Record Revenue and Income from Operations LOVELAND, Colo., Feb. 26
/PRNewswire-FirstCall/ -- Heska Corporation (NASDAQ:HSKA) today
reported financial results for its fourth quarter, the three months
ended December 31, 2007, and year ended December 31, 2007. (Logo:
http://www.newscom.com/cgi-bin/prnh/20000622/HESKALOGO) Heska
Corporation ("Heska" or the "Company") highlights for 2007 were: --
Total Revenue of $82.3 million - the highest total revenue in Heska
history -- $65.9 million in Core Companion Animal Health Product
Revenue, representing 10% growth from prior year period -- Income
from Operations of $5.5 million, an 80% improvement from prior year
period -- Net Income in all four quarters of the calendar year --
the first time this has occurred in Heska history -- Third
consecutive year of profitable growth "2007 was another record year
for Heska. We experienced broad growth with several product areas
in our Core Companion Animal Health segment increasing compared to
2006. We also had a solid year in our Other Vaccines,
Pharmaceuticals and Products area, with product revenue up 25% from
2006," said Robert Grieve, Heska's Chairman and CEO. "In the fourth
quarter of 2007, we continued the steady growth of our Core
Companion Animal Health segment with 11% product revenue growth
compared to prior year period. As we have previously predicted, the
fourth quarter of 2006 presented a difficult comparison for us due
to the impact of an allergy-related patent portfolio sale in
December 2006. As we look to 2008, we are particularly excited by
the prospects for our diagnostic instruments, where we launched
three major new products in 2007." Total Revenue Total revenue for
the fourth quarter of 2007 was $20.0 million, a decrease of 2%
compared to the fourth quarter of 2006. 2007 total revenue was
$82.3 million, up 10% compared to $75.1 million in 2006. Total
revenue consists of product revenue and research, development and
other revenue, both of which are discussed below. Segment Product
Revenue Total product revenue for the fourth quarter of 2007 was
$19.7 million, up 7% from $18.5 million in the fourth quarter of
2006. For the year ended December 31, 2007, total product revenue
was $80.8 million, up 13% from $71.8 million in 2006. 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 instruments and supplies as well as single
use, point-of-care tests, vaccines and pharmaceuticals, primarily
for canine and feline use. In the fourth quarter of 2007, this
segment generated product revenue of $17.1 million, up 11% as
compared to $15.4 million in the fourth quarter of 2006. For the
year ended December 31, 2007, this segment generated product
revenue of $65.9 million, up 10% from $59.9 million in 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 and fish. In the fourth quarter of 2007, this segment
generated product revenue of $2.6 million, down 15% as compared to
$3.1 million in the fourth quarter of 2006. In 2007, this segment
generated product revenue of $14.9 million up 25% from $11.9
million in 2006. Results for the year ended December 31, 2007
include approximately $1.6 million in revenue recognized in the
first quarter upon receipt of a payment for product previously
shipped and "take-or-pay" minimums for 2005 and 2006 which
previously had not been paid as part of a now settled dispute with
United Vaccines, Inc. ("United"), a former customer. Research,
Development and Other Revenue Research, development and other
revenue was $325 thousand in the fourth quarter of 2007, a decrease
of approximately $1.6 million when compared to $1.9 million in the
prior year period. The fourth quarter of 2006 result includes
approximately $1.5 million in revenue from previously deferred
licensing fees recognized upon the completion of the sale of a
worldwide patent portfolio covering a number of major allergens and
the genes that encode them to Allergopharma Joachim Ganzer KG (the
"Allergopharma Portfolio") in December 2006. For 2007, research,
development and other revenue was $1.5 million, a decrease of
approximately $1.7 million compared to $3.2 million in 2006. For
2006, the Company recognized approximately $2.0 million in
licensing revenue related to the Allergopharma Portfolio, including
revenue from the amortization of previous upfront payments and
other payments from third parties. In 2007, the Company recognized
approximately $250 thousand in revenue under a now completed
