Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 07, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Heska Corp | |
Entity Central Index Key | 1,038,133 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 | |
Entity Common Stock, Shares Outstanding | 7,497,791 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 13,675 | $ 9,659 |
Accounts receivable, net of allowance for doubtful accounts of $219 and $215, respectively | 12,999 | 15,710 |
Due from – related parties | 0 | 1 |
Inventories, net | 28,873 | 32,596 |
Lease receivable, current, net of allowance for doubtful accounts of $36 and $0, respectively | 2,593 | 2,069 |
Contract acquisition costs, current | 865 | 30 |
Other current assets | 3,073 | 3,066 |
Total current assets | 62,078 | 63,131 |
Property and equipment, net | 16,587 | 17,331 |
Goodwill | 26,673 | 26,687 |
Other intangible assets, net | 1,764 | 1,958 |
Deferred tax asset, net | 11,970 | 11,877 |
Lease receivable, non-current | 11,141 | 9,615 |
Contract acquisition costs, non-current | 1,623 | 3 |
Other non-current assets | 6,191 | 5,185 |
Total assets | 138,027 | 135,787 |
Current liabilities: | ||
Accounts payable | 7,038 | 9,489 |
Due to – related parties | 367 | 1,828 |
Accrued liabilities | 3,143 | 4,417 |
Current portion of deferred revenue | 3,008 | 3,992 |
Line of credit and other short-term borrowings | 6,019 | 6,000 |
Total current liabilities | 19,575 | 25,726 |
Deferred revenue, net of current portion, and other | 8,530 | 9,621 |
Total liabilities | 28,105 | 35,347 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, $.01 par value, 2,500,000 shares authorized, none issued or outstanding | 0 | 0 |
Common stock, $.01 par value, 10,250,000 and 10,000,000 shares authorized, respectively, none issued or outstanding | 0 | 0 |
Public common stock, $.01 par value, 10,250,000 and 10,000,000 shares authorized, 7,497,717 and 7,302,954 shares issued and outstanding, respectively | 75 | 73 |
Additional paid-in capital | 246,422 | 243,598 |
Accumulated other comprehensive income | 201 | 232 |
Accumulated deficit | (136,776) | (143,463) |
Total stockholders' equity | 109,922 | 100,440 |
Total liabilities and stockholders' equity | $ 138,027 | $ 135,787 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Allowance for doubtful accounts | $ 219 | $ 215 |
Leases, allowance for doubtful accounts | $ 36 | $ 0 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 2,500,000 | 2,500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Traditional Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 10,250,000 | 10,000,000 |
Common stock, shares issued | 0 | 0 |
Common stock, shares outstanding | 0 | 0 |
Public Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 10,250,000 | 10,000,000 |
Common stock, shares issued | 7,497,717 | 7,302,954 |
Common stock, shares outstanding | 7,497,717 | 7,302,954 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenue: | ||||
Total revenue, net | $ 29,662 | $ 33,405 | $ 62,427 | $ 62,964 |
Cost of revenue | 16,597 | 18,476 | 36,055 | 34,826 |
Gross profit | 13,065 | 14,929 | 26,372 | 28,138 |
Operating expenses: | ||||
Selling and marketing | 5,944 | 5,993 | 12,084 | 12,093 |
Research and development | 559 | 445 | 1,229 | 975 |
General and administrative | 4,358 | 3,931 | 8,984 | 7,722 |
Total operating expenses | 10,861 | 10,369 | 22,297 | 20,790 |
Operating income | 2,204 | 4,560 | 4,075 | 7,348 |
Interest and other expense (income), net | 92 | (118) | 88 | (180) |
Income before income taxes | 2,112 | 4,678 | 3,987 | 7,528 |
Income tax expense (benefit): | ||||
Current income tax expense | 12 | 10 | 29 | 17 |
Deferred income tax expense (benefit) | 203 | 1,529 | (94) | 69 |
Total income tax expense (benefit) | 215 | 1,539 | (65) | 86 |
Net income | 1,897 | 3,139 | 4,052 | 7,442 |
Net loss attributable to non-controlling interest | 0 | (194) | 0 | (498) |
Net income attributable to Heska Corporation | $ 1,897 | $ 3,333 | $ 4,052 | $ 7,940 |
Earnings Per Share [Abstract] | ||||
Basic earnings per share attributable to Heska Corporation (in dollars per share) | $ 0.26 | $ 0.47 | $ 0.57 | $ 1.14 |
Diluted earnings per share attributable to Heska Corporation (in dollars per share) | $ 0.24 | $ 0.44 | $ 0.52 | $ 1.05 |
Weighted average outstanding shares used to compute basic earnings per share attributable to Heska Corporation (in shares) | 7,226 | 7,069 | 7,146 | 6,967 |
Weighted average outstanding shares used to compute diluted earnings per share attributable to Heska Corporation (in shares) | 7,850 | 7,632 | 7,781 | 7,570 |
Core companion animal health | ||||
Revenue: | ||||
Total revenue, net | $ 26,644 | $ 26,090 | $ 53,463 | $ 49,875 |
Other vaccines, pharmaceuticals and products | ||||
Revenue: | ||||
Total revenue, net | $ 3,018 | $ 7,315 | $ 8,964 | $ 13,089 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | ||||
Net income | $ 1,897 | $ 3,139 | $ 4,052 | $ 7,442 |
Other comprehensive (loss) income: | ||||
Foreign currency translation | (112) | 114 | (31) | 170 |
Comprehensive income | 1,785 | 3,253 | 4,021 | 7,612 |
Comprehensive loss attributable to non-controlling interest | 0 | (194) | 0 | (498) |
Comprehensive income attributable to Heska Corporation | $ 1,785 | $ 3,447 | $ 4,021 | $ 8,110 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Total | Previously Reported | Traditional Common Stock | Traditional Common StockPreviously Reported | Additional Paid-in Capital | Additional Paid-in CapitalPreviously Reported | Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss)Previously Reported | Accumulated Deficit | Accumulated DeficitPreviously Reported |
Beginning balance at Dec. 31, 2016 | $ 86,975 | $ 70 | $ 238,635 | $ 97 | $ (151,827) | |||||
Beginning balance (in shares) at Dec. 31, 2016 | 7,026 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net income | 7,442 | 7,442 | ||||||||
Issuance of common stock, net of shares withheld for employee taxes | 711 | $ 2 | 709 | |||||||
Issuance of common stock, net of shares withheld for employee taxes (in shares) | 170 | |||||||||
Stock-based compensation | 1,386 | 1,386 | ||||||||
Accretion of non-controlling interest | 845 | 845 | ||||||||
Distribution for Heska Imaging minority interest | (954) | (954) | ||||||||
Other comprehensive income | 170 | 170 | ||||||||
