Page 1

# 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 September 30, 2003

or

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
 (State or other jurisdiction of  
 incorporation or organization)                                     | 58-1528626
  (I.R.S. Employer
Identification Number)
|5203 Bristol Industrial Way
                Buford, Georgia           
(Address of principal executive offices) | 30518
(Zip Code)                                    

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 such
filing requirements for the past 90 days. YES X _ NO ___

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES
X _

NO ___

As of November 10, 2003 the
number of shares of $.01 par value common stock outstanding was 29,936,996.

---

THERAGENICS
CORPORATION®

TABLE OF CONTENTS

|                                                                                                                                    |         
|----------------------------------------------------------------------------------------------------------------------------------- | --------
|PART I.    FINANCIAL INFORMATION:                                                                                                   | Page No.
|ITEM 1.     FINANCIAL STATEMENTS (UNAUDITED)                                                                                        |         
|Balance Sheets - September 30, 2003 and December 31, 2002                                                                           | xx      
|Statements of Earnings for the three and nine months ended
                 
                September 30, 2003 and 2002            | xx      
|Statements of Cash Flows for the nine months ended
                   
              September 30, 2003 and 2002                    | xx      
|Statement of Changes in Stockholders' Equity for the nine
                  
               months ended September 30, 2003         | xx      
|Notes to Financial Statements                                                                                                       | xx      
|ITEM 2.    
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 
                CONDITION AND RESULTS OF OPERATIONS |         
|ITEM 3.    
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                     
            MARKET RISK                            |         
|ITEM 4.    
 CONTROLS AND PROCEDURES                                                                                                | xx      
|PART II.    OTHER INFORMATION                                                                                                       | xx      
|ITEM 1.    
LEGAL PROCEEDINGS                                                                                                       | XX      
|ITEM 4.    
SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS                                                                   | XX      
|ITEM 6.    
EXHIBITS AND REPORTS ON FOR 8-K                                                                                         | XX      
|SIGNATURES                                                                                                                          | XX      

---

# THERAGENICS
CORPORATION®BALANCE SHEETS

# (Amounts in thousands,
except per share data)

ASSETS

|                                                     | September 30, | December 31,
|---------------------------------------------------- | ------------- | ------------
|
|                                                     |               |             
|                                                     |               |             
|CURRENT ASSETS                                       |               |             
|Cash and short-term investments                      |               |             
|Marketable Securities                                |               |             
|Trade accounts receivable, less allowance of $153 in |               |             
|2003 and $147 in 2002                                |               |             
|Inventories                                          |               |             
|Deferred income tax asset                            |               |             
|Prepaid expenses and other current  assets           |               |             
|                                                     |               |             
|TOTAL CURRENT ASSETS                                 |               |             
|Buildings and improvements                           |               |             
|Machinery and equipment                              |               |             
|Office furniture and equipment                       |               |             
|                                                     |               |             
|                                                     |               |             
|Less accumulated depreciation and amortization       |               |             
|                                                     |               |             
|                                                     |               |             
|Land                                                 |               |             
|Construction in progress                             |               |             
|                                                     |               |             
|TOTAL PROPERTY AND EQUIPMENT                         |               |             
|Product line purchase deposit                        |               |             
|                                                     |               |             
|TOTAL ASSETS                                         |               |             
|                                                     |               |             

The accompanying notes are an
integral part of these statements.

# THERAGENICS
CORPORATION®BALANCE SHEETS

# (Amounts in thousands,
except per share data)

LIABILITIES &
STOCKHOLDERS EQUITY

|                                          | September 30, | December 31,
|----------------------------------------- | ------------- | ------------
|
|
|                                          |               |             
|CURRENT LIABILITIES                       |               |             
|Trade accounts payable                    |               |             
|Accrued salaries, wages and payroll taxes |               |             
|Other current liabilities                 |               |             
|                                          |               |             
|TOTAL CURRENT LIABILITIES                 |               |             
|LONG-TERM LIABILITIES                     |               |             
|Deferred income taxes                     |               |             
|Asset retirement obligation               |               |             
|Other liabilities                         |               |             
|                                          |               |             
|TOTAL LONG-TERM LIABILITIES               |               |             
|STOCKHOLDERS' EQUITY                      |               |             
|Common stock, $.01 par value, 100,000     |               |             
|shares authorized; 29,933 and 29,760      |               |             
|issued and outstanding                    |               |             
|Additional paid-in capital                |               |             
|Retained earnings                         |               |             
|Accumulated other comprehensive income    |               |             
|                                          |               |             
|TOTAL STOCKHOLDERS' EQUITY                |               |             
|                                          |               |             
|TOTAL LIABILITIES AND                     |               |             
|STOCKHOLDERS' EQUITY                      |               |             
|                                          |               |             

The
accompanying notes are an integral part of these statements.

# THERAGENICS
CORPORATION®STATEMENTS OF OPERATIONS

# (UNAUDITED)

# (Amounts in thousands,
except per share data)

---

|                                                   | Three Months Ended
  September 30, | Nine Months Ended
   September 30,
|-------------------------------------------------- | ---------------------------------- | ----------------------------------
|
|REVENUE                                            |                                    |                                   
|Product sales                                      |                                    |                                   
|Licensing fees                                     |                                    |                                   
|                                                   |                                    |                                   
|Total revenue                                      |                                    |                                   
|COST OF SALES                                      |                                    |                                   
|                                                   |                                    |                                   
|GROSS PROFIT                                       |                                    |                                   
|OPERATING EXPENSES                                 |                                    |                                   
|Selling, general & administrative                  |                                    |                                   
|Research & development                             |                                    |                                   
|                                                   |                                    |                                   
|                                                   |                                    |                                   
|                                                   |                                    |                                   
|EARNINGS/(LOSS) FROM OPERATIONS                    |                                    |                                   
|OTHER INCOME (EXPENSE)                             |                                    |                                   
|Interest income                                    |                                    |                                   
|Interest and financing costs                       |                                    |                                   
|Other                                              |                                    |                                   
|                                                   |                                    |                                   
|                                                   |                                    |                                   
|                                                   |                                    |                                   
|Earnings/(loss) before income tax and cumulative   |                                    |                                   
|effect of change in accounting principle           |                                    |                                   
|Income tax expense/(benefit)                       |                                    |                                   
|                                                   |                                    |                                   
|Earnings/(loss) before cumulative effect of change |                                    |                                   
|in accounting principle                            |                                    |                                   
|Cumulative effect of change in accounting          |                                    |                                   
|principle                                          |                                    |                                   
|                                                   |                                    |                                   
|NET EARNINGS/(LOSS)                                |                                    |                                   
|                                                   |                                    |                                   

