Core Companion Animal Health Segment Increases Annual Revenue
LOVELAND, Colo., March 16 /PRNewswire-FirstCall/ -- Heska
Corporation (NASDAQ:HSKA) ("Heska" or the "Company") today reported
financial results for its fourth quarter, the three months ended
December 31, 2008, and year ended December 31, 2008. (Logo:
http://www.newscom.com/cgi-bin/prnh/20000622/HESKALOGO) "The poor
economic environment had an impact on our fourth quarter 2008
results in addition to the anticipated revenue shortfall in our
Other Vaccines, Pharmaceuticals and Product segment. This was
particularly true in new instrument sales, which represent a
relatively large capital expenditure for a significant portion of
our customers. We believe many veterinarians are consciously
delaying capital expenditures until they perceive more positive
economic conditions," said Robert Grieve, Heska's Chairman and CEO.
"We cannot plan for this situation to change quickly. Accordingly,
we took steps late in 2008 to reduce our overhead costs in the
coming year. Our restructuring charge of $785 thousand includes
severance payments for several employees. Despite the economic
downturn experienced globally in the fourth quarter, our Core
Companion Animal Health product revenue grew to a record level in
2008. We are committed to managing our business through these
challenging times and positioning our company to prosper in the
years to come." Total Revenue Total revenue for the fourth quarter
of 2008 was $15.4 million, a decrease of 23% compared to $20.0
million in the fourth quarter of 2007. 2008 total revenue was $81.7
million, down 1% compared to $82.3 million in 2007. 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 2008 was $15.1
million, down 23% from $19.7 million in the fourth quarter of 2007.
For the year ended December 31, 2008, total product revenue was
$80.3 million, down 1% from $80.8 million in 2007. 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 2008, this
segment generated product revenue of $13.4 million, down 22% as
compared to $17.1 million in the fourth quarter of 2007. For the
year ended December 31, 2008, this segment generated product
revenue of $67.0 million, up 2% from $65.9 million in 2007. Other
Vaccines, Pharmaceuticals and Products This segment includes
revenue from private label vaccine and pharmaceutical production,
primarily for cattle but also for other animals such as small
mammals. In the fourth quarter of 2008, this segment generated
product revenue of $1.7 million, down 34% as compared to $2.6
million in the fourth quarter of 2007. In 2008, this segment
generated product revenue of $13.3 million down 11% from $14.9
million in 2007. 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 $307 thousand in the fourth quarter of 2008, a decrease
of 6% compared to $325 thousand in the prior year period. For the
year ended December 31, 2008, research, development and other
revenue was $1.3 million, a 13% decline compared to $1.5 million in
2007. Income Tax Benefit The Company reported an income tax benefit
for all periods presented which generally relate to an anticipated
future tax benefit for financial results in the period presented.
Prior to December 2007, the Company's domestic net operating loss
carryforward ("NOL") had 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 amount of income taxes
the Company will recognize in its future statement of operations as
income tax expense that the Company will not have to pay in cash as
the Company utilizes its domestic NOL, assuming the Company's
estimate of the realizable portion of its domestic NOL is correct.
This was a non-cash accounting entry. In addition, the Company's
fourth quarter 2008 and 2008 income tax benefit was reduced by $10
thousand with a corresponding reduction of its net deferred tax
asset related to its NOL in Switzerland as the Company did not
generate sufficient taxable income in 2008 to fully utilize its
Swiss net deferred tax asset, which expired at the end of 2008. The
Company does not anticipate a valuation allowance adjustment
related to its deferred tax assets in any period in the near
future, although there can be no assurance a significant valuation
allowance adjustment - increase or decrease - will not be
appropriate in the future. Investor Conference Call Management will
conduct a conference call on Monday, March 16, 2009 at 9:00 a.m.
