0000707388-13-000012.txt : 20130506 0000707388-13-000012.hdr.sgml : 20130506 20130503195905 ACCESSION NUMBER: 0000707388-13-000012 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20130506 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20130506 DATE AS OF CHANGE: 20130503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGIRAD CORP CENTRAL INDEX KEY: 0000707388 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 330145723 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-50789 FILM NUMBER: 13814238 BUSINESS ADDRESS: STREET 1: 13950 STOWE DRIVE CITY: POWAY STATE: CA ZIP: 92064 BUSINESS PHONE: (858) 726-1600 MAIL ADDRESS: STREET 1: 13950 STOWE DRIVE CITY: POWAY STATE: CA ZIP: 92064 8-K 1 digirad8-k.htm 8-K DIGIRAD 8-K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549



FORM 8‑K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report: May 6, 2013
(Date of earliest event reported)



DIGIRAD CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
000-50789
 
33-0145723
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)

13950 Stowe Drive
Poway, California 92064
(Address of principal executive offices, including zip code)

(858) 726-1600
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02.  Results of Operations and Financial Condition

On May 6, 2013, Digirad Corporation issued a press release announcing financial results for the three months ended March 31, 2013. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The disclosure herein under Item 2.02 and the related exhibit are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.

Item 9.01.  Financial Statements and Exhibits
 
(a) Financial statements:
None
(b) Pro forma financial information:
None
(c) Shell company transactions:
None
(d)  Exhibits:
99.1 Press Release of Digirad Corporation dated May 6, 2013
99.2 Information Related to the Use of Non-GAAP Financial Measures    
  




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 hereunto duly authorized.

 
 
DIGIRAD CORPORATION
 
 
 
 
By:
/s/ Jeffry R. Keyes
 
 
 
Jeffry R. Keyes
Chief Financial Officer

Date:    May 6, 2013



Exhibit Index

Exhibit No.
 
Description
 
 
 
99.1
 
Press Release dated May 6, 2013, announcing financial results for the three months ended March 31, 2013.
99.2
 
Information Related to the use of Non-GAAP Financial Measures.


 EX-99.1 2 exhibit991digiradpressrele.htm EXHIBIT Exhibit 99.1 DIGIRAD PRESS RELEASE




Exhibit 99.1

Digirad Corporation Reports First Quarter Financial Results

Q1 2013 Highlights Include: The Beginning of Implementing the Company's New Strategy, Significant Restructuring Progress, Integration of Acquired Assets and Additional Increases to Share Buyback Program


POWAY, Calif. - May 6, 2013 - Digirad Corporation (NASDAQ: DRAD) today reported revenue of $11.5 million for the first quarter and an ending cash, cash equivalents and available-for-sale securities balance of $25.8 million.

At the end of February, the Company announced that following a lengthy strategic review, management and the board of directors had determined a new strategic direction for the Company. That initiative included:

•
A significant restructuring, primarily of the Diagnostic Imaging camera operation to reduce costs by $3 million to $4 million, on an annual basis.

•
A go-forward focus on maximizing and growing cash flow from its DIS services business. This strategy will include executing on financially disciplined acquisitions that align to and expand cash flow from the DIS operations. The diagnostic imaging business will emphasize a streamlined camera selling effort and efficiency in generating cash flow from the service and maintenance business associated with its installed base of cameras.

•
The aggressive return of cash to shareholders via an increased stock repurchase program, for which the Board ultimately increased the stock repurchase program from its existing $4 million program ($2 million availability) to a $12 million program ($10 million availability).

Digirad CEO Todd Clyde commented on the progress made, “Commercial and corporate activity in the first quarter was brisk as the management team implemented major steps in the restructuring of the business and executed on the organizational changes that will result in a leaner, focused operation. Key recent moves included significant cuts in senior management and other positions that will not be required in the new corporate direction, a decrease in the size of the board of directors, and the acceleration in assessment of acquisition targets that might complement the DIS footprint.”
 
Clyde continued, “Though these changes involved tough decisions and near term financial charges, we have already begun to decrease our ongoing expense levels in most key categories, and we should see a more significant impact of those reductions by the third quarter, with continued decreases in expenses through the end of fiscal year 2013.”

Digirad President Matt Molchan said, “Run rates in the DIS business remained relatively stable in the first quarter. The year-over-year revenue and gross margin comparison were principally impacted by some pricing pressures and a favorable one-time workers compensation insurance credit of approximately $200,000 reflected in the Q1 2012 gross margin results. During the period, we also completed the integration of the operations of the business we acquired at the end of 2012 and that business began to contribute to our results in Q1 2013.”