---

# THERAGENICS
CORPORATION®

# STATEMENTS OF OPERATIONS
cont

# (UNAUDITED)

# (Amounts in thousands, except
per share data)

|                                                 | Three Months Ended September 30, | Nine Months Ended September 30,
|------------------------------------------------ | -------------------------------- | -------------------------------
|
|NET EARNINGS/(LOSS) PER COMMON SHARE             |                                  |                                
|Basic:                                           |                                  |                                
|Earnings/(loss) before cumulative effect of      |                                  |                                
|change in accounting principle                   |                                  |                                
|Cumulative effect of change in accounting        |                                  |                                
|principle                                        |                                  |                                
|                                                 |                                  |                                
|Net earnings/(loss) per common share (basic)     |                                  |                                
|                                                 |                                  |                                
|Diluted:                                         |                                  |                                
|Earnings/(loss) before cumulative effect of      |                                  |                                
|change in accounting principle                   |                                  |                                
|Cumulative effect of change in accounting        |                                  |                                
|principle                                        |                                  |                                
|                                                 |                                  |                                
|Net earnings/(loss) per common share (diluted) $ |                                  |                                
|                                                 |                                  |                                
|WEIGHTED AVERAGE SHARES:                         |                                  |                                
|Basic                                            |                                  |                                
|Diluted                                          |                                  |                                
|Net earnings/(loss)                              |                                  |                                
|Comprehensive income/(loss)                      |                                  |                                
|Unrealized gain/(loss) on securities             |                                  |                                
|available for sale:                              |                                  |                                
|                                                 |                                  |                                
|Total comprehensive income/(loss)                |                                  |                                
|                                                 |                                  |                                

The accompanying notes are an
integral part of these statements.

# THERAGENICS
CORPORATION®STATEMENTS OF CASH FLOWS

# (UNAUDITED)

# (Amounts in thousands,
except per share data)

|                                                                | Nine Months Ended September 30,
|--------------------------------------------------------------- | -------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                           |                                
|Net Earnings                                                    |                                
|Adjustments to reconcile net earnings to                        |                                
|net cash provided by operating activities                       |                                
|Cumulative effect of change in accounting principle             |                                
|Deferred income taxes                                           |                                
|Depreciation & amortization                                     |                                
|Provision for allowances                                        |                                
|Stock-based compensation                                        |                                
|Income tax benefit from options                                 |                                
|Loss on disposal of equipment                                   |                                
|Changes in assets and liabilities:                              |                                
|Accounts receivable                                             |                                
|Inventories                                                     |                                
|Prepaid expenses and other current assets                       |                                
|Other assets                                                    |                                
|Trade accounts payagle                                          |                                
|Accrued salaries, wages and payroll taxes                       |                                
|Other current liabilities                                       |                                
|Other long-term liabilities                                     |                                
|                                                                |                                
|Net cash provided by operating activities                       |                                
|CASH FLOWS FROM INVESTING ACTIVITIES                            |                                
|Purchases and construction of property and equipment            |                                
|Purchases and maturities of marketable securities               |                                
|                                                                |                                
|Net cash used by investing activities                           |                                
|CASH FLOWS FROM FINANCING ACTIVITIES:                           |                                
|Proceeds from exercise of stock options and stock purchase plan |                                
|                                                                |                                
|Net cash provided by financing activities                       |                                
|NET CHANGE IN CASH AND                                          |                                
|SHORT-TERM INVESTMENTS                                          |                                
|CASH AND SHORT-TERM INVESTMENTS AT                              |                                
|BEGINNING OF PERIOD                                             |                                
|                                                                |                                
|CASH AND SHORT-TERM INVESTMENTS AT                              |                                
|END OF PERIOD                                                   |                                
|                                                                |                                

The accompanying notes are an
integral part of these statements.

---

# THERAGENICS
CORPORATION®STATEMENT OF SHAREHOLDERS EQUITY

# FOR THE NINE MONTHS
ENDED September 30, 2003

# (UNAUDITED)

# (Amounts in thousands,
except per share data)

|                                     | Common Stock |  |  |        |  |  
|------------------------------------ | ------------ |  |  | ------ |  | -
|
|BALANCE, December 31, 2002           |              |  |  | 29,760 |  | $
|Exercise of stock options            |              |  |  | 155    |  |  
|Employee stock purchase plan         |              |  |  | 18     |  |  
|Stock-based compensation             |              |  |  | 0      |  |  
|Unrealized gain (loss) on securities |              | 
|available for sale                   |              |  |  | 0      |  |  
|Tax effect from options              |              |  |  | 0      |  |  
|Net earnings for the period          |              |  |  | 0      |  |  
|                                     |              |  |  |        |  |  
|BALANCE, September 30, 2003          |              |  |  | 29,993 |  | $
|                                     |              |  |  |        |  |  

The accompanying notes are an
integral part of these statements.

---

# THERAGENICS
CORPORATION®

# NOTES TO FINANCIAL
STATEMENTS

# SEPTEMBER 30, 2003

# (Unaudited)

# NOTE A  BASIS OF
PRESENTATION

The interim financial statements
included herein have been prepared by the Company without audit. These statements reflect
all adjustments that are, in the opinion of management, necessary to present fairly the
financial position, results of operations, cash flows and changes in stockholders
equity for the periods presented. All such adjustments are of a normal recurring nature.
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. The Company believes that the financial
statements and disclosures are adequate to make the information not misleading. It is
suggested that these financial statements and notes be read in conjunction with the
audited financial statements and notes for the year ended December 31, 2002, included in
the Form 10-K filed by the Company.

Certain amounts in prior period
financial statements have been reclassified to conform to the current periods
presentation.

# NOTE B 
DISTRIBUTION AGREEMENTS AND MAJOR CUSTOMERS

The Company sells its
TheraSeed®directly to health care providers and to third party
distributors. Theragenics also distributes I-Seed, an iodine-125 based medical
device, directly to health care providers. During the first quarter of 2003, the
distribution agreement with one distributor was discontinued upon notification of the
acquisition of the distributor by C. R. Bard, also a TheraSeed®
distributor. In addition, during the second quarter of 2003, Theragenics was
notified that a current distributor acquired another TheraSeed®
distributor. Currently, the Company has non-exclusive distribution agreements in place
with two companies for the distribution of TheraSeed®, C. R. Bard and
Medi-Physics, Inc. (formerly d/b/a/ Nycomed Amersham and now part of Oncura, a company
formed by a merger of the brachytherapy business of Amersham plc and Galil Medical Ltd.)
Sales to the two non-exclusive distributors represented approximately 81% of total product
revenue for the quarter ended September 30, 2003 and 82% for the nine months ended
September 30, 2003, with sales to each of the two non-exclusive distributors exceeding 10%
of total revenue for the quarter and year-to-date. Accounts receivable from the
non-exclusive distributors represented approximately 74% of accounts receivable at
September 30, 2003, both exceeding 10% of total accounts receivable.

# NOTE C 
CONSTRUCTION IN PROGRESS AND PURCHASE COMMITMENTS

The U.S. Department of Energy (DOE)
has granted Theragenics access to unique DOE technology (plasma separation process
or PSP) for use in production of isotopes, including palladium-103. The
Company has constructed a facility in Oak Ridge, Tennessee to house the equipment,
infrastructure and work force necessary to support the production of isotopes, including
palladium-103, using this DOE technology. The building and the PSP became

# THERAGENICS
CORPORATION®

# NOTES TO FINANCIAL
STATEMENTS  CONTINUED

# SEPTEMBER 30, 2003

# (Unaudited)

operational during the latter half of
2002. Additional equipment in the amount of $1.7 million has not yet been placed in
service and is recorded as construction-in-progress on the accompanying balance sheet for
the period ended September 30, 2003.