service contract related to the Allergopharma Portfolio. Income Tax
Benefit - Valuation Allowance Adjustment The Company's domestic net
operating loss carryforward ("NOL") has historically been reduced
by an equal, offsetting valuation allowance. Based on the Company's
profitable operating performance in the United States, in December
2007 the Company concluded that a portion of its domestic NOL was
realizable on a more-likely-than-not-basis and reduced the
corresponding valuation allowance. This resulted in an income tax
benefit of approximately $30 million and a corresponding $30
million net deferred tax asset - equal to the estimated quantity of
income taxes the Company will recognize in its future statement of
operations as income tax expense that the Company will not have to
actually pay in cash as the Company utilizes its domestic NOL,
assuming the Company's estimate of the realizable portion of its
domestic NOL is exactly correct. This is a non-cash accounting
entry. The Company does not anticipate a similar valuation
allowance adjustment in any period in the near future, although
there can be no assurance a significant valuation allowance
adjustment -- increase or decrease -- to this or another valuation
allowance will not be appropriate in the future. Investor
Conference Call Management will conduct a conference call on
Tuesday, February 26, 2008 at 9:00 a.m. MST (11:00 a.m. EST) to
discuss the fourth quarter and year end 2007 financial results. To
participate, dial (800) 218-9073 (domestic) or (303) 262-2130
(international); the conference call access number is 11109131. 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 March 11, 2008. 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 March 11, 2008. 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 and unparalleled customer support to
veterinarians. 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. Investors should note that there is an inherent risk
in using past results to predict future outcomes. Revenue generated
in 2007 or 2006 related to customers, technology or products may
not recur in 2008. For example, in the year ended December 31,
2007, Heska recognized approximately $1.6 million in revenue upon
receipt of a payment from United for product previously shipped and
"take or pay" minimums for 2005 and 2006. As United has ceased
operations, Heska does not expect to generate any future revenue
from United. As another example, although Heska recognized
approximately $2.0 million in research, development and other
revenue related to the Allergopharma Portfolio in 2006 and
recognized approximately $250 thousand in research, development and
other revenue under a now completed service agreement, Heska does
not expect to generate any revenue related to the Allergopharma
Portfolio in 2008. In addition, factors that could affect the
business and financial results of Heska generally include the
following: uncertainties regarding Heska's ability to forecast its
net operating loss usage, including over the very long term; risks
related to the ultimate market acceptance of recently launched
diagnostic instrumentation products; risks regarding Heska's
reliance on third-party suppliers, which is substantial and could
have significant negative consequences if Heska were to lose
exclusive rights or access to a product due to a failure to meet
minimum sales requirements or for other reasons; risks regarding
Heska's ability to successfully market, sell and distribute its
products; competition, including uncertainties regarding the impact
of new products competitors have recently launched or may launch in
the future; uncertainties regarding Heska's reliance on third
parties to whom Heska has granted substantial marketing rights to
certain of Heska's existing products; risks regarding Heska's fixed
expense base and the potential negative impact of unexpected
events, such as significant shortfalls in anticipated revenue, or
Heska's ability to meet its financial and other obligations,
especially in the short term; 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, 2006 and Quarterly Report
on Form 10-Q for the quarter ended September 30, 2007. Financial
Table Follows: Consolidated Statements of Operations In Thousands,
Except per Share Amounts (unaudited) Three Months Ended Twelve
Months Ended December 31, December 31, 2006 2007 2006 2007 Revenue,