Molchan continued, “Though we experienced some large restructuring charges during the quarter and anticipate more charges in the second quarter, by the middle of the year we anticipate we will have the majority of those expenses behind us. In addition, since we announced our new focus, we have identified a growing number of potential “tuck-in” acquisition targets to assess in key DIS regions. The team is focused on implementing all aspects of our new strategy, and I am pleased with the progress we have made thus far. We should start to see the effects of our restructuring in the second half of 2013 as those efforts start translating into improved income and cash flow.”

First Quarter 2013 Summary

•
Total revenue for the first quarter of 2013 was $11.5 million, compared to $13.0 million for the same period in the prior year. DIS revenue for the first quarter of 2013 was $8.9 million, compared to $9.3 million for the same period of the prior year, which included some pricing pressures experience during the 2013 first quarter. Diagnostic Imaging revenue for the first quarter of 2013 was $2.6 million, compared to $3.7 million for the same period of the prior year, reflecting a disruption as the Company deployed its restructuring plan.

•
Gross profit for the first quarter of 2013 was $2.8 million, or 24 percent of revenue, compared to $3.7 million, or 28 percent of revenue in the prior year quarter.

•
Net loss for the first quarter of 2013 was $2.4 million, or $0.13 loss per share, compared to a net loss of $1.3 million, or $0.07 loss per share, in the same period of the prior year. Adjusted net loss for the 2013 first quarter, excluding the $1.0 million in expenses incurred for nonrecurring items related to restructuring activities, was $1.4 million or $0.07 loss per share on an adjusted basis.

•
Operating expenses for the first quarter of 2013 was $5.2 million, compared to $5.0 million in the same period in the prior year. Adjusted operating expenses for the first quarter of 2013 was $4.2 million, compared to the $5.0 million in the same period of the prior year, which reflects the beginning of the restructuring expense reductions since the February 28, 2013 restructuring announcement.

•
Cash, cash equivalents and available-for-sale securities totaled $25.8 million as of March 31, 2013. Cash, cash equivalents and available-for-sale securities totaled $27.2 million as of December 31, 2012.


Conference Call Information
A conference call is scheduled for 10:00 a.m. EDT today to discuss the results and management's outlook. The call may be accessed by dialing 877-941-1427 five minutes prior to the scheduled start time and referencing Digirad. A simultaneous webcast of the call may be accessed online from the Events & Presentations link on the Investor Relations page at www.digirad.com; an archived replay of the webcast will be available within 15 minutes of the end of the conference call.












Use of Non-GAAP Financial Measures by Digirad Corporation
This Digirad news release presents the non-GAAP financial measures “adjusted operating expenses”, “adjusted operating loss” and “adjusted loss per share” and “adjusted segment loss”. The most directly comparable measure for these non-GAAP financial measures are operating expenses, operating loss, loss per share and segment loss. The company has included below unaudited adjusted financial information for the quarter ended March 31, 2013 and 2012, which present the Company's results of operations after excluding restructuring charges.
A discussion of the reasons why management believes that the presentation of non-GAAP financial measures provides useful information to investors regarding Digirad's financial condition and results of operations is included as Exhibit 99.2 to Digirad's report on Form 8-K filed with the Securities and Exchange Commission on May 6, 2013.


Forward-Looking Statements
This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding the Company's ability to deliver value to customers, the Company's ability to grow and generate positive cash flow, the ability to execute on restructuring activities, and ability to successfully execute acquisitions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made, including the risks associated with changes in business conditions, technology, customers' business conditions, reimbursement, radiopharmaceutical shortages, economic outlook, operational policy or structure, acceptance and use of Digirad's camera systems and services, reliability, recalls, analysis of potential impairment and restructuring charges, the conclusion of our audit and other risks detailed in Digirad's filings with the U.S. Securities and Exchange Commission, including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports. Readers are cautioned to not place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, and Digirad undertakes no obligation to revise or update the forward-looking statements contained herein.