Ending balance at Jun. 30, 2017 | 96,575 | $ 72 | 240,621 | 267 | (144,385) | |||||
Ending balance (in shares) at Jun. 30, 2017 | 7,196 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Adoption of accounting standards | 2,635 | 2,635 | ||||||||
Beginning balance at Dec. 31, 2017 | 103,075 | $ 100,440 | $ 73 | $ 73 | 243,598 | $ 243,598 | 232 | $ 232 | (140,828) | $ (143,463) |
Beginning balance (in shares) at Dec. 31, 2017 | 7,303 | 7,303 | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net income | 4,052 | 4,052 | ||||||||
Issuance of common stock, net of shares withheld for employee taxes | 458 | $ 2 | 456 | |||||||
Issuance of common stock, net of shares withheld for employee taxes (in shares) | 195 | |||||||||
Stock-based compensation | 2,368 | 2,368 | ||||||||
Other comprehensive income | (31) | (31) | ||||||||
Ending balance at Jun. 30, 2018 | $ 109,922 | $ 75 | $ 246,422 | $ 201 | $ (136,776) | |||||
Ending balance (in shares) at Jun. 30, 2018 | 7,498 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 4,052 | $ 7,442 |
Adjustments to reconcile net income to cash provided by operating activities: | ||
Depreciation and amortization | 2,333 | 2,192 |
Deferred income tax (benefit) expense | (94) | 69 |
Stock-based compensation | 2,368 | 1,386 |
Other expense | 8 | 20 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,719 | 6,302 |
Inventories | 3,192 | (5,954) |
Due from related parties | 1 | 79 |
Lease receivable, current | (524) | (660) |
Other current assets | 26 | 75 |
Accounts payable | (2,451) | 1,432 |
Due to related parties | (1,336) | (1,296) |
Accrued liabilities and other | (1,272) | (1,569) |
Lease receivable, non-current | (1,526) | (2,962) |
Other non-current assets | (1,101) | (526) |
Deferred revenue and other | (1,896) | (1,175) |
Net cash provided by operating activities | 4,499 | 4,855 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of minority interest | 0 | (13,757) |
Purchases of property and equipment | (811) | (1,295) |
Proceeds from disposition of property and equipment | 4 | 0 |
Net cash used in investing activities | (807) | (15,052) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of common stock | 1,613 | 1,571 |
Repurchase of common stock | (1,155) | (860) |
Proceeds from line of credit borrowings | 0 | 26,051 |
Repayments of line of credit borrowings | 0 | (22,690) |
Distributions to non-controlling interest members | (126) | (954) |
Repayments of other debt | 0 | (79) |
Net cash provided by financing activities | 332 | 3,039 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (8) | 91 |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 4,016 | (7,067) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 9,659 | 10,794 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 13,675 | 3,727 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Non-cash transfers of equipment between inventory and property and equipment, net | $ 528 | $ 482 |
OPERATIONS AND SUMMARY OF SIGNI
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Heska Corporation and its wholly-owned subsidiaries ("Heska", the "Company", "we" or "our") sell veterinary and animal health diagnostic and specialty products. Our offerings include Point of Care diagnostics laboratory instruments and consumables, digital imaging diagnostic products, software and services, vaccines, local and cloud-based data services, allergy testing and immunotherapy, and single-use offerings such as in-clinic diagnostic tests and heartworm preventive products. Our core focus is on supporting veterinarians in the canine and feline healthcare space. Basis of Presentation and Consolidation In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the financial position of the Company as of June 30, 2018 and December 31, 2017 , the results of our operations for the three and six months ended June 30, 2018 and 2017 , and cash flows for the six months ended June 30, 2018 and 2017 . The unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. Our unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our wholly-owned subsidiaries since their respective dates of acquisitions. All intercompany accounts and transactions have been eliminated in consolidation. Where our ownership of a subsidiary was less than 100%, the non-controlling interest is reported on our Condensed Consolidated Balance Sheets. The non-controlling interest in our consolidated net income is reported as "Net loss attributable to non-controlling interest" on our Condensed Consolidated Statements of Income. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017 and other financial information filed with the SEC. Reclassification To maintain consistency and comparability, certain amounts in the financial statements have been reclassified to conform to current year presentation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are required when establishing the allowance for doubtful accounts and the provision for excess or obsolete inventory; determining future costs associated with warranties provided; determining the period over which our obligations are fulfilled under agreements to license product rights and/or technology rights; evaluating long-lived and intangible assets for impairment; estimating the useful lives of instruments under leasing arrangements; determining the allocation of purchase price under purchase accounting; estimating the expense associated with the granting of stock options; and determining the need for, and the amount of a valuation allowance on deferred tax assets. Critical Accounting Policies Our accounting policies are described in our audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K/A for the year ended December 31, 2017, and other than the recently adopted accounting pronouncements discussed below, have not changed significantly since such filing. Adoption of New Accounting Pronouncements In August 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which became effective for us beginning January 1, 2018. The new standard made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. Adoption of this standard did not have a material impact on our financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers and has subsequently issued several supplemental and/or clarifying Accounting Standards Updates