The Company diversified its product
line in 2003 with the purchase of the U. S. iodine-125 prostate brachytherapy business of
BEBIG Isotopen-und Medizintechnik GmbH (BEBIG), formerly distributed by Isotope Products
Laboratories (both subsidiaries of a publicly traded German company, Eckert & Ziegler
AG). The purchase gives Theragenics exclusive U.S. manufacturing and distribution
rights to an iodine-125-based medical device for the treatment of prostate cancer.
Theragenics also acquired BEBIGs assets related to this operation.
Non-exclusive rights to distribute TheraSeed®in Europe were granted to
BEBIG as part of the transaction. Progress payments are being made to BEBIG based upon
completion of pre-defined milestones. Therefore, the timing of all outstanding payments
and subsequent operation of the equipment may vary based on milestone completion. A total
of approximately $4.2 million in progress payments and professional fees has been paid
through September 30, 2003.

# NOTE D 
CONTINGENCIES

In January 1999, the Company and
certain of its officers and directors were named as defendants in certain securities
actions alleging violations of the federal securities laws, including Sections 10(b),
20(a) and Rule 10b-5 of the Securities and Exchange Act of 1934, as amended. These actions
have been consolidated into a single action pending in the U.S. District Court for the
Northern District of Georgia. The complaint, as amended, purports to represent a class of
investors who purchased or sold securities during the time period from January 29, 1998 to
January 11, 1999. The amended complaint generally alleges that the defendants made certain
misrepresentations and omissions in connection with the performance of the Company during
the class period and seeks unspecified damages. On May 14, 1999 a stockholder of the
Company filed a derivative complaint in the Delaware Court of Chancery purportedly on
behalf of the Company, alleging that certain directors breached their fiduciary duties by
engaging in the conduct that is alleged in the consolidated federal class action
complaint. The derivative action has been stayed by the agreement of the parties. On July
19, 2000, the Court granted the Companys motion to dismiss the consolidated federal
class action complaint for failure to state a claim against the Company, and granted the
plaintiffs leave to amend their complaint. On August 21, 2000, the plaintiffs filed a
second amended complaint and on March 30, 2001, the Court denied the defendants
motion to dismiss the plaintiffs second amended complaint. The Court also denied the
Companys motion for reconsideration. Subsequently, the court certified the class and
the parties commenced discovery. Discovery in the case is now complete. On September 30,
2003 the Company filed a motion for summary judgment, which is currently pending before
the Court. A ruling on this motion is not anticipated until early 2004. Management
continues to believe these charges are without merit and is opposing the litigation
vigorously; however, given the nature and stage of the proceedings, the ultimate outcome
of the litigation cannot be determined at this time. Accordingly, no provision has been
made for any liability that might result from this litigation.

# THERAGENICS
CORPORATION®

# NOTES TO FINANCIAL
STATEMENTS  CONTINUED

# September 30, 2003

# (Unaudited)

# NOTE E  ACCOUNTING
FOR STOCK-BASED COMPENSATION

The Company has four approved stock
option plans, which in aggregate cover up to five million shares of common stock. The
plans provide for the expiration of options ten years from the date of grant and require
the exercise price of the options granted to be at least equal to 100% of market value on
the date granted. Stock options become exercisable over a three  to five-year
vesting period.

In December 2002, the FASB issued
Statement No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure. FAS 148 amends FAS 123 Accounting for Stock-Based
Compensation to provide alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee compensation. In
addition, FAS 148 amends the disclosure requirement of FAS 123 to require more prominent
disclosures in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on reported
results. The additional disclosure requirements of FAS 148 are effective for fiscal years
ending after December 15, 2002. The Company accounts for stock-based compensation for
employees under Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and elected the disclosure-only
alternative under SFAS No. 123, Accounting for Stock-Based Compensation.
No stock-based compensation cost is included in net earnings, as all options granted have
an exercise price equal to the market value of the stock on the date of grant. In
accordance with SFAS No. 148, Accounting for Stock Based
Compensation-Transition and Disclosure, the following table presents the effect on
net earnings and net earnings per share had compensation cost for the Companys stock
plans been determined consistent with SFAS No. 123 (in thousands, except per share
data):

|                                      | Three Months Ended | SNine Months Ended
|------------------------------------- | ------------------ | ------------------
|
|
|Net earnings, as reported             |                    |                   
|Less:  total stock-based compensation |                    |                   
|expense determined under fair value   |                    |                   
|method for all stock options, net of  |                    |                   
|related income tax benefit            |                    |                   
|                                      |                    |                   
|Pro forma net earnings                |                    |                   
|Basic net earnings per common share:  |                    |                   
|As reported                           |                    |                   
|Pro forma                             |                    |                   
|As reported                           |                    |                   
|Pro forma                             |                    |                   
|                                      |                    |                   

---

THERAGENICS
CORPORATION®NOTES TO FINANCIAL
STATEMENTS - CONTINUEDJUNE 30, 2003(Unaudited)

Fair
value was estimated on the grant date using the Black-Scholes options-pricing model with
the following assumptions for options issued during third quarter ending September 30, 2003
and third quarter and nine months ending September 30, 2002.

|                                | Three Months Ended |      | Nine Months Ended
|------------------------------- | ------------------ | ---- | -----------------
|
|
|Expected dividend yield         |                    | 0.0  | %                
|Expected stock price volatility |                    | 75.5 | %                
|Risk-free interest rate         |                    | 3.4  | %                
|Expected life of option (years) |                    | 5.5  |                  
|                                |                    |      |                  

# THERAGENICS
CORPORATION®

# NOTES TO FINANCIAL
STATEMENTS  CONTINUED

# September 30, 2003

(Unaudited)

Fair
value was estimated on the grant date using the Black-Scholes options-pricing model with
the following assumptions for options issued during the nine months ending September 30,
2003 and nine months ending September 30, 2002.

---

# NOTE F  ASSET
RETIREMENT OBLIGATIONS

In September 2001, the FASB issued
Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations, which is effective for the Companys 2003 fiscal year. Under
Statement 143, a future retirement obligation relating to future decommissioning costs of
the Companys equipment and buildings is recorded at present value by discounting the
Companys estimated future asset retirement obligation using the Companys
estimated credit-adjusted borrowing rate. The offset to the liability is capitalized as
part of the carrying amount of the related long-lived asset. The asset retirement
obligation (ARO) has been recorded in the accompanying balance sheet and will be adjusted
to fair value over the estimated useful lives of the assets as an accretion expense.

At January 1, 2003 the Company
adopted Statement 143 and recognized an initial ARO of approximately $478,000 and net
capitalized costs of $126,000. The impact of adopting the Statement was recognized as a
cumulative effect of change in accounting principle in the amount of $353,000 ($222,000
after taxes). The Company has recognized an increase in the ARO of approximately $9,000
and $23,000 for the third quarter and nine months ended September 30, 2003 representing
the accretion expense. Approximately $7,000 and $22,000 in amortization expense was
recognized for the third quarter and nine months ended September 30, 2003 related to the
capitalized cost through the period ending September 30, 2003.

