Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 13-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | Heska Corp | |
Entity Central Index Key | 1038133 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 6,501,506 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $5,728 | $5,855 |
Accounts receivable, net of allowance for doubtful accounts of $216 and $254, respectively | 11,515 | 11,919 |
Due from - related party | 840 | 892 |
Inventories, net | 15,711 | 12,658 |
Deferred tax asset, current | 1,482 | 1,489 |
Other current assets | 1,848 | 1,587 |
Total current assets | 37,124 | 34,400 |
Property and equipment, net | 14,080 | 13,410 |
Note receivable - related party | 1,481 | 1,466 |
Goodwill and other intangibles | 21,165 | 21,205 |
Deferred tax asset, net of current portion | 25,470 | 25,721 |
Other long-term assets | 1,032 | 642 |
Total assets | 100,352 | 96,844 |
Current liabilities: | ||
Accounts payable | 5,138 | 4,897 |
Due to - related party | 275 | 252 |
Accrued liabilities | 5,884 | 5,130 |
Current portion of deferred revenue | 4,747 | 4,584 |
Line of credit | 1,681 | 48 |
Other short-term borrowings, including current portion of LT note payable | 159 | 141 |
Total current liabilities | 17,884 | 15,052 |
Long-term note payable, net of current portion | 175 | 227 |
Deferred revenue, net of current portion, and other | 12,191 | 12,754 |
Total liabilities | 30,250 | 28,033 |
Non-Controlling Interest | 15,825 | 15,679 |
Stockholders' equity: | ||
Public common stock, $.01 par value, 7,500,000 shares authorized; 6,342,205 and 6,489,050 shares issued and outstanding, respectively | 65 | 63 |
Additional paid-in capital | 222,782 | 222,297 |
Accumulated other comprehensive income | 359 | 283 |
Accumulated deficit | -168,929 | -169,511 |
Total stockholders' equity | 54,277 | 53,132 |
Total liabilities and stockholders' equity | $100,352 | $96,844 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, except Share data, unless otherwise specified | ||
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowance for doubtful accounts | $254 | $216 |
Preferred stock at par value | $0.01 | $0.01 |
Preferred stock shares authorized | 2,500 | 2,500 |
Common stock at par value | $0.01 | $0.01 |
Common stock shares authorized | 7,500 | 7,500 |
Public common stock at par value | $0.01 | $0.01 |
Public common stock shares authorized | 7,500 | 7,500 |
Public common stock shares issued | 65,000 | 63,000 |
Public common stock shares outstanding | 65,000 | 63,000 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Revenue, net: | ||
Core companion animal health | $19,572 | $17,366 |
Other vaccines, pharmaceuticals and products | 3,322 | 3,427 |
Total revenue, net | 22,894 | 20,793 |
Cost of revenue | 12,810 | 12,514 |
Gross profit | 10,084 | 8,279 |
Operating expenses: | ||
Selling and marketing | 5,460 | 4,945 |
Research and development | 419 | 388 |
General and administrative | 3,184 | 3,047 |
Total operating expenses | 9,063 | 8,380 |
Operating income (loss) | 1,021 | -101 |
Interest and other (income) expense, net | 137 | 16 |
Income (loss) before income taxes | 884 | -117 |
Current tax expense | 44 | 21 |
Deferred tax expense | 257 | 135 |
Total income tax expense | 301 | 156 |
Net income (loss) | 583 | -273 |
Net (income) loss attributable to non-controlling interest | -15 | -465 |
Net income attributable to Heska Corporation | $598 | $192 |
Basic net income per share attributable to Heska Corporation | $0.10 | $0.03 |
Diluted net income per share attributable to Heska Corporation | $0.09 | $0.03 |
Weighted average outstanding shares used to compute basic net income per share attributable to Heska Corp. | 6,181 | 5,870 |
Weighted average outstanding shares used to compute diluted net income per share attributable to Heska Corp | 6,869 | 5,985 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Income Statement [Abstract] | ||
Net Income (loss) | $583 | ($273) |
Other comprehensive income (expense): | ||
Foreign currency translation | 76 | 27 |
Unrealized gain (loss) on available for sale investments | -14 | |
Comprehensive income (loss) | 659 | -260 |
Comprehensive income (loss) attributable to non-controlling interest | -15 | -465 |
Comprehensive income attributable to Heska Corporation | $674 | $205 |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: | ||
Net income (loss) | $583 | ($273) |
Depreciation and amortization | 1,006 | 729 |
Deferred tax expense | 257 | 135 |
Stock-based compensation | 398 | 119 |
Unrealized (gain) loss on foreign currency translation | 16 | -1 |
Accounts receivable | 405 | 1,136 |
Inventories | -4,058 | -1,470 |
Other current assets | -194 | 442 |
Accounts payable | 237 | 2,175 |
Accrued liabilities and other | 785 | -13 |
Other non-current assets | -393 | -83 |
Deferred revenue and other | -432 | 2,329 |
Net cash provided by (used in) operating activities | -1,390 | 5,225 |
CASH FLOWS FROM PROVIDED BY (USED IN) INVESTING ACTIVITIES: | ||
Purchase of property and equipment | -605 | -1,317 |
Proceeds from disposition of property and equipment | 6 | |
Net cash provided by (used in) investing activities | -605 | -1,311 |
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: | ||
Proceeds from issuance of common stock | 235 | 215 |
Proceeds from (repayments of) line of credit borrowings, net | 1,633 | -3,877 |
Proceeds from (repayments of) other debt | -34 | -78 |
Net cash provided by (used in) financing activities | 1,834 | -3,740 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 34 | 10 |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | -127 | 184 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 5,855 | 6,016 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | $5,728 | $6,200 |
ORGANIZATION_AND_BUSINESS
ORGANIZATION AND BUSINESS | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
ORGANIZATION AND BUSINESS | 1. ORGANIZATION AND BUSINESS |
Heska Corporation ("Heska" or the "Company") develops, manufactures, markets, sells and supports veterinary products. Heska's core focus is on the canine and feline companion animal health markets. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Accounting Policies [Abstract] | ||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||
Basis of Presentation | ||||||||
The accompanying unaudited condensed consolidated financial statements are the responsibility of the Company's management and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the instructions to Form 10-Q and rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed consolidated balance sheet as of March 31, 2015, the condensed consolidated statements of operations for the three months ended March 31, 2014 and 2015, the condensed consolidated statements of comprehensive income for the three months ended March 31, 2014 and 2015 and the condensed consolidated statements of cash flows for the three months ended March 31, 2014 and 2015 are unaudited, but include, in the opinion of management, all adjustments (consisting of normal recurring adjustments) which the Company considers necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented. All material intercompany transactions and balances have been eliminated in consolidation. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC. | ||||||||
Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2014, included in the Company's Annual Report on Form 10-K filed with the SEC on March 25, 2015. | ||||||||
