Digital Angel Reports 3Q 2008 Financial Results

DIGAD | Quote | Chart | News | PowerRating -- Digital Angel, a provider of technology solutions in the field of animal identification and emergency identification solutions, announced financial results for its third quarter ended September 30.

The company said that revenue for the third quarter of 2008 was $18.9 million, and consolidated net loss from continuing operations was ($33.5) million, or ($2.17) per share; compared to revenue of $28.3 million, and a net loss from continuing operations of ($8.8) million, or ($1.01) per share for the third quarter of 2007, on a historical basis. Revenue for the third quarter of 2007 on a pro forma basis, as explained below, was $20.3 million, and consolidated net loss from continuing operations was ($8.8) million, or ($1.01) per share. The Company's stockholders approved a 1-for-8 reverse stock split on October 30, which the Company expects to effect on or about November 10th. All per share amounts in this release are presented on a post-split basis.

Actual results from continuing operations for the third quarter and first nine months of 2008 include Digital Angel's animal identification and emergency identification segments, as well as corporate expenses, and reflect the equity method of accounting for the Company's approximately 46 percent equity share in VeriChip Corp. During the three-months ended March 31, the Company began accounting for its ownership in VeriChip under the equity method of accounting. Prior to that, it included the results of operations of VeriChip under the consolidation method, as at that time the Company had greater than 50 percent ownership in this entity. Historical 2007 results are shown on a consolidated basis, but for comparative purposes, pro forma results for the third quarter and first nine-months of 2007 are presented in this release as if VeriChip had been accounted for under the equity method of accounting during those periods.

Revenue for the first nine months of 2008 was $62.0 million, and consolidated net loss from continuing operations was ($48.2) million, or ($3.25) per share; compared to revenue of $78.6 million, and a net loss from continuing operations of ($19.6) million, or ($2.30) per share for the first nine months of 2007, on a historical basis. Revenue for the first nine months of 2007 on a pro forma basis, as explained above, was $55.2 million, and consolidated net loss from continuing operations was ($19.6) million, or ($2.30) per share.

During the third quarter of 2008, the Company's earnings (loss) before interest, taxes, depreciation and amortization (EBITDA), was ($27.1) million, compared to EBITDA of ($4.8) million for the third quarter of 2007 on a historical basis, and ($5.4) million on a pro forma basis, as defined above. Included in the ($27.1) million EBITDA results for the third quarter of 2008 were $0.4 million of restructuring expenses, and $0.2 million of inventory reserves associated with the restructuring plan. The Company announced the restructuring plan on June 30. In addition, EBITDA results for the third quarter of 2008 included approximately $26.1 million of goodwill and asset impairments, which were primarily associated with the Company's animal identification segment. As a result of the recent declines in our equity market capitalization, which fell below our stockholders' equity, we were required to perform an interim goodwill assessment in the third quarter of 2008. This assessment resulted in a $25.0 million non-cash goodwill impairment charge in the quarter. This charge is unrelated to management's long-range forecast, which continues to call for growth and margin expansion in our animal identification business. However, in performing our assessments, we were required to place greater emphasis on current trading values, including those of our competitors, as well as higher market-risk discount rates, in performing our impairment assessments.

During the first nine months of 2008, the Company's EBITDA, a non-GAAP financial measure, was ($35.9) million, compared to EBITDA of ($15.0) million for the first nine months of 2007 on a historical basis, and ($16.8) million on a pro forma basis, as defined above. Included in the ($35.9) million EBITDA results for the first nine months of 2008 were $2.3 million of overhead reduction and restructuring expenses, $1.4 million of inventory reserves associated with the restructuring plan and $4.4 million of asset impairments related to the restructuring plan. In addition, EBITDA results for the first nine months of 2008 included approximately $26.1 million of goodwill and other asset impairments, which were primarily associated with the Company's animal identification segment.

Joseph J. Grillo, Digital Angel's CEO and President, said, "During the third quarter, we continued streamlining our operations and driving our business towards profitability. During the quarter, our emergency identification's SARBE division was awarded a contract valued at approximately $9 million with the United Kingdom Ministry of Defense to supply the latest generation SARBE Personal Locator Beacons and related equipment and support. We expect to fulfill this contract by mid- 2009. And we are on track with our previously announced restructuring plan, which when fully implemented is expected to result in annual cost savings of approximately $4.0 million."

Lorraine M. Breece, Digital Angel's CFO, said, "The Company continues to strengthen its balance sheet and improve its capitalization structure. During the third quarter of 2008, we reduced our debt from continuing operations by approximately $9.5 million, eliminated approximately $2.7 million of debt from a discontinued company that we sold for a gain during the quarter, improved our working capital position by approximately $6.2 million and reduced approximately 6.2 million of common stock warrants from our overhang."

The Company develops, manufactures, and markets visual and electronic radio frequency identification (RFID) products for the animal identification segment, under the brand name Destron Fearing.

((Comments on this story may be sent to newsdesk@closeupmedia.com))

((Distributed via M2 Communications Ltd - http://www.m2.com))

http://www.10meters.com

Comments on this story may be sent to newsdesk@closeupmedia.com

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index