net: Product revenue, net: Core companion animal health $15,413
$17,082 $59,936 $65,910 Other vaccines, pharmaceuticals and
products 3,089 2,635 11,879 14,897 Total product revenue, net
18,502 19,717 71,815 80,807 Research, development and other 1,916
325 3,245 1,528 Total revenue 20,418 20,042 75,060 82,335 Cost of
revenue: Cost of products sold 11,645 13,084 43,000 48,874 Cost of
research, development and other 545 40 1,414 274 Total cost of
revenue 12,190 13,124 44,414 49,148 Gross profit 8,228 6,918 30,646
33,187 Operating expenses: Selling and marketing 3,585 3,937 14,356
16,109 Research and development 820 570 3,483 2,679 General and
administrative 2,717 1,883 9,887 8,925 Other (155) - (155) (47)
Total operating expenses 6,967 6,390 27,571 27,666 Income from
operations 1,261 528 3,075 5,521 Interest and other expense, net
232 155 1,041 588 Income before income taxes 1,029 373 2,034 4,933
Income tax expense (benefit): Current 58 (4) 58 108 Net operating
loss usage 1 8 79 17 Valuation allowance adjustment (1) 69 (30,000)
69 (30,000) Total income tax expense (benefit) 128 (29,996) 206
(29,875) Net income $901 $30,369 $1,828 $34,808 Basic net income
per share $0.02 $0.59 $0.04 $0.68 Diluted net income per share
$0.02 $0.55 $0.03 $0.63 Shares used for basic net income per share
50,595 51,364 50,347 51,097 Shares used for diluted net income per
share 54,128 55,659 52,932 55,509 (1) Adjustment due to a change in
circumstances that causes a change in judgment about the
realizability of the related deferred tax asset in future years.
Balance Sheet Data In Thousands (unaudited) December 31, December
31, 2006 2007 Cash and cash equivalents $5,275 $5,524 Total current
assets 30,652 35,127 Total assets 38,495 75,591 Line of credit
8,022 12,614 Current portion of long-term debt and capital leases
1,275 776 Total current liabilities 21,980 25,195 Long-term debt
and capital leases 1,927 1,151 Stockholders' equity 6,748 42,883
Pro Forma Financial Information Statement of Utility The following
pro forma financial information is presented assuming Heska had
reduced its valuation allowance related to its domestic net
operating loss on December 31, 2006 rather than December 31, 2007.
In this circumstance, there would have been no Valuation Allowance
Adjustment in 2007 and the Company would have recognized Net
Operating Loss Usage as Income Tax Expense, as outlined below. The
Company believes the pro forma information may be valuable to
investors as an additional tool to benchmark future periods versus
historical results on a consistently reported basis. The Company
does not suggest that investors should consider such pro forma
financial information in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP. Pro Forma
Reconciliation to GAAP Consolidated Statements of Operations In
Thousands, Except per Share Amounts (unaudited) Twelve Months Ended
December 31, 2007 As Reported(GAAP) Adjustments Pro Forma Revenue,
net: Product revenue, net: Core companion animal health $65,910 $-
$65,910 Other vaccines, pharmaceuticals and products 14,897 -
14,897 Total product revenue, net 80,807 - 80,807 Research,
development and other 1,528 - 1,528 Total revenue 82,335 - 82,335
Cost of revenue: Cost of products sold 48,874 - 48,874 Cost of
research, development and other 274 - 274 Total cost of revenue
49,148 - 49,148 Gross profit 33,187 - 33,187 Operating expenses:
Selling and marketing 16,109 - 16,109 Research and development
2,679 - 2,679 General and administrative 8,925 - 8,925 Other (47) -
(47) Total operating expenses 27,666 - 27,666 Income from
operations 5,521 - 5,521 Interest and other expense, net 588 - 588
Income before income taxes 4,933 - 4,933 Income tax expense
(benefit): Current 108 - 108 Net operating loss usage 17 1,825
1,842 Valuation allowance adjustment(1) (30,000) 30,000 - Total
income tax expense (benefit) (29,875) 31,825 1,950 Net income
$34,808 $(31,825) $2,983 Basic net income per share $0.68 $(0.62)
$0.06 Diluted net income per share $0.63 $(0.58) $0.05 Shares used
for basic net income per share 51,097 51,097 51,097 Shares used for
diluted net income per share 55,509 55,509 55,509 (1) Adjustment
due to a change in circumstances that causes a change in judgment
about the realizability of the related deferred tax asset in future
years. 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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