Use of Estimates | ||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expense during the reported period. Actual results could differ from those estimates. Significant estimates are required when establishing the allowance for doubtful accounts and the provision for excess/obsolete inventory, in determining the period over which the Company's obligations are fulfilled under agreements to license product rights and/or technology rights, in determining the need for, and the amount of, a valuation allowance on certain deferred tax assets and in determining the need for, and the amount of, an accrued liability for future payments related to minimum purchase obligations the Company may make in order to maintain certain product rights. | ||||||||
Inventories | ||||||||
Inventories are stated at the lower of cost or market using the first-in, first-out method. Inventory manufactured by the Company includes the cost of material, labor and overhead. If the cost of inventories exceeds estimated fair value, provisions are made to reduce the carrying value to estimated fair value. | ||||||||
Inventories, net consist of the following (in thousands): | ||||||||
December 31, | March 31, | |||||||
2014 | 2015 | |||||||
Raw materials | $ | 6,298 | $ | 7,997 | ||||
Work in process | 2,966 | 3,570 | ||||||
Finished goods | 4,949 | 5,650 | ||||||
Allowance for excess or obsolete inventory | (1,555 | ) | (1,506 | ) | ||||
$ | 12,658 | $ | 15,711 | |||||
Property and Equipment | ||||||||
The Company has utilized marketing programs whereby its instruments in inventory may be placed in a customer's location on a rental basis. The cost of these instruments is transferred to machinery and equipment or other long-term assets and depreciated or amortized, typically over a five to seven year period depending on the circumstance under which the instrument is placed with the customer. For the three months ended March 31, 2014 and the three months ended March 31, 2015, total costs transferred from inventory, including related to instrument rentals, were approximately $803 thousand and $1.0 million, respectively. | ||||||||
The Company has sold certain customer rental contracts and underlying assets to a third party under the agreement that once the customer has met the customer obligations under the contract, ownership of the assets underlying the contract would be returned to the Company. The Company enters a debit to cash and a corresponding credit to deferred revenue at the time of these sales. These sales provided $314 thousand and $42 thousand of cash which was reported in the "deferred revenue and other" line item of the Company's consolidated statements of cash flows as of March 31, 2014 and March 31, 2015, respectively, all related to the Company's 54.6%-owned subsidiary, Heska Imaging US, LLC. As the Company anticipates it will regain ownership of the assets underlying these sales, it reports these assets as part of property and equipment and depreciates these assets per its depreciation policies. The Company had $3.0 million of net property and equipment and $2.9 million of net property and equipment related to these transactions as of December 31, 2014 and March 31, 2015, respectively, all related to the Company's 54.6%-owned subsidiary, Heska Imaging US, LLC. | ||||||||
Capitalized Software | ||||||||
The Company capitalizes third-party software costs, where appropriate, and reports such capitalized costs, net of accumulated amortization, on the "property and equipment" line of its consolidated balance sheets. The Company had $587 thousand and $564 thousand of such capitalized costs, net of accumulated amortization, on the "property and equipment" line of its consolidated balance sheets as of December 31, 2014 and March 31, 2015, respectively. Capitalized software costs in a given year are reported on the "purchases of property and equipment" line item of the Company’s consolidated statements of cash flows. The Company had $10 thousand and $35 thousand of capitalized software costs reported on the "purchases of property and equipment" line item of its consolidated statements of cash flows for the three months ended March 31, 2014 and March 31, 2015, respectively. | ||||||||
Cash Interest | ||||||||
Cash paid for interest for the three months ending March 31, 2014 and March 31, 2015 was $25 thousand and $18 thousand, respectively. | ||||||||
Basic and Diluted Net Income (Loss) Per Share | ||||||||
Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding used to calculate basic net income per common share for the three months ended March 31, 2015 excluded unvested shares of restricted common stock, which totaled 235,177 shares at March 31, 2015. Diluted net income (loss) per share is computed using the sum of the weighted average number of shares of common stock outstanding, and, if not anti-dilutive, the effect of outstanding common stock equivalents (such as stock options and warrants) determined using the treasury stock method. | ||||||||
For the three months ended March 31, 2014 and the three months ended March 31, 2015, the Company reported net income attributable to Heska Corporation and therefore, unvested shares of restricted common stock and other dilutive common stock equivalent securities, as computed using the treasury method (but excluding options to purchase fractional shares resulting from the Company's December 2010 1-for-10 reverse stock split), were added to basic weighted average shares outstanding for the period to derive the weighted average shares for diluted earnings per share calculation. Common stock equivalent securities, other than options to purchase fractional shares, that were anti-dilutive for the three months ended March 31, 2014 and the three months ended March 31, 2015, and therefore excluded, were outstanding options to purchase 694,728 and 106,078 shares of common stock, respectively. These securities are anti-dilutive primarily due to exercise prices greater than the average trading price of the Company's common stock during the three months ended March 31, 2014 and three months ended March 31, 2015. |
NONCONTROLLING_INTEREST_AND_RE
NON-CONTROLLING INTEREST AND RELATED PARTY ITEMS | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Business Combinations [Abstract] | |||||
Non-Controlling Interest and Realted Party Items | 3. NON-CONTROLLING INTEREST AND RELATED PARTY ITEMS | ||||
On February 24, 2013, the Company acquired a 54.6% interest in Cuattro Veterinary USA, LLC, an entity which was subsequently renamed Heska Imaging US, LLC ("Heska Imaging"). The remaining minority position (45.4%) in Heska Imaging is subject to purchase by Heska under performance-based puts and calls following calendar year 2015, 2016 and 2017. Should Heska undergo a change in control, as defined, prior to the end of 2017, Heska Imaging minority unit holders will be entitled to sell their Heska Imaging units to Heska at the highest call value they could have otherwise obtained if Heska Imaging meets certain minimum performance criteria. | |||||
Heska Imaging markets, sells and supports digital radiography and ultrasound products along with embedded software and support, data hosting and other services. | |||||
