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)
August
6, 2007
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)
N/A
(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:
o
Written communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
o
Soliciting
material pursuant to Rule
14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o
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
August
6, 2007, Digirad Corporation issued a press release announcing financial
results
for the quarter ended June 30, 2007. 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 August 6, 2007.
|
2
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/
Todd Clyde
|
||
|
Todd
Clyde
Chief
Financial Officer
|
|||
Date: August
6,
2007
3
Exhibit
99.1
NEWS
RELEASE for August 6, 2007 at 6:00 a.m. EDT
| Contact: | Allen & Caron | Digirad Corporation |
| Dan Matsui (investors) | Todd Clyde | |
| Len Hall (media) | Chief Financial Officer | |
| 949 474 4300 | 858 726 1600 |
DIGIRAD
REPORTS 2007 SECOND-QUARTER, SIX-MONTH FINANCIAL RESULTS
Net
Income on Higher Margins for Quarter, Six Months; Positive Free Cash Flows
POWAY,
Calif.—August 6, 2007—Digirad Corporation (Nasdaq: DRAD), a
leading
provider of diagnostic imaging systems and services to physicians’ offices,
hospitals and other medical services providers, today reported net income
of
$238,000, after stock-based compensation expense, for the second quarter
ended
June 30, 2007, compared to a net loss of $1.2 million for second-quarter
2006.
For six months, the Company reported net income of $312,000, after stock-based
compensation expense, compared to net losses of $4.0 million for the same
period
a year ago.
Chief
Executive Mark Casner commented: “We are pleased to report improved earnings,
including our second consecutive quarter of profitability, and a return to
positive free cash flow. Revenues are also in a sequential quarterly growth
trend. That said, accelerating revenue growth is our principal focus. We
are
also pleased to note the integration of recently acquired Ultrascan, our
first
step in diversifying our business, is progressing according to plan.”
Consolidated
revenues for the quarter were $18.8 million, compared to $19.0 million for
second-quarter 2006. DIS revenue, including revenue from our May 1, 2007,
acquisition of Ultrascan, was $13.3 million, which included no stress agent
sales, compared to DIS revenue for second-quarter 2006 of $13.4 million,
which
included stress agent revenue of $854,000. For the quarter, DIS operated
130
units in service with an overall asset utilization rate of 60%, compared
to 80
units in service and an asset utilization rate of 60% for second-quarter
2006,
before the Ultrascan acquisition. Digirad management is using the asset
utilization metric to track the productivity of its DIS assets and drive
improved margins.
Product-related
revenues, which include camera sales and maintenance revenue, were $5.5 million
and included sales of 19 cameras for the quarter, compared to $5.6 million,
including sales of 19 cameras, for second-quarter 2006.
Casner
continued: “We believe that Ultrascan-related augmentation of DIS’ services
platform, continuing upgrades of DIS’ fleet of mobile cameras and higher
utilization of these added resources will position us to generate growth
of
services revenues. We are also optimistic about the anticipated effects of
our
marketing initiatives, which include our efforts to form strategic alliances
with centers of influence such as academic institutions and medical centers,
to
build awareness of Digirad services by supporting the imaging needs of
local-area practitioners.”
Consolidated
gross profit for the quarter improved to $5.8 million, or 30.9% of revenues,
from $5.7 million, or 29.8% of revenues, for the second quarter of 2006.
DIS
gross margin improved to 27.4% of revenue, compared to 25.6% for second-quarter
2006. Product-related gross margin was 39.2%, compared to 39.8% for the second
quarter of 2006.
Casner
added: “During the quarter we continued to upgrade our DIS nuclear fleet of 87
cameras by replacing 15 cameras with the advanced multi-headed Cardius XPO
configuration. Forty-two multi-headed mobile cameras are now in operation,
and
we expect to complete the upgrade within the next 18 months. We believe that
the
enhanced reliability and higher throughput of multi-headed cameras, and the
higher productivity and shorter workdays they can achieve, enable us to reduce
labor costs. This quarter’s results support our belief that this program can
deliver the productivity and cost benefits we anticipate for our DIS business.”
Operating
expenses for the quarter declined $1.3 million to $6.0 million from $7.3
million
in second- quarter 2006. "Cost control remains a high priority,” Casner
stated.
Net
income for the quarter was $238,000, or $0.01 per share, after accounting
for
stock-based compensation expense of $351,000, compared to a net loss of $1.2
million, or $(0.06) per share, including stock-based compensation expense
of
$574,000.
For
six
months ended June 30, 2007, consolidated revenues were $36.4 million, compared
to $38.0 million for the first six months of 2006. DIS revenue for the period
was $25.5 million, compared to $26.6 million for six-months 2006, and
product-related revenues were $10.8 million, compared to $11.4 million in
the
prior period. Consolidated gross margin for six months improved to 31.0%
from
26.5% for the same period last year.
