Form 8-K DIGIRAD CORP For: Apr 30

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April 30, 2015 6:04 AM EDT


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: April 30, 2015
(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.)

1048 Industrial Court,
Suwanee, GA 30024
(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 April 30, 2015, Digirad Corporation issued a press release announcing financial results for the three months ended March 31, 2015. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

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 April 30, 2015
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:     April 30, 2015



Exhibit Index

Exhibit No.
 
Description
 
 
 
99.1
 
Press Release of Digirad Corporation dated April 30, 2015

99.2
 
Information Related to the Use of Non-GAAP Financial Measures




Exhibit 99.1
News Release
For immediate release
For more information contact:
April 30, 2015
Jeffry Keyes
 
Chief Financial Officer
 
858-726-1600
 

Digirad Corporation Reports Financial Results for First Quarter of 2015

•
Announces positive adjusted net income and adjusted EBITDA for 8th quarter in a row
•
Confirms financial guidance for 2015
•
Announces a regular quarterly cash dividend of $0.05 cents per share

Suwanee, GA. - April 30, 2015 - Digirad Corporation (Nasdaq: DRAD) today reported its financial results for the first quarter ended March 31, 2015.
Total revenues for the 2015 first quarter were $13.8 million, an increase of 6 percent compared to the prior year’s first quarter revenues of $13.0 million.
Adjusted net income for the 2015 first quarter was $261,000, or $0.01 per diluted share, compared to adjusted net income of $353,000, or $0.02 per diluted share in the prior year's first quarter. Adjusted EBITDA for the 2015 first quarter was $797,000, compared to $789,000 in for the prior year first quarter. A reconciliation of adjusted net income and adjusted EBITDA is provided later in this release.
Digirad President and CEO Matt Molchan said, “Despite all the weather related activity up and down the east coast during the first quarter, which primarily affected our Diagnostic Services businesses, I am pleased with our results. We have made solid progress on all our initiatives, and we are quickly integrating our recent acquisition of MD Office Solutions.”
Molchan continued, “With the completion of our first year of ownership of Telerhythmics, I am also pleased to announce that we have completed our integration efforts. We have had some challenges with integration efforts and weather related to Telerhythmics, but believe that we are poised for growth going forward now that these two items are behind us. Based on this, and other forward opportunities we are seeing, we expect to finish solidly within our previously announced 2015 financial guidance.”
The previously announced 2015 financial guidance was to generate revenues between $61.0 million and $63.0 million; non-GAAP adjusted diluted earnings per share between $0.19 and $0.21; and non-GAAP adjusted EBITDA between $6.5 million and $6.9 million. The Company's non-GAAP financial measure adjusted diluted earnings per share excludes restructuring charges, acquired intangible asset amortization and acquisition related income tax adjustments. Adjusted EBITDA further excludes stock-based compensation expense.
During the 2015 first quarter, the Company generated cash flow from operations of $122,000, compared to a cash use in operations of $1.8 million in the prior year’s first quarter. The Company’s cash, cash equivalents and available-for-sale securities balance at March 31, 2015 was $20.9 million, a $1.1 million decrease from the December 31, 2014 balance of $22.0 million. Cash activity for the quarter included normal working capital changes along with payment of cash dividends.
The Company also announced a cash dividend of $0.05 cents per share that will be paid on May 27, 2015, to shareholders of record on May 13, 2015.

Conference Call Information
A conference call is scheduled for 11:00 a.m. EDT on April 30, 2015 to discuss the results and management's outlook. The call may be accessed by dialing 1-877-407-9039 (international callers: 201-689-8470) 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 http://drad.client.shareholder.com/events.cfm; 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 net income (loss),” “adjusted net income (loss) per diluted share,” and “adjusted EBITDA.” The most directly comparable measure for these non-GAAP financial measures are operating expenses, net income (loss), and diluted net income (loss) per share. The Company has included below unaudited adjusted financial information, which presents the Company's results of operations after excluding restructuring charges, acquired intangible asset amortization, acquisition related income tax items, and in the measure of adjusted EBITDA, interest, taxes, depreciation, amortization and stock-based compensation.
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 April 30, 2015.

About Digirad Corporation
Digirad delivers convenient, effective, and efficient diagnostic solutions on an as needed, when needed, and where needed basis. Digirad is one of the largest national providers of in-office nuclear cardiology and ultrasound imaging services, and also provides cardiac event monitoring services. These services are provided to physician practices, hospitals and imaging centers through its Diagnostic Services business. Digirad also sells medical diagnostic imaging systems, including solid-state gamma cameras, for nuclear cardiology and general nuclear medicine applications, as well as provides service on the products sold through its Diagnostic Imaging business. For more information, please visit www.digirad.com. Digirad® and Cardius® are registered trademarks of Digirad Corporation.

