Slide 1: Schedule 14A Proxy Statement - Digirad Corporation
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant x Filed by a Party other than the Registrant ¨ Check the appropriate box: ¨ Preliminary Proxy
Slide 2: Digirad: Moving Forward, April 2013
DIGIRAD MovinG FORWARD April 2013
Slide 3: Safe Harbor Statement
“SafeHarbor”Statementunderthe PrivateSecuritiesLitigationReformActof 1995: The presentationand information containedherein present“forward-looking statements”addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. The matters discussed i
Slide 4: Executive Summary
EXECUTIVE SUMMARY TheDigiradBoardis newly reconstitutedwith 5 independentdirectors • 4 introduced in past 12 months and recommended by stockholders TheReconstitutedBoardhasadopteda new strategicplanto drive cash flow and stockholder value • Refocus on Digirad Imaging Solutions (DIS) and installed ba
Slide 5: Board reconstituted on February 7, 2013
• Board reconstituted on February 7, 2013 to become a more nimble and cost efficient size • Size reduced from 8 members to 6 members • Jeff Eberwein appointed Chairman of the Board • 4 independent directors introduced in past 12 months, each of whom were recommended by our stockholders • 3 in April
Slide 6: Board responsive to stockholder concerns; stock price up almost 40%
• On February 28, 2013, the reconstituted Board announced a new strategic plan, management changes, the adoption of significant corporate governance reforms, and its commitment to returning cash to stockholders • Since February 7, 2013 (the date the Board was reconstituted), the Company’s stock pric
Slide 7: New strategic focus on cash flow
Digirad Imaging Solutions • New strategic focus; it is all about cash flow: Focus on Digirad Imaging Solutions (DIS) cash flow generation Execute financially disciplined acquisitions via attractive returns and fast payback; committedto only acquisitions that make financial sense Utilize NOLs to offs
Slide 8: Increase Value to Stockholders
IncreaseValue to Stockholders • Stockholder value will be increased by: Reducing costs as we restructure and focus on cash flow + Acquiring financially disciplined, cash generating businesses, subject to stockholder approval if cost exceeds $5 million + Share repurchases = Stockholder Value • Goal i
Slide 9: Management team being right-sized
• Management team is being right-sized based on our healthcare services focus • Top three management positions appointed since September 2012 • Todd Clyde will step down after a transition period (July 2013) • Several other management positions are being eliminated to make the organization lean and
Slide 10: Board corporate governance reforms
Digirad’s Board has: • Established a CEO stock ownership policy that requires significant participation of the CEO,at 3x annualbasesalary,whichis in line with ISS’recommended practices • Adopted a resolution to require stockholder approval for any acquisition in excess of $5 million in purchase pric
Slide 11: Directors Have the Relevant Experience to Execute Our New Strategic Plan
Digirad’s Directors Have the Relevant Experience to Execute Our New Strategic Plan and Maximize Value For All Stockholders
Slide 12: Jeffrey E. Eberwein – Chairman
Jeffrey E. Eberwein – Chairman, Director since 2012 Founder and Chief Executive Officer of Lone Star Value Investors, LLC • Over 20 years of Wall Street experience • Board experience with a variety of companies • Specific experience in mergers & acquisitions as well as proper NOL utilization • Signi
Slide 13: John M. Climaco – Director
John M. Climaco – Director since 2012 President, Chief Executive Officer and Director, Axial Biotech, Inc. • Extensive executive and operating experience with healthcare services • Track record of raising capital, engineering strategic alliances, building executive teams and managing complex busines
Slide 14: Charles M. Gillman – Director
Charles M. Gillman – Director since 2012 Portfolio Manager, Nadel and Gussman, LLC • Extensive experience with strategic capital allocation and consulting • Substantial public board experience In June 2001, Charles M. Gillman was employed by Nadel and Gussman, LLC (“NG”) to serve as portfolio manage
Slide 15: James B. Hawkins – Director
James B. Hawkins Director - since 2012 President, Chief Executive Officer and Director, Natus Medical Incorporated • Over 20 years of experience running medical device companies • Completed over 20 acquisitions in his career • As a Founder and CEO of Invivo Corporation,Hawkins Mr. sold the Company f
Slide 16: John W. Sayward – Director