Net
income for six months was $312,000, or $0.02 per share, including stock-based
compensation expense of $625,000, compared to a net loss of $4.0 million,
or
$(0.21) per share, including stock-based compensation expense of $1.0 million,
for the same period in 2006.
Cash
and
equivalents and securities available for sale on June 30, 2007, totaled $32.2
million, compared to $44.3 million on December 31, 2006. Cash usage in
second-quarter 2007 included the $7.25 million acquisition of Ultrascan and
repayment in full of $1.5 million of assumed debt which was offset in part
by
positive operating cash flows of $1.2 million. Net receivables were $9.7
million
on June 30, 2007, compared to $7.5 million on December 31, 2006, the increase
being largely attributable to acquiring Ultrascan receivables. Net inventories
were $6.0 million on June 30, 2007 compared to $5.9 million on December 31,
2006.
Management
Reaffirms 2007 Guidance
Reflecting
the results for the first half of the year and the integration of Ultrascan,
Digirad anticipates consolidated revenues for 2007 in the range of $77 million
to $80 million, consisting of DIS revenue between $54 million and $56 million
and product revenue between $23 million and $24 million; and consolidated
net
losses ranging from $500,000 to $2.5 million, including estimated stock-based
compensation expense of $1.1 million. Digirad anticipates no stress agent
revenue for 2007 versus stress agent revenue of $2.0 million for
2006.
Conference
Call Information
Digirad
has scheduled a conference call at 11:00 a.m. EDT today. 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. A telephone replay of the call will be available at
(800)
406-7325 or (303) 590-3030, conference ID #3764151, from approximately 2
p.m.
EDT. The telephone replay will be available until 11:59 pm EDT on August
8.
About
Digirad
Digirad
Corporation provides diagnostic nuclear and ultrasound imaging systems and
services to physicians’ offices, hospitals and other medical services providers
for cardiac, vascular, and general imaging applications. Digirad’s Cardius XPO
line of nuclear imaging cameras use patented solid-state technology and unique
multi (single, dual, triple) head design for superior performance and advanced
features for sharper digital images, faster processing, compact size, lighter
weight for portability, ability to handle patients up to 500 pounds, and
improved patient comfort compared to standard nuclear cameras. Digirad’s 2020tc
general-purpose nuclear imager has a small footprint and may also be configured
for fixed or mobile use to supplement primary imaging. Digirad’s installed base
of equipment exceeds 450 systems; in addition, a mobile fleet of more than
120
nuclear and ultrasound imaging systems is being used in 22 states, primarily
in
the eastern, midwestern and southwestern United States. For more information,
please visit www.digirad.com. Digirad®, Digirad Imaging Solutions®, and Cardius®
are registered trademarks of Digirad Corporation.
2
Forward-Looking
Statements
Digirad
cautions that statements included in this press release that are not a
description of historical facts are forward-looking statements. You can identify
these statements by the fact that they do not relate strictly to historical
or
current facts and 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. Examples of such statements include the statements
regarding our expectations of gross margin improvements and declining operating
expenses in both DIS and the product business; our belief that the Utlrascan
acquisition is complementary to our DIS business and provides opportunities
for
the creation of future growth and positive financial performance; our
expectations of improved performance and lower costs from our upgrade of
the DIS
fleet to the mobile version of the Cardius 3 XPO system, improved utilization
of
DIS assets and our efforts to form strategic alliances with centers of
influence;; our expectations of achieving reduced operating costs as a result
of
cost cutting measures; and, in general, our anticipated financial results
for
2007. The inclusion of these and other 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 personnel changes and related
disruptions in our business activities may affect Digirad's products, customers,
work force, suppliers, and our overall business prospects and operations;
the
degree to which Digirad's camera systems and related services will be accepted
by physicians and hospitals some of whom may experience reliability issues
or
technical problems; the ability of Digirad effectively to market, sell and
distribute its medical devices, and related services given its limited
capabilities in these areas; Digirad's ability to manage risks relating to
product liability, warranty claims, recalls, property damage and personal
injury
with respect to its imaging systems; and other risks detailed in Digirad's
Securities and Exchange Commission filings, including its Annual Report on
Form
10-K and other reports filed with the Securities and Exchange Commission.
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.