# THERAGENICS
CORPORATION®

# NOTES TO FINANCIAL
STATEMENTS  CONTINUED

# September 30, 2003

# (Unaudited)

The pro forma effects of the
application of Statement 143 as if the Statement had been adopted on January 1, 2002
(rather than January 1, 2003) are presented below:

Pro forma amounts assuming the
accounting change is applied retroactively net-of-tax:

|Pro forma amounts assuming the
accounting change is applied
retroactively net-of-tax: | Three months ended |  | Nine months ended |       
|------------------------------------------------------------------------------------- | ------------------ |  | ----------------- | ------
|
|
|
|Net earnings                                                                          |                    |  | $                 | (388) 
|Basic and diluted net earnings per                                                    |                    | 
|common share                                                                          |                    |  | $                 | (0.01)
|                                                                                      |                    |  |                   |       

The pro forma asset retirement
obligation liability balances as if Statement 143 had been adopted on January 1, 2002
(rather than January 1, 2003) are as follows:

|(in thousands)                                  | Nine months ended September 30,
|----------------------------------------------- | -------------------------------
|
|Pro forma amounts of liability for asset        |                                
|retirement obligation at beginning of 2003      |                                
|Pro forma amounts of liability for asset        |                                
|retirement obligation at end of six months 2003 |                                
|                                                |                                

# NOTE G  UNSECURED
CREDIT AGREEMENT

On October 29, 2003, the Company
signed a Credit Agreement with a financial institution that provides for maximum
borrowings of $40.0 million through a credit facility secured for a three-year term. No
borrowings were outstanding under previous credit agreements as of
September 30, 2003. No borrowings are outstanding under the current Credit Agreement.
Interest on outstanding borrowings is payable at the rate of interest
periodically designated by the financial institution as its base rate, or, at the option
of the Company, interest may accrue at a LIBOR based rate, plus applicable margin which is
subject to quarterly adjustment, based on a performance grid. Interest on base rate loans
is payable monthly, while interest on LIBOR loans is payable on the last day of the
applicable one, two or three month interest period. The Credit Agreement provides for a
springing lien to be established on certain assets of
the Company in the event an event of default (as that term
is defined by the agreement) occurs under the Credit Agreement.

Certain provisions of the Unsecured
Credit Agreement limit the incurrence of debt and require the maintenance of certain
financial ratios, among other things. Letters of credit totaling $933,000 were outstanding
under the prior credit agreement as of September 30, 2003

# THERAGENICS
CORPORATION®

# NOTES TO FINANCIAL
STATEMENTS  CONTINUED

# September 30, 2003

# (Unaudited)

primarily related to
 decommission funding required by the Georgia Department of Natural
Resources.

# NOTE H  NEW
ACCOUNTING PRONOUNCEMENTS

In December 2002, the Emerging Issues
and Task Force (EITF) issued Issue 00-21, or EITF 00-21, for Revenue Arrangements
with Multiple Deliverables. EITF 00-21 provides guidance on determining whether
a revenue arrangement contains multiple deliverable items and if so, requires revenue be
allocated among the different items based on fair value. EITF 00-21 also requires that
revenue on any item in a revenue arrangement with multiple deliverables not delivered
completely must be deferred until delivery of the item is completed.
 EITF 00-21 had an impact on the Company's financial statements, as the Companys
revenue arrangements do not involve multiple deliverables.

In May 2003, the FASB issued
Statement of Financial Accounting Standards No. 150 (SFAS 150), Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.
SFAS 150 requires certain financial instruments that embody obligations of the issuer and
have characteristics of both liabilities and equity to be classified as liabilities. Many
of these instruments previously were classified as equity or temporary equity and as such,
SFAS 150 represents a significant change in practice in the accounting for a number of
mandatory redeemable equity instruments and certain equity derivatives that frequently are
used in connection with share repurchase programs. SFAS 150 is effective for all financial
instruments created or modified after May 31, 2003, and to other instruments at the
beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS
150 had no effect on the Companys results of operations or financial condition.

In April 2003 the Financial
Accounting Standards Board issued Statement No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, effective for contracts entered into or
modified after September 30, 2003, and hedging relationships designated after September
30, 2003. Statement No. 149 clarifies the definition of a derivative, and is intended to
result in more consistent reporting of contracts as either freestanding derivative
instruments subject to Statement No. 133 in its entirety, or as hybrid instruments with
debt host contracts and embedded derivative features. The effect of the adoption of this
statement is not material on the Companys results of operations or financial
condition.

In January 2003, the FASB issued FASB
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51. This Interpretation addresses the consolidation by
business enterprises of variable interest entities as defined in the Interpretation. The
Interpretation applies immediately to variable interests in variable interest entities
created after January 31, 2003. For public enterprises with a variable interest in a
variable interest entity created before February 1, 2003, the Interpretation applies to
that enterprise no later than the beginning of the first interim or annual reporting
period beginning after September 15, 2003. The

# THERAGENICS
CORPORATION®

# NOTES TO FINANCIAL
STATEMENTS  CONTINUED

# September 30, 2003

# (Unaudited)

application of this Interpretation
requires certain disclosures in financial statements issued after January 31, 2003 if it
is reasonably possible that the Company will consolidate or disclose information about
variable interest entities when the Interpretation becomes effective. Management has
evaluated this accounting standard and has determined no disclosure is necessary, as the
Company does not have an interest in variable interest entities.

# NOTE I  REVENUE
RECOGNITION

Product sales represent orders for
the TheraSeed® and I-Seed devices. The implantable radiation devices
produced according to patient and procedure requirements are sold to third-party
distributors, as well as to direct customers. All revenues from product sales are
recognized upon shipment and are generally not returnable. Licensing fees are recognized
in the period to which they relate.

# NOTE J  SUBSEQUENT
EVENT (Credit Facility)

Subsequent to the end of the quarter,
the Company executed a Credit Agreement with a financial institution on October 29, 2003.
The Credit Agreement, which expires on October 29, 2006 (subject to earlier
termination by the lender upon the occurrence of certain events of default), provides for
revolving borrowings of up to $40.0 million at any time outstanding, including a $5.0
million sub-limit for letters of credit. Interest on outstanding borrowings is payable at
the rate of interest periodically designated by the financial institution as its base
rate, or, at the option of the Company, interest may accrue at a LIBOR based rate, plus an
applicable margin which is subject to quarterly adjustment. Interest on base rate loans is
payable monthly, while interest on LIBOR loans is payable on the last day of the
applicable one, two or three month interest period.

The Credit Agreements is unsecured,
but provides for a springing lien to be established on certain of the
assets of the Company in the event certain
events of default occur under the Credit Agreement. The Credit Agreement 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.

The Credit Agreement replaced the
August 1999 unsecured credit agreement with the Companys previous lender, which
would have expired on October 31, 2003. The prior credit agreement had
provided for a $40.0 million revolving loan and letter of credit commitment, and an
additional uncommitted $10.0 million line of credit.

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.

