UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Delaware
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77-0192527
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification Number) |
3760 Rocky Mountain Avenue
Loveland, Colorado |
80538
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code:
(970) 493-7272
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
(Do not check if a small reporting company)
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Smaller Reporting Company
¨
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Page
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PART I - FINANCIAL INFORMATION
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Item 1.
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Unaudited Condensed Consolidated Financial Statements:
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Item 2.
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Item 3.
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Item 4.
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PART II - OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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December 31,
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(unaudited)
March 31,
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||||
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2015
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2016
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||||
ASSETS
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||||||||
Current assets:
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|
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Cash and cash equivalents
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$
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6,890
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$
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6,180
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Accounts receivable, net of allowance for doubtful accounts of
$189 and $203, respectively |
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16,136
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13,707
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Due from – related parties
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308
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244
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Inventories, net
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16,101
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18,613
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Other current assets
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1,827
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1,440
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Total current assets
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41,262
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40,184
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Property and equipment, net
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17,020
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17,761
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Note receivable – related party
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1,516
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1,528
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Goodwill and other intangibles
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20,966
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20,992
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Deferred tax asset
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25,883
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25,302
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Other long-term assets
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3,072
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4,325
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Total assets
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$
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109,719
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$
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110,092
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||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
Current liabilities:
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Accounts payable
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$
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7,624
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$
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5,941
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Accrued liabilities
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5,416
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6,661
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Current portion of deferred revenue
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5,461
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3,896
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Line of credit
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143
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798
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Other short-term borrowings, including current portion of
long-term note payable |
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159
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159
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Total current liabilities
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18,803