Investor Contact:
Matt Clawson
Allen & Caron
949-474-4300
matt@allencaron.com 
Company Contact:
Jeffry Keyes, CFO
858-726-1600
ir@digirad.com
 
(Financial tables follow)








Digirad Corporation
Condensed Consolidated Statements of Loss
(Unaudited)

 
Three Months Ended
(in thousands, except per share data)
March 31,
 
2013
 
2012
 

 

Revenues:
 
 
 
DIS
$
8,939

 
$
9,289

Diagnostic Imaging
2,607

 
3,680

           Total revenues
11,546

 
12,969

 
 
 
 
Cost of revenues:
 
 
 
     DIS
6,825

 
6,976

     Diagnostic Imaging
1,904

 
2,321

          Total cost of revenues
8,729

 
9,297

 
 
 
 
Gross profit
2,817

 
3,672

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
Research and development
818

 
897

Marketing and sales
1,236

 
1,715

General and administrative
2,102

 
2,265

Amortization of intangible assets
66

 
77

Restructuring charges
1,004

 
—

Total operating expenses
5,226

 
4,954

 
 
 
 
Loss from operations
(2,409
)
 
(1,282
)
 
 
 
 
Other income (expense):
 
 
 
Interest income
22

 
26

Other expense
(32
)
 
(12
)
Total other income (expense)
(10
)
 
14

Net loss
$
(2,419
)
 
$
(1,268
)
 
 
 
 
Net loss per share: Basic and diluted
$
(0.13
)
 
$
(0.07
)
 
 
 
 
Shares used in per share computations:
 
 
 
 
 
 
 
Weighted average shares outstanding: Basic and diluted
19,322

 
19,242










Digirad Corporation
Adjusted Financial Information
(Unaudited)

 
 
 
 
 
 
(in thousands, except per share data)
Three Months Ended March 31, 2013
 
 
 
Nonrecurring
 
 
 
GAAP
 
Items 1
 
Adjusted 2
 

 

 

Revenues:
 
 
 
 
 
DIS
$
8,939

 
$
—

 
$
8,939

Diagnostic Imaging
2,607

 
—

 
2,607

           Total revenues
11,546

 
—

 
11,546

 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
     DIS
6,825

 
—

 
6,825

     Diagnostic Imaging
1,904

 
—

 
1,904

          Total cost of revenues
8,729

 
—

 
8,729

 
 
 
 
 
 
Gross profit
2,817

 
—

 
2,817

 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Research and development
818

 
—

 
818

Marketing and sales
1,236

 
—

 
1,236

General and administrative
2,102

 
—

 
2,102

Amortization of intangible assets
66

 
—

 
66

Restructuring charges
1,004

 
(1,004
)
 
—

Total operating expenses
5,226

 
(1,004
)
 
4,222

 
 
 
 
 
 
Loss from operations
(2,409
)
 
1,004

 
(1,405
)
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
Interest income
22

 
—

 
22

Other expense
(32
)
 
—

 
(32
)
Total other income (expense)
(10
)
 
—

 
(10
)
Net loss
$
(2,419
)
 
$
1,004

 
$
(1,415
)
 
 
 
 
 
 
Net loss per share: Basic and diluted 3
$
(0.13
)
 
$
0.05

 
$
(0.07
)
 
 
 
 
 
 
Shares used in per share computations:
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding: Basic and diluted
19,322

 
19,322

 
19,322


1 Reflects nonrecurring charges primarily related to restructuring of the Diagnostic Imaging camera operating activities.

2 Adjusted financial information reflects GAAP results adjusted on a non-GAAP basis to exclude nonrecurring items noted.

3 Net loss per share calculations are performed separately for each component presented. Therefore, the sum of the per share components from the table may not equal the per share amounts presented.





Digirad Corporation
Adjusted Financial Information
(Unaudited)

 
 
 
 
 
 
(in thousands, except per share data)
Three Months Ended March 31, 2012
 
 
 
Nonrecurring
 
 
 
GAAP
 
Items 1
 
Adjusted 2
 

 

 

Revenues:
 
 
 
 
 
DIS
$
9,289

 
$
—

 
$
9,289

Diagnostic Imaging
3,680

 
—

 
3,680

           Total revenues
12,969

 
—

 
12,969

 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
     DIS
6,976

 
—

 
6,976

     Diagnostic Imaging
2,321

 
—

 
2,321

          Total cost of revenues
9,297

 
—

 
9,297

 
 
 
 
 
 
Gross profit
3,672

 
—

 
3,672

 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Research and development
897

 
—

 
897

Marketing and sales
1,715

 
—

 
1,715

General and administrative
2,265

 
—

 
2,265

Amortization of intangible assets
77

 
—

 
77

Total operating expenses
4,954

 
—

 
4,954

 
 
 
 
 
 
Loss from operations
(1,282
)
 
—

 
(1,282
)
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
Interest income
26

 
—

 
26

Other expense
(12
)
 
—

 
(12
)
Total other income (expense)
14

 
—

 
14

Net loss
$
(1,268
)
 