Shawna M. Wilson, Clint Roth, DVM, Steven M. Asakowicz, Rodney A. Lippincott, Kevin S. Wilson and Cuattro, LLC own approximately 29.75%, 8.39%, 4.09%, 3.07%, 0.05% and 0.05% of Heska Imaging, respectively. Kevin S. Wilson is the Chief Executive Officer and President of the Company, a member of the Company's Board of Directors and the spouse of Shawna M. Wilson. Steven M. Asakowicz serves as Executive Vice President, Companion Animal Health Sales for the Company. Rodney A. Lippincott serves as Executive Vice President, Companion Animal Health Sales for the Company. Mr. Wilson, Mrs. Wilson and trusts for their children and family own a 100% interest in Cuattro, LLC. Cuattro, LLC owns a 100% interest in Cuattro Software, LLC. Mr. Wilson, Mrs. Wilson and trusts for their children and family own a majority interest in Cuattro Veterinary, LLC and Cuattro Medical, LLC. | |||||
Since January 1, 2015, Cuattro, LLC charged Heska Imaging $2.1 million, primarily related to digital imaging products, for which there is an underlying supply contract with minimum purchase obligations, software and services as well as other operating expenses; Heska Corporation charged Heska Imaging $1.7 million, primarily related to sales expenses; Heska Corporation charged Cuattro, LLC $33 thousand, primarily related to facility usage and other services. | |||||
At March 31, 2015, Heska Imaging has a $1.5 million note receivable, including accrued interest, from Cuattro Veterinary, LLC, which is due on March 15, 2016 and which is listed as "Note receivable – related party" on the Company's consolidated balance sheets; Heska Imaging had accounts receivable from Cuattro Software, LLC of $826 thousand, which is included in "Due from – related parties" on the Company's consolidated balance sheets; Heska Corporation had net accounts receivable from Cuattro, LLC of $14 thousand which is included in "Due from – related parties" on the Company's consolidated balance sheets; Heska Imaging had net accounts payable to Cuattro, LLC of $275 thousand which is included in "Due to – related party" on the Company's consolidated balance sheets; Heska Corporation had accounts receivable from Heska Imaging of $5.8 million, including accrued interest, which eliminated in consolidation of the Company's financial statements; all monies owed accrue interest at the same rate Heska Corporation pays under its credit and security agreement with Wells Fargo Bank, National Association ("Wells Fargo") once past due with the exception of the note receivable, which accrues at this rate to its maturity date. | |||||
The aggregate position in Heska Imaging of the unit holders who hold the 45.4% of Heska Imaging that Heska Corporation does not own (the "Put Value") is being accreted to its estimated redemption value in accordance with Heska Imaging's Amended and Restated Operating Agreement (the "Operating Agreement"). Since the Operating Agreement contains certain put rights that are out of the control of the Company, authoritative guidance requires the non-controlling interest, which includes the estimated values of such put rights, to be displayed outside of the equity section of the consolidated balance sheets. The adjustment to increase or decrease the Put Value to its expected redemption value and to estimate any distributions required under Heska Imaging's Operating Agreement to the unit holders who hold the 45.4% of Heska Imaging that Heska Corporation does not own (the "Imaging Minority") each reporting period is recorded to stockholders' equity in accordance with United States Generally Accepted Accounting Principles. | |||||
The following is a reconciliation of the non-controlling interest balance (in thousands): | |||||
Beginning at December 31, 2014 | $ | 15,679 | |||
Accretion of Put Value | 146 | ||||
Balance at March 31, 2015 | $ | 15,825 |
CAPITAL_STOCK
CAPITAL STOCK | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2015 | ||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||
CAPITAL STOCK | 4. CAPITAL STOCK | |||||||||||||||||||
Stock Option Plans | ||||||||||||||||||||
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model, with the following weighted average assumptions for options granted in the three months ended March 31, 2014 and 2015. | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | ||||||||||||||||||||
2014 | 2015 | |||||||||||||||||||
Risk-free interest rate | 0.89% | 1.10% | ||||||||||||||||||
Expected lives | 3.4 years | 3.4 years | ||||||||||||||||||
Expected volatility | 43% | 42% | ||||||||||||||||||
Expected dividend yield | 0% | 0% | ||||||||||||||||||
A summary of the Company's stock option plans, excluding options to purchase fractional shares resulting from the Company's December 2010 1-for-10 reverse stock split is as follows: | ||||||||||||||||||||
Year Ended | Three Months Ended | |||||||||||||||||||
31-Dec-14 | 31-Mar-15 | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Exercise | Exercise | |||||||||||||||||||
Options | Price | Options | Price | |||||||||||||||||
Outstanding at beginning of period | 1,321,232 | $ | 10.386 | 1,074,251 | $ | 10.111 | ||||||||||||||
Granted at market | 134,800 | $ | 16.398 | 2,546 | $ | 19.651 | ||||||||||||||
Cancelled | (218,926 | ) | $ | 17.786 | -27,457 | $ | 10.076 | |||||||||||||
Exercised | (162,855 | ) | $ | 7.234 | -95,750 | $ | 8.632 | |||||||||||||
Outstanding at end of period | 1,074,251 | $ | 10.11 | 953,590 | $ | 10.286 | ||||||||||||||
Exercisable at end of period | 729,175 | $ | 9.8 | 655,639 | $ | 9.977 | ||||||||||||||
The estimated fair value of stock options granted during the three months ended March 31, 2014 and 2015 was computed to be approximately $14 thousand and $15 thousand, respectively. The amount is amortized ratably over the vesting period of the options. The per share weighted average estimated fair value of options granted during the three months ended March 31, 2014 and 2015 was computed to be approximately $2.98 and $6.17, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2014 and 2015 was approximately $151 thousand and $1.28 million, respectively. The cash proceeds from options exercised during the three months ended March 31, 2014 and 2015 were approximately $253 thousand and $407 thousand, respectively. | ||||||||||||||||||||
The following table summarizes information about stock options outstanding and exercisable at March 31, 2015, excluding outstanding options to purchase an aggregate of 9.2 fractional shares resulting from the Company's December 2010 1-for-10 reverse stock split with a weighted average remaining contractual life of 1.25 years, a weighted average exercise price of $14.75 and exercise prices ranging from $7.30 to $22.50. The Company intends to issue whole shares only from option exercises. | ||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Exercise Prices | Number of | Weighted | Weighted | Number of | Weighted | |||||||||||||||
Options | Average | Average | Options | Average | ||||||||||||||||
Outstanding | Remaining | Exercise | Exercisable | Exercise | ||||||||||||||||
at | Contractual | Price | at | Price | ||||||||||||||||
March 31, | Life in Years | March 31, | ||||||||||||||||||
2015 | 2015 | |||||||||||||||||||
$ 2.70 - $ 6.90 | 234,971 | 5.65 | $ | 5.609 | 216,027 | $ | 5.512 | |||||||||||||
$ 6.91 - $ 7.36 | 188,366 | 8.64 | $ | 7.359 | 64,293 | $ | 7.358 | |||||||||||||
$ 7.37 - $11.47 | 195,322 | 7.44 | $ | 8.996 | 136,697 | $ | 9.182 | |||||||||||||
$11.48 -$17.17 | 173,854 | 2.1 | $ | 13.63 | 167,733 | $ | 13.616 | |||||||||||||
$17.18 - $22.50 | 161,077 | 6.88 | $ | 18.484 | 70,889 | $ | 18.881 | |||||||||||||
$ 2.70 - $22.50 | 953,590 | 6.17 | $ | 10.286 | 655,639 | $ | 9.977 | |||||||||||||