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17,455
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Long-term note payable, net of current portion
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69
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32
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Deferred revenue, net of current portion, and other
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11,572
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11,323
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Total liabilities
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30,444
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28,810
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Commitments and contingencies (Note 11)
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Non-Controlling Interest
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15,747
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15,777
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Stockholders' equity:
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Preferred stock, $.01 par value, 2,500,000 shares authorized,
none issued or outstanding |
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—
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—
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Common stock, $.01 par value, 7,500,000 shares authorized,
none issued or outstanding |
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—
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—
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Public common stock, $.01 par value, 7,500,000 shares authorized,
6,625,287 and 6,636,389 shares issued and outstanding, respectively |
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66
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66
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Additional paid-in capital
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227,267
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227,798
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Accumulated other comprehensive income
|
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187
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186
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Accumulated deficit
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(163,992
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)
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(162,545
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)
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Total stockholders' equity
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63,528
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65,505
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Total liabilities and stockholders' equity
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$
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109,719
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$
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110,092
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Three Months Ended
March 31,
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||||||
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2015
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2016
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Revenue:
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Core companion animal health
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$
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19,572
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$
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23,434
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Other vaccines, pharmaceuticals and products
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3,322
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3,712
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Total revenue, net
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22,894
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27,146
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Cost of revenue
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12,810
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15,704
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Gross profit
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10,084
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11,442
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Operating expenses:
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Selling and marketing
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5,460
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5,619
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Research and development
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|
419
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|
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575
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General and administrative
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3,184
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3,278
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Total operating expenses
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9,063
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|
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9,472
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Operating income
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1,021
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1,970
