-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JQN8m+ADnAHhbbyDo7QAl2/ksiPk5uWpZd34UpfvXL8ISVIIxkB+0h6lHMbSAG+l tqGgPVvBc5HW5fAYOKsoZA== 0001157523-05-002011.txt : 20050228 0001157523-05-002011.hdr.sgml : 20050228 20050228160718 ACCESSION NUMBER: 0001157523-05-002011 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050228 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050228 DATE AS OF CHANGE: 20050228 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: 05645672 BUSINESS ADDRESS: STREET 1: 9350 TRADE PLACE CITY: SAN DIEGO STATE: CA ZIP: 92126 BUSINESS PHONE: 8585301238 MAIL ADDRESS: STREET 1: 9350 TRADE PLACE CITY: SAN DIEGO STATE: CA ZIP: 92126 8-K 1 a4831863.txt DIGIRAD CORPORATION 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 (Date of earliest event reported): February 28, 2005 DIGIRAD CORPORATION (Exact name of registrant as specified in its charter) Delaware 000-50789 33-0145723 (State or Other Jurisdiction of (Commission (I.R.S. Employer Incorporation) File Number) Identification Number) 13950 Stowe Drive Poway, California 92064 (Address of Principal Executive Offices) (Zip Code) (858) 726-1600 (Registrant's telephone number, including area code) (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 (see General Instruction A.2. below): [ ] 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 February 28, 2005, Digirad Corporation issued a press release announcing financial results for the three months and year ending December 31, 2004. A copy of this press release is attached hereto as Exhibit 99.1. This information and the exhibits hereto 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 (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 Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. Exhibit No. Description ----------- ---------------------------------------------------------- 99.1 Press release dated February 28, 2005. 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 February 28, 2005 By: /S/ TODD P. CLYDE ---------------------------------------- Todd P. Clyde Chief Financial Officer EXHIBIT INDEX Exhibit No. Description - ----------- -------------------------------------------------------------- 99.1 Press release dated February 28, 2005. EX-99.1 2 a4831863-ex991.txt DIGIRAD CORPORATION PRESS RELEASE Exhibit 99.1 Fourth Quarter DIS Revenues Up 23% in Digirad's First Full Year of Profitability; Annual Revenues Increase by 21% to $68.1 Million; Company Delivers First Two Cardius-3 Systems POWAY, Calif.--(BUSINESS WIRE)--Feb. 28, 2005--Digirad Corporation (Nasdaq:DRAD), a leader in providing solid-state medical imaging products and services to physician offices, hospitals and imaging centers, today reported financial results for the three months and year ended December 31, 2004. Fourth Quarter 2004 Results For the fourth quarter of 2004, total revenues rose 17% to $17.8 million, compared with $15.2 million in the fourth quarter of 2003. Digirad Imaging Solutions' (DIS) mobile leasing services revenues rose 23% to $11.8 million, compared with $9.6 million for the fourth quarter of the prior year. Product revenues, which include sales of gamma cameras, upgrades, accessories and maintenance contract revenues, were $6.0 million, up 6% from $5.7 million a year ago. "The fourth quarter of 2004 marked a number of significant accomplishments. We achieved solid growth in our DIS business segment, launched our Cardius-3, triple-head, dedicated cardiac camera, and sold the first two of these systems, receiving very positive initial customer feedback. DIS expansion plans continued as we entered new geographies during the quarter and saw an increase in new contracts in expansion geographies," said David Sheehan, President and CEO of Digirad. Gross profit for the quarter ended December 31, 2004 increased 11% to $5.5 million, or 30.9% of revenue, from $5.0 million, or 32.6% of revenue in the prior year period. The decline in gross margin reflects lower DIS margin resulting primarily from lower priced DigiTech(SM) contracts signed in the second and third quarters. DigiTech was launched in May 2004 and is offered to physicians who have bought a Digirad camera but wish to lease DIS personnel and licensure. The Company re-priced the DigiTech program in January 2005 to reflect the value it brings to customers, and believes this action will result in higher per day revenue and margin to the overall DIS business. Product gross margins increased to 38.2% in the fourth quarter of 2004 from 32.8% in the prior year period due to lower production costs and improved field reliability, resulting in lower warranty costs. Operating expenses were $5.7 million for the 2004 fourth quarter, compared with $4.6 million for the comparable 2003 period, due to higher research and development costs related to new products, additional sales headcount in conjunction with the DIS expansion efforts, and various general and administrative costs required to operate as a public company. Net income for the fourth quarter of 2004 was $22,000, or $0.00 per share on a diluted basis, compared with a net loss of $5,000 for the fourth quarter of 2003. During the fourth quarter, Digirad paid off $566,000 of principal of capital lease obligations, and in the first quarter of 2005, the Company paid off a further $2 million. This debt reduction eliminates approximately $300,000 of interest expense that would have been due over the life of the lease obligations, with the majority of the leases expiring by end of December 2006. The Company paid approximately $20,000 and $55,000 in the fourth quarter of 2004 and first quarter of 2005, respectively, in prepayment penalties. 