HSKA Heska Corporation

$864 thousand in Net Income Exceeds Guidance LOVELAND, Colo., Nov. 9 /PRNewswire-FirstCall/ -- Heska Corporation (NASDAQ:HSKA) today reported financial results for its third quarter ended September 30, 2006. (Logo: http://www.newscom.com/cgi-bin/prnh/20000622/HESKALOGO) Heska Corporation ("Heska" or the "Company") third quarter results include: -- $15.6 million in Core Companion Animal Health segment product revenue - the highest third quarter result in Company history -- Gross profit of $7.9 million - the highest third quarter result in Company history -- Gross margin improvement of 3 percentage points compared to prior year third quarter to 42.7% "This is the first time Heska has been profitable for the January through September nine month period. In addition, our gross margin increased five points in this period as compared to the same period last year," said Robert Grieve, Heska's Chairman and CEO. "For the quarter, our total revenue and operating expense results were consistent with our guidance and we did marginally better than guidance on the gross margin line. Investors will recall that our third quarter 2005 results set a high bar for the quarter we are reporting today." Segment Product Revenue Total product revenue for the third quarter of 2006 was $18.2 million, down 4% from $19.0 million in the third quarter of 2005. Heska Corporation's business is comprised of two reportable segments -- Core Companion Animal Health and Other Vaccines, Pharmaceuticals and Products. Product revenue from these segments is as follows: Core Companion Animal Health This segment includes revenue from the Company's diagnostic and monitoring instruments and supplies as well as single use, point-of-care tests, pharmaceuticals and vaccines, primarily for canine and feline use. In the third quarter of 2006, this segment generated product revenue of $15.6 million, up 1% as compared to $15.5 million in the third quarter of 2005. In the third quarter of 2005, the Company sold approximately $600 thousand of used hematology products back to its previous hematology supplier. No such sales occurred in the third quarter of 2006. Other Vaccines, Pharmaceuticals and Products This segment includes revenue from private label vaccine and pharmaceutical production, primarily for cattle but also for other animals including small mammals, horses and fish. In the third quarter of 2006, this segment generated product revenue of $2.6 million, down 27% as compared to $3.5 million in the third quarter of 2005. Investor Conference Call Management will conduct a conference call on Thursday, November 9, 2006 at 9:00 a.m. MST (11:00 a.m. EST) to discuss the third quarter 2006 financial results. To participate, dial (866) 249-5225 (domestic) or (303) 205-0066 (international); the conference call access number is 11074573. The conference call will also be broadcast live over the Internet at http://www.heska.com/. To listen, simply log on to the web at this address at least ten minutes prior to the start of the call to register, download and install any necessary audio software. Telephone replays of the conference call will be available for playback until November 22, 2006. The telephone replay may be accessed by dialing (800) 405-2236 (domestic) or (303) 590-3000 (international). The webcast replay may be accessed from Heska's home page at http://www.heska.com/ until November 22, 2006. About Heska Heska Corporation (NASDAQ:HSKA) sells advanced veterinary diagnostic and other specialty veterinary products. Heska's state-of-the-art offerings to its customers include diagnostic and monitoring instruments and supplies as well as single use, point-of-care tests, pharmaceuticals and vaccines. The company's core focus is on the canine and feline markets where it strives to provide high value products for unmet needs in veterinary medicine. For further information on Heska and its products, visit the company's website at http://www.heska.com/. Forward-Looking Statements This announcement contains forward-looking statements regarding Heska's future financial and operating results. These statements are based on current expectations and are subject to a number of risks and uncertainties. In addition, factors that could affect the business and financial results of Heska generally include the following: uncertainties regarding Heska's ability to achieve sustained and/or material profitability; uncertainties regarding the accuracy of any current or future financial guidance; risks regarding Heska's ability to successfully market, sell and distribute its products; uncertainties regarding Heska's reliance on third parties who Heska has granted substantial marketing rights to certain of Heska's existing products; competition; uncertainties regarding the outcome of relationships, collaborations and agreements with third parties from which Heska is hoping to generate new product opportunities or other benefits; risks regarding Heska's reliance on third-party suppliers, which is substantial; risks regarding the commercialization and market acceptance of products Heska may introduce in the future; uncertainties regarding the impact of revenue fluctuations or shortfalls versus our expectations on Heska's cash flow and liquidity as many of Heska's expenses are fixed; uncertainties regarding the cost and outcome of litigation Heska may be involved in; and the risks set forth in Heska's filings and future filings with the Securities and Exchange Commission, including those set forth in Heska's Annual Report on Form 10-K for the year ended December 31, 2005 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. Financial Table Follows: HESKA CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2005 2006 2005 2006 Revenue, net: Product revenue, net: Core companion animal health $15,487 $15,612 $41,667 $44,523 Other vaccines, pharmaceuticals and products 3,497 2,561 10,324 8,790 Total product revenue, net 18,984 18,173 51,991 53,313 Research, development and other 356 432 1,068 1,329 Total revenue 19,340 18,605 53,059 54,642 Cost of revenue: Cost of products sold 11,358 10,348 33,167 31,355 Cost of research, development and other 304 321 771 869 Total cost of revenue 11,662 10,669 33,938 32,224 Gross profit 7,678 7,936 19,121 22,418 Operating expenses: Selling and marketing 3,484 3,490 10,711 10,771 Research and development 884 814 3,061 2,663 General and administrative 1,838 2,482 5,687 7,170 Total operating expenses 6,206 6,786 19,459 20,604 Income (loss) from operations 1,472 1,150 (338) 1,814 Interest and other expense, net 238 263 503 809 Income (loss) before income taxes 1,234 887 (841) 1,005 Income tax expense -- 23 -- 78 Net income (loss) $1,234 $864 $(841) $927 Basic and diluted net income (loss) per share $0.02 $0.02 $(0.02) $0.02 Weighted average shares used to compute basic net income (loss) per share 49,817 50,411 49,573 50,264 Weighted average shares used to compute diluted net income (loss) per share 50,133 52,940 49,573 52,442 Balance Sheet Data (in thousands) (unaudited) December 31, September 30, 2005 2006 Cash and cash equivalents $5,231 $5,259 Total current assets 26,845 30,460 Total assets 36,784 38,271 Line of credit 9,453 8,834 Current portion of long-term debt and capital leases 1,263 1,275 Total current liabilities 20,722 23,156 Long-term debt and capital leases 2,703 2,122 Stockholders' equity 3,233 4,923 http://www.newscom.com/cgi-bin/prnh/20000622/HESKALOGO http://photoarchive.ap.org/ DATASOURCE: Heska Corporation CONTACT: Jason Napolitano, Executive Vice President & CFO of Heska Corporation, +1-970-493-7272, ext. 4105 Web site: http://www.heska.com/

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