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Interest and other expense (income), net
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137
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|
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(133
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)
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Income before income taxes
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884
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2,103
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Income tax expense:
|
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Current income tax expense
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44
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74
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Deferred income tax expense
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257
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|
582
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||
Total income tax expense
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301
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656
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Net income
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583
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1,447
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Net income (loss) attributable to non-controlling interest
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(15
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)
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261
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Net income attributable to Heska Corporation
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$
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598
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$
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1,186
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Basic earnings per share attributable
to Heska Corporation
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$
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0.10
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$
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0.18
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Diluted earnings per share attributable
to Heska Corporation
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$
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0.09
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$
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0.17
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Weighted average outstanding shares used to compute basic earnings per share attributable to Heska Corporation
|
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6,181
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6,496
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Weighted average outstanding shares used to compute diluted earnings per share attributable to Heska Corporation
|
|
6,869
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|
|
7,164
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Three Months Ended March 31,
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||||||
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2015
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2016
|
||||
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Net income
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|
$
|
583
|
|
|
$
|
1,447
|
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Other comprehensive income (expense):
|
|
|
|
|
|
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Sale of equity investment
|
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—
|
|
|
(90
|
)
|
||
Foreign currency translation
|
|
76
|
|
|
89
|
|
||
Comprehensive income
|
|
659
|
|
|
1,446
|
|
||
|
|
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||||
Comprehensive income (loss) attributable to non-controlling interest
|
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(15
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)
|
|
261
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|
||
Comprehensive income attributable to Heska Corporation
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|
$
|
674
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|
|
$
|
1,185
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Three Months Ended March 31,
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||||||
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2015
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|
2016
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
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||||
Net income
|
|
$
|
583
|
|
|
$
|
1,447
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Adjustments to reconcile net income to cash provided by (used in) operating activities:
|
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|
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|
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Depreciation and amortization
|
|
1,006
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|
|
1,096
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|
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Deferred tax expense
|
|
257
|
|
|
582
|
|
||
Stock based compensation
|
|
398
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|
|
527
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|
||
Unrealized (gain) loss on foreign currency translation
|
|
16