2004 Full Year Financial Results For the year ended December 31, 2004, total revenues rose 21% to $68.1 million, and reflected a 28% increase in DIS revenues to $44.5 million and a 10% increase in product revenues to $23.6 million. Gross margin increased to 31.9%, up from 29.5% last year and operating expenses rose 26% to $21.2 million. For 2004, net income was $245,000, compared with a net loss of $1.7 million in 2003. When calculated on a pro forma basis to account for the conversion of all preferred stock into common stock in connection with Digirad's initial public offering, net income per diluted share for 2004 was $0.01, compared with the pro forma net loss per share of $0.13 for 2003. Sheehan further commented, "We are delighted to report our first full year of profitability. We have entered 2005 with a commitment to DIS expansion as well as to margin improvement throughout the year. Our focus will be on funding research and development initiatives that lower manufacturing costs and enhance reliability and system sensitivity. We believe that we will be able to achieve continued top-line growth and gross margin improvements, both accelerating as 2005 progresses." Cash and cash equivalents and short-term investments as of December 31, 2004 totaled $55.6 million, compared with $7.7 million as of December 31, 2003. Conference Call Information Management will be hosting an investment community conference call beginning at 4:45 p.m. Eastern Time (1:45 p.m. Pacific Time) today to discuss this announcement and to answer questions. Individuals interested in listening to the conference call may do so by dialing 877-815-7177 for domestic callers or 706-634-1178 for international callers. A telephone replay will be available for 48 hours following the conclusion of the call by dialing 800-642-1687 for domestic callers, or 706-645-9291 for international callers and entering reservation code 3861907. The live conference call also will be available via the Internet on the investor relations section of the Company's Web site at www.digirad.com. A recording of the call will be available on the Company's Web site for one year following the completion of the call. About Digirad Digirad Corporation develops, manufactures and markets solid-state, digital gamma cameras to hospitals, imaging centers and physician offices. Digirad offers a comprehensive line of solid-state nuclear gamma cameras that produce a high-quality image for use in the detection of many medical conditions including cardiovascular disease. Digirad's cameras are unique as their lightweight and compact design allows them to fit easily into small office spaces. Through its wholly owned subsidiaries, Digirad Imaging Solutions and Digirad Imaging Systems, Digirad also offers a comprehensive and mobile imaging leasing and services program for physicians who wish to perform nuclear cardiology procedures in their offices but do not have the patient volume, capital or resources to justify purchasing a gamma camera. Digirad Corporation and subsidiaries are headquartered in Poway, California. For more information, please visit www.digirad.com. Digirad(R) and Digirad Imaging Solutions(R) are registered trademarks of Digirad Corporation. Cardius(TM) and DigiTech(SM) are trade and service marks of Digirad Corporation. Forward-Looking Statements Digirad cautions that statements included in this press release that are not a description of historical facts (including, without limitation, statements regarding Digirad's plans to increase its revenues, improve its margins, lower its costs and improve the reliability of its products) are forward-looking statements. Forward-looking statements give expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and other words and terms of similar meaning in connection with a discussion of future operating or financial performance or events. In particular, these include statements relating to future actions, prospective products, services or market opportunities, future performance or results of current and anticipated products or services, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. The inclusion of forward-looking statements should not be regarded as a representation by Digirad that any of its plans will be achieved. Actual results may differ materially from those set forth in this press release due to the risks and uncertainties inherent in Digirad's business including, without limitation: the degree to which Digirad's existing imaging systems and services will be accepted by physicians and hospitals; Digirad's ability to compete against large, well-established competitors with significantly greater resources; any unforeseen changes in domestic and international legislation, regulation or coverage and reimbursement policies of third-party payors; Digirad's ability to timely develop new products, product enhancements and services that are accepted by the market; Digirad's lack of a diversified line of products and services; any technical problems that may develop with respect to Digirad's imaging systems, including the Cardius-3, or any manufacturing or supply problems or price fluctuations that may affect Digirad's third-party suppliers; the ability of Digirad to effectively market, sell and distribute its imaging systems, including the Cardius-3, and services given its limited capabilities in these areas; Digirad's ability to retain and attract key executives, qualified managers, engineers and imaging technologists; Digirad's ability