or ASUs (collectively “ASC 606”). ASC 606 prescribes a single common revenue standard that replaces most existing U.S. GAAP revenue recognition guidance. ASC 606 outlines a five-step model, under which Heska will recognize revenue as performance obligations within customer contracts are satisfied. ASC 606 is intended to provide more consistent interpretation and application of the principles outlined in the standard across filers in multiple industries and within the same industries compared to current practices, which should improve comparability. Along with the issuance of ASC 606, additional cost guidance was issued and codified under ASC 340-40 that outlines the requirement for capitalizing incremental costs of obtaining a contract and costs to fulfill a contract that meet certain capitalization criteria. On January 1, 2018, we adopted ASC 606 using the modified retrospective method for all customer contracts not yet completed as of the adoption date. Results for reporting periods beginning January 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605, Revenue Recognition . We recorded an increase to beginning retained earnings of $2.6 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606. The impact to beginning retained earnings was primarily driven by the capitalization of certain costs to obtain our customer contracts, which were primarily sales-related commissions. The adoption of ASC 606 did not have a significant impact on our Condensed Consolidated Financial Statements as of and for the three and six month periods ended June 30, 2018. As a result, comparisons of revenues and operating profit performance between periods are not affected by the adoption of this ASU. Refer to Note 2 for additional disclosures required by ASC 606. We generate our Core Companion Animal (“CCA”) segment revenue through the sale of products, either by outright purchase by our customers or through a subscription agreement whereby our customers receive instruments and pay us a monthly fee for the usage of the instrument as well as the consumables needed to conduct testing. Outright sales to customers is the majority of both Point of Care imaging diagnostic transactions and the sale of pharmaceuticals and vaccines, while subscription placement is the majority of Point of Care diagnostic laboratory transactions. For outright sales of products, revenue is recognized when control of the promised products or services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606. For instruments, consumables, and most software licenses sold by the Company, control transfers to the customer at a point in time. To indicate the transfer of control, the Company must have a present right to payment, legal title must have passed to the customer, the customer must have the significant risks and rewards of ownership, and where acceptance is not a formality, the customer must have accepted the product or service. Heska’s principal terms of sale are FOB Shipping Point, or equivalent, and, as such, we primarily transfer control and record revenue for product sales upon shipment. If a performance obligation to the customer with respect to a sales transaction remains unfulfilled following shipment (typically owed installation or acceptance by the customer), revenue recognition for that performance obligation is deferred until such commitments have been fulfilled. We do not generally allow return of products or instruments. For extended warranty plans, control transfers to the customer over the term of the arrangement. Revenue for extended warranties is recognized based upon the period of time elapsed under the arrangement. Our revenue under subscription agreements relate to operating-type lease (“OTL”) arrangements or sales-type lease (“STL”) arrangements. A STL would result in earlier recognition of instrument revenue as compared to an OTL, which is generally upon installation of the instruments. The cost of the customer-leased instruments is removed from inventory and recognized in the Condensed Consolidated Statements of Income. Determination of an OTL or STL is primarily determined as a result of the length of the contract as compared to the estimated useful life of the instrument, among other factors. Leases are outside of the scope of ASC 606 and are therefore accounted for in accordance with ASC 840 , Leases . Instrument lease revenue for OTL agreements is recognized on a straight-line basis over the life of the lease, and the costs of customer-leased instruments are recorded within property and equipment in the accompanying Condensed Consolidated Balance Sheets and depreciated over the instrument’s estimated useful life. The depreciation expense is reflected in cost of revenue in the accompanying Condensed Consolidated Statements of Income. The OTLs and STLs are not cancellable until after an initial term. Under either type of lease, we often charge a subscription fee and provide a minimum supply credit. OTLs may include a minimum utilization rather than a minimum supply credit. For contracts with multiple performance obligations, the Company allocates the contracts' transaction price for each performance obligation on a relative standalone selling price basis using our best estimate of the standalone selling price of each distinct product or service in the contract. The primary method used to estimate the standalone selling price is the price observed in standalone sales to customers. However, when prices in standalone sales are not available, we may use a cost-plus margin approach. Allocation of the transaction price is determined at the contracts' inception. The Company does not adjust the transaction price for the effects of a significant financing component when the period between the transfer of the promised good or service to the customer and payment for that good or service by the customer is expected to be one year or less. This allocation approach also applies to contracts for which a portion of the contract relates to a lease component. We generate revenue within our Other Vaccines, Pharmaceuticals, and Products (“OVP”) segment through contract manufacturing contracts with customers. The timing of revenue recognition of our customer contracts are generally recognized upon shipment or acceptance by our