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|
(1
|
)
|
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Changes in operating assets and liabilities:
|
|
|
|
|
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Accounts receivable
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|
405
|
|
|
2,429
|
|
||
Inventories
|
|
(4,058
|
)
|
|
(3,538
|
)
|
||
Other current assets
|
|
(194
|
)
|
|
323
|
|
||
Accounts payable
|
|
237
|
|
|
(1,683
|
)
|
||
Accrued liabilities and other
|
|
785
|
|
|
1,229
|
|
||
Other non-current assets
|
|
(393
|
)
|
|
(1,250
|
)
|
||
Deferred revenue and other
|
|
(432
|
)
|
|
(1,798
|
)
|
||
Net cash used in operating activities
|
|
(1,390
|
)
|
|
(637
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
||||
Proceeds from sale of equity investment
|
|
—
|
|
|
115
|
|
||
Purchases of property and equipment
|
|
(605
|
)
|
|
(905
|
)
|
||
Proceeds from disposition of property and equipment
|
|
—
|
|
|
95
|
|
||
Net cash used in investing activities
|
|
(605
|
)
|
|
(695
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
||||
Proceeds from issuance of common stock, net of distributions
|
|
235
|
|
|
33
|
|
||
Proceeds from line of credit borrowings, net
|
|
1,633
|
|
|
655
|
|
||
Repayments of other debt
|
|
(34
|
)
|
|
(128
|
)
|
||
Net cash provided by financing activities
|
|
1,834
|
|
|
560
|
|
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
34
|
|
|
62
|
|
||
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
(127
|
)
|
|
(710
|
)
|
||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
5,855
|
|
|
6,890
|
|
||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
5,728
|
|
|
$
|
6,180
|
|
Beginning December 31, 2015
|
$
|
15,747
|
|
Accretion of Put Value
|
30
|
|
|
Balance March 31, 2016
|
$
|
15,777
|
|
|
|
Three months ended March 31,
|
||||||
|
|
2015
|
|
2016
|
||||
Income before income taxes
|
|
$
|
884
|
|
|
$
|
2,103
|
|
Total income tax expense
|
|
301
|
|
|
656
|
|
||
Effective tax rate
|
|
34.0
|
%
|
|
31.2
|
%
|
|
Three Months Ended March 31,
|
||||||
|
2015
|
|
2016
|
||||
Net income attributable to Heska Corporation
|
$
|
598
|
|
|
$
|
1,186
|
|
|
|
|
|
||||
Basic weighted-average common shares outstanding
|
6,181
|
|
|
6,496
|
|
||
Assumed exercise of dilutive stock options and restricted stock units
|
688
|
|
668
|
|
|||
Diluted weighted-average common shares outstanding
|
6,869
|
|
|
7,164
|
|
||
|
|
|
|
||||
Basic earnings per share
|
$
|
0.10
|
|
|
$
|
0.18
|
|
Diluted earnings per share
|
$
|
0.09
|
|
|
$
|
0.17
|
|
|
March 31,
|
||
|
2016
|
||
Carrying amount, beginning of period
|
$
|
20,910
|
|
Adjustments due to foreign currency fluctuations
|
29
|
|
|
Carrying amount, end of period
|
$
|
20,939
|
|
|
December 31,
|
|
March 31,
|
||||
|
2015
|
|
2016
|
||||
Gross carrying amount
|
$
|
788
|
|
|
$
|
788
|
|
Accumulated amortization
|
(732
|
)
|
|
(735
|
)
|
||
Net carrying amount
|
$
|
56
|
|
|
$
|
53
|
|
|
Three Months Ended March 31,
|
||||||
|
2015
|
|
2016
|
||||
Amortization expense
|
$
|
65
|
|
|
$
|
3
|
|
|
December 31,
|
|
March 31,
|
||||
|
2015
|
|
2016
|
||||
Land
|
$
|
377
|
|
|
$
|
377
|
|
Building
|
2,868
|
|
|
2,868
|
|
||
Machinery and equipment
|
35,284
|
|
|
36,945
|
|
||
Leasehold and building improvements
|
6,673
|
|
|
6,720
|
|
||
Construction in progress
|
1,496
|
|
|
1,531
|
|
||
|
46,698
|
|
|
48,441
|
|
||
Less accumulated depreciation and amortization
|
(29,678
|
)
|
|
(30,680
|
)
|
||
Total property and equipment, net
|
$
|
17,020
|
|
|
$
|
17,761
|
|
|
|
December 31,
|
|
March 31,
|
||||
|
|
2015
|
|
2016
|
||||
Raw materials
|
|
$
|
8,531
|
|
|
$
|
10,475
|
|
Work in process
|
|
2,839
|
|
|
3,472
|
|
||
Finished goods
|
|
6,122
|
|
|
6,092
|
|
||
Allowance for excess or obsolete inventory
|
|
(1,391
|
)
|
|
(1,426
|
)
|
||
|
|
$
|
16,101
|
|
|
$
|
18,613
|
|
|
December 31,
2015 |
|
March 31,
2016 |
||||
Accrued payroll and employee benefits
|
$
|
860
|
|
|
$
|
1,013
|
|
Accrued property taxes
|
721
|
|
|
357
|
|
||
Accrued purchases
|
300
|
|
|
1,274
|
|
||
Other
|
3,535
|
|
|
4,017
|
|
||
Total accrued liabilities
|
$
|
5,416
|
|
|
$
|
6,661
|
|
|
2015
|
|
2016
|
Risk-free interest rate
|
1.10%
|
|
1.45%
|
Expected lives
|
3.4 years
|
|
4.5 years
|
Expected volatility
|
42%
|
|
41%
|
Expected dividend yield
|
0%
|
|
0%
|
|
Year Ended
December 31,
|
|
Three Months Ended
March 31,
|
||||||||||
|
2015
|
|
2016
|
||||||||||
|
Options |
|
Weighted Average Exercise Price
|
|
Options |
|
Weighted Average Exercise Price
|
||||||
Outstanding at beginning of period
|
1,074,251
|
|
|
$
|
10.110
|
|
|
940,610
|
|
|
$
|
14.163
|
|
Granted at Market
|
146,446
|
|
|
$
|
36.904
|
|
|
1,000
|
|
|
$
|
30.520
|
|
Canceled
|
(28,440
|
)
|
|
$
|
10.080
|
|
|
(347
|
)
|
|
$
|
14.711
|
|
Exercised
|
(251,647
|
)
|
|
$
|
10.559
|
|
|
(5,290
|
)
|
|
$
|
11.675
|
|
Outstanding at end of period
|
940,610
|
|
|
$
|
14.163
|
|
|
935,973
|
|
|
$
|
14.195
|
|
Exercisable at end of period
|
621,559
|
|
|
$
|
10.269
|
|
|
642,909
|
|
|
$
|
10.272
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Exercise Prices
|
|
Number of
Options Outstanding at March 31, 2016 |
|
Weighted
Average Remaining Contractual Life in Years |
|
Weighted
Average Exercise Price |
|
Number of
Options Exercisable at March 31, 2016 |
|
Weighted
Average Exercise Price |
||||||
$ 4.40 - $ 6.90
|
|
225,302
|
|
|
4.52
|
|
$
|
5.600
|
|
|
223,052
|
|
|
$
|
5.594
|
|
$ 6.91 - $ 8.26
|
|
188,524
|
|
|
7.62
|
|
$
|
7.384
|
|
|
108,788
|
|
|
$
|
7.384
|
|
$ 8.27 - $15.80
|
|
189,795
|
|
|
6.02
|
|
$
|
9.688
|
|
|
162,762
|
|
|
$
|
9.748
|
|
$15.81 - $18.30
|
|
178,965
|
|
|
5.19
|
|
$
|
18.016
|
|
|
114,674
|
|
|
$
|