Forward-Looking Statements
This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. Some of these forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seek,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates,” or the negative of those words or other comparable terminology, or in specific statements such as the Company's ability to deliver value to customers, the 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. These risks are 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.

 



(Financial tables follow)








Digirad Corporation
Condensed Consolidated Statements of Income (Loss)
(Unaudited)
 
Three Months Ended
 
March 31,
(in thousands, except per share amounts)
2015
 
2014
 

 

Revenues:
 
 
 
Diagnostic Services
$
10,563

 
$
9,555

Diagnostic Imaging
3,276

 
3,442

Total revenues
13,839

 
12,997

Cost of revenues:
 
 
 
Diagnostic Services
8,505

 
7,534

Diagnostic Imaging
1,686

 
2,021

Total cost of revenues
10,191

 
9,555

 
 
 
 
Gross profit
3,648

 
3,442

Total gross profit percentage
26.4
%
 
26.5
%
Diagnostic Services gross profit percentage
19.5
%
 
21.2
%
Diagnostic Imaging gross profit percentage
48.5
%
 
41.3
%
 
 
 
 
Operating expenses:
 
 
 
Marketing and sales
1,210

 
1,095

General and administrative
2,168

 
1,995

Amortization of intangible assets
105

 
66

Restructuring charges
—

 
441

Total operating expenses
3,483

 
3,597

 
 
 
 
Income (loss) from operations
165

 
(155
)
 
 
 
 
Other income (expense):
 
 
 
Interest and other income, net
11

 
17

Interest expense
(11
)
 
(8
)
Total other income
—

 
9

 
 
 
 
Income (loss) before income taxes
165

 
(146
)
Income tax benefit (expense)
580

 
(2
)
Net income (loss)
$
745

 
$
(148
)
 
 
 
 
Net income (loss) per share:
 
 
 
Basic
$
0.04

 
$
(0.01
)
Diluted
$
0.04

 
$
(0.01
)
Dividends declared per common share
$
0.05

 
$
0.05

 
 
 
 
Weighted average shares outstanding – basic
18,803

 
18,518

Weighted average shares outstanding – diluted
19,291

 
18,518

 
 
 
 





Digirad Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
 
(in thousands, except share data)
March 31,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
13,876

 
$
14,051

Securities available-for-sale
7,048

 
7,935

Accounts receivable, net
7,060

 
5,989

Inventories, net
3,657

 
3,644

Other current assets
898

 
856

Restricted cash
477

 
477

 Total current assets
33,016

 
32,952

 
 
 
 
Property and equipment, net
5,197

 
4,766

Intangible assets, net
3,479

 
2,577

Goodwill
2,889

 
1,337

Other assets
289

 
269

Total assets
$
44,870

 
$
41,901

 
 
 
 
Liabilities and stockholders’ equity
 
 
 
Accounts payable
$
2,242

 
$
1,423

Accrued compensation
2,587

 
3,261

Accrued warranty
159

 
176

Deferred revenue
1,481

 
1,644

Other accrued liabilities
2,086

 
1,789

Total current liabilities
8,555

 
8,293

Other liabilities
966

 
963

Total liabilities
9,521

 
9,256

 
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock
—

 
—

Common stock
2

 
2

Treasury stock
(5,728
)
 
(5,728
)
Additional paid-in capital
155,714

 
153,769

Accumulated other comprehensive loss
(5
)
 
(19
)
Accumulated deficit
(114,634
)
 
(115,379
)
Total stockholders’ equity
35,349

 
32,645

Total liabilities and stockholders’ equity
$
44,870

 
$
41,901








Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
 
 
 
Three Months Ended March 31,
(in thousands, except per share amounts)
 
2015
 
2014
 
 
 
 
 
 
Total operating expenses
 
$
3,483

 
$
3,597

 
Restructuring charges(1)
 
—

 
(441
)
 Non-GAAP Adjusted operating expenses
 
$
3,483

 
$
3,156

 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
745

 
$
(148
)
 
Restructuring charges(1)
 
—

 
441

 
Acquired intangible amortization
 
103

 
64

 
Income tax items(2)
 
(587
)
 
(4
)
Non-GAAP Adjusted net income
 
$
261

 
$
353

 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - diluted
 
$
0.04

 
$
(0.01
)
 
Restructuring charges(1)(3)
 
—

 
0.02

 
Acquired intangible amortization(3)
 
0.01

 
—

 
Income tax items(2)(3)
 
(0.03
)
 
—

Non-GAAP Adjusted net income per share - diluted(3)
 
$
0.01

 
$
0.02

 
 
 
 
 
 

 
 
 
Three Months Ended March 31,
(in thousands)
 