# THERAGENICS
CORPORATION®

Item
2. Managements Discussion and Analysis of Financial Condition andResults of
Operations

Overview

Theragenics Corporation® is the
manufacturer of TheraSeed®, a rice-sized, FDA-cleared device used to treat solid
localized tumors, primarily prostate cancer, with a one-time, minimally invasive
procedure. Theragenics is the worlds leading producer of palladium-103, the
radioactive isotope that supplies the therapeutic radiation for its TheraSeed®
implant. Physicians, hospitals and other healthcare providers, primarily located in the
United States, utilize the TheraSeed® product. TheraSeed® has also been
approved for marketing throughout the member countries of the European Union by obtaining
its CE Mark. Sales of TheraSeed® in Europe have not been significant.
The Company currently sells its TheraSeed® implants directly to physicians
and non-exclusive third-party distributors.

Early in 2003 the Company diversified
its product line with the purchase of the U.S. iodine-125 prostate brachytherapy business
of BEBIG Isotopen-und Medizintechnik GmbH (BEBIG), formerly distributed by Isotope
Products Laboratories (both subsidiaries of a publicly traded German company, Eckert &
Ziegler AG). The purchase gives Theragenics exclusive U.S. manufacturing and
distribution rights to an FDA-cleared iodine-125-based medical device for the treatment of
prostate cancer. The Company also procured an automated production line that is expected
to become operational in 2004. Non-exclusive rights to distribute
TheraSeed® in Europe were granted to BEBIG as part of the transaction. The
Company believes that the ability to provide both palladium-103 and iodine-125 devices
will enhance the Companys ability to market to customers who seek a single source
for both palladium-103 and iodine-125 brachytherapy seeds. The product line and equipment
purchase will not affect the Companys existing non-exclusive distribution agreements
for TheraSeed®.

The Company has an active and ongoing
program targeted at diversifying its future revenue stream. As part of this program the
Company constructed a facility in the Oak Ridge, Tennessee area to house the equipment,
infrastructure and work force necessary to support the production of isotopes, including
palladium-103, using unique plasma separation process (PSP) technology being leased from
the U.S. Department of Energy. PSP technology is a method of separating relatively large
quantities of non-radioactive isotopes. In the past the PSP technology demonstrated the
ability to produce material for the U.S. Government to support nuclear power generation.
The Company believes that the PSP technology enables current and future feasibility runs
designed to validate isotope usage in various markets and industries in addition to
possibly increasing the Companys manufacturing capacity and allowing for expanded
use of palladium-103 in other applications.

In July 2002 Theragenics signed
an agreement with an international nuclear fuel services company to use the PSP technology
to produce test quantities of certain gadolinium isotopes for determining the
isotopes usefulness as a fuel life extender in nuclear power generation. The
material was delivered during the second quarter of 2003. This agreement did not have a
material impact on revenue or earnings.

The Company entered into an agreement
in the second quarter of 2003 with UT-Battelle, LLC, a partnership between the University
of Tennessee and Battelle which manages the Oak Ridge National Laboratory for the U. S.
Department of Energy. Under the terms of the agreement, feasibility runs were performed to
validate the PSPs capabilities to produce certain rare earth elements.
The agreement was completed in the third quarter of 2003. UT-Battelle intends to evaluate
the materials produced by the PSP in experiments designed to determine their effectiveness
as a fuel life extender for nuclear power generation. This agreement did not have a
material impact on revenue or earnings, but the knowledge gained from the feasibility runs
could provide information that may determine future uses of the PSP. The PSP is also
capable of producing palladium raw material that, following further processing, could
generate Pd-103 output equal to or greater than the Companys current cyclotron
capacity. This capacity can be utilized to support the ongoing research and development
(R&D) initiatives underway to foster the Companys diversification program, such
as the TheraP clinical trial. The TheraP trial uses a palladium-103 device, called the
TheraSource Intravascular Brachytherapy System, designed to prevent restenosis or
renarrowing of arteries following treatment of peripheral vascular disease by percutaneous
transluminal angioplasty.

Following the approval of the
Investigational Device Exemption granted by the U. S. Food and Drug Administration (FDA)
in August 2002 to initiate the TheraP clinical trial, Theragenics began a clinical
trial using a patented palladium-103 device early in 2003. The trial was initiated at the
Fuqua Heart Center at Piedmont Hospital and St. Josephs Hospitals, both in Atlanta.
A third center signed on and began enrollment in the trial early in the fourth quarter. In
total, the trial calls for 30 patients in up to three centers to be enrolled in order to
study the safety and feasibility of the system. To date, 14 patients have been implanted.
Preliminary indications from the study are encouraging, although the study is ongoing and
conclusions cannot yet be reached.

Additionally, an animal pilot study
using palladium-103 in a prototype device designed for the treatment of age-related
macular degeneration (AMD), a disease that leads to loss of eyesight and in some cases
complete blindness, was completed early in 2002. Efforts continue toward the submission of
an Investigational Device Exemption (IDE) to the FDA to begin a trial evaluating the
safety and efficacy of a palladium-103 device for the treatment of AMD. The increases in
research and development expenditures may continue as these initiatives are pursued.

The Company is also searching for,
reviewing and evaluating external opportunities for diversification in the form of joint
ventures, partnerships, and/or acquisitions of technologies, products and companies.

Results of Operations

Revenues for the third quarter of
2003 were $8.5 million, compared to $9.8 million for the third quarter of 2002, a decrease
of $1.3 million, or 13.3%. Revenues for the nine months ended September 30, 2003 were
$28.6 million, compared to $32.5 million for the same period in 2002, a decrease of $3.9
million, or 12.2%. During the third quarter of 2003, unit sales of the
TheraSeed® product decreased approximately 17.2% from the third quarter of
2002 and 14.1% in the first nine months of 2003 compared to the same period in 2002.
Revenues from distributors decreased approximately 25.8% in the third quarter 2003 as
compared to the third quarter of 2002. As a result of the Companys direct sales
initiative throughout 2003, revenues from sales to direct customers were 18.7% of total
sales revenues in the third quarter of 2003 compared to 16.1% exclusively from
TheraSeed® sales in the same quarter of 2002. This increase is directly
related to a decrease in sales through distributors.

Currently, the Company has
non-exclusive distribution agreements in place with two companies for the distribution of
TheraSeed®. An existing TheraSeed®distributor acquired two
prior distributors during the first half of 2003. Comparing this consolidated
distributors sales to the sales of the same three distributors shows a 27% reduction
for the three months ended and a 22% reduction for the nine months ended September 30,
2003 when compared to the same periods of 2002.

In the third quarter of 2003, the
average selling price realized by TheraSeed® was consistent with the
average selling price realized in the third quarter of 2002. However, the Companys
weighted average unit selling price in the third quarter of 2003 was slightly lower than
that in the third quarter of 2002, due to the introduction in 2003 of the lower-priced
I-Seed device. Quarter over quarter, the weighted average unit sales price decrease
(TheraSeed® and I-Seed) combined with a decrease in total unit sales of
brachytherapy seeds of approximately 20.4% and 17.1% during the third quarter and year to
date 2003, respectively, was primarily responsible for the decrease in revenues.