17.952
|
|
$18.31 - $39.76
|
|
153,387
|
|
|
9.26
|
|
$
|
36.306
|
|
|
33,633
|
|
|
$
|
26.980
|
|
$ 4.40 - $39.76
|
|
935,973
|
|
|
6.35
|
|
$
|
14.195
|
|
|
642,909
|
|
|
$
|
10.272
|
|
|
Three Months Ended March 31,
|
||
|
2015
|
|
2016
|
Risk-free interest rate
|
0.23%
|
|
0.51%
|
Expected lives
|
1.3 years
|
|
1.2 years
|
Expected volatility
|
35%
|
|
41%
|
Expected dividend yield
|
0%
|
|
0%
|
|
Minimum pension liability
|
|
Foreign currency translation
|
|
Unrealized gains (losses) on available for sale investments
|
|
Total accumulated other comprehensive income
|
||||||||
Balances at December 31, 2015
|
$
|
(576
|
)
|
|
$
|
673
|
|
|
$
|
90
|
|
|
$
|
187
|
|
Current period other comprehensive income (loss)
|
—
|
|
|
89
|
|
|
(90
|
)
|
|
(1
|
)
|
||||
Balances at March 31, 2016
|
$
|
(576
|
)
|
|
$
|
762
|
|
|
$
|
—
|
|
|
$
|
186
|
|
Three Months Ended March 31, 2015
|
|
Core
Companion Animal Health |
|
Other Vaccines, Pharmaceuticals and Products
|
|
Total |
||||||
Total revenue
|
|
$
|
19,572
|
|
|
$
|
3,322
|
|
|
$
|
22,894
|
|
Operating Income
|
|
535
|
|
|
486
|
|
|
1,021
|
|
|||
Income before income taxes
|
|
410
|
|
|
474
|
|
|
884
|
|
|||
Capital expenditures
|
|
307
|
|
|
298
|
|
|
605
|
|
|||
Depreciation and amortization
|
|
830
|
|
|
176
|
|
|
1,006
|
|
Three Months Ended March 31, 2016
|
|
Core
Companion Animal Health |
|
Other Vaccines, Pharmaceuticals and Products
|
|
Total |
||||||
Total revenue
|
|
$
|
23,434
|
|
|
$
|
3,712
|
|
|
$
|
27,146
|
|
Operating Income
|
|
1,758
|
|
|
212
|
|
|
1,970
|
|
|||
Income before income taxes
|
|
1,808
|
|
|
295
|
|
|
2,103
|
|
|||
Capital expenditures
|
|
397
|
|
|
508
|
|
|
905
|
|
|||
Depreciation and amortization
|
|
897
|
|
|
199
|
|
|
1,096
|
|
|
|
Core
Companion
Animal Health
|
|
Other Vaccines, Pharmaceuticals and Products
|
|
Total
|
||||||
Total assets
|
|
$
|
92,567
|
|
|
$
|
17,152
|
|
|
$
|
109,719
|
|
Net assets
|
|
48,175
|
|
|
15,353
|
|
|
63,528
|
|
|
|
Core
Companion
Animal Health
|
|
Other Vaccines, Pharmaceuticals and Products
|
|
Total
|
||||||
Total assets
|
|
$
|
93,330
|
|
|
$
|
16,762
|
|
|
$
|
110,092
|
|
Net assets
|
|
57,152
|
|
|
8,353
|
|
|
65,505
|
|
|
December 31,
|
|
March 31,
|
||||
|
2015
|
|
2016
|
||||
United States
|
$
|
106,780
|
|
|
$
|
106,980
|
|
Europe
|
2,939
|
|
|
3,112
|
|
||
Total
|
$
|
109,719
|
|
|
$
|
110,092
|
|
|
Three Months Ended March 31,
|
||||||
|
2015
|
|
2016
|
||||
Revenue
|
$
|
22,894
|
|
|
$
|
27,146
|
|
Gross Profit
|
10,084
|
|
|
11,442
|
|
||
Operating expenses
|
9,063
|
|
|
9,472
|
|
||
Operating income
|
1,021
|
|
|
1,970
|
|
||
Interest and other expense (income), net
|
137
|
|
|
(133
|
)
|
||
Income before income taxes
|
884
|
|
|
2,103
|
|
||
Provision for income taxes
|
301
|
|
|
656
|
|
||
Net income
|
583
|
|
|
1,447
|
|
||
Net income (loss) attributable to non-controlling interest
|
(15
|
)
|
|
261
|
|
||
Net income attributable to Heska Corporation
|
$
|
598
|
|
|
$
|
1,186
|
|
|
Three Months Ended March 31,
|
||||
|
2015
|
|
2016
|
||
Revenue
|
100.0
|
%
|
|
100.0
|
%
|
Gross Profit
|
44.0
|
%
|
|
42.1
|
%
|
Operating expenses
|
39.6
|
%
|
|
34.9
|
%
|
Operating income
|
4.5
|
%
|
|
7.3
|
%
|
Interest and other expense (income), net
|
0.6
|
%
|
|
(0.5
|
)%
|
Income before income taxes
|
3.9
|
%
|
|
7.7
|
%
|
Provision for income taxes
|
1.3
|
%
|
|
2.4
|
%
|
Net income
|
2.5
|
%
|
|
5.3
|
%
|
Net income (loss) attributable to non-controlling interest
|
(0.1
|
)%
|
|
1.0
|
%
|
Net income attributable to Heska Corporation
|
2.6
|
%
|
|
4.4
|
%
|
|
Three Months Ended March 31,
|
||||||
|
2015
|
|
2016
|
||||
Net cash used in operating activities
|
$
|
(1,390
|
)
|
|
$
|
(637
|
)
|
Net cash used in investing activities
|
(605
|
)
|
|
(695
|
)
|
||
Net cash provided by financing activities
|
1,834
|
|
|
560
|
|
||
Effect of currency translation on cash
|
34
|
|
|
62
|
|
||
Decrease in cash and cash equivalents
|
(127
|
)
|
|
(710
|
)
|
||
Cash and cash equivalents, beginning of the period
|
5,855
|
|
|
6,890
|
|
||
Cash and cash equivalents, end of the period
|
$
|
5,728
|
|
|
$
|
6,180
|
|
Item 1
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors
|
•
|
Inability to meet minimum obligations.
Current agreements, or agreements we may negotiate in the future, may commit us to certain minimum purchase or other spending obligations. It is possible we will not be able to create the market demand to meet such obligations, which could create a drain on our financial resources and liquidity. Some such agreements may require minimum purchases and/or sales to maintain product rights and we may be significantly harmed if we are unable to meet such requirements and lose product rights.
|
•
|
Loss of exclusivity.
In the case of our blood testing instruments, if we are entitled to non-exclusive access to consumable supplies for a defined period upon expiration of exclusive rights, we may face increased competition from a third party with similar non-exclusive access or our former supplier, which could cause us to lose customers and/or significantly decrease our margins and could significantly affect our financial results. In addition, current agreements, or agreements we may negotiate in the future, with suppliers may require us to meet minimum annual sales levels to maintain our position as the exclusive distributor of these products. We may not meet these minimum sales levels and maintain exclusivity over the distribution and sale of these products. If we are not the exclusive distributor of these products, competition may increase significantly, reducing our revenues and/or decreasing our margins.
|
•
|
Changes in economics.