[Financial
tables follow]
3
Digirad Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
|
2007
|
2006
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2007
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2006
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||||||||||
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Revenues:
|
|||||||||||||
|
DIS
|
$
|
13,323
|
$
|
13,403
|
$
|
25,520
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$
|
26,620
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|||||
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Product
|
5,489
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5,619
|
10,830
|
11,357
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|||||||||
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Total
revenues
|
18,812
|
19,022
|
36,350
|
37,977
|
|||||||||
|
Cost
of revenues:
|
|||||||||||||
|
DIS
|
9,667
|
9,967
|
18,605
|
20,399
|
|||||||||
|
Product
|
3,335
|
3,383
|
6,493
|
7,513
|
|||||||||
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Total
cost of revenues
|
13,002
|
13,350
|
25,098
|
27,912
|
|||||||||
|
Gross
profit
|
5,810
|
5,672
|
11,252
|
10,065
|
|||||||||
|
Operating
expenses:
|
|||||||||||||
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Research
and development
|
791
|
1,117
|
1,573
|
2,213
|
|||||||||
|
Sales
and marketing
|
1,939
|
2,066
|
4,037
|
4,525
|
|||||||||
|
General
and administrative
|
3,117
|
4,105
|
6,089
|
8,234
|
|||||||||
|
Amortization
of intangible assets
|
103
|
20
|
109
|
29
|
|||||||||
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Total
operating expenses
|
5,950
|
7,308
|
11,808
|
15,001
|
|||||||||
|
Loss
from operations
|
(140
|
)
|
(1,636
|
)
|
(556
|
)
|
(4,936
|
)
|
|||||
|
Interest
and other, net
|
378
|
433
|
868
|
929
|
|||||||||
|
Net
income (loss)
|
$
|
238
|
$
|
(1,203
|
)
|
$
|
312
|
$
|
(4,007
|
)
|
|||
|
Net
income (loss) per share - basic and diluted
|
$
|
0.01
|
$
|
(0.06
|
)
|
$
|
0.02
|
$
|
(0.21
|
)
|
|||
|
Weighted
average shares outstanding:
|
|||||||||||||
|
Basic
|
18,821
|
18,761
|
18,818
|
18,736
|
|||||||||
|
Diluted
|
19,208
|
18,761
|
19,208
|
18,736
|
|||||||||
|
Stock-based
compensation expense
|
|||||||||||||
|
is
included in the above as follows:
|
|||||||||||||
|
Cost
of DIS revenue
|
$
|
19
|
$
|
71
|
$
|
44
|
$
|
91
|
|||||
|
Cost
of Product revenue
|
17
|
23
|
43
|
41
|
|||||||||
|
Research
and development
|
21
|
47
|
44
|
89
|
|||||||||
|
Sales
and marketing
|
15
|
74
|
65
|
149
|
|||||||||
|
General
and administrative
|
279
|
359
|
429
|
675
|
|||||||||
4
Digirad Corporation
Condensed Consolidated Balance Sheets
(in thousands)
|
June
30,
2007
|
Dec.
31,
2006(1)
|
||||||
|
(Unaudited)
|
|||||||
|
Assets
|
|||||||
|
Cash
and cash equivalents
|
$
|
9,826
|
$
|
10,070
|
|||
|
Securities
available-for-sale
|
22,394
|
34,256
|
|||||
|
Accounts
receivable, net
|
9,704
|
7,534
|
|||||
|
Inventories,
net
|
6,020
|
5,860
|
|||||
|
Other
current assets
|
1,097
|
1,499
|
|||||
|
Total
current assets
|
49,041
|
59,219
|
|||||
|
Property
and equipment, net
|
14,418
|
9,570
|
|||||
|
Other
intangible assets, net
|
3,219
|
428
|
|||||
|
Goodwill
|
2,699
|
—
|
|||||
|
Restricted
cash
|
60
|
60
|
|||||
|
Total
assets
|
$
|
69,437
|
$
|
69,277
|
|||
|
Liabilities
and stockholders' equity
|
|||||||
|
Accounts
payable
|
$
|
2,011
|
$
|
2,643
|
|||
|
Accrued
compensation
|
3,348
|
3,650
|
|||||
|
Accrued
warranty
|
949
|
788
|
|||||
|
Other
accrued liabilities
|
3,274
|
3,306
|
|||||
|
Deferred
revenue
|
2,865
|
2,775
|
|||||
|
Current
portion of long-term debt
|
262
|
269
|
|||||
|
Total
current liabilities
|
12,709
|
13,431
|
|||||
|
Long-term
debt, net of current portion
|
5
|
99
|
|||||
|
Deferred
rent
|
268
|
302
|
|||||
|
Total
stockholders' equity
|
56,455
|
55,445
|
|||||
|
Total
liabilities and stockholders' equity
|
$
|
69,437
|
$
|
69,277
|
|||
(1) The condensed consolidated balance sheet as of December 31, 2006,
was derived from the
audited financial statements as of that date.
#
# #
#
5