Management believes that the
brachytherapy industry continues to be affected by the changes in Medicare reimbursement,
declining prices for iodine-125 and palladium-103 products and ongoing consolidation in
the industry, including consolidation of TheraSeed®distributors. At any
point in time, the Company and/or its non-exclusive distributors may change their
respective pricing policies for the TheraSeed® or I-Seed (in the case of
the Company) devices in order to take advantage of market opportunities to respond to
competitive situations. Responding to market opportunities and competitive situations
could have an adverse effect on the prices of the TheraSeed® or I-Seed
devices and could have a favorable effect or prevent an unfavorable effect on market share
and volumes. Conversely, the Company and its non-exclusive distributors could individually
and independently decide to maintain per unit pricing under certain competitive situations
that could adversely affect current or potential market share and volumes.

Licensing fees revenue represents
licensing payments received for the Companys TheraSphere® technology.
Such licensing fees are not expected to become material in the foreseeable future.

Cost of sales was approximately $3.6
million during the third quarter of 2003, resulting in a gross profit margin of 57.6%,
compared with cost of sales of $3.3 million and a gross profit margin of 66.8% during the
third quarter of 2002. For the first nine months of 2003, cost of sales was $12.1 million,
resulting in a gross profit margin of 57.6%, compared with cost of sales of $10.6 million
and a gross profit margin of 67.4% for the same period of 2002. Prior to coming on line in
the latter half of 2002, costs associated with the Oak Ridge facility and PSP project were
capitalized. Margins declined as expenses related to the Oak Ridge operations in the
amount of approximately $885,000 in the third quarter of 2003 and $2.7 million in the
first nine months of 2003 were recognized in cost of sales. Direct costs related to I-Seed
sales also contributed to the decrease in gross margin in 2003. Direct costs related to
I-Seed production are expected to remain relatively high as a percentage of revenue until
the I-Seed product is manufactured in-house. The product line for I-Seed is expected to be
operational early in 2004. A portion of the increase in cost of sales as a percentage of
sales for the third quarter and nine months ending September 30, 2003 compared to the same
periods in 2002 is due to the considerable fixed cost component of Theragenics
operations. The increases described above were partially offset by material and labor
transferred to support the ongoing research and development efforts in the areas of
peripheral vascular disease and macular degeneration (see Overview
above). Cost of sales increases were partially offset by the completion of depreciation
during the first quarter of 2003 of the first of fourteen cyclotrons placed in operation.

Selling, general and administrative
(SG&A) expenses were $3.4 million, or 40.0% of revenue, during the third quarter of
2003, compared to $3.0 million, or 30.0% of revenue, during the third quarter of 2002, an
increase of $0.4 million or 15.3%. For the nine months of 2003, SG&A expenses were
$10.0 million, or 35.1% of revenue, compared to $9.6 million, or 29.6% of revenue, during
the same period of 2002, an increase of approximately $0.4 million or 4.3%. The increases
in the 2003 periods compared to the same period of 2002, were due to an increase in
headcount and expenses associated with the direct sales force through the hiring of
brachytherapy specialists to promote the TheraSeed®brand. Additional
marketing activities include outsourcing of the Companys cancer information center
to healthcare specialist, Telerx, a subsidiary of Merck Pharmaceutical, for cancer
information inquiries and patient support and a significant increase in Directors and
Officers liability insurance premiums. These increases were partially offset by certain
Oak Ridge PSP related costs recognized in cost of sales during the entire 2003 period (see
Overview above and Liquidity and Capital Resources
below).

R&D expenses decreased slightly
to $2.3 million, or approximately 27.6% of revenue, in the third quarter of 2003, from
approximately $2.4 million, or approximately 24.8% of revenue, in the second quarter of
2002. R&D expenses increased during the first nine months of 2003, to $5.5 million, or
19.1% of revenue from $4.6 million, or 14.2% of revenue, in 2002. The increase in R&D
expenses in the nine month period was a result of the Companys diversification
initiatives geared to expand the application of palladium-103 to other oncological and
non-oncological uses, and to explore options for using the Companys expertise and
capabilities in other areas. The bulk of these expenses were associated with the
Companys peripheral vascular and macular degeneration programs (see
Overview above).

Management plans to continue to
increase efforts in R&D as its initiatives to diversify move forward, and expects
R&D expenditures to increase accordingly. Such increases in R&D may negatively
affect margins. However, R&D spending is dependent on the complex scheduling of
R&D activities in progress as well as the pursuit of other appropriate opportunities
as they arise. Accordingly, R&D expenses may fluctuate significantly from period to
period.

Other income, comprising interest
income and non-operating expenses, was $225,000 in the third quarter of 2003 compared to
$229,000 during the third quarter of 2002. For the first nine months of the year, other
income was $678,000 in 2003, compared to $684,000 in 2002. The Companys investments
consist primarily of short-term cash investments and high-credit quality municipal
obligations, in accordance with the Companys investment policies. Funds available
for investment have, and will continue to be utilized for the Companys current and
future expansion programs, diversification efforts, and research and development
activities. As funds continue to be used for these programs and activities, and as
interest rates continue to change, management expects other income to fluctuate
accordingly.

The Companys effective income
tax rate was approximately 34% for the period ended September 30, 2003. The Companys
income tax rate in the period is lower than the statutory rate due to the recognition of
tax credits generated by the Companys investments in research activities and
tax-exempt interest income.

Critical Accounting
Policies

The financial statements of
Theragenics Corporation® are prepared in conformity with accounting
principles generally accepted in the United States of America. Management is required to
make certain estimates, judgments and assumptions that we believe are reasonable based
upon the information available. These estimates and assumptions affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the periods presented. The significant accounting
policies which we believe are the most critical to aid in fully understanding and
evaluating our reported financial results include the following:

Property, plant and equipment.Property, plant and equipment are recorded at cost and depreciated on a straight-line
basis over the estimated useful lives of such assets. The Companys estimates can
result in differences from the actual useful lives of certain assets. We currently own and
operate 14 cyclotrons, the first of which entered service in 1993. Each of the
Companys cyclotrons is depreciated using an estimated 10-year life. The cyclotrons
incorporate a number of proprietary design modifications that render the cyclotrons unique
to commercial applications. Managements estimate of the useful life of these
cyclotrons is based on the Companys experience to date with these cyclotrons. Based
on experience gained relative to the operation, repair, refurbishment, and maintenance of
the cyclotrons, management believes there is a substantive basis for the current
depreciable lives of the cyclotrons. Although the older cyclotrons require increased
costs, the material harvested from each machine is imperative to ongoing operations and
the Companys current research and development initiatives. Therefore, all of the
cyclotrons, including the older machines, remain in service.

The DOE has granted Theragenics
access to unique DOE technology, known as the plasma separation process (PSP), for use in
production of isotopes, including palladium-103. The PSP equipment was placed in service
during the second half of 2002 and is depreciated using an estimated 15-year life. The PSP
equipment utilizes specialized, unique technology. Management will continue to
periodically examine estimates used for depreciation for reasonableness in relation to the
cyclotrons and PSP equipment. If the Company determines that the useful life of property,
plant or equipment should be shortened or lengthened, depreciation expense would be
adjusted accordingly for the remaining useful life (lives) of the identified asset(s).