An underlying change in the economics with a supplier, such as a large price increase or new requirement of large minimum purchase amounts, could have a significant, adverse effect on our business, particularly if we are unable to identify and implement an alternative source of supply in a timely manner.
|
•
|
The loss of product rights upon expiration or termination of an existing agreement.
Unless we are able to find an alternate supply of a similar product, we would not be able to continue to offer our customers the same breadth of products and our sales and operating results would likely suffer. In the case of an instrument supplier, we could also potentially suffer the loss of sales of consumable supplies, which would be significant in cases where we have built a significant installed base, further harming our sales prospects and opportunities. Even if we were able to find an alternate supply for a product to which we lost rights, we would likely face increased competition from the product whose rights we lost being marketed by a third party or the former supplier and it may take us additional time and expense to gain the necessary approvals and launch an alternative product.
|
•
|
High switching costs.
In our blood testing instrument products we could face significant competition and lose all or some of the consumable revenues from the installed base of those instruments if we were to switch to a competitive instrument. If we need to change to other commercial manufacturing contractors for certain of our regulated products, additional regulatory licenses or approvals generally must be obtained for these contractors prior to our use. This would require new testing and compliance inspections prior to sale, thus resulting in potential delays. Any new manufacturer would have to be educated in, or develop, substantially equivalent processes necessary for the production of our products. We likely would have to train our sales force, distribution network employees and customer support organization on the new product and spend significant funds marketing the new product to our customer base.
|
•
|
The involuntary or voluntary discontinuation of a product line.
Unless we are able to find an alternate supply of a similar product in this or similar circumstances with any product, we would not be able to continue to offer our customers the same breadth of products and our sales would likely suffer. Even if we are able to identify an alternate supply, it may take us additional time and expense to gain the necessary approvals and launch an alternative product, especially if the product is discontinued unexpectedly.
|
•
|
Inconsistent or inadequate quality control.
We may not be able to control or adequately monitor the quality of products we receive from our suppliers. Poor quality items could damage our reputation with our customers.
|
•
|
Limited capacity or ability to scale capacity.
If market demand for our products increases suddenly, our current suppliers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand. If we consistently generate more demand for a product than a given supplier is capable of handling, it could lead to large backorders and potentially lost sales to competitive products that are readily available. This could require us to seek or fund new sources of supply, which may be difficult to find or may require terms that are less advantageous if available at all.
|
•
|
Regulatory risk.
Our manufacturing facility and those of some of our third-party suppliers are subject to ongoing periodic unannounced inspection by regulatory authorities, including the FDA, USDA and other federal, state and foreign agencies for compliance with strictly enforced Good Manufacturing Practices, regulations and similar foreign standards. We do not have control over our suppliers' compliance with these regulations and standards. Regulatory violations could potentially lead to interruptions in supply that could cause us to lose sales to readily available competitive products.
|
•
|
Developmental delays.
We may experience delays in the scale-up quantities needed for product development that could delay regulatory submissions and commercialization of our products in development, causing us to miss key opportunities.
|
•
|
Limited geographic rights.
We typically do not have global geographic rights to products supplied by third parties. If we were to determine a market opportunity in a geography where we did not have distribution rights and were unable to obtain such rights from the supplier, it might hamper our ability to succeed in such geography and our sales and profits would be lower than they otherwise would have been.
|
•
|
Limited intellectual property rights.
We typically do not have intellectual property rights, or may have to share intellectual property rights, to the products supplied by third parties and any improvements to the manufacturing processes or new manufacturing processes for these products.
|
•
|
stock sales by large stockholders or by insiders;
|
•
|
changes in the outlook for our business;
|
•
|
our quarterly operating results, including as compared to expected revenue or earnings and in comparison to historical results;
|
•
|
termination, cancellation or expiration of our third-party supplier relationships;
|
•
|
announcements of technological innovations or new products by our competitors or by us;
|
•
|
litigation;
|
•
|
regulatory developments, including delays in product introductions;
|
•
|
developments or disputes concerning patents or proprietary rights;
|
•
|
availability of our revolving line of credit and compliance with debt covenants;
|
•
|
releases of reports by securities analysts;
|
•
|
economic and other external factors; and
|
•
|
general market conditions.