As of March 31, 2015, there was approximately $1.04 million of total unrecognized compensation cost related to outstanding stock options. That cost is expected to be recognized over a weighted average period of 1.7 years, with approximately $324 thousand to be recognized in the nine months ending December 31, 2015 and all the cost to be recognized as of February 2019, assuming all options vest according to the vesting schedules in place at March 31, 2015. As of March 31, 2015, the aggregate intrinsic value of outstanding options was approximately $14.8 million and the aggregate intrinsic value of exercisable options was approximately $10.4 million. | ||||||||||||||||||||
Employee Stock Purchase Plan (the "ESPP") | ||||||||||||||||||||
In the three months ended March 31, 2014 and March 31, 2015, the Company issued 7,647 and 827 shares under the ESPP, respectively. For the three months ending March 31 of the following years, the Company estimated the fair values of stock purchase rights granted under the ESPP using the Black-Scholes pricing model and the following weighted average assumptions: | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | ||||||||||||||||||||
2014 | 2015 | |||||||||||||||||||
Risk-free interest rate | 0.23% | 0.23% | ||||||||||||||||||
Expected lives | 1.3 years | 1.3 years | ||||||||||||||||||
Expected volatility | 33% | 35% | ||||||||||||||||||
Expected dividend yield | 0% | 0% | ||||||||||||||||||
For the three months ended March 31, 2014 and March 31, 2015, the weighted-average fair value of the purchase rights granted was $2.33 and $5.21 per share, respectively. | ||||||||||||||||||||
Restricted Stock Vesting and Issuance | ||||||||||||||||||||
In the three months ended March 31, 2015, Mr. Wilson vested 13,000 shares originally issued on May 6, 2014 following a vote of approval by the Company’s stockholders pursuant to an employment agreement between Mr. Wilson and the Company effective as of March 26, 2014 (the "Wilson Employment Agreement") upon the Company’s achievement of certain stock price targets as defined and further described in the Wilson Employment Agreement. | ||||||||||||||||||||
On March 17, 2015, the Company issued unvested shares to certain Executive Officers related to performance-based restricted stock grants (the "Performance Grants") and performance-based restricted stock grants related to the Company’s 2015 Management Incentive Plan (the "MIP Grants"). The Performance Grants are to cliff vest three years following issuance, subject to the Company’s achieving $7 million in Operating Cash Flow, as defined in the underlying restricted stock grant agreement, in at least one of 2015, 2016 or 2017, and other vesting provisions in the underlying restricted stock grant agreement. The MIP Grants are to vest on the date MIP Payouts are to be made under the 2015 Management Incentive Plan and are subject to the Company’s achievement of certain financial goals and other vesting provisions in the underlying restricted stock grant agreement. The Company issued 52,956 shares under Performance Grants and 24,649 shares under MIP Grants on March 17, 2015. | ||||||||||||||||||||
Restrictions on the transfer of Company stock | ||||||||||||||||||||
The Company’s Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), places restrictions (the "Transfer Restrictions") on the transfer of the Company’s stock that could adversely effect the Company’s ability to utilize its domestic Federal Net Operating Loss Position. In particular, the Transfer Restrictions prevent the transfer of shares without the approval of the Company’s Board of Directors if, as a consequence of such transfer, an individual, entity or groups of individuals or entities would become a 5-percent holder under Section 382 of the Internal Revenue Code of 1986, as amended, and the related Treasury regulations, and also prevents any existing 5-percent holder from increasing his or her ownership position in the Company without the approval of the Company’s Board of Directors. Any transfer of shares in violation of the Transfer Restrictions (a "Transfer Violation") shall be void ab initio under the Certificate of Incorporation, and the Company’s Board of Directors has procedures under the Certificate of Incorporation to remedy a Transfer Violation including requiring the shares causing such Transfer Violation to be sold and any profit resulting from such sale to be transferred to a charitable entity chosen by the Company’s Board of Directors in specified circumstances. |
SEGMENT_REPORTING
SEGMENT REPORTING | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Notes to Financial Statements | |||||||||||||||
SEGMENT REPORTING | 5. SEGMENT REPORTING | ||||||||||||||
The Company is comprised of two reportable segments, Core Companion Animal Health ("CCA") and Other Vaccines, Pharmaceuticals and Products ("OVP"). The Core Companion Animal Health segment includes diagnostic instruments and supplies, as well as single use diagnostic and other tests and pharmaceuticals. The CCA segment also includes digital radiography and ultrasound products along with embedded software and support, data hosting and other services from Heska Imaging. These products are sold directly by the Company as well as through independent third-party distributors and through other distribution relationships. CCA segment products manufactured at the Des Moines, Iowa production facility included in the OVP segment's assets are transferred at cost and are not recorded as revenue for the OVP segment. The Other Vaccines, Pharmaceuticals and Products segment includes private label vaccine and pharmaceutical production, primarily for cattle, but also for other animals including small mammals. All OVP products are sold by third parties under third-party labels. | |||||||||||||||
Summarized financial information concerning the Company's reportable segments is shown in the following table (in thousands): | |||||||||||||||
Core | Other Vaccines, | ||||||||||||||
Companion | Pharmaceuticals | ||||||||||||||
Animal Health | and Products | Total | |||||||||||||
Three Months Ended | |||||||||||||||
March 31, 2014: | |||||||||||||||
Total revenue | $ | 17,366 | $ | 3,427 | $ | 20,793 | |||||||||
Operating income (loss) | (308 | ) | 207 | (101 | ) | ||||||||||
Interest expense | 37 | 13 | 50 | ||||||||||||
Total assets | 80,839 | 13,187 | 94,026 | ||||||||||||
Net assets | 41,484 | 4,606 | 46,090 | ||||||||||||
Capital expenditures | 1,211 | 106 | 1,317 | ||||||||||||
Depreciation and amortization | 543 | 186 | 729 | ||||||||||||
Three Months Ended | |||||||||||||||
March 31, 2015: | |||||||||||||||
Total revenue | $ | 19,572 | $ | 3,322 | $ | 22,894 | |||||||||
Operating income (loss) | 535 | 486 | 1,021 | ||||||||||||
Interest expense | 40 | 12 | 52 | ||||||||||||
Total assets | 86,921 | 13,431 | 100,352 | ||||||||||||
Net assets | 48,966 | 5,311 | 54,277 | ||||||||||||
Capital expenditures | 307 | 298 | 605 | ||||||||||||
Depreciation and amortization | 830 | 176 | 1,006 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Accounting Policies [Abstract] | ||||||||
Basis of Presentation | Basis of Presentation | |||||||
The accompanying unaudited condensed consolidated financial statements are the responsibility of the Company's management and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the instructions to Form 10-Q and rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed consolidated balance sheet as of March 31, 2015, the condensed consolidated statements of operations for the three months ended March 31, 2014 and 2015, the condensed consolidated statements of comprehensive income for the three months ended March 31, 2014 and 2015 and the condensed consolidated statements of cash flows for the three months ended March 31, 2014 and 2015 are unaudited, but include, in the opinion of management, all adjustments (consisting of normal recurring adjustments) which the Company considers necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented. All material intercompany transactions and balances have been eliminated in consolidation. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC. | ||||||||
Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2014, included in the Company's Annual Report on Form 10-K filed with the SEC on March 25, 2015. | ||||||||
Use of Estimates | Use of Estimates | |||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expense during the reported period. Actual results could differ from those estimates. Significant estimates are required when establishing the allowance for doubtful accounts and the provision for excess/obsolete inventory, in determining the period over which the Company's obligations are fulfilled under agreements to license product rights and/or technology rights, in determining the need for, and the amount of, a valuation allowance on certain deferred tax assets and in determining the need for, and the amount of, an accrued liability for future payments related to minimum purchase obligations the Company may make in order to maintain certain product rights. | ||||||||
Inventories | Inventories | |||||||
Inventories are stated at the lower of cost or market using the first-in, first-out method. Inventory manufactured by the Company includes the cost of material, labor and overhead. If the cost of inventories exceeds estimated fair value, provisions are made to reduce the carrying value to estimated fair value. | ||||||||
Inventories, net consist of the following (in thousands): | ||||||||
December 31, | March 31, | |||||||
2014 | 2015 | |||||||
Raw materials | $ | 6,298 | $ | 7,997 | ||||
Work in process | 2,966 | 3,570 | ||||||
Finished goods | 4,949 | 5,650 | ||||||
Allowance for excess or obsolete inventory | (1,555 | ) | (1,506 | ) | ||||
$ | 12,658 | $ | 15,711 | |||||
Property and Equipment | Property and Equipment | |||||||
The Company has utilized marketing programs whereby its instruments in inventory may be placed in a customer's location on a rental basis. The cost of these instruments is transferred to machinery and equipment or other long-term assets and depreciated or amortized, typically over a five to seven year period depending on the circumstance under which the instrument is placed with the customer. For the three months ended March 31, 2014 and the three months ended March 31, 2015, total costs transferred from inventory were approximately $803 thousand and $1.0 million, respectively. | ||||||||
The Company has sold certain customer rental contracts and underlying assets to a third party under the agreement that once the customer has met the customer obligations under the contract, ownership of the assets underlying the contract would be returned to the Company. The Company enters a debit to cash and a corresponding credit to deferred revenue at the time of these sales. These sales provided $314 thousand and $42 thousand of cash which was reported in the "deferred revenue and other" line item of the Company's consolidated statements of cash flows as of March 31, 2014 and March 31, 2015, respectively, all related to the Company's 54.6%-owned subsidiary, Heska Imaging US, LLC. As the Company anticipates it will regain ownership of the assets underlying these sales, it reports these assets as part of property and equipment and depreciates these assets per its depreciation policies. The Company had $3.0 million of net property and equipment and $2.9 million of net property and equipment related to these transactions as December 31, 2014 and March 31, 2015, respectively, all related to the Company's 54.6%-owned subsidiary, Heska Imaging US, LLC. | ||||||||
Capitalized Software | Capitalized Software | |||||||
The Company capitalizes third-party software costs, where appropriate, and reports such capitalized costs, net of accumulated amortization, on the "property and equipment" line of its consolidated balance sheets. The Company had $587 thousand and $564 thousand of such capitalized costs, net of accumulated amortization, on the "property and equipment" line of its consolidated balance sheets as of December 31, 2014 and March 31, 2015, respectively. Capitalized software costs in a given year are reported on the "purchases of property and equipment" line item of the Company’s consolidated statements of cash flows. The Company had $10 thousand and $35 thousand of capitalized software costs reported on the "purchases of property and equipment" line item of its consolidated statements of cash flows for the three months ended March 31, 2014 and March 31, 2015, respectively. | ||||||||
Cash Interest | Cash Interest | |||||||
Cash paid for interest for the three months ending March 31, 2014 and March 31, 2015 was $25 thousand and $18 thousand, respectively. | ||||||||
Basic and Diluted Net Income (Loss) Per Share | Basic and Diluted Net Income (Loss) Per Share | |||||||
Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding used to calculate basic net income per common share for the three months ended March 31, 2015 excluded unvested shares of restricted common stock, which totaled 235,177 shares at March 31, 2015. Diluted net income (loss) per share is computed using the sum of the weighted average number of shares of common stock outstanding, and, if not anti-dilutive, the effect of outstanding common stock equivalents (such as stock options and warrants) determined using the treasury stock method. | ||||||||
For the three months ended March 31, 2014 and the three months ended March 31, 2015, the Company reported net income attributable to Heska Corporation and therefore, unvested shares of restricted common stock and other dilutive common stock equivalent securities, as computed using the treasury method (but excluding options to purchase fractional shares resulting from the Company's December 2010 1-for-10 reverse stock split), were added to basic weighted average shares outstanding for the period to derive the weighted average shares for diluted earnings per share calculation. Common stock equivalent securities, other than options to purchase fractional shares, that were anti-dilutive for the three months ended March 31, 2014 and the three months ended March 31, 2015, and therefore excluded, were outstanding options to purchase 694,728 and 106,078 shares of common stock, respectively. These securities are anti-dilutive primarily due to exercise prices greater than the average trading price of the Company's common stock during the three months ended March 31, 2014 and three months ended March 31, 2015. |
CAPITAL_STOCK_POLICIES_Policie
CAPITAL STOCK POLICIES (Policies) | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2015 | ||||||||||||||||||||
Capital Stock Policies Policies | ||||||||||||||||||||
Stock Option Plans | Stock Option Plans | |||||||||||||||||||
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model, with the following weighted average assumptions for options granted in the three months ended March 31, 2013 and 2014. | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | ||||||||||||||||||||
2014 | 2015 | |||||||||||||||||||
Risk-free interest rate | 0.89% | 1.10% | ||||||||||||||||||
Expected lives | 3.4 years | 3.4 years | ||||||||||||||||||
Expected volatility | 43% | 42% | ||||||||||||||||||
Expected dividend yield | 0% | 0% | ||||||||||||||||||