to manage risks relating to product liability, warranty claims, recalls, property damage and personal injury with respect to its imaging systems, including the Cardius-3; Digirad's reliance on a limited number of customers for its products and imaging services; Digirad's compliance with extensive and complex product service and reimbursement regulations, licensure and reporting requirements of the Food and Drug Administration and other state and federal agencies, including with respect to the DIS business, those that are subject to variable interpretations; Digirad's ability to protect its intellectual property and proprietary technology through patents and other means and defend against claims by third parties; and other risks detailed in Digirad's Securities and Exchange Commission filings, including its Prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission on June 10, 2004. Given these uncertainties, readers are cautioned not to 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 this press release including the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Digirad Corporation Consolidated Statements of Operations (In thousands, except per share amounts) Three Months Ended Years Ended December 31, December 31, ---------------------- ------------------ (unaudited)(unaudited) (unaudited) 2004 2003 2004 2003 ---- ---- ---- ---- Revenues: DIS $11,781 $9,561 $44,505 $34,848 Product 5,975 5,662 23,632 21,388 Total revenues 17,756 15,223 68,137 56,236 Cost of revenues: DIS 8,529 6,438 31,005 24,463 Product 3,696 3,773 14,992 15,091 Stock-based compensation 39 47 381 114 Total cost of revenues 12,264 10,258 46,378 39,668 Gross profit 5,492 4,965 21,759 16,568 Operating expenses: Research and development 785 532 2,982 2,191 Sales and marketing 2,135 1,620 7,626 6,008 General and administrative 2,604 2,336 9,769 8,097 Amortization and impairment of intangible assets 16 88 64 444 Stock-based compensation 126 49 736 112 Total operating expenses 5,666 4,625 21,177 16,852 Income (loss) from operations (174) 340 582 (284) Other income (expense): Interest income 297 7 576 36 Interest expense (100) (352) (888) (1,432) Other expense (1) -- (25) -- Total other income (expense) 196 (345) (337) (1,396) Net income (loss) 22 (5) 245 (1,680) Accretion of deferred issuance costs on preferred stock -- (78) (161) (326) Net income (loss) applicable to common stockholders $22 $(83) $84 $(2,006) Historical - basic and diluted net income (loss) per share (1) $0.00 $(4.16) $0.01 $(127.62) Pro forma - basic net income (loss) per share $0.00 $(0.00) $0.02 $(0.13) Pro forma - diluted net income (loss) per share $0.00 $(0.00) $0.01 $(0.13) Shares used in historical per share computations: Basic (1) 18,048 20 10,095 16 Diluted (1) 19,398 20 16,963 16 Shares used in pro forma per share computations: Basic 18,048 12,464 15,584 12,460 Diluted 19,398 12,464 16,963 12,460 (1) As a result of the conversion of our preferred stock into 12.4 million shares of our common stock upon completion of our initial public offering in June 2004, there is a lack of comparability in the historical basic and diluted net income (loss) per share amounts for the periods presented above. Accordingly, the pro forma per share information presented assumes the conversion of all the shares of preferred stock into common stock as of the beginning of each period presented or the date of issuance, if later. Digirad Corporation Consolidated Balance Sheets (In thousands, except par value amounts) December 31, ----------------- (unaudited) 2004 2003 ---- ---- Assets Current assets: Cash and cash equivalents $11,348 $7,681 Securities available-for-sale 44,215 -- Accounts receivable, net 10,017 12,195 Inventories, net 6,980 3,709 Other current assets 1,620 855 Total current assets 74,180 24,440 Property and equipment, net 11,182 10,087 Intangibles, net 542 512 Restricted cash 120 120 Total assets $86,024 $35,159 Liabilities and stockholders' equity (deficit) Current liabilities: Accounts payable $4,313 $3,036 Accrued compensation 2,410 1,893 Accrued warranty 1,219 1,051 Other accrued liabilities 2,651 2,649 Deferred revenue 2,344 1,514 Current portion of notes payable to stockholders -- 245 Current portion of debt 2,228 11,474 Total current liabilities 15,165 21,862 Deferred rent 371 -- Notes payable to stockholders, net of current portion -- 490 Long-term debt, net of current portion 1,754 4,232 Commitments and contingencies Redeemable convertible preferred stock, $0.0001 par value: no shares and 46,023 shares authorized at December 31, 2004 and 2003, respectively; no shares and 43,555 shares issued and outstanding at December 31, 2004 and 2003, respectively -- 84,278 Stockholders' equity (deficit): Preferred stock, $0.0001 par value: 10,000 and no shares authorized at December 31, 2004 and December 31, 2003, respectively; no shares issued and outstanding at December 31, 2004 and 2003 -- -- Common stock, $0.0001 par value: 150,000 shares authorized at December 31, 2004 and 2003; 18,075 and 24 shares issued and outstanding at December 31, 2004 and 2003, respectively 2 -- Additional paid-in capital 149,845 5,032 Accumulated other comprehensive loss (97) -- Deferred compensation (920) (555) Accumulated deficit (80,096) (80,180) Total stockholders' equity (deficit) 68,734 (75,703) Total liabilities and stockholders' equity (deficit) $86,024 $35,159 DRADG CONTACT: Digirad Corporation Todd Clyde, 858-726-1600 ir@digirad.com or Lippert/Heilshorn & Associates Ina McGuinness or Bruce Voss, 310-691-7100 imcguinness@lhai.com -----END PRIVACY-ENHANCED MESSAGE-----