|
•
|
supply of products from third-party suppliers or termination, cancellation or expiration of such relationships;
|
•
|
competition and pricing pressures from competitive products;
|
•
|
the introduction of new products or services by our competitors or by us;
|
•
|
large customers failing to purchase at historical levels;
|
•
|
fundamental shifts in market demand;
|
•
|
manufacturing delays;
|
•
|
shipment problems;
|
•
|
information technology problems, which may prevent us from conducting our business effectively, or at all, and may also raise our costs;
|
•
|
regulatory and other delays in product development;
|
•
|
product recalls or other issues which may raise our costs;
|
•
|
changes in our reputation and/or market acceptance of our current or new products; and
|
•
|
changes in the mix of products sold.
|
Period
|
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid per Share (1)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
|
|||||
January 1 - January 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
February 1 - February 29, 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
March 1 - March 31, 2016
|
|
4,788
|
|
|
33.64
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
4,788
|
|
|
$
|
33.64
|
|
|
—
|
|
|
—
|
|
Item 6.
|
Exhibits.
|
|
Exhibit Number
|
|
Notes
|
|
Description of Document
|
|
31.1
|
|
|
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
31.2
|
|
|
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
32.1**
|
|
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
10.1+
|
|
|
|
Amendment No. 5 to Supply and License Agreement between Registrant and Intervet Inc., d.b.a. Merck Animal Health, effective as of October 30, 2015.
|
|
10.2+
|
|
(1)
|
|
Agreement and Plan of Merger among Heska Corporation, Cuattro Veterinary, LLC, Kevin S. Wilson, Cuattro LLC, Lane Naffziger, Clint Roth, DVM and Doug G. Wilson, III, dated as of March 14, 2016.
|
|
10.3
|
|
(2)
|
|
Letter Agreement between Heska Imaging US, LLC and Cuattro Veterinary, LLC, dated as of March 14, 2016.
|
|
10.4
|
|
|
|
1997 Stock Incentive Plan Restricted Stock Grant Agreement.
|
|
10.5
|
|
|
|
1997 Stock Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award).
|
|
10.6
|
|
|
|
2003 Equity Incentive Plan Restricted Stock Grant Agreement.
|
|
10.7
|
|
|
|
2003 Equity Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award).
|
|
101.INS
|
|
|
|
XBRL Instance Document.
|
|
101.SCH
|
|
|
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.PRE
|
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
101.LAB
|
|
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
Notes
|
|
+
|
Portions of the exhibit have been omitted pursuant to a request for confidential treatment.
|
**
|
Furnished with this report.
|
(1)
|
Incorporated by reference to Exhibit No. 10.77 to the Registrants' Form 10-K filed for the year ended December 31, 2015.
|
(2)
|
Incorporated by reference to the Registrants' Form 8-K filed on March 15, 2016.
|
|
HESKA CORPORATION
|
|
|
|
By:
/s/ KEVIN S. WILSON
Kevin S. Wilson
Chief Executive Officer and President
|
|
By:
/s/ JASON A. NAPOLITANO
Jason A. Napolitano
Chief Operating Officer, Chief Financial Officer,
Executive Vice President and Secretary
(Principal Financial Officer)
|
|
By:
/s/ JOHN MCMAHON
John McMahon
Vice President, Financial Operations and Controller
(Principal Accounting Officer)
|
|
Exhibit Number
|
|
Notes
|
|
Description of Document
|
|
31.1
|
|
|
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
31.2
|
|
|
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
32.1**
|
|
**
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
10.1+
|
|
+
|
|
Amendment No. 5 to Supply and License Agreement between Registrant and Intervet Inc., d.b.a. Merck Animal Health, effective as of October 30, 2015.
|
|
10.2+
|
|
(1)
|
|
Agreement and Plan of Merger among Heska Corporation, Cuattro Veterinary, LLC, Kevin S. Wilson, Cuattro LLC, Lane Naffziger, Clint Roth, DVM and Doug G. Wilson, III, dated as of March 14, 2016.
|
|
10.3
|
|
(2)
|
|
Letter Agreement between Heska Imaging US, LLC and Cuattro Veterinary, LLC, dated as of March 14, 2016.
