Heska Corporation Reports Record Revenues in Third Quarter Results / Company Delivers Increased Product Sales, Improved Margins and Reduced Operating Expenses

FORT COLLINS, Colo. (PROTEXT) - Heska Corporation (Nasdaq:HSKA), a leader in companion animal health care products andservices, today reported its financial results for the thirdquarter ended September 30, 1999. Total revenue increased 33 percent to $13.1 million for thequarter ended September 30, 1999, as compared to $9.9 million forthe third quarter of 1998. This represents the highest quarterlyrevenue in the Company's history. The growth in revenue duringthe 1999 third quarter was primarily due to sales of productsintroduced by the Company during 1998 and 1999. The Company's net loss for the third quarter of 1999 improvedto $8.3 million, or $0.31 per share, compared to a net loss of$10.9 million, or $0.42 per share, for the third quarter of 1998.The 1999 results included a restructuring charge of $1.2 million,or $0.05 per share, related to the previously announcedconsolidation of the Company's diagnostic and monitoringinstrumentation operations. The improvement in the Company'sfinancial performance was primarily due to record revenues,significantly improved gross profit margins and lower operatingexpenses. For the nine-month period ending September 30, 1999, totalrevenue increased 37 percent to $37.0 million compared to $27.0million for the same period in 1998. The revenue growth during1999 was primarily due to sales of products introduced by theCompany during 1998 and 1999. The net loss for the nine-month period ending September 30,1999, was $23.1 million, or $0.87 per share, compared to a netloss of $30.6 million, or $1.27 per share, for the first ninemonths of 1998. The Company's results for the nine-month periodin 1999 included the $1.2 million, or $0.05 per share,restructuring charge previously discussed. The 1999 year-to-dateimprovement was primarily due to higher revenues, increased grossprofit margins and lower operating expenses. Robert Grieve, Heska's Chief Executive Officer, said, "We arevery pleased with our 1999 third quarter results as we continuedto increase revenue, control our operating expenses andsignificantly reduce Heska's overall net loss. Through the firstthree quarters of the year, we have made substantial progresstoward achieving our financial goals for 1999. Quarterly revenuewas again a record for any period in the Company's history. Theincrease in revenue occurred despite the fact that we continuedto rationalize our product line, eliminating certain productsthat did not meet current gross margin requirements. We continueto be pleased with the market acceptance of our HESKA(TM) SoloStep(TM) CH canine heartworm diagnostic test, particularly inlight of the very competitive market conditions which exist forthis product. "Our gross profit margins continued to improve over the prioryear, reflecting our increased emphasis in this area. Thecombination of record revenue and improved gross profit marginsfor the third quarter of 1999 resulted in a 139 percent increasein gross profit dollars over the third quarter of the prior year.On a year-to-date basis, gross profit dollars increased 66percent over the comparable 1998 period. "Finally, our total operating expenses for the first ninemonths of 1999, exclusive of cost of goods sold and therestructuring charge, declined more than $5.8 million from thecomparable period a year ago. We were able to achieve asignificant reduction in operating expenses while continuing todrive the growth of our business. We believe these results are aclear demonstration of our focus on improved operating results,while also developing the product pipeline for long-term growth." Heska discovers, develops, manufactures and markets companionanimal health products, primarily for dogs, cats and horses.Heska has a large and sophisticated scientific effort devoted toapplying biotechnology to the large and growing companion animalhealth market. Heska also offers diagnostic and patientmonitoring instrumentation and supplies, as well as laboratorydiagnostic products in the United States and Europe toveterinarians, and operates USDA- and FDA-licensed facilities,which manufacture vaccine, pharmaceutical, and allergyimmunotherapy products. For additional information on Heska andits products, visit the company's web site at www.heska.com. With the exception of historical matters, this press releasecontains express or implied forward-looking information aboutHeska's products, markets, and results of operations, includingimplied statements concerning the market acceptance of theproducts described above, the anticipated growth rate of thebusiness and the ability to reduce operating losses goingforward. Such forward-looking statements involve known andunknown risks, uncertainties and other factors which may causeactual results, performance or achievements of Heska to bematerially different from any future results, performance orachievements expressed or implied by such forward-lookingstatements. Heska's achievement of these results may be affectedby many factors, including among others, the following: delays inor failure to achieve market acceptance of products; delays in orfailure to achieve future product development; uncertaintiesregarding the outcome of research and development efforts or theability to successfully develop or commercialize products inresearch and development, uncertainties regarding the ability toreceive required regulatory approvals in a timely manner, if atall, uncertainties regarding the scope, enforceability andvalidity of patents and proprietary rights, which are subject tocomplex legal standards that vary from country to country and aresubject to interpretation by administrative agencies and courts;quality of management; competition; changes in business strategyor development plans; inability to obtain renewal or continuationof contracts, or obtain exclusivity, to market, sell ordistribute products described herein; inability to manufacture,market, sell or distribute products at currently projected costsand the risks set forth in Heska's filings and future filingswith the Securities and Exchange Commission, including those setforth in Heska's Annual Report on Form 10-K for the year endedDecember 31, 1998 under the caption "Business-Factors that MayAffect Results," and in its Quarterly Report on Form 10-Q for thequarter ended June 30, 1999 under the caption "Management'sDiscussion and Analysis of Financial Condition and Results ofOperations - Factors that May Affect Results."

In Thousands, Except per Share Amounts

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

1999

1998

1999

1998 Revenues:

Products, net

$12,915 $9,823 $36,478 $26,313

Research and

development

152

38

518

677

13,067

9,861

36,996

26,990 Costs and operating expenses:

Cost of goods

sold

8,702

8,034

24,697

19,596

Gross profit

4,365

1,827

12,299

7,394

Research and

development

3,942

6,311

12,477

18,991

Selling and

marketing

3,736

3,159

10,548

9,117

General and

administrative

2,804

3,065

8,253

8,891

Amortization of

intangible assets

and deferred

compensation

276

650

1,960

2,087

Restructuring

charge

1,210

--

1,210

--

Total operating

expenses

11,968 13,185

34,448

39,086 Loss from operations

(7,603) (11,358) (22,149) (31,692) Other income (expense):

Interest income

327

879

1,319

2,351

Interest expense

(409)

(521) (1,418) (1,459)

Other, net

(638)

147

(889)

175 Net loss

$(8,323)$(10,853) $(23,137) $(30,625) Basic net loss per share

$(0.31) $(0.42) $(0.87) $(1.27) Shares used to compute basic net loss per share

26,845 26,023

26,717

24,077

Balance Sheet Data

In Thousands

(unaudited)

September 30,

1999

1998 Cash and cash equivalents

$20,459

$61,169 Working capital

26,752

66,578 Total assets

73,175

109,102 Long-term obligations

7,993

11,894 Shareholders' equity

44,552

81,173 ots OriginalText Service: Heska Corporation Internet:http://www.newsaktuell.de Contact: Ron Hendrick, Executive VicePresident & Chief Financial Officer of Heska Corporation, 970-493-7272; or Judy Brenna, Investor Relations, Ext. 221, orMatthew Knight, Media Relations, Ext. 271, both of Noonan/RussoCommunications, Inc., 212-696-4455 Web site:http://www.heska.com

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