brachytherapy devices. Stranded seeds are becoming
a larger portion of our brachytherapy business.


Effective
July 2007, CMS issued new reimbursement codes for brachytherapy sources. The
codes are isotope specific and recognize the distinction between non-stranded
versus stranded seeds, as mandated by the 2006 Act. In early November 2007, CMS
again posted a final OPPS rule for calendar year 2008 with fixed prospective
reimbursement rates for all brachytherapy source codes, including the new codes
established in July 2007.




In
December 2007, Congress passed the Medicare, Medicaid and SCHIP Extension Act of
2007 (the “2007 Act”), which once again superseded another CMS final OPPS rule
by extending the existing “pass-through” reimbursement policies for
brachytherapy seeds through June 30, 2008. Fixed reimbursement rates would have
become effective on January 1, 2008 without the enactment of the 2007 Act. As a
result of the 2007 Act, fixed reimbursement rates for seeds were delayed until
July 1, 2008.




On July
15, 2008, the Medicare Improvements for Patients and Providers Act of 2008 (the
“2008 Act”) was enacted into law. The 2008 Act extends Medicare’s longstanding
“pass through” reimbursement policies for brachytherapy seeds administered in
the hospital outpatient setting through December 31, 2009, ensuring that the
Medicare program does not implement potentially restrictive caps on
reimbursement during this period. The 2008 Act was retroactive to July 1, 2008.
We expect to continue to support efforts to extend the “pass-through”
reimbursement policies beyond 2009. The potential for fixed reimbursement rates
after the expiration of the 2008 Act on December 31, 2009 and other factors can
be expected to lead to continued pricing pressure from hospitals and other
health care providers. Any of these factors could have an adverse effect on
brachytherapy revenue.




Forward
Looking and Cautionary Statements




This
document contains certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, the accuracy of which is
necessarily subject to risks and uncertainties, including, without limitation,
statements regarding sales, marketing and distribution efforts, ordering
patterns of customers, our direct sales organization and its growth and
effectiveness, third-party reimbursement, CMS policy, sales mix, effectiveness
and continuation of non-exclusive distribution agreements, pricing for the
TheraSeed® and
I-Seed devices, anticipated growth in the surgical products business segment,
future cost of sales and gross margins, R&D efforts and expenses (including
our centralized, corporate-wide R&D initiative), investment in additional
personnel, infrastructure and capital assets, implementation of information
technology systems, SG&A expenses, other income, potential new products and
opportunities, the potential effect of the NeedleTech acquisition on our
surgical products business and on our consolidated results generally, expected
changes in interest income and interest expenses, the effect on our results and
cash flows from accounting for the income tax effect of the sale of our Oak
Ridge facility, results in general, plans and strategies for continuing
diversification, valuation of cash equivalents and marketable securities, and
the sufficiency of our liquidity and capital resources. From time to time, we
may also make other forward-looking statements relating to such matters as well
as statements relating to anticipated financial performance, business prospects,
technological developments 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 new product development cycles, effectiveness and execution of
marketing and sales programs of our business segments and their distributors,
competitive conditions and selling tactics of our competitors, potential changes
in third-party reimbursement (including CMS), changes in product pricing by our
brachytherapy business segment, changes in cost of materials used in production
processes, continued acceptance of our products by the market, potential changes
in demand for the products manufactured and sold by our brachytherapy and
surgical products segments, integration of acquired companies into the
Theragenics organization, ability and resources to implement an information
technology system, capitalization on opportunities for growth within our
surgical products business segment, competition within the medical device
industry, development and growth of new applications within our markets,
competition from other methods of treatment, ability to execute on acquisition
opportunities on favorable terms and successfully integrate any acquisition, the
ability to realize our estimate of fair value upon sale or other liquidation of
marketable securities and cash equivalents that we may hold, volatility in U.S.
and global stock markets, economic conditions generally, potential changes in
tax rates and market interest rates, the effect of current difficulties in the
credit markets on our business, our ability to renew or replace our current
credit facility and the current expectation that a renewed or replacement credit
facility would be on less favorable terms than the current facility in view of
current market conditions, our ability to maintain our listing on the NYSE and
comply with the applicable continued listing standards, and the risks identified
elsewhere in this report. All forward looking statements and cautionary
statements included in this document are made as of the date hereof based on
information available to us, and we assume no obligation to update any forward
looking statement or cautionary statement.