|
|
10.4
|
|
|
|
1997 Stock Incentive Plan Restricted Stock Grant Agreement.
|
|
10.5
|
|
|
|
1997 Stock Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award).
|
|
10.6
|
|
|
|
2003 Equity Incentive Plan Restricted Stock Grant Agreement.
|
|
10.7
|
|
|
|
2003 Equity Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award).
|
|
101.INS
|
|
|
|
XBRL Instance Document.
|
|
101.SCH
|
|
|
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.PRE
|
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
101.LAB
|
|
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
Notes
|
|
+
|
Portions of the exhibit have been omitted pursuant to a request for confidential treatment.
|
**
|
Furnished with this report.
|
(1)
|
Incorporated by reference to Exhibit No. 10.77 to the Registrants' Form 10-K filed for the year ended December 31, 2015.
|
(2)
|
Incorporated by reference to the Registrants' Form 8-K filed on March 15, 2016.
|
1.
|
Pricing. The initial Product transfer price for all orders placed by MAH and delivered by Heska during a Calendar Year shall be volume-tiered as set forth below and based on MAH’s good faith forecast of projected purchases of Product for such Calendar Year provided to Heska pursuant to Section 2.2. [***]
|
|
[***]
|
[***]
|
[***]
|
[***]
|
Small Tablets
|
[***]
|
[***]
|
[***]
|
[***]
|
|
[***]
|
[***]
|
[***]
|
[***]
|
Medium Tablets
|
[***]
|
[***]
|
[***]
|
[***]
|
|
[***]
|
[***]
|
[***]
|
[***]
|
Large Tablets
|
[***]
|
[***]
|
[***]
|
[***]
|
2.
|
Minimum Purchase Size:
|
a.
|
Small Tablets:
[***]
|
b.
|
Medium Tablets:
[***]
|
c.
|
Large Tablets:
[***]
|
3.
|
Annual Minimum Purchase Requirement Per Calendar Year:
|
a.
|
2015:
[***]
|
b.
|
2016:
[***]
|
c.
|
2017:
[***]
|
d.
|
2018:
[***]
|
e.
|
2019+:
The annual minimum purchase requirement for each year going forward [***]
|
|
|
|
HESKA CORPORATION
|
|
EXECUTIVE
|
|
a Delaware corporation
|
||
|
|
|
By:
|
|
|
|
|
Title:
|
|
Address
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruction
:
|
Please do not fill in any blanks other than the signature line.
|
|
|
|
HESKA CORPORATION
|
|
EXECUTIVE
|
|
a Delaware corporation
|
||
|
|
|
By:
|
|
|
|
|
Title:
|
|
Address
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruction
:
|
Please do not fill in any blanks other than the signature line.
|
|
|
|
HESKA CORPORATION
|
|
EXECUTIVE
|
|
a Delaware corporation
|
||
|
|
|
By:
|
|
|
|
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Title:
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Address
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Instruction
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Please do not fill in any blanks other than the signature line.
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HESKA CORPORATION
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EXECUTIVE
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a Delaware corporation
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By:
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Title:
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Address
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Instruction
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Please do not fill in any blanks other than the signature line.
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1.
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I have reviewed this annual report on Form 10-Q of Heska Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
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c.
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Dated: March 10, 2016
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/s/ Kevin S. Wilson
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KEVIN S. WILSON
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Chief Executive Officer and President
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(Principal Executive Officer)
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1.
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I have reviewed this annual report on Form 10-Q of Heska Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
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c.
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Dated:
March 10, 2016
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/s/ Jason A. Napolitano
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JASON A. NAPOLITANO
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Chief Operating Officer, Chief Financial Officer, Executive Vice President and Secretary
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(Principal Financial Officer)
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Dated: May 10, 2016
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By:
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/s/ Kevin S. Wilson
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Name:
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KEVIN S. WILSON
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Title:
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Chief Executive Officer and President
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Dated: May 10, 2016
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By:
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/s/ Jason A. Napolitano
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Name:
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JASON A. NAPOLITANO
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Title:
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Chief Operating Officer, Chief Financial Officer,
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Executive Vice President and Secretary
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