Allowance for doubtful accounts.Management judgments and estimates are made and used in connection with establishing
an allowance for the possibility that portions of our accounts receivable balances may
become uncollectable. Accounts receivable are reduced by this allowance. Specifically,
management analyzes accounts receivable in relation to current economic trends and changes
in our customer payment history in establishing this allowance. The accounts receivable
balance, net of the provision for this trade accounts receivables allowance of $153,000,
was approximately $5.0 million as of September 30, 2003.

Liquidity and Capital
Resources

The Company had cash, short-term
investments and marketable securities of $68.0 million at September 30, 2003, compared to
$68.3 million at December 31, 2002. Marketable securities consist primarily of short-term
cash investments and high-credit quality municipal obligations, in accordance with the
Companys investment policies. Working capital was $76.2 million at September 30,
2003, compared to $74.7 million at December 31, 2002. The Company also has 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, pursuant to thea
three-year Credit Agreement. No borrowings are outstanding under the previous agreement or
current Credit Agreement as of November 14, 2003. Letters of credit totaling $933,000 were
outstanding under the prior agreement as of September 30, 2003 and are now outstanding
under the Credit Agreement. These letters of credit primarily represent decommission
funding required by the Georgia Department of Natural Resources.and a utility deposit to
the City of Oak Ridge, Tennessee in connection with the PSP facility.

Cash generated by operations was $4.6
million and $11.8 million during the first nine months of 2003 and 2002, respectively.
Cash generated from operations consists of net earnings plus non-cash expenses such as
depreciation, amortization, deferred income tax expense and changes in balance sheet items
such as accounts receivable, inventories, prepaid expenses and payables. Depreciation and
amortization increased to approximately $4.9 million in the first nine months of 2003 from
$4.5 million in the same period of 2002 largely due to the depreciation of the building
and equipment placed in service at the Oak Ridge facility during the latter half of 2002.
The increase in depreciation and amortization contributed by the Oak Ridge facility and
equipment was partially offset by the completion of the depreciable life of one cyclotron
mid way through the first quarter of 2003. Inventories increased approximately $700,000 in
the first nine months of 2003 primarily due to a purchase of palladium metal at a cost of
approximately $500,000 to support ongoing and future R&D initiatives (see
Results of Operations above). The raw material, purchased from a U.S.
mining company, will be processed using PSP technology housed in the Oak Ridge facility.
Inventory also increased in the nine months ending September 30, 2003 as raw material,
components and shipping supplies inventory increased to accommodate the I-Seed product
line. Prepaid expenses and other current assets increased as payments representing repair
and spare parts for cyclotrons and equipment increased in 2003 compared to the same period
in 2002. These primary sources of cash from operations were partially offset by the
year-over-year decrease in net income.

Cash used in investing activities
totaled $15.2 million and $6.6 million during the first nine months of 2003 and 2002,
respectively. This spending related primarily to purchases of marketable securities
according to the Companys investment policy. Also, the Companys purchase of
the U. S. iodine-125 prostate brachytherapy business of BEBIG (see
Overview above) contributed to capital spending in the period ending
September 30, 2003. The Company procured an automated production line as part of the
agreement that is expected to become operational in 2004. Progress payments have been made
to BEBIG and will continue upon completion of pre-defined milestones. Therefore, the
timing of all payments and subsequent operation of the equipment may vary based on
milestone completion. A total of approximately $4.2 million in progress payments and
capitalized professional fees has been paid through September 30, 2003.

The Company has constructed a
facility in the Oak Ridge, Tennessee area to house the equipment, infrastructure and work
force intended to support the production of isotopes, including palladium-103, using DOE
technology. Construction costs of approximately $27 million have been incurred on the PSP
Project through September 30, 2003. The building and PSP became operational during the
latter half of 2002. Additional equipment in the amount of $1.7 million related to the Oak
Ridge facility is expected to become operational during 2004.

The Company expects that R&D
spending will continue at the current level or will increase (see Results of
Operations, above). At this time, routine capital expenditures, and the purchase
of the equipment and facility renovations related to the iodine-125 line, are expected to
reach approximately $7 million during 2003. Cash could also be used in the remainder of
2003 for increased marketing and TheraSeed®support activities (see
Results of Operations above), and in the pursuit of diversification
efforts such as the purchase of technologies, products or companies.

Cash provided by financing activities
was $491,000 and $291,000 in the first half of 2003 and 2002, respectively, consisting of
cash proceeds from the exercise of stock options and the Companys Employee Stock
Purchase Plan.

The Company believes that current
cash and investment balances, cash from future operations and credit facilities, will be
sufficient to meet its currently anticipated working capital and capital expenditure
requirements. In the event additional financing becomes necessary,management may choose to
raise those funds through other means of financing, as appropriate.

Subsequent to the end of the quarter,
the Company executed a Credit Agreement with a financial institution on October 29, 2003.
The Credit Agreement, which expires on October 29, 2006 (subject to earlier termination by
the lender upon the occurrence of certain events of default), provides for revolving
borrowings of up to $40.0 million at any time outstanding, including a $5.0 million
sub-limit for letters of credit. Interest on outstanding borrowings is payable at the rate
of interest periodically designated by the financial institution as its base rate, or, at
the option of the Company, interest may accrue at a LIBOR based rate, plus an applicable
margin which is subject to quarterly adjustment. Interest on base rate loans is payable
monthly, while interest on LIBOR loans is payable on the last day of the applicable one,
two or three month interest period.

The Credit Agreement provides for a
springing lien to be established on certain assets of the in the event certain
events of default occur under the Credit Agreement. The Credit Agreement 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.

The Credit Agreement replaced the
August 1999 credit agreement with the Companys previous lender, which would have
expired on October 31, 2003. The prior credit agreement had provided for a $40.0
million revolving loan and letter of credit commitment, and an additional uncommitted
$10.0 million line of credit.

Medicare
Developments

Previously, Theragenics
TheraSeed® device and other brachytherapy seeds fell within various
transitional pass-through codes, which were separate from the procedure
payment codes that comprise much of Medicares Outpatient Prospective Payment System
(OPPS). On April 1, 2002, The Centers for Medicare and Medicaid Services (CMS) implemented
changes in hospital payments for brachytherapy and other services provided under
Medicares OPPS for the remainder of 2002. Through December 31, 2002, CMS bundled a
portion of pass-through reimbursement for all brachytherapy seeds and other devices with
the associated procedure codes, thereby effectively sheltering seeds from pro rata
reductions that would otherwise have applied under current Medicare Law. To the
extent that these pass-through device costs exceeded the bundled amount, the remaining
cost was subject to a 63.6% pro-rated reduction in reimbursement.

