Heska Corporation Announces Record Q2 2006 Results

LOVELAND, Colo., July 25 /PRNewswire-FirstCall/ -- Heska Corporation today reported financial results for its second quarter ended June 30, 2006.

(Logo: http://www.newscom.com/cgi-bin/prnh/20000622/HESKALOGO)

Heska Corporation ("Heska" or the "Company") second quarter results include:

-- $18.5 million revenue -- the highest second quarter result in Company history -- 12% Revenue Growth compared to prior year second quarter -- Gross Margin improvement of over 7.5 percentage points compared to prior year second quarter to 41.2% -- $622 thousand in income from operations -- the first time the Company has had operating income in the second quarter -- Over a $1 million improvement in net income (loss) compared to prior year second quarter

"We are extremely pleased to report our first profitable second quarter and profitability for the January through June six month period," said Robert Grieve, Heska's Chairman and CEO. "The 10% growth in our Core Companion Animal Health segment for both the second quarter and first six months of 2006 reflects our continuing commitment to both improving profitability while growing our core business. Once again, we were able to grow our revenues at the same time we significantly increased our gross margins."

Segment Product Revenue

Total product revenue for the second quarter of 2006 was $18.2 million, up 12% from $16.2 million in the second 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 second quarter of 2006, this segment generated product revenue of $14.7 million, up 10% as compared to $13.3 million in the second quarter of 2005. 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 second quarter of 2006, this segment generated product revenue of $3.5 million, up 24% as compared to $2.8 million in the second quarter of 2005. Investor Conference Call

Management will conduct a conference call on Tuesday, July 25, 2006 at 9:00 a.m. MDT (11:00 a.m. EDT) to discuss the second quarter 2006 financial results. To participate, dial (800) 240-5318 (domestic) or (303) 262-2137 (international); the conference call access number is 11065798. 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 8, 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 www.heska.com until August 8, 2006.

About Heska

Heska Corporation 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 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; risks regarding the loss of large customers such as distributors; uncertainties regarding Heska's reliance on third parties who Heska has granted substantial marketing rights to certain of Heska's existing products; 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; competition; 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 outcome of relationships and collaborations with third parties from which Heska is hoping to generate new product opportunities; 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 March 31, 2006.

Financial Table Follows: HESKA CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2005 2006 2005 2006 Revenue, net: Product revenue, net: Core companion animal health $13,324 $14,652 $26,180 $28,911 Other vaccines, pharmaceuticals and products 2,847 3,520 6,827 6,229 Total product revenue, net 16,171 18,172 33,007 35,140 Research, development and other 394 365 712 897 Total revenue 16,565 18,537 33,719 36,037 Cost of revenue: Cost of products sold 10,752 10,795 21,809 21,007 Cost of research, development and other 288 113 467 548 Total cost of revenue 11,040 10,908 22,276 21,555 Gross profit 5,525 7,629 11,443 14,482 Operating expenses: Selling and marketing 3,428 3,607 7,227 7,281 Research and development 950 1,104 2,177 1,849 General and administrative 1,854 2,296 3,849 4,688 Total operating expenses 6,232 7,007 13,253 13,818 Income (loss) from operations (707) 622 (1,810) 664 Interest and other expense, net 60 286 265 546 Income (loss) before income taxes (767) 336 (2,075) 118 Income tax expense -- 34 -- 55 Net income (loss) $(767) $302 $(2,075) $63 Basic and diluted net income (loss) per share $(0.02) $0.01 $(0.04) $0.00 Weighted average shares used to compute basic net income (loss) per share 49,521 50,251 49,448 50,189 Weighted average shares used to compute diluted net income (loss) per share 49,521 51,594 49,448 52,174 Balance Sheet Data (in thousands) (unaudited) December 31, June 30, 2005 2006 Cash and cash equivalents $5,231 $5,188 Total current assets 26,845 27,175 Total assets 36,784 36,524 Line of credit 9,453 9,493 Current portion of long-term debt and capital leases 1,263 1,275 Total current liabilities 20,722 20,633 Long-term debt and capital leases 2,703 2,315 Stockholders' equity 3,233 3,867

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20000622/HESKALOGOAP Archive: http://photoarchive.ap.orgPRN Photo Desk, photodesk@prnewswire.comHeska Corporation

CONTACT: Jason Napolitano, Executive Vice President & CFO of HeskaCorporation, +1-970-493-7272, ext. 4105

Web site: http://www.heska.com/