SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:

1. Consolidation

These consolidated financial statements include the accounts of Theragenics Corporation® and our wholly owned subsidiaries.  We have no unconsolidated entities and no special purpose entities. All significant intercompany accounts and transactions have been eliminated in consolidation.

2. Use of Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current conditions and various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions.

3. Revenue Recognition and Cost of Sales

We recognize revenue when persuasive evidence of a sales arrangement exists, title and risk of loss have transferred, the selling price is fixed or determinable, contractual obligations have been satisfied, and collectability is reasonably assured.  Revenue for product sales is recognized upon shipment.  License fees are recognized in the periods to which they relate.

Charges for returns and allowances are recognized as a deduction from revenue on an accrual basis in the period in which the related revenue is recorded.  The accrual for product returns and allowances is based on our history.  We allow customers to return defective products.  In our brachytherapy segment, we also allow customers to return products in cases where the attending physician or hospital has certified that the brachytherapy procedure was unable to be performed as scheduled due to the patient’s health or other valid reason.  Historically, product returns and allowances have not been material.

Shipping and handling costs are included in cost of sales. Billings to customers to recover such costs are included in product sales. Any sales taxes charged to customers are excluded from both net sales and expenses.

4. Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash in banks, variable rate demand notes, treasury investments and U.S. obligations and commercial paper with original maturities equal to or less than 90 days from purchase.

5. Marketable Securities

Marketable securities are classified as available-for-sale and are reported at fair value with unrealized gains or losses reported net of tax in accumulated other comprehensive income (loss).

6.  Interest Rate Swaps

As of December 31, 2011, we recognized our interest rate swaps at fair value as liabilities in our consolidated balance sheet. Changes in the fair value of interest rate swaps were recorded in current earnings as interest expense.  Our interest rate swaps matured in June 2012, and we held no such derivative instruments at December 31, 2012.

7. Accounts Receivable and Allowance for Doubtful Accounts and Returns

Trade accounts receivable arise from sales in our various markets, are stated at the amount expected to be collected and do not bear interest. We maintain an allowance for doubtful accounts based upon reviewing our accounts receivable aging and our estimate of the expected collectability of the amounts. Outstanding receivables are considered past due based upon invoice due dates. The collectability of trade receivable balances is regularly evaluated based on a combination of factors such as customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If we determine that a customer will be unable to fully meet its financial obligation, such as in the case of a bankruptcy filing or other material events impacting its business, we record a specific reserve for bad debt to reduce the related receivable to the amount expected to be recovered.

8. Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Market is replacement cost or net realizable value. We estimate reserves for inventory obsolescence based on our judgment of future realization.  Inventories consist of the following (in thousands):

	December 31,
	2012			2011
Raw materials	$	6,806		$	7,756
Work in progress		4,024			3,724
Finished goods		4,344			3,988
Spare parts and supplies		956			920
		16,130			16,388
Allowance for obsolete inventory		(748	)		(617	)
Inventories, net	$	15,382		$	15,771

9. Property, Equipment, and Depreciation

Property and equipment are recorded at historical cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives on a straight-line basis.  Leasehold improvements are amortized over the useful life of the asset or the lease term, whichever is shorter. Estimated service lives are 30 years for buildings and improvements, and 3 to 15 years for machinery, equipment, furniture, and land improvements. Expenditures for repairs and maintenance not considered to substantially lengthen the life of the asset or increase capacity or efficiency are charged to expense as incurred.

10. Impairment of Long-Lived Assets

We evaluate long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in conditions may indicate that the carrying value may not be recoverable. Factors that we consider important that could initiate an impairment review include, among other things, the following:

● Significant or recurring operating losses;

● Significant adverse change in legal factors or in the business climate;

● Significant declines in demand for a product produced by an asset capable of producing only that product;

● Assets that are idled or held for sale; and

● Assets that are likely to be divested.

The impairment review requires us to estimate future undiscounted cash flows associated with an asset or group of assets. If the future undiscounted cash flows are less than the carrying amount of the asset, we must estimate the fair value of the asset. If the fair value of the asset is below the carrying value, then the asset carrying value will be adjusted to its fair value. Estimating future cash flows requires us to make judgments regarding future economic conditions, product demand and pricing. Although we believe our estimates are appropriate, significant differences in the actual performance of the asset or group of assets may materially affect the values of our asset and our results of operations.

No impairment charges related to long-lived assets subject to depreciation and amortization were recorded in any of the three years in the period ended December 31, 2012.

11. Intangible Assets

Our intangible assets are determined to have finite lives and are amortized over their useful lives using a method that is expected to reflect the pattern of its economic benefit. When a pattern of economic benefit cannot be determined, or if the straight-line method results in greater amortization, then the straight-line method is used. To date, all finite-lived intangible assets have been amortized using the straight-line method.

12. Income Taxes

We account for income taxes using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets when it is more likely than not that the asset will not be realized.

We review all of our tax positions, and the tax benefits of uncertain tax positions are recognized only if it is more likely than not that we will be able to sustain a position taken on an income tax return. We have concluded that there were no significant uncertain tax positions as of December 31, 2012 and 2011. Our policy is to recognize accrued interest expense and penalties associated with uncertain tax positions as a component of income tax expense.

13. Contingencies

From time to time we may be subject to various legal proceedings and claims, including, for example, disputes on agreements, employment disputes and other commercial disputes, the outcomes of which are not within our complete control and may not be known for extended periods of time. In some cases, the claimants seek damages, as well as other relief, which, if granted, could require significant expenditures. We record a liability for damages and/or costs related to claims, settlements and judgments where we have assessed that a loss is probable, and an amount can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range. Legal costs associated with these matters are expensed as incurred.

14. Earnings Per Share

Basic net earnings per common share is based upon the weighted average number of common shares outstanding during the period. Diluted net earnings per common share is based upon the weighted average number of common shares outstanding plus dilutive potential common shares, including options and awards outstanding during the period.

15. Share-Based Compensation

Compensation costs related to share-based payments, including stock options and other equity awards, are measured at the grant date fair value of the award. To estimate the fair value of stock options, we use the Black-Scholes options-pricing model. Inherent in this model are assumptions related to expected stock price volatility, option life, risk-free interest rate and dividend yield.  Expected stock price volatility is primarily 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. 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 are also considered. These factors may cause the expected volatility and expected life of options granted to differ from period to period.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the grant date with a term equal to the expected term of the stock option.  Fair value of restricted shares is based on the fair value of the underlying common stock at the grant date. The fair value of the restricted shares granted to non-employees is remeasured each period until they are vested based on the fair value of the underlying common stock.  Share-based compensation costs are recognized as expense over the requisite service period of each award, which is generally equal to the vesting period.

16. Research and Development Costs

Research and development (R&D) costs are expensed as incurred.

17. Advertising

Advertising costs are expensed as incurred and totaled approximately $365,000, $504,000, and $799,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

18. Software Capitalization

Internally used software, whether purchased or developed, is capitalized and amortized using the straight-line method over an estimated useful life of five to seven years. Capitalized software costs are included in machinery and equipment. We capitalize certain costs associated with internal-use software, such as the payroll costs of employees devoting time to the projects and external direct costs for materials and services. Costs associated with internal-use software are expensed during the design phase until the point at which the project has reached the application development stage. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. Capitalized costs related to internally used software, including payroll costs and external direct costs, totaled approximately $393,000, $1,300,000, and $1,500,000 for the years ended December 31, 2012, 2011, and 2010, respectively.