On November 1, 2002, CMS issued
its rule for 2003 Medicare OPPS reimbursement. Under the 2003 rule, CMS bundled the costs
of the brachytherapy procedure, as well as the costs for catheters, needles and all seeds,
into two new codes for prostate brachytherapy (one for palladium-103 and one for
iodine-125). By creating two codes and setting separate reimbursement amounts in the final
rule for palladium-103 seed brachytherapy (including the TheraSeed® device)
and iodine-125 seed brachytherapy (including the I-Seed device), CMS made an important,
positive change compared to its initial proposal published on August 9, 2002.
Specifically, the per-patient amount under the 2003 final rule for palladium-103 prostate
brachytherapy exceeds the original payment amount proposed in August 2002 for both
palladium-103 and iodine-125. The 2003 per-patient amount for palladium-103 prostate
brachytherapy also exceeds the 2003 payment amount for iodine-125 prostate brachytherapy.
To the extent that the brachytherapy costs exceed the bundled amount, the remaining cost
may no longer be submitted for reimbursement.

On October 31, 2003, CMS issued its
final rule for 2004 Medicare OPPS reimbursement. The new 2004 rule reflects another
positive step forward in reimbursement for prostate brachytherapy. Specifically, under the
2004 final rule, CMS will unbundle prostate brachytherapy seeds from the two core
procedure payments and pay for them on a seed-by-seed basis for each patient. Payment per
seed has been capped at a level of $44.67 per palladium seed, and $37.34 per iodine seed.
Depending on the number of seeds needed, total reimbursement in 2004 (for the combination
of the unbundled procedure codes and seeds) may be higher than the current 2003 bundled
payment.

Medicare reimbursement for
brachytherapy continues to create confusion for hospitals and doctors. The Company
believes that this confusion may have had a detrimental impact on sales in 2003 (see
Results of Operations above). Management continues to closely monitor
any effects of the 2003 reimbursement structure on the brachytherapy market as it
continues to evaluate pricing, marketing and distribution strategies.

Theragenics has been pursuing,
and will continue to pursue avenues to attempt to address the reimbursement structure set
forth by CMS. Theragenics is continuing its efforts to assist policymakers in
formulating and revising Medicare policies to recognize the unique aspects of
classification and reimbursement that apply to the TheraSeed® device and
recognize its superior characteristics compared to other avenues of treatment. These
efforts include working with policymakers to advance legislation, which would create more
favorable reimbursement for brachytherapy devices. Theragenics in conjunction with
the brachytherapy device industry was successful in getting appropriate language in the
House Medicare Reform Bill. In addition less favorable placeholder language
was included in the Senate Bill. At this time, the Company is unable to predict which, if
any, of the proposed reforms will be enacted.

The Company continues to engage a
consulting firm specializing in reimbursement practices to help communicate brachytherapy
reimbursement guidelines to customers.

Forward Looking and
Cautionary Statements

This document contains certain
forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995 including, without limitation, statements regarding sales, marketing and
distribution efforts, third-party reimbursement, CMS policy, sales mix, effectiveness of
non-exclusive distribution agreements, pricing for the TheraSeed® and
I-Seed devices, future cost of sales, R&D efforts and expenses, inventory investment,
SG&A expenses, other income, timing and ultimate outcome of the Companys
activities in restenosis, macular degeneration and other diversification efforts,
potential new products and opportunities, the PSP operation, the development of new
markets and technologies, the capabilities of the PSP to produce enriched isotopes,
opportunities for isotopes produced by Theragenics, the identification and
development of new markets and applications for isotopes, Theragenics plans
and strategies for diversification, and the sufficiency of the Companys liquidity
and capital resources. From time to time, the Company may also make other forward-looking
statements relating to such matters as well as statements relating to anticipated
financial performance, business prospects, technological developments, other research and
development activities 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 research and
development activities, including animal studies and clinical trials related to new
products, risks associated with new product development cycles, effectiveness and
execution of marketing and sales programs of Theragenics and its non-exclusive
distributors, risks associated with customer distribution concentration and consolidation
among non-exclusive distributors, potential costs and delays in capacity expansion and
start-up, (especially as it relates to the PSP project and the iodine-125 line and
automated equipment purchase from BEBIG), the actual start-up for the PSP project, the
actual installation of the automated equipment for the iodine-125 line, the iodine-125
product line, potential changes in product pricing and competitive conditions, continued
acceptance of TheraSeed® or the I-Seed devices by the market, management of
growth, acceptance and efficacy of pallidium-103 for other applications, adverse changes
in governmental program priorities and budgetary funding by the relevant governmental
authorities, continuing access to unique DOE technology, government regulation of the
therapeutic radiological pharmaceutical and device business, potential changes in
third-party reimbursement, Congressional action or inaction on the Presidents
Medicare Bill, risks associated with market development activities, inability of the PSP
to produce isotopes suited for a particular application, potential inability to produce
selected isotopes at costs competitive to other options, risks associated with
governmental regulations and related export controls and security requirements for PSP
products. All forward looking statements and cautionary statements included in this
document are made as of the date hereby based on information available to the Company as
of the date hereof, and the Company assumes no obligation to update any forward looking
statement or cautionary statement.

# Item 3. Quantitative and
Qualitative Disclosures About Market Risk

The Companys market risk
exposure, related to market risk sensitive financial instruments, is not material. Letters
of credit totaling approximately $933,000 were outstanding under the terms of the prior
credit agreement as of September 30, 2003. No borrowings were outstanding under the prior
credit agreement as of September 30, 2003. (See Liquidity and Capital Resourcesabove).

# Item 4. Controls and
Procedures

The Company carried out an
evaluation, under the supervision and with the participation of the Companys
management, including the Companys President and Chief Executive Officer and its
Chief Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 as
of the end of the period covered by this report. Based upon that evaluation, the
Companys President and Chief Executive Officer and its Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective in
alerting them on a timely basis to material information relating to the Company that is
required to be included in the Companys periodic filings with the Securities and
Exchange Commission. Furthermore, with regard to the Companys internal controls,
there have been no significant changes in the Companys internal controls or, to the
Companys knowledge, in other factors that materially affected, or are likely to
materially affect the Companys internal control over financial reporting. Management
necessarily applied its judgment in assessing the costs and benefits of such controls and
procedures, which, by their nature, can provide only reasonable assurance regarding
managements control objectives.

# PART II. OTHER
INFORMATION

# Item 1. Legal
Proceedings.

See Note D to the Companys
financial statements included in Part I, Item 1 of this report, which is incorporated by
reference hereby.

# Item 4.  Submission of Matters to a Vote of Securities Holders

None

# Item 6. Exhibits and
Reports on Form 8-K.

(a)
Exhibits

Exhibit
No. Title

| | 10.1 |  | Credit Agreement dated October 29, 2003 between Theragenics Corporation®and SouthTrust Bank.
| | ---- |  | --------------------------------------------------------------------------------------------

| | 31.1 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- |  | ------------------------------------------------------------------------

| | 31.2 |  | Certification pursuant to 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.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b)       
          Reports on Form 8-K

| | Form
8-K furnished on October 22, 2003 under Item 9, Regulation FD Disclosure but
intended to be furnished under Item 12, Results of Operations and Financial
Condition (with respect to a press release relating to the Companys
performance in the fourth quarter ended September 30, 2003). .
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

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 CORPORATION®                                                 
| |                                                                          
| | /s/ M. Christine Jacobs
 M. Christine Jacobs
  Chief Executive Officer   
| |                                                                          
| | /s/ James A. MacLennan
    James A. MacLennan
    Chief Financial Officer

Dated: November 14, 2003