2008-08-11 08:00:00
Heska Announces Q2 2008 Results
15% Growth in Income from Operations
LOVELAND, Colo., Aug. 11 /EMWNews/ -- Heska Corporation
(Nasdaq: HSKA) today reported financial results for its second quarter
ended June 30, 2008.
Heska Corporation ("Heska" or the "Company") generated its highest
second quarter revenue ever in the three months ended June 30, 2008, with
total revenue of $22.6 million -- an increase of 13% from the prior year
period. The Company also posted record second quarter income from
operations of $1.4 million in the three months ended June 30, 2008.
"We posted a solid second quarter result, with revenue from our new
chemistry instrument -- the Heska(R) Dri-Chem 4000 Veterinary Clinical
Chemistry Analyzer by FUJIFILM -- representing a key factor in our Core
Companion Animal Health segment product revenue growth," said Robert
Grieve, Heska's Chairman and CEO. "As we have discussed previously,
beginning in 2008 we are reporting our domestic net operating loss usage
and other deferred tax items as income tax expense. This presents a
difficult comparison as we did not report these items as income tax expense
in 2007, which is why investors will note a large increase in
year-over-year tax expense and a corresponding decrease in net income. We
have prepared pro forma information to aid our investors in evaluating this
accounting consequence."
Total Revenue
Total revenue for the second quarter of 2008 was $22.6 million, an
increase of 13% compared to the second quarter of 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 second quarter of 2008 was $22.2 million,
up 12% from $19.8 million in the second quarter of 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 second quarter of 2008, this segment generated product
revenue of $17.3 million, up 7% as compared to $16.2 million in the second
quarter of 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 including small mammals and fish. In
the second quarter of 2008, this segment generated product revenue of $4.9
million, up 38% as compared to $3.5 million in the second quarter of 2007.
Results for the six months ended June 30, 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 $417 thousand in the second
quarter of 2008, an increase of approximately $106 thousand when compared
to $311 thousand in the prior year period.
Investor Conference Call
Management will conduct a conference call on Monday, August 11, 2008 at
9:00 a.m. MDT (11:00 a.m. EDT) to discuss the second quarter 2008 financial
results. To participate, dial (800) 218-8862 (domestic) or (303) 262-2137
(international); the conference call access number is 11116661. 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 August 25, 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 August 25, 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 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 the
past related to customers, technology or products may not recur in future
periods. For example, in the six months ended June 30, 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: risks related to the ultimate commercial success of the Heska's
recently launched chemistry instrument; uncertainties related to Heska's
ability to project future financial results, including its expectation of
profitability in the third and fourth quarters of 2008; 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; risks related to the
loss of large or significant customers; 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; 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 March 31, 2008.
Consolidated Statements of Operations
In Thousands, Except per Share Amounts
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2008 2007 2008
Revenue, net:
Product revenue, net:
Core companion animal health $16,236 $17,324 $33,227 $34,679
Other vaccines, pharmaceuticals
and products 3,540 4,874 8,863 9,155
Total product revenue,
net 19,776 22,198 42,090 43,834
Research, development and other 311 417 712 699
Total revenue 20,087 22,615 42,802 44,533
Cost of revenue:
Cost of products sold 11,713 13,860 23,965 27,993
Cost of research, development
and other 73 184 176 233
Total cost of revenue 11,786 14,044 24,141 28,226
Gross profit 8,301 8,571 18,661 16,307
Operating expenses:
Selling and marketing 3,959 4,644 8,377 9,566
Research and development 742 417 1,446 956
General and administrative 2,390 2,124 5,025 4,622
(Gain) on sale of assets - - (47) -
Total operating expenses 7,091 7,185 14,801 15,144
Income from operations 1,210 1,386 3,860 1,163
Interest and other expense, net 159 181 339 347
Income before income taxes 1,051 1,205 3,521 816
Income tax expense:
Current 15 83 89 119
Net operating loss
usage and other deferred 3 456 5 257
Total income tax expense 18 539 94 376
Net income $1,033 $666 $3,427 $440
Basic net income per share $0.02 $0.01 $0.07 $0.01
Diluted net income per share $0.02 $0.01 $0.06 $0.01
Shares used for basic net
income per share 50,946 51,595 50,875 51,538
Shares used for diluted net
income per share 55,739 53,961 55,047 54,401
Balance Sheet Data
In Thousands (unaudited)
December 31, June 30,
2007 2008
Cash and cash equivalents $5,524 $6,153
Total current assets 35,127 32,707
Total assets 75,591 73,354
Line of credit 12,614 12,720
Current portion of long-term
debt and capital leases 776 1,539
Total current liabilities 25,195 23,650
Long-term debt and capital leases 1,151 -
Stockholders' equity 42,883 44,055
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 Six Months Ended
June 30, 2007 June 30, 2007
As Reported Adjust- Pro As Reported Adjust- Pro
(GAAP) ments Forma (GAAP) ments Forma
Revenue, net:
Product revenue,
net:
Core companion
animal
health $16,236 $- $16,236 $33,227 $- $33,227
Other vaccines,
pharmaceuticals
and products 3,540 - 3,540 8,863 - 8,863
Total
product
revenue,
net 19,776 - 19,776 42,090 - 42,090
Research,
development
and other 311 - 311 712 - 712
Total
revenue 20,087 - 20,087 42,802 - 42,802
Cost of revenue:
Cost of products
sold 11,713 - 11,713 23,965 - 23,965
Cost of research,
development and
other 73 - 73 176 - 176
Total
cost of
revenue 11,786 - 11,786 24,141 - 24,141
Gross profit 8,301 - 8,301 18,661 - 18,661
Operating expenses:
Selling and
marketing 3,959 - 3,959 8,377 - 8,377
Research and
development 742 - 742 1,446 - 1,446
General and
administrative 2,390 - 2,390 5,025 - 5,025
(Gain) on sale
of assets - - - (47) - (47)
Total
operating
expenses 7,091 - 7,091 14,801 - 14,801
Income from
operations 1,210 - 1,210 3,860 - 3,860
Interest and other
expense, net 159 - 159 339 - 339
Income before
income taxes 1,051 - 1,051 3,521 - 3,521
Income tax expense:
Current 15 - 15 89 - 89
Net operating loss
usage and other
deferred 3 454 457 5 1,276 1,281
Total
income tax
expense 18 454 472 94 1,276 1,370
Net income $1,033 $(454) $579 $3,427 $(1,276) $2,151
Basic net income
per share $0.02 $(0.01) $0.01 $0.07 $(0.03) $0.04
Diluted net income
per share $0.02 $(0.01) $0.01 $0.06 $(0.02) $0.04
Shares used for
basic net income
per share 50,946 50,946 50,946 50,875 50,875 50,875
Shares used for
diluted net
income per
share 55,739 55,739 55,739 55,047 55,047 55,047
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