A summary of the Company's stock option plans, excluding options to purchase fractional shares resulting from the Company's December 2010 1-for-10 reverse stock split is as follows: | ||||||||||||||||||||
Year Ended | Three Months Ended | |||||||||||||||||||
31-Dec-14 | 31-Mar-15 | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Exercise | Exercise | |||||||||||||||||||
Options | Price | Options | Price | |||||||||||||||||
Outstanding at beginning of period | 1,321,232 | $ | 10.386 | 1,074,251 | $ | 10.111 | ||||||||||||||
Granted at market | 134,800 | $ | 16.398 | 2,546 | $ | 19.651 | ||||||||||||||
Cancelled | (218,926 | ) | $ | 17.786 | -27,457 | $ | 10.076 | |||||||||||||
Exercised | (162,855 | ) | $ | 7.234 | -95,750 | $ | 8.632 | |||||||||||||
Outstanding at end of period | 1,074,251 | $ | 10.11 | 953,590 | $ | 10.286 | ||||||||||||||
Exercisable at end of period | 729,175 | $ | 9.8 | 655,639 | $ | 9.977 | ||||||||||||||
The estimated fair value of stock options granted during the three months ended March 31, 2014 and 2015 was computed to be approximately $14 thousand and $15 thousand, respectively. The amount is amortized ratably over the vesting period of the options. The per share weighted average estimated fair value of options granted during the three months ended March 31, 2014 and 2015 was computed to be approximately $2.98 and $6.17, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2014 and 2015 was approximately $151 thousand and $1.28 million, respectively. The cash proceeds from options exercised during the three months ended March 31, 2014 and 2015 were approximately $253 thousand and $407 thousand, respectively. | ||||||||||||||||||||
The following table summarizes information about stock options outstanding and exercisable at March 31, 2015, excluding outstanding options to purchase an aggregate of 9.2 fractional shares resulting from the Company's December 2010 1-for-10 reverse stock split with a weighted average remaining contractual life of 1.25 years, a weighted average exercise price of $14.75 and exercise prices ranging from $7.30 to $22.50. The Company intends to issue whole shares only from option exercises. | ||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Exercise Prices | Number of | Weighted | Weighted | Number of | Weighted | |||||||||||||||
Options | Average | Average | Options | Average | ||||||||||||||||
Outstanding | Remaining | Exercise | Exercisable | Exercise | ||||||||||||||||
at | Contractual | Price | at | Price | ||||||||||||||||
March 31, | Life in Years | March 31, | ||||||||||||||||||
2015 | 2015 | |||||||||||||||||||
$ 2.70 - $ 6.90 | 234,971 | 5.65 | $ | 5.609 | 216,027 | $ | 5.512 | |||||||||||||
$ 6.91 - $ 7.36 | 188,366 | 8.64 | $ | 7.359 | 64,293 | $ | 7.358 | |||||||||||||
$ 7.37 - $11.47 | 195,322 | 7.44 | $ | 8.996 | 136,697 | $ | 9.182 | |||||||||||||
$11.48 -$17.17 | 173,854 | 2.1 | $ | 13.63 | 167,733 | $ | 13.616 | |||||||||||||
$17.18 - $22.50 | 161,077 | 6.88 | $ | 18.484 | 70,889 | $ | 18.881 | |||||||||||||
$ 2.70 - $22.50 | 953,590 | 6.17 | $ | 10.286 | 655,639 | $ | 9.977 | |||||||||||||
As of March 31, 2015, there was approximately $1.04 million of total unrecognized compensation cost related to outstanding stock options. That cost is expected to be recognized over a weighted average period of 1.7 years, with approximately $324 thousand to be recognized in the nine months ending December 31, 2015 and all the cost to be recognized as of February 2019, assuming all options vest according to the vesting schedules in place at March 31, 2015. As of March 31, 2015, the aggregate intrinsic value of outstanding options was approximately $14.8 million and the aggregate intrinsic value of exercisable options was approximately $10.4 million. | ||||||||||||||||||||
Employee Stock Purchase Plan (the "ESPP") | Employee Stock Purchase Plan (the "ESPP") | |||||||||||||||||||
In the three months ended March 31, 2014 and March 31, 2015, the Company issued 7,647 and 827 shares under the ESPP, respectively. For the three months ending March 31 of the following years, the Company estimated the fair values of stock purchase rights granted under the ESPP using the Black-Scholes pricing model and the following weighte average assumptions: | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | ||||||||||||||||||||
2014 | 2015 | |||||||||||||||||||
Risk-free interest rate | 0.23% | 0.23% | ||||||||||||||||||
Expected lives | 1.3 years | 1.3 years | ||||||||||||||||||
Expected volatility | 33.00% | 35% | ||||||||||||||||||
Expected dividend yield | 0% | 0% | ||||||||||||||||||
For the three months ended March 31, 2014 and March 31, 2015, the weighted-average fair value of the purchase rights granted was $2.33 and $5.21 per share, respectively. | ||||||||||||||||||||
Restricted Stock Vesting and Issuance | Restricted Stock Vesting and Issuance | |||||||||||||||||||
In the three months ended March 31, 2015, Mr. Wilson vested 13,000 shares originally issued on May 6, 2014 following a vote of approval by the Company’s stockholders pursuant to an employment agreement between Mr. Wilson and the Company effective as of March 26, 2014 (the "Wilson Employment Agreement") upon the Company’s achievement of certain stock price targets as defined and further described in the Wilson Employment Agreement. | ||||||||||||||||||||
On March 17, 2015, the Company issued unvested shares to certain Executive Officers related to performance-based restricted stock grants (the "Performance Grants") and performance-based restricted stock grants related to the Company’s 2015 Management Incentive Plan (the "MIP Grants"). The Performance Grants are to cliff vest three years following issuance, subject to the Company’s achieving $7 million in Operating Cash Flow, as defined in the underlying restricted stock grant agreement, in at least one of 2015, 2016 or 2017, and other vesting provisions in the underlying restricted stock grant agreement. The MIP Grants are to vest on the date MIP Payouts are to be made under the 2015 Management Incentive Plan and are subject to the Company’s achievement of certain financial goals and other vesting provisions in the underlying restricted stock grant agreement. The Company issued 52,956 shares under Performance Grants and 24,649 shares under MIP Grants on March 17, 2015. | ||||||||||||||||||||
Restrictions on the Transfer of Company stock | Restrictions on the transfer of Company stock | |||||||||||||||||||
The Company’s Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), places restrictions (the "Transfer Restrictions") on the transfer of the Company’s stock that could adversely effect the Company’s ability to utilize its domestic Federal Net Operating Loss Position. In particular, the Transfer Restrictions prevent the transfer of shares without the approval of the Company’s Board of Directors if, as a consequence of such transfer, an individual, entity or groups of individuals or entities would become a 5-percent holder under Section 382 of the Internal Revenue Code of 1986, as amended, and the related Treasury regulations, and also prevents any existing 5-percent holder from increasing his or her ownership position in the Company without the approval of the Company’s Board of Directors. Any transfer of shares in violation of the Transfer Restrictions (a "Transfer Violation") shall be void ab initio under the Certificate of Incorporation, and the Company’s Board of Directors has procedures under the Certificate of Incorporation to remedy a Transfer Violation including requiring the shares causing such Transfer Violation to be sold and any profit resulting from such sale to be transferred to a charitable entity chosen by the Company’s Board of Directors in specified circumstances. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Accounting Policies [Abstract] | ||||||||