$
—

 
$
(1,268
)
 
 
 
 
 
 
Net loss per share: Basic and diluted
$
(0.07
)
 
$
—

 
$
(0.07
)
 
 
 
 
 
 
Shares used in per share computations:
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding: Basic and diluted
19,242

 
19,242

 
19,242


1 There were no nonrecurring restructuring charges during the quarter ended March 31, 2012.

2 Adjusted financial information reflects GAAP results adjusted on a non-GAAP basis to exclude nonrecurring items noted.







Digirad Corporation
Adjusted Financial Information
(Unaudited)

 
Three Months Ended March 31, 2013

 
 
Nonrecurring
 
 
(in thousands)
GAAP
 
Items 1
 
Adjusted 2
 

 

 

DIS
 
 
 
 
 
    Revenue
$
8,939

 
$
—

 
$
8,939

    Gross Profit
2,114

 
—

 
2,114

    Operating loss
(144
)
 
—

 
(144
)
 
 
 
 
 
 
Diagnostic Imaging
 
 
 
 
 
    Revenue
$
2,607

 
$
—

 
$
2,607

    Gross Profit
703

 
—

 
703

    Operating loss
(2,265
)
 
1,004

 
(1,261
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2012
 
 
 
Nonrecurring
 
 
(in thousands)
GAAP
 
Items 3
 
Adjusted 2
 
 
 
 
 
 
DIS
 
 
 
 
 
    Revenue
$
9,289

 
$
—

 
$
9,289

    Gross Profit
2,313

 
—

 
2,313

    Operating loss
(168
)
 
—

 
(168
)
 
 
 
 
 
 
Diagnostic Imaging
 
 
 
 
 
    Revenue
$
3,680

 
$
—

 
$
3,680

    Gross Profit
1,359

 
—

 
1,359

    Operating loss
(1,114
)
 
—

 
(1,114
)

1 Reflects nonrecurring charges related to restructuring of the Diagnostic Imaging segment.

2 Adjusted financial information reflects GAAP results adjusted on a non-GAAP basis to exclude nonrecurring items noted.

3 There were no nonrecurring restructuring charges during the quarter ended March 31, 2012.



 EX-99.2 3 exhibit992useofnon-gaapfin.htm EXHIBIT Exhibit 99.2 USE OF NON-GAAP FINANCIAL MEASURES


Exhibit 99.2

Use of Non-GAAP Financial Measures

In addition to financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), information containing non-GAAP financial measures for Digirad Corporation (the “Company”) was disclosed in the Company's news release (the “News Release”) dated May 6, 2013 announcing results for the quarter ended March 31, 2013 that accompanied a conference call held by the Company on May 6, 2013 to discuss the Company's financial results for the quarter ended March 31, 2013. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Management encourages readers to rely upon the GAAP numbers, but includes the non-GAAP financial measures as supplemental metrics to assist readers. Definitions of the non-GAAP financial measures are included in the News Release.
In the News Release and the Presentation, the Company presented the non-GAAP financial measures “adjusted operating expenses”, “adjusted operating loss”, “adjusted net loss”, “adjusted loss per share” and “adjusted segment loss”. These non-GAAP financial measures exclude nonrecurring restructuring charges. A restructuring activity is a program whereby the Company fundamentally changes its operations such as closing facilities, moving a product to another location or outsourcing the production of a product. Restructuring activities may also involve substantial re-alignment of the management structure of a business unit in response to changing market conditions. Restructuring charges are recorded in accordance with Accounting Standards Codification 420 “Exit or Disposal Cost Obligations” (“ASC 420”). Under ASC 420, a liability is measured at its fair value and recognized as incurred.
Company management uses these non-GAAP financial measures to evaluate the Company's performance. As the Company's core business is providing healthcare services and products to the healthcare industry, its management finds it useful to use financial measures that do not include charges associated with restructuring activities. While we may have these types of items and charges in the future, Company management believes that they are not reflective of the day-to-day offering of its products and services and relate more to strategic, multi-year corporate actions, without predictable trends, and that may obscure the trends and financial performance of the Company's core business.
The limitation associated with using these non-GAAP financial measures is that these measures exclude items that impact the Company's current period operating results. In most cases, the excluded items include transactions that reflect cash costs to the Company. This limitation is best addressed by using these non-GAAP financial measures in combination with “operating expenses”, “operating loss”, “net loss”, “loss per share” and “segment loss” (the most comparable GAAP measures) because these non-GAAP financial measures do not reflect items that impact current period operating results and may be higher than the most comparable GAAP measure.