John W. Sayward – Director since 2008 Retired Partner, Nippon Heart Hospital LLC • Over 15 years experience serving as CFO of medical device and pharmaceutical companies • Significant experience in financial discipline and financial oversight From September 2005 to January 2007, Mr. Sayward was a pa
Slide 17: Red Oak seeking control without paying a premium
• Digirad believes Red Oak is just seeking control without paying a control premium. This is their second proxy contest for control in 2 years, despite a newly constituted Board comprised entirely of independent directors. • Red Oak has not articulated any new business plan for the company • Red Oak
Slide 18: Timeline of Red Oak engagement
• November30, 2011– RedOaknominatesfive candidatesfor electionto the Boardat the 2012AnnualMeeting of Stockholders , disclosing an ownership of just 3,000 shares or less than 1% of our outstanding stock. Digirad offered RedOak3 Boardseatsin anattempt to avoida costlyandunproductiveproxy contest– Red
Slide 19: Red Oak proposals already addressed
Red Oak has proposed cost-cutting measures and corporate governance reforms that we have already addressed. • Red Oak wants greater stock ownership for directors and to reduce Board compensation Digirad’s Board has already adopted a comprehensive director stock ownership policy, which all directors
Slide 20: Responses to Red Oak claims on special meetings and compensation
• Red Oak would seek to reduce the stockholder threshold to call special a meeting to 10% Digirad already has a policy that owners of 20% of common stock may call a special meeting, which is a normal and customary level for many companies. • Red Oak believes our management compensation is excessive.
Slide 21: Red Oak nominees lack healthcare experience
• None of the Red Oak nominees have any meaningful healthcare experience. • Three of five Red Oak nominees have little or no experience serving on a public company board. • A California bank, co-founded by a Red Oak nominee, was shut down by the FDIC after suffering heavy losses on mortgages. • Red
Slide 22: Your Board is Committed to Stockholder Return
Your Board is Committed to Stockholder Return Since our last Annual Meeting, we have: Added four new independent Board members with significant relevant experience Initiated and implemented, as well as continuously review, a variety of best corporate governance practices Initiated and completed a St
Slide 23: Appendix: Business Overview
APPENDIX: BUSINESS OVERVIEW
Slide 24: Digirad business lines and services
• Personnel & Equipment Leasing (Services) • Customer Service (Maintenance) • Nuclear Medicine • Focused Product Sales • Ultrasound • Other Mobile Services • New Services 23
Slide 25: Personnel and equipment leasing for physicians
Delivers licensed staffing and imaging equipment to physicians with no burden and cost of full ownership Personnel Logistics Equipment Physician Issues Benefits to Physician/Healthcare System 24
Slide 26: Evolving regulation and economics forcing structural change in healthcare
Evolving regulation and economics are forcing structural change in Healthcare • Increase revenue-generating patients • Improve level of care • Participating in integrated networks (ACOs, acquisitions) Physician • Multi-use exam room maximizes revenue Practices • Creating integrated networks (ACOs, a
Slide 27: Growth strategy and locations
Expand Practice revenues and profits • Cardiology practices • Internists New revenue streams from channel • New services; variety of other mobile-based services • Accreditation consulting services Geographic optimization Tuck-in acquisitions Stabilizing reimbursement Nuclear Nuclear / Ultrasound Hea
Slide 28: Customer Service: most profitable part of Diagnostic Imaging
The most profitable component of Diagnostic Imaging: Customer Service • Includes over 20 Field Service Engineers located throughout the United States • Flexible and nimble to address customer needs • Actively managed to increase margins and to enhance cash flows • Serves a significant installed base
Slide 29: Liquid, Strong Ratios, No Long-Term Debt
Liquid, Strong Ratios, No Long-Term Debt; Well Positioned to Deploy our Strategy 28
Slide 30: Managed well through volatile external market dynamics
Managed well through volatile external market dynamics * 2012 results include $1.2 million of inventory reserve adjustments (included in gross profit) related to our February 28, 2013 restructuring announcement, and impact of $0.4 million estimated settlement of radiopharmaceutical supply litigation