2015
 
2014
 
 
 
 
 
 
Net income (loss)
 
$
745

 
$
(148
)
 
Restructuring charges(1)
 
—

 
441

 
Depreciation and amortization
 
488

 
453

 
Stock-based compensation
 
144

 
50

 
Interest and other income, net
 
(11
)
 
(17
)
 
Interest expense
 
11

 
8

 
Income tax expense (benefit)
 
(580
)
 
2

Non-GAAP Adjusted EBITDA
 
$
797

 
$
789

 
 
 
 
 
 

(1) Reflects nonrecurring charges primarily related to the lease termination of the Poway, CA facility.
(2) Reflects income tax effect for adjusted financial data and acquisition related income tax adjustments.
(3) Per share amounts are computed independently for each discrete item presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal to the total for the year, and sum of individual items may not equal the total.






Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
 
 
 
Three Months Ended
(in thousands, except per share amounts)
 
March 31, 2014
 
June 30, 2014
 
September 30, 2014
 
December 31, 2014
 
March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
Total operating expenses
 
$
3,597

 
$
3,680

 
$
3,377

 
$
3,468

 
$
3,483

 
Restructuring charges(1)
 
(441
)
 
(138
)
 
(80
)
 
(33
)
 
—

 Non-GAAP Adjusted operating expenses
 
$
3,156

 
$
3,542

 
$
3,297

 
$
3,435

 
$
3,483

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(148
)
 
$
823

 
$
1,028

 
772

 
745

 
Restructuring charges(1)
 
441

 
138

 
80

 
33

 
—

 
Acquired intangible amortization
 
64

 
102

 
90

 
90

 
103

 
Income tax items(2)
 
(4
)
 
(2
)
 
(1
)
 
(3
)
 
(587
)
Non-GAAP Adjusted net income
 
$
353

 
$
1,061

 
$
1,197

 
$
892

 
$
261

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - diluted(3)
 
$
(0.01
)
 
$
0.04

 
$
0.05

 
0.04

 
0.04

 
Restructuring charges(1)(3)
 
0.02

 
0.01

 
—

 
—

 
—

 
Acquired intangible amortization(3)
 
—

 
0.01

 
—

 
—

 
0.01

 
Income tax items(2)(3)
 
—

 
—

 
—

 
—

 
(0.03
)
Non-GAAP Adjusted net income per share - diluted(3)
 
$
0.02

 
$
0.06

 
$
0.06

 
$
0.05

 
$
0.01

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
Three Months Ended
(in thousands)
 
March 31, 2014
 
June 30, 2014
 
September 30, 2014
 
December 31, 2014
 
March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(148
)
 
$
823

 
$
1,028

 
$
772

 
$
745

 
Restructuring charges(1)
 
441

 
138

 
80

 
33

 
—

 
Depreciation and amortization
 
453

 
485

 
497

 
494

 
488

 
Stock-based compensation
 
50

 
61

 
96

 
119

 
144

 
Interest and other income, net
 
(17
)
 
(15
)
 
(14
)
 
(12
)
 
(11
)
 
Interest expense
 
8

 
9

 
10

 
12

 
11

 
Income tax expense (benefit)
 
2

 
8

 
8

 
44

 
(580
)
Non-GAAP Adjusted EBITDA
 
$
789

 
$
1,509

 
$
1,705

 
$
1,462

 
$
797

 
 
 
 
 
 
 
 
 
 
 
 

(1) Reflects nonrecurring charges primarily related to restructuring of the Diagnostic Imaging reporting segment and lease termination of the Poway, CA facility.
(2) Reflects income tax effect for adjusted financial data and acquisition related income tax adjustments.
(3) Per share amounts are computed independently for each discrete item presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal to the total for the year, and sum of individual items may not equal the total.




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 press release (the “Press Release”) dated April 30, 2015 announcing results for the three months ended March 31, 2015 that accompanied a conference call held by the Company on April 30, 2015. 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 Press Release.
In the Press Release, the Company presented the non-GAAP financial measures “adjusted operating expenses,” “adjusted net income (loss),” “adjusted net income (loss) per diluted share,” and “adjusted EBITDA.” 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, Company management finds it useful to use financial measures that do not include charges associated with restructuring activities, acquired intangible asset amortization or acquisition-related income tax adjustments. 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. In the case of “adjusted EBITDA,” Company management believes the exclusion of interest, taxes, depreciation, amortization, and stock-based compensation is a very common measure utilized in the investment community and it helps Company management benchmark its operations and results with the industry.
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. This limitation is best addressed by using these non-GAAP financial measures in combination with “operating expenses,” “net income (loss),” and “net income (loss) per diluted share” (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 or lower than the most comparable GAAP measure.





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