MDT (11:00 a.m. EDT) to discuss the fourth quarter and year end
2008 financial results. To participate, dial (800) 218-0204
(domestic) or (303) 262-2138 (international); the conference call
access number is 11124767. 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 30,
2009. 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 30, 2009. 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 2008 or 2007 related to customers,
technology or products may not recur in 2009. 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. In addition, factors that
could affect the business and financial results of Heska generally
include the following: uncertainties regarding overall economic
conditions, the effect of these conditions on Heska's business and
Heska's accuracy in predicting these and related matters; the level
of Heska's fixed expense, which is significant, and the
corresponding cash flow and liquidity-related risks resulting from
unanticipated revenue and gross margin shortfalls; uncertainties
related to the Company's ability to generate taxable income in the
future to benefit from its net operating loss and other deferred
tax assets, and its ability to predict such outcomes, including
over the very long term; 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; uncertainties related to Heska's
ability to obtain access to capital in the future in order to
sustain its business; uncertainties related to Heska's ability to
maintain its listing on the Nasdaq Capital Market; risks related to
Heska's reliance on third parties for products Heska may intend to
introduce in the future; 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, 2007 and Quarterly Report on Form 10-Q
for the quarter ended September 30, 2008. Financial Table Follows:
Consolidated Statements of Operations In Thousands, Except per
Share Amounts (unaudited) Three Months Twelve Months Ended Ended
December 31, December 31, 2007 2008 2007 2008 Revenue, net: Product
revenue, net: Core companion animal health $17,082 $13,398 $65,910
$67,021 Other vaccines, pharmaceuticals and products 2,635 1,729
14,897 13,310 Total product revenue, net 19,717 15,127 80,807
80,331 Research, development and other 325 307 1,528 1,322 Total
revenue, net 20,042 15,434 82,335 81,653 Cost of revenue: Cost of
products sold 13,084 11,083 48,874 52,478 Cost of research,
development and other 40 10 274 331 Total cost of revenue 13,124
11,093 49,148 52,809 Gross profit 6,918 4,341 33,187 28,844
Operating expenses: Selling and marketing 3,937 3,616 16,109 17,640
Research and development 570 489 2,679 1,951 General and
administrative 1,883 2,161 8,925 8,917 Restructuring expenses - 785
- 785 Other - 232 (47) 232 Total operating expenses 6,390 7,283
27,666 29,525 Income (loss) from operations 528 (2,942) 5,521 (681)
Interest and other expense, net 155 140 588 640 Income (loss)
before income taxes 373 (3,082) 4,933 (1,321) Income tax expense
(benefit) (29,996) (1,215) (29,875) (471) Net income (loss) $30,369
$(1,867) $34,808 $(850) Basic net income (loss) per share $0.59
$(0.04) $0.68 $(0.02) Diluted net income (loss) per share $0.55
$(0.04) $0.63 $(0.02) Shares used for basic net income (loss) per
share 51,364 51,821 51,097 51,674 Shares used for diluted net
income (loss) per share 55,659 51,821 55,509 51,674 Balance Sheet
Data In Thousands (unaudited) December 31, December 31, 2007 2008
Cash and cash equivalents $5,524 $4,705 Total current assets 35,127
31,290 Total assets 75,591 70,438 Line of credit 12,614 11,042
Current portion of long-term debt and capital leases 776 770 Total
current liabilities 25,195 22,228 Long-term debt and capital leases
1,151 381 Stockholders' equity 42,883 42,523 Pro Forma Financial
Information Statement of Utility The following estimated 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, 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) Three Months Ended
Twelve Months Ended December 31, 2007 December 31, 2007 As As
Reported Pro Reported Pro (GAAP) Adjustments Forma (GAAP)
Adjustments Forma Revenue, net: Product revenue, net: Core
companion animal health $17,082 $- $17,082 $65,910 $- $65,910 Other
vaccines, pharmaceuticals and products 2,635 - 2,635 14,897 -
14,897 Total product revenue, net 19,717 - 19,717 80,807 - 80,807
Research, development and other 325 - 325 1,528 - 1,528 Total
revenue, net 20,042 - 20,042 82,335 - 82,335 Cost of revenue: Cost
of products sold 13,084 - 13,084 48,874 - 48,874 Cost of research,
development and other 40 - 40 274 - 274 Total cost of revenue
13,124 - 13,124 49,148 - 49,148 Gross profit 6,918 - 6,918 33,187 -
33,187 Operating expenses: Selling and marketing 3,937 - 3,937
16,109 - 16,109 Research and development 570 - 570 2,679 - 2,679
General and administrative 1,883 - 1,883 8,925 - 8,925 (Gain) on
sale of assets - - - (47) - (47) Total operating expenses 6,390 -
6,390 27,666 - 27,666 Income from operations 528 - 528 5,521 -
5,521 Interest and other expense, net 155 - 155 588 - 588 Income
before income taxes 373 - 373 4,933 - 4,933 Income tax expense
(benefit) (29,996) 30,218 222 (29,875) 31,825 1,950 Net income
$30,369 $30,218 $151 $34,808 $(31,825) $2,983 Basic net income per
share $0.59 $(0.59) $0.00 $0.68 $(0.62) $0.06 Diluted net income
per share $0.55 $(0.55) $0.00 $0.63 $(0.58) $0.05 Shares used for
basic net income per share 51,364 51,364 51,364 51,097 51,097
51,097 Shares used for diluted net income per share 55,659 55,659
55,659 55,509 55,509 55,509
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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