Inventories | Inventories, net consist of the following (in thousands): | |||||||
December 31, | March 31, | |||||||
2014 | 2015 | |||||||
Raw materials | $ | 6,298 | $ | 7,997 | ||||
Work in process | 2,966 | 3,570 | ||||||
Finished goods | 4,949 | 5,650 | ||||||
Allowance for excess or obsolete inventory | (1,555 | ) | (1,506 | ) | ||||
$ | 12,658 | $ | 15,711 | |||||
NONCONTROLLING_INTERESY_AND_RE
NON-CONTROLLING INTERESY AND RELATED PARTY ITEMS (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Business Combinations [Abstract] | |||||
Non-controlling interest reconciliation | The following is a reconciliation of the non-controlling interest balance (in thousands): | ||||
Beginning at December 31, 2014 | $ | 15,679 | |||
Accretion of Put Value | 146 | ||||
Balance at March 31, 2015 | $ | 15,825 |
CAPITAL_STOCK_Tables
CAPITAL STOCK (Tables) | 3 Months Ended | ||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||
Fair Value of each Option Grant | Three Months Ended | ||||||||||||||||||
March 31, | |||||||||||||||||||
2014 | 2015 | ||||||||||||||||||
Risk-free interest rate | 0.89% | 1.10% | |||||||||||||||||
Expected lives | 3.4 years | 3.4 years | |||||||||||||||||
Expected volatility | 43% | 42% | |||||||||||||||||
Expected dividend yield | 0% | 0% | |||||||||||||||||
Summary of Company Stock Option Plans | Year Ended | Three Months Ended | |||||||||||||||||
31-Dec-14 | 31-Mar-15 | ||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||
Average | Average | ||||||||||||||||||
Exercise | Exercise | ||||||||||||||||||
Options | Price | Options | Price | ||||||||||||||||
Outstanding at beginning of period | 1,321,232 | $ | 10.386 | 1,074,251 | $ | 10.111 | |||||||||||||
Granted at market | 134,800 | $ | 16.398 | 2,546 | $ | 19.651 | |||||||||||||
Cancelled | (218,926 | ) | $ | 17.786 | -27,315 | $ | 10.076 | ||||||||||||
Exercised | (162,855 | ) | $ | 7.234 | -95,750 | $ | 8.632 | ||||||||||||
Outstanding at end of period | 1,074,251 | $ | 10.11 | 953,590 | $ | 10.286 | |||||||||||||
Exercisable at end of period | 729,175 | $ | 9.8 | 655,639 | $ | 9.977 | |||||||||||||
Stock Options Outstanding and Exercisable | Options Outstanding | Options Exercisable | |||||||||||||||||
Exercise Prices | Number of | Weighted | Weighted | Number of | Weighted | ||||||||||||||
Options | Average | Average | Options | Average | |||||||||||||||
Outstanding | Remaining | Exercise | Exercisable | Exercise | |||||||||||||||
at | Contractual | Price | at | Price | |||||||||||||||
March 31, | Life in Years | March 31, | |||||||||||||||||
2015 | 2015 | ||||||||||||||||||
$ 2.70 - $ 6.90 | 234,971 | 5.65 | $ | 5.609 | 216,027 | $ | 5.512 | ||||||||||||
$ 6.91 - $ 7.36 | 188,366 | 8.64 | $ | 7.359 | 64,293 | $ | 7.358 | ||||||||||||
$ 7.37 - $11.47 | 195,322 | 7.44 | $ | 8.996 | 136,697 | $ | 9.182 | ||||||||||||
$11.48 -$17.17 | 173,854 | 2.1 | $ | 13.63 | 167,733 | $ | 13.616 | ||||||||||||
$17.18 - $22.50 | 161,077 | 6.88 | $ | 18.484 | 70,889 | $ | 18.881 | ||||||||||||
$ 2.70 - $22.50 | 953,590 | 6.17 | $ | 10.286 | 655,639 | $ | 9.977 | ||||||||||||
Employee Stock Purchase Plan | Employee Stock Purchase Plan (the "ESPP") | ||||||||||||||||||
In the three months ended March 31, 2014 and March 31, 2015, the Company issued 7,647 and 827 shares under the ESPP, respectively. For the three months ending March 31 of the following years, the Company estimated the fair values of stock purchase rights granted under the ESPP using the Black-Scholes pricing model and the following weighte average assumptions: | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
March 31, | |||||||||||||||||||
2014 | 2015 | ||||||||||||||||||
Risk-free interest rate | 0.23% | 0.23% | |||||||||||||||||
Expected lives | 1.3 years | 1.3 years | |||||||||||||||||
Expected volatility | 33.00% | 35% | |||||||||||||||||
Expected dividend yield | 0% | 0% | |||||||||||||||||
For the three months ended March 31, 2014 and March 31, 2015, the weighted-average fair value of the purchase rights granted was $2.33 and $5.21 per share, respectively. |
SEGMENT_REPORTING_Tables
SEGMENT REPORTING (Tables) | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Notes to Financial Statements | |||||||||||||||
Segment Reporting | 5. SEGMENT REPORTING | ||||||||||||||
The Company is comprised of two reportable segments, Core Companion Animal Health ("CCA") and Other Vaccines, Pharmaceuticals and Products ("OVP"). The Core Companion Animal Health segment includes diagnostic instruments and supplies, as well as single use diagnostic and other tests and pharmaceuticals. The CCA segment also includes digital radiography and ultrasound products along with embedded software and support, data hosting and other services from Heska Imaging. These products are sold directly by the Company as well as through independent third-party distributors and through other distribution relationships. CCA segment products manufactured at the Des Moines, Iowa production facility included in the OVP segment's assets are transferred at cost and are not recorded as revenue for the OVP segment. The Other Vaccines, Pharmaceuticals and Products segment includes private label vaccine and pharmaceutical production, primarily for cattle, but also for other animals including small mammals. All OVP products are sold by third parties under third-party labels. | |||||||||||||||
Summarized financial information concerning the Company's reportable segments is shown in the following table (in thousands): | |||||||||||||||
Core | Other Vaccines, | ||||||||||||||
Companion | Pharmaceuticals | ||||||||||||||
Animal Health | and Products | Total | |||||||||||||
Three Months Ended | |||||||||||||||
March 31, 2014: | |||||||||||||||
Total revenue | $ | 17,366 | $ | 3,427 | $ | 20,793 | |||||||||
Operating income (loss) | (308 | ) | 207 | (101 | ) | ||||||||||
Interest expense | 37 | 13 | 50 | ||||||||||||
Total assets | 80,839 | 13,187 | 94,026 | ||||||||||||
Net assets | 41,484 | 4,606 | 46,090 | ||||||||||||
Capital expenditures | 1,211 | 106 | 1,317 | ||||||||||||
Depreciation and amortization | 543 | 186 | 729 | ||||||||||||
Three Months Ended | |||||||||||||||
March 31, 2015: | |||||||||||||||
Total revenue | $ | 19,572 | $ | 3,322 | $ | 22,894 | |||||||||
Operating income (loss) | 535 | 486 | 1,021 | ||||||||||||
Interest expense | 40 | 12 | 52 | ||||||||||||
Total assets | 86,921 | 13,431 | 100,352 | ||||||||||||
Net assets | 48,966 | 5,311 | 54,277 | ||||||||||||
Capital expenditures | 307 | 298 | 605 | ||||||||||||
Depreciation and amortization | 830 | 176 | 1,006 |
INVENTORIES_Details
INVENTORIES (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Inventories Details | ||
Raw materials | $7,997 | $6,298 |
Work in process | 3,570 | 2,966 |
Finished goods | 5,650 | 4,949 |
Allowance for excess or obsolete inventory | 1,506 | 1,555 |
Total Inventories | $15,711 | $12,658 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 3 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Accounting Policies [Abstract] | |||
Non-cash transfer of inventory to PP&E and other assets | $1,000 | $803 | |
Deferred revenue to third parties | 42 | 314 | |
Net PP&E value of third party transactions | 2,900 | 3,000 | |
Capitalized Software Costs | 564 | 587 | |
Capitalized Software in PP&E on Cash Flow Statement | 35 | 10 | |
Cash Interest | $18 | $25 | |
Weighted average number of common shares used to calculate basic net income | 235,177 | ||
Outstanding Options | 106,078 | 694,728 |
ACQUISITION_Details
ACQUISITION (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Dec. 31, 2014 | Feb. 24, 2013 |
Heska Imaging charges from Cuattro, LLC | $2,100 | ||
Heska Imaging carges from Heska Corp. | 1,700 | ||
Cuattro, LLC charges from Heska Corp. | 33 | ||
Heska Imaging Note Receivable from Cuattro Vet, LLC | 1,500 | ||
Heska Imaging accounts receivable from Cuattro Software, LLC | 826 | ||
Heska Corp. accounts receivable from Heska Imaging | 5,800 | ||
Heska Corp. accounts receivable from Cuattro, LLC | 14 | ||
Heska Imaging accounts payable to Cuattro, LLC | 275 | ||
Non-Controlling Interest | 15,825 | 15,679 | |
Accretion of non-controlling interest | 146 | ||
Cuattro Veterinary USA, LLC | |||
Interest acquired in combination | 54.60% | ||
Cost of business acquisition in cash and stock | 7,600 | ||
Minimum cash paid for acquisition | $4,000 | ||
Following acquisition, former Cuattro Vet unit holders retained Public Common Stock | 7.20% | ||
Remaining minority position of Cuattro Vet subject to purchase | 45.40% | ||
Shawna M. Wilson ownership in Heska Imaging | 29.75% | ||
Clint Roth, DVM ownership in Heska Imaging | 8.39% | ||
Steven M. Asakowicz ownership in Heska Imaging | 4.09% | ||
Rodney A. Lippincott ownership in Heska Imaging | 3.07% | ||
Kevin S. Wilson ownership in Heska Imaging | 5.00% | ||
Cuattro, LLC ownership in Heska Imaging | 5.00% |
FAIR_VALUE_OF_EACH_OPTION_GRAN
FAIR VALUE OF EACH OPTION GRANT (Details) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Fair Value Of Each Option Grant Details | ||
Risk-free interest rate | 1.10% | 0.89% |
Expected lives | 3 years 4 months | 3 years 4 months |
Expected volatility | 42.00% | 43.00% |
Expected dividend yield | 0.00% | 0.00% |
SUMMARY_OF_COMPANY_STOCK_OPTIO
SUMMARY OF COMPANY STOCK OPTION PLANS (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Summary Of Company Stock Option Plans Details | ||
Outstanding at beginning of period | 1,074,251 | 1,321,232 |
Outstanding at begining of period, Weighted Average Exercise Price | $10.11 | $10.39 |
Granted at market, options | 2,546 | 134,800 |
Granted at market, Weighted Average Exercise Price | $19.65 | $16.40 |
Cancelled, Options | -27,457 | -218,926 |
Cancelled, Weighted Average Excercise Price | 10.076 | 17.786 |
Exercised, Options | ($95,750) | ($162,855) |
Exercised, Weighted Average Exercise Price | $8.63 | $7.23 |
Outstanding at beginning of period | 953,590 | 1,074,251 |
Outstanding at end of period, Weighted Average Exercise Price | $10.29 | $10.11 |
Exercisable at end of period, Options | 655,639 | 729,175 |
Exercisable at end of period, Weighted Average Exercise Price | $9.98 | $9.80 |
STOCK_OPTIONS_OUTSTANDING_Deta
STOCK OPTIONS OUTSTANDING (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Stock options Outstanding | 953,590 | 1,074,251 | 1,321,232 |
Weighted Average Exercise Price on Outstanding Options | $9.98 | $9.80 | |
Stock Options Exercisable | $10.11 | $10.39 | |
Weighted Average Exercise Price on Exercisable Options | $10.29 | $10.11 | |
$ 2.70 - $ 6.90 | |||
Stock options Outstanding | 234,971 | ||
Average Remaining Contractual Life in Years | $5.65 | ||
Weighted Average Exercise Price on Outstanding Options | $5.61 | ||
Stock Options Exercisable | $216,027 | ||
Weighted Average Exercise Price on Exercisable Options | $5.51 | ||
$ 6.91 - $ 7.36 | |||
Stock options Outstanding | 188,366 | ||
Average Remaining Contractual Life in Years | $8.64 | ||
Weighted Average Exercise Price on Outstanding Options | $7.36 | ||
Stock Options Exercisable | $64,293 | ||
Weighted Average Exercise Price on Exercisable Options | $7.36 | ||
$ 7.37 - $ 11.47 | |||
Stock options Outstanding | 195,322 | ||
Average Remaining Contractual Life in Years | $7.44 | ||
Weighted Average Exercise Price on Outstanding Options | $9.00 | ||
Stock Options Exercisable | $136,697 | ||
Weighted Average Exercise Price on Exercisable Options | $9.18 | ||
$ 11.48 - $ 17.17 | |||
Stock options Outstanding | 173,854 | ||
Average Remaining Contractual Life in Years | $2.10 | ||
Weighted Average Exercise Price on Outstanding Options | $13.63 | ||
Stock Options Exercisable | $167,733 | ||
Weighted Average Exercise Price on Exercisable Options | $13.62 | ||
$ 17.18 - $ 22.50 | |||
Stock options Outstanding | 161,077 | ||
Average Remaining Contractual Life in Years | $6.88 | ||
Weighted Average Exercise Price on Outstanding Options | $18.48 | ||
Stock Options Exercisable | $70,889 | ||
Weighted Average Exercise Price on Exercisable Options | $18.88 | ||
$ 2.70 - $22.50 | |||
Stock options Outstanding | 953,590 | ||
Average Remaining Contractual Life in Years | $6.17 | ||
Weighted Average Exercise Price on Outstanding Options | $10.29 | ||
Stock Options Exercisable | $655,639 | ||
Weighted Average Exercise Price on Exercisable Options | $9.98 |
FAIR_VALUE_OF_STOCK_UNDER_ESPP
FAIR VALUE OF STOCK UNDER ESPP (Details) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Fair Value Of Stock Under Espp Details | ||
Risk-free interest rate | 2.30% | 2.30% |
Expected lives | 1 year 3 months | 1 year 3 months |
Expected volatility | 35.00% | 33.00% |
Expected dividend yield | 0.00% | 0.00% |
CAPITAL_STOCK_Details
CAPITAL STOCK (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2015 | Mar. 17, 2015 |
Notes to Financial Statements | ||||
Fair Value Of Stock Options Granted | $15 | $14 | ||
Weighted Average Fair Value of Options | $6.17 | $2.98 | ||
Intrinsic Value of Options Exercised | 1,280 | 151 | ||
Cash Proceeds from Options Exercised | 407 | 253 | ||
Fractional Shares of Outstanding Options | $9.20 | |||
Weighted Average Reamining Contractual Life | $1.25 | |||
Weighted Average Exercise Price | $14.75 | |||
Exercise Price Range Low | $7.30 | |||
Exercise Price Range High | $22.50 | |||
Unrecognized Compensation Costs of Options | 1,040 | 842 | ||
Weighted Average Period of Recognized Costs | 1.7 | |||
Option Compensation Costs to be Recognized this Year | 324 | |||
Aggregate Intrinsic Value of Outstanding Options | 14,800 | |||
Aggregate Intrinsic Value of Exercisable Options | $10,400 | |||
ESPP shares issued | 827 | 7,647 | ||
Weighted Average Fair Value of Purchase Rights Granted | $5.21 | $2.33 | ||
Shares vested by Mr. Wilson | 13,000 | |||
Performance Grant shares issued | 52,956 | |||
MIP Grant shares issued | 24,649 |
SEGMENT_REPORTING_Details
SEGMENT REPORTING (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Total revenue | $22,894 | $20,793 | |
Operating income | 1,021 | -101 | |
Interest expense | 52 | 50 | |
Total assets | 100,352 | 94,026 | 96,844 |
Net assets | 54,277 | 46,090 | |
Capital expenditures | 605 | 1,317 | |
Depreciation and amortization | 1,006 | 729 | |
Core Companion Animal Health | |||
Total revenue | 19,572 | 17,366 | |
Operating income | 535 | -308 | |
Interest expense | 40 | 37 | |
Total assets | 86,921 | 80,839 | |
Net assets | 48,966 | 41,484 | |
Capital expenditures | 307 | 1,211 | |
Depreciation and amortization | 830 | 543 | |
Other Vaccines, Pharmaceuticals and Products | |||
Total revenue | 3,322 | 3,427 | |
Operating income | 486 | 207 | |
Interest expense | 12 | 13 | |
Total assets | 13,431 | 13,187 | |
Net assets | 5,311 | 4,606 | |
Capital expenditures | 298 | 106 | |
Depreciation and amortization | $176 | $186 |