21




Item
3. Quantitative and
Qualitative Disclosures About Market Risk




We have
borrowings of $32.0 million and letters of credit totaling approximately
$876,000 outstanding under our $40.0 million credit facility as of April 5,
2009. Interest on outstanding borrowings is payable monthly at LIBOR plus 1%
(effective rate of 1.5% as of April 5, 2009). Accordingly, we are exposed to
changes in interest rates on these borrowings. A hypothetical 1% change in the
interest rate applicable to our credit facility would result in an increase or
decrease in interest expense of $320,000 per year before income taxes, assuming
the same level of borrowings under the facility.




U.S. and
global market and economic conditions continue to be disruptive and volatile,
and the disruption has been particularly acute in the financial sector. General
economic and credit conditions have continued to deteriorate in early 2009.
Although we believe these recent events have not materially affected our
liquidity, the cost and availability of funds may be adversely affected by,
among other things, illiquid credit markets. Our $40.0 million Credit Agreement
expires on October 31, 2009. Continued disruption in U.S. and global markets
could adversely affect our ability to renew or replace this credit facility and
any new or replacement facility will likely be under terms that are not as
favorable as our current Credit Agreement. The negative impact of recent and
continuing adverse changes in the economy and credit markets generally or our
inability to obtain financing on favorable terms, if at all, may have a material
adverse effect on our results of operations and business.




Item
4. Controls and
Procedures




Under the
supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, we conducted an evaluation
of the effectiveness of the design and operation of our disclosure controls
and procedures, as such term is defined under Rule 13a-15(e) promulgated under
the Securities Exchange Act of 1934, as amended. Based on this evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of April 5, 2009, the end of the
period covered by this report. We acquired NeedleTech Products, Inc.
(“NeedleTech”) on July 28, 2008. Since the date of acquisition, we have been
focusing on analyzing, evaluating, and implementing changes in NeedleTech’s
procedures and controls to determine their effectiveness and to make them
consistent with our disclosure controls and procedures. Prior to our acquisition
of NeedleTech, they were not required to maintain disclosure controls and
procedures or maintain, document and assess internal control over financial
reporting, in each case as required under the rules and regulation of the U.S.
Securities and Exchange Commission. Accordingly, we expect that it will take
several months to continue to analyze NeedleTech’s procedures and controls and
expect to make additional changes to those controls in the future. As permitted
by guidance issued by the staff of the U.S. Securities and Exchange Commission,
NeedleTech has been excluded from the scope of our quarterly discussion of
material changes in internal control over financial reporting below. We have
performed additional procedures to review accounting records and substantiate
the financial information of NeedleTech included in this report. NeedleTech was
included in our results of operations subsequent to our acquisition on July
28, 2008 and constituted 22.9% of our consolidated revenues for the three months
ended April 5, 2009.




No
changes in our internal control over financial reporting were identified as
having occurred during the quarter ended April 5, 2009 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting, except as described above with respect to NeedleTech.
Changes to processes, information technology systems, and other components of
internal control over financial reporting resulting from the acquisition of
NeedleTech are expected as the integration proceeds.




22




PART
II. OTHER INFORMATION
  Item
1. Legal
Proceedings
  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.
  Item
1A. Risk
Factors
  In
addition to the other information set forth in this report, the factors
discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2008, which could materially affect our
business, financial condition or future results, should be carefully considered.
The risks described in our Annual Report on Form 10-K are not the only risks
facing us. Additional risks and uncertainties not currently known to us or that
we currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.


23




Item 6.Exhibits
 Exhibit No.
                                                    
                                                    
                                                    Title10.1
                                                    
                                                    2009
      Long-Term Cash Incentive Plan (incorporated by reference to Exhibit 10.1
      of the Company’s Form 8-K dated March 4, 2009).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.
 24


SIGNATURES




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
      CORPORATIONDate:
      May 12, 2009
              By:
              /s/
      M. Christine JacobsM.
      Christine JacobsChief
      Executive OfficerDate:
      May 12, 2009
              By:
              /s/
      Francis J. TaralloFrancis
      J. TaralloChief
      Financial Officer
  25