customer, under the same guidelines noted above for other outright product sales. Heska assessed the over-time criteria within ASC 606 and concluded that because products within this segment have no alternative use to Heska, as Heska is contractually prohibited to redirect the product to other customers, Heska does not have right to payment for performance to date. Therefore, point in time revenue recognition has been determined to be appropriate. Revenue generated from licensing arrangements is recognized based on the underlying term of the contract. Accounting Pronouncements Not Yet Adopted In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718) , Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. ASU 2018-07 is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted but no earlier than an entity’s adoption date of Topic 606. We will adopt the provisions of this ASU in the first quarter of 2019. Adoption of the new standard is not expected to have a material impact on our Consolidated Financial Statements. In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . The ASU permits companies to elect a reclassification of the disproportionate tax effects in accumulated other comprehensive income ("AOCI") caused by the Tax Cuts and Jobs Act of 2017 to retained earnings. The ASU also requires additional disclosures. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted. We will adopt the provisions of this ASU in the first quarter of 2019. We are currently evaluating the effect of this ASU on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , which require that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The amendments in this update are effective for fiscal years beginning after December 15, 2019 and interim periods within those annual periods. Early adoption for fiscal year beginning after December 15, 2018 is permitted. We will adopt the provisions of this ASU in the first quarter of 2019. We are currently evaluating the effect of this update on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which supersedes ASC 840, Leases . This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. The accounting for lessors does not fundamentally change except for changes to conform and align guidance to the lessee guidance as well as to the new revenue recognition guidance in ASU 2014-09. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the effect of this update on our consolidated financial statements. |
REVENUE
REVENUE | 6 Months Ended |
Jun. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | REVENUE We separate our goods and services among: • Point of Care laboratory products including instruments, consumables, and other services; • Point of Care imaging products including instruments, software and services; • Single use pharmaceuticals, vaccines, and diagnostic tests primarily related to companion animals; and • Other vaccines and pharmaceuticals related to our OVP segment. Revenue from our CCA segment consists of Point of Care laboratory products, including instruments and consumables, Point of Care imaging products, and single use diagnostic and other tests, pharmaceuticals and biologicals. Point of Care laboratory products are generally sold under a long-term subscription agreement with the instrument portion of the sale accounted for under Topic 840, Leases , as either an OTL or STL. For STL, we apply the provisions of ASC 606 to determine the point in time when control is transferred to the customer, generally when installation of the instrument occurs. Related profit and derecognition of the asset from the Company's balance sheet follows prescribed guidance under ASC 840. Revenue recognized under this topic was approximately $1.8 million and $3.3 million in the three and six months ended June 30, 2018 , respectively. For the three and six months ended June 30, 2018 , we recognized approximately $1.3 million and $2.1 million , respectively, of instrument sales related to the outright sale of instruments to customers, which also included shipping and preparation fees. Consumables are critical to the use of the Point of Care laboratory instruments and are used one-time, requiring frequent replacement in the customer's operating cycle. Revenue recorded related to sales of consumables was $11.5 million and $22.3 million in the three and six months ended June 30, 2018 , respectively. Other services, such as extended service plans and repairs, resulted in approximately $0.4 million and $0.9 million of revenue in the three and six months ended June 30, 2018 , respectively. Point of Care imaging products for instruments and software are generally sold outright to customers and recognized upon shipment, which is generally the point in time when control transfers to customers. Revenue of approximately $3.6 million and $8.7 million was recognized in the three and six months ended June 30, 2018 , respectively. Rental agreements, generally accounted for as OTLs under Topic 840, Leases , resulted in approximately $0.4 million and $0.6 million of rental revenue in the three and six months ended June 30, 2018 , respectively. Service revenue, including extended warranty revenue, of approximately $0.5 million and $1.1 million was recognized in the three and six months ended June 30, 2018 , respectively. Revenue from single use diagnostic and other tests, pharmaceuticals and biologicals as well as research and development, licensing and royalty revenue, represented approximately $7.1 million of our revenue for the three months ended June 30, 2018 , and $14.3 million of our revenue for the six months ended June 30, 2018 . Of those amounts, approximately $0.1 million and $0.2 million related to license and royalty income for the three and six months ended June 30, 2018 , respectively. Revenue from our OVP segment consists of revenue generated from contract manufacturing contracts and from other license and research and development. Revenue from contract manufacturing contracts and from other license and research and development was $2.9 million and $0.1 million , respectively, in the three months ended June 30, 2018 , and $8.7 million and $0.3 million , respectively, in the six months ended June 30, 2018 . Remaining Performance Obligations Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period. Remaining performance obligations include noncancelable purchase orders, the non-lease portion of minimum purchase commitments under long-term supply arrangements, extended warranty, service and other long-term contracts. Remaining performance obligations do not include revenue from contracts with customers with an original term of one year or less, revenue from long-term supply arrangements with no minimum purchase requirements or revenue expected from purchases made in excess of the minimum purchase requirements or revenue from instruments leased to customers. While the remaining performance obligation disclosure is similar in concept to backlog, the definition of remaining performance obligations excludes leases and contracts that provide the customer with the right to cancel or terminate for convenience with no substantial penalty, even if historical experience indicates the likelihood of cancellation or termination is remote. Additionally, the Company has elected to exclude contracts with customers with an original term of one year or less from remaining performance obligations while these contracts are included within backlog. As of June 30, 2018 , the aggregate amount of the transaction price allocated to remaining minimum performance obligations was approximately $77.8 million . As of June 30, 2018 , the Company expects to recognize revenue as follows (in thousands): Year Ending December 31, Revenue 2018 (remaining) $ 11,535 2019 19,807 2020 16,206 2021 12,510 2022 9,373 Thereafter 8,344 $ 77,775 Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue, customer deposits and billings in excess of revenue recognized (contract liabilities) on the Condensed Consolidated Balance Sheets. In addition, the Company defers certain costs incurred to obtain contracts (contract costs). Contract assets - Most of the Company’s long-term contracts are billed as product is shipped. Therefore, there are no contract assets because the Company does not recognize revenue prior to invoicing. Contract liabilities - The Company receives cash payments from customers for licensing fees or other arrangements that extend for a specified term. These contract liabilities are classified as either current or long-term in the Condensed Consolidated Balance Sheets based on the timing of when the Company expects to recognize revenue. As of June 30, 2018 and December 31, 2017 , contract liabilities were $10.3 million and $12.3 million , respectively, and are included within the current portion of "Deferred revenue" and the non-current portion of "Deferred revenue, net of current portion, and other" in the accompanying Condensed Consolidated Balance Sheets. The decrease in the contract liability balance during the six month period ended June 30, 2018 is $2.6 million of revenue recognized during the period, offset by $0.6 million of additional deferred sales in 2018. Contract costs - The Company capitalizes certain direct incremental costs incurred to obtain customer contracts, typically sales-related commissions, where the recognition period for the related revenue is greater than one year. Contract costs are classified as current or non-current "Contract acquisition costs" in the Condensed Consolidated Balance Sheets based on the timing of when the Company expects to recognize the expense and are generally amortized into earnings with a certain percentage recognized immediately based upon placement of the instrument with the remainder recognized on a straight-line basis (which is consistent with the transfer of control for the related goods or services) over the term of the contract. Management assesses these costs for impairment at least quarterly on a contract by contract basis and as “triggering” events occur that indicate it is more likely than not that an impairment exists. The balance of contract costs as of June 30, 2018 and at the date of adoption was $2.5 million and $2.4 million , respectively. Amortization expense for the six month period ended June 30, 2018 , was $0.5 million . The costs to obtain a contract where the amortization period for the related asset is one year or less are expensed as incurred and recorded within selling and marketing expenses and general and administrative expenses in the accompanying Condensed Consolidated Statements of Income. Contract liabilities and costs are reported on the accompanying Condensed Consolidated Balance Sheets on a contract-by-contract basis whereas contract costs are calculated and reported on a portfolio basis. |
ACQUISITION AND RELATED PARTY I
ACQUISITION AND RELATED PARTY ITEMS | 6 Months Ended |
Jun. 30, 2018 | |
Business Combinations and Related Party Disclosures [Abstract] | |
ACQUISITION AND RELATED PARTY ITEMS | ACQUISITIONS AND RELATED PARTY ITEMS Cuattro Veterinary, LLC On May 31, 2016, the Company closed a transaction (the "Merger") to acquire Cuattro Veterinary, LLC ("Cuattro International"), which was owned by Kevin S. Wilson, among other members (the "Members"). The Company recorded assets acquired and liabilities assumed at their estimated fair values. Intangible assets were valued based on a report from an independent third party. The goodwill associated with the acquisition is the result of expected synergies and expansion of the technology into additional markets. Cuattro International is a provider to international markets of digital radiography technologies for veterinarians. As a leading provider of advanced veterinary diagnostic and specialty products, we made the acquisition in an effort to combine Cuattro International's international reach with our domestic success in the imaging and laboratory markets in the United States. International markets represent a significant portion of worldwide veterinary revenues. As of the closing date of the Merger, Cuattro International was renamed Heska Imaging International, LLC, ("International Imaging") and the Company's interest in both International Imaging and Heska Imaging US, LLC ("US Imaging") was transferred to the Company's wholly-owned subsidiary, Heska Imaging Global, LLC ("Global Imaging"). Mr. Wilson is a founder of Cuattro International, Cuattro, LLC, Cuattro Software, LLC and Cuattro Medical, LLC. Mr. Wilson, Mrs. Wilson and trusts for the benefit of Mr. and Mrs. Wilson’s children and family own a 100% interest in Cuattro, LLC and a majority interest in Cuattro Medical, LLC. Cuattro, LLC owns a 100% interest in Cuattro Software, LLC and prior to the Merger, owned a majority interest in Cuattro International. Cuattro Veterinary USA, LLC On February 24, 2013, the Company acquired a 54.6% interest in Cuattro Veterinary USA, LLC (the "Acquisition"), which was subsequently renamed Heska Imaging US, LLC ("US Imaging"). The remaining minority position (45.4%) in US Imaging was subject to purchase by Heska under performance-based puts and calls following the audit of our financial statements for the 2016 and 2017 fiscal years. With the required performance criteria met in fiscal year 2016, we considered notice given on March 3, 2017 that the put option was being exercised and on May 31, 2017, we delivered $13.8 million in cash to obtain the remaining minority interest position in US Imaging. Prior to the purchase of the minority interest position (the "Imaging Minority"), Shawna M. Wilson, Clint Roth, DVM, Steven M. Asakowicz, Rodney A. Lippincott, Kevin S. Wilson and Cuattro, LLC owned approximately 29.75% , 8.39% , 4.09% , 3.07% , 0.05% and 0.05% of US Imaging, respectively. Kevin S. Wilson is the Chief Executive Officer and President of the Company and the spouse of Shawna M. Wilson. Steven M. Asakowicz and Rodney A Lippincott each serve as Executive Vice President, Companion Animal Health Sales for the Company. On April 3, 2017, and in accordance with the terms of its Operating Agreement, US Imaging distributed $2.1 million based on past operating performance, including $1.0 million to its minority interest members. As of December 31, 2017, US Imaging accrued an additional $0.3 million distribution, including $0.1 million to its minority interest members, all of which was paid in January 2018. On June 1, 2017, the Company consolidated its assets and liabilities in the US Imaging and International Imaging companies into Global Imaging, which was re-named Heska Imaging, LLC ("Heska Imaging"). Related Party Activities Cuattro, LLC charged Heska Imaging $2.3 million and $8.6 million during the six months ended June 30, 2018 and 2017 , respectively, primarily for digital imaging products, pursuant to an underlying supply contract that contains minimum purchase obligations, software and services as well as other operating expenses. The Company charged US Imaging $2.9 million during the five months ended May 31, 2017, prior to the purchase of the Imaging Minority on May 31, 2017, primarily related to sales expenses. The Company charged Cuattro, LLC approximately $1 thousand and $67 thousand during the six months ended June 30, 2018 , and 2017 , respectively, for facility usage and other services. The Company had receivables from Cuattro, LLC of approximately $0 and $1 thousand as of June 30, 2018 and December 31, 2017 , respectively, which is included in "Due from – related parties" on the Company's Condensed Consolidated Balance Sheets. Heska Imaging owed Cuattro, LLC $0.4 million and $1.7 million as of June 30, 2018 and December 31, 2017 , respectively, which is included in "Due to – related parties" on the Company's Condensed Consolidated Balance Sheets. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Our total income tax expense (benefit) and the effective tax rate for our income before income taxes were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Income before income taxes $ 2,112 $ 4,678 $ 3,987 $ 7,528 Total income tax expense (benefit) 215 1,539 (65 ) 86 Effective tax rate 10.2 % 32.9 % (1.6 )% 1.1 % There were cash payments of $12 thousand and $30 thousand , respectively, for income taxes, net of refunds, for the three and six months ended June 30, 2018 , and there were $144 thousand and $206 thousand in cash payments for income taxes, net of refunds, for the three and six months ended June 30, 2017 . The Company’s effective tax rate decreased to a tax expense (benefit) of 10.2% and (1.6)% , respectively, for the three and six months ended June 30, 2018 , compared to a tax expense of 32.9% and 1.1% , respectively, for the three and six months ended June 30, 2017 . The decrease in rates for both periods was primarily attributable to an increase in stock-based compensation excess tax benefits which were partially offset by an increase in the valuation allowance for the second quarter of 2017 as opposed to no increase in the valuation allowance for the second quarter of 2018. The Company continues to analyze the different aspects of the Tax Cuts and Jobs Act that was enacted in December 2017. Specifically, we continue to analyze the provisional amounts estimated for the transition tax, the possible impact of the “GILTI” tax, and the possible executive compensation limitations imposed by IRC Section 162(m) of the Internal Revenue Code of 1986, as amended. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE Basic earnings per share ("EPS") is computed by dividing net income attributable to the Company by the weighted-average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the numerator is increased to exclude charges that would not have been incurred, and the denominator is increased to include the number of additional common shares that would have been outstanding (using the if-converted and treasury stock methods), if securities containing potentially dilutive common shares (stock options and restricted stock units but excluding options to purchase fractional shares resulting from the Company's December 2010 1-for- 10 reverse stock split) had been converted to common shares, and if such assumed conversion is dilutive. The following is a reconciliation of the weighted-average shares outstanding used in the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2018 and 2017 (in thousands, except per share data): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Net income attributable to Heska $ 1,897 $ 3,333 $ 4,052 $ 7,940 Basic weighted-average common shares outstanding 7,226 7,069 7,146 6,967 Assumed exercise of dilutive stock options and restricted shares 624 563 635 603 Diluted weighted-average common shares outstanding 7,850 7,632 7,781 7,570 Basic earnings per share attributable to Heska $ 0.26 $ 0.47 $ 0.57 $ 1.14 Diluted earnings per share attributable to Heska $ 0.24 $ 0.44 $ 0.52 $ 1.05 The following stock options and restricted shares were excluded from the computation of diluted earnings per share because they would have been anti-dilutive (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Stock options 169 25 238 132 |
GOODWILL AND OTHER INTANGIBLES
GOODWILL AND OTHER INTANGIBLES | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOOWILL AND OTHER INTANGIBLES | GOODWILL AND OTHER INTANGIBLES The following summarizes the change in goodwill during the six months ended June 30, 2018 (in thousands): Carrying amount, December 31, 2017 $ 26,687 Foreign currency adjustments (14 ) Carrying amount, June 30, 2018 $ 26,673 Other intangibles consisted of the following (in thousands): June 30, December 31, 2018 2017 Gross carrying amount $ 3,309 $ 3,309 Accumulated amortization (1,545 ) (1,351 ) Net carrying amount $ 1,764 $ 1,958 Amortization expense relating to other intangibles was as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Amortization expense $ 97 $ 97 $ 194 $ 194 Estimated amortization expense related to intangibles for each of the five years from 2018 (remaining) through 2022 and thereafter is as follows (in thousands): Year Ending December 31, 2018 (remaining) $ 194 2019 388 2020 388 2021 384 2022 378 Thereafter 32 $ 1,764 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Property and equipment, net, consisted of the following (in thousands): June 30, December 31, 2018 2017 Land $ 377 $ 377 Building 2,978 2,868 Machinery and equipment 39,131 38,432 Leasehold and building improvements 9,866 8,156 Construction in progress 1,201 3,531 53,553 53,364 Less accumulated depreciation (36,966 ) (36,033 ) Total property and equipment, net $ 16,587 $ 17,331 The Company has subscription agreements whereby its instruments in inventory may be placed at a customer's location on a rental basis. The cost of these instruments is transferred to machinery and equipment and depreciated, typically over a five -to- seven year period depending on the circumstance under which the instrument is placed with the customer. Depreciation expense was $1.0 million for both of the three months ended June 30, 2018 and 2017 . Depreciation expense was $2.1 million and $2.0 million for the the six months ended June 30, 2018 and 2017 , respectively. Our cost of instruments under operating leases as of June 30, 2018 and December 31, 2017 , was $10.5 million and $10.8 million , respectively, before accumulated depreciation of $5.6 million and $5.0 million , respectively, and the net book value was $4.9 million and $5.8 million , respectively. |
INVENTORIES, NET
INVENTORIES, NET | 6 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES, NET | INVENTORIES, NET Inventories, net, consisted of the following (in thousands): June 30, December 31, 2018 2017 Raw materials $ 17,037 $ 18,465 Work in process 4,186 4,296 Finished goods 9,225 11,465 Allowance for excess or obsolete inventory (1,575 ) (1,630 ) Total inventory, net $ 28,873 $ 32,596 Inventories are stated at lower of cost (first-in, first-out) or net realizable value. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
ACCRUED LIABILITIES | ACCRUED LIABILITIES Accrued liabilities consisted of the following (in thousands): June 30, December 31, Accrued payroll and employee benefits $ 891 $ 1,209 Accrued purchases 371 695 Accrued property taxes 394 661 Other 1,487 1,852 Total accrued liabilities $ 3,143 $ 4,417 Other accrued liabilities consisted of items that are individually less than 5% of total current liabilities. |
CAPITAL STOCK
CAPITAL STOCK | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
CAPITAL STOCK | 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 and six months ended June 30, 2018 and 2017 . Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Risk-free interest rate 2.76% 1.75% 2.64% 1.75% Expected lives 4.9 years 4.9 years 4.9 years 4.9 years Expected volatility 40% 41% 40% 41% Expected dividend yield 0% 0% 0% 0% A summary of our stock option plans is as follows: Six Months Ended June 30, Year Ended December 31, 2018 2017 Weighted Average Exercise Price Weighted Average Exercise Price Outstanding at beginning of period 630,847 $ 29.312 829,617 $ 23.203 Granted at market 131,000 $ 69.887 27,050 $ 99.087 Canceled (19,374 ) $ 52.158 (18,331 ) $ 57.197 Exercised (45,657 ) $ 27.533 (207,489 ) $ 11.520 Outstanding at end of period 696,816 $ 36.421 630,847 $ 29.312 Exercisable at end of period 449,097 $ 19.854 456,802 $ 18.316 The total estimated fair value of stock options granted during the six months ended June 30, 2018 and 2017 was computed to be approximately $3.5 million and $0.9 million , respectively. The amounts are amortized ratably over the vesting periods of the options. The weighted average estimated fair value of options granted during the six months ended June 30, 2018 and 2017 was computed to be approximately $26.74 and $37.37 , respectively. The total intrinsic value of options exercised during the six months ended June 30, 2018 and 2017 was $3.1 million and $12.4 million , respectively. The cash proceeds from options exercised during the six months ended June 30, 2018 and 2017 was $1.3 million and $1.3 million , respectively. The following table summarizes information about stock options outstanding and exercisable at June 30, 2018 : Options Outstanding Options Exercisable Exercise Prices Number of Weighted Average Remaining Contractual Life in Years Weighted Average Exercise Price Number of Weighted Average Exercise Price $ 4.40 - $ 6.90 92,535 2.14 $ 5.378 92,535 $ 5.378 $ 6.91 - $ 8.55 158,623 5.08 $ 7.771 158,623 $ 7.771 $ 8.56 - $ 39.56 130,030 6.57 $ 22.467 117,582 $ 22.650 $ 39.57 - $ 69.77 207,950 8.86 $ 58.575 45,578 $ 39.858 $ 69.78 - $ 108.25 107,678 8.62 $ 79.372 34,779 $ 77.817 $ 4.40 - $ 108.25 696,816 6.64 $ 36.421 449,097 $ 19.854 As of June 30, 2018 , there was approximately $5.7 million in total unrecognized compensation cost related to outstanding stock options. That cost is expected to be recognized over a weighted average period of 1.98 years, with all cost to be recognized by the end of October 2021, assuming all options vest according to the vesting schedules in place at June 30, 2018 . As of June 30, 2018 , the aggregate intrinsic value of outstanding options was approximately $46.9 million and the aggregate intrinsic value of exercisable options was approximately $37.7 million . Employee Stock Purchase Plan (the "ESPP") For the three months ended June 30, 2018 and 2017 , we issued 2,327 and 2,339 shares under the ESPP, respectively. For the six months ended June 30, 2018 and 2017 , we issued 5,454 and 5,543 shares under the ESPP, respectively. For the three and six months ended June 30, 2018 and 2017 , we estimated the fair values of stock purchase rights granted under the ESPP using the Black-Scholes pricing model. The weighted average assumptions used for the periods presented were as follows: Three Months Ended Six Months Ended June 30, 2018 2017 2018 2017 Risk-free interest rate 1.09% 0.70% 1.06% 0.67% Expected lives 1.2 years 1.2 years 1.2 years 1.2 years Expected volatility 44% 45% 44% 45% Expected dividend yield 0% 0% 0% 0% For the three months ended June 30, 2018 and 2017 , the weighted-average fair value of the purchase rights granted was $17.98 and $18.67 per share, respectively. For the six months ended June 30, 2018 and 2017 , the weighted-average fair value of the purchase rights granted was $15.86 and $15.63 per share, respectively. Restricted Stock Issuance On March 26, 2014, we issued 110,000 shares to Mr. Wilson pursuant to an employment agreement between Mr. Wilson and the Company effective as of March 26, 2014 (the "Wilson Employment Agreement"). The shares were issued in four equal tranches and subject to time-based vesting and other provisions outlined in the Wilson Employment Agreement. On March 26, 2017, the final of these four equal tranches of 27,500 shares vested. On March 17, 2015, the Company issued unvested shares to certain Executive Officers related to performance-based restricted stock grants (the "Performance Grants"). The Company issued 52,956 shares under the Performance Grants. The Performance Grants have met the underlying performance condition based on the Company's 2015 financial performance and vested on March 17, 2018, subject to other vesting provisions in the underlying restricted stock grant agreement. Of the shares issued, 52,956 vested, 0 were forfeited, and 14,334 were withheld for tax. On March 2, 2016, the Company issued 15,000 unvested shares to certain Executive Officers related to performance-based restricted stock grants as part of the Company’s 2016 Management Incentive Plan (the "2016 MIP Grants"). Of the shares issued, 14,629 vested, 371 were forfeited, and 4,133 were withheld for tax. The 2016 MIP Grants vested during the three months ended March 31, 2017. On May 1, 2017, the Company issued 2,720 shares of our Common Stock to the Company's non-employee directors. These grants were to vest (the "Vesting Time") in full on the latter of (i) the one year anniversary of the date of grant and (ii) the Company’s Annual Meeting of Stockholders for the year following the year of grant for the award (the "Vesting Meeting"), subject to (i) the non-employee director's continued service to the Company through the Vesting Time, unless the non-employee director’s current term expires at the Vesting Meeting in which case vesting is subject to the non-employee director’s service to the Vesting Meeting and (ii) the non-employee director not engaging in “competition”, as defined in a restricted stock grant agreement executed by the non-employee director, to the Vesting Time. Of these shares, all vested on May 3, 2018. On May 31, 2017, the Company issued 23,700 unvested performance-based restricted stock shares to certain key employees. The vesting of these shares is subject to the achievement of certain Company performance and market conditions that must be met on or before May 30, 2024 . On June 15, 2017, the Company issued 6,594 unvested restricted shares to certain Executive Officers related to performance-based restricted stock grants as part of the Company’s 2017 Management Incentive Plan. As of December 31, 2017, all shares were forfeited and no compensation expense was recorded for the year ended December 31, 2017. On March 7, 2018, the Company issued 128,500 shares of performance-based restricted common stock and stock options with 130,000 underlying shares of common stock under the 1997 Plan, including 118,500 shares of performance-based restricted common stock and stock options with 120,000 underlying shares of common stock granted to Company Executive Officers. The vesting of the performance-based restricted shares is subject to the achievement of certain Company performance and market conditions and, in some instances, a service period requirement. The shares are to be forfeited if the applicable performance or market condition is not met by the date in each fiscal year that the Company's independent registered public accountants issue their financial report on the Company's prior fiscal year financial statements in 2025 or March 31, 2025, respectively, with the exception of 27,539 shares of restricted common stock with vesting tied to the Company's stock outperforming the S&P 500 Index over a two or four year time period, which will be forfeited if not achieved at the specified time. The stock options are to vest annually in three approximately equal tranches and immediately upon a change in control. On May 3, 2018, the Company issued 4,230 shares of our Common Stock to the Company's non-employee directors. These grants were to vest (the "Vesting Time") in full on the latter of (i) the one year anniversary of the date of grant or (ii) the Company’s Annual Meeting of Stockholders for the year following the year of grant for the award (the "Vesting Meeting"), subject to (a) the non-employee director's continued service to the Company through the Vesting Time, unless the non-employee director’s current term expires at the Vesting Meeting, in which case vesting is subject to the non-employee director’s service to the Vesting Meeting, and (b) the non-employee director not engaging in “competition”, as defined in a restricted stock grant agreement executed by the non-employee director, until the Vesting Time. On May 3, 2018, the Company issued 33,000 shares of performance-based restricted common stock under the 1997 Plan to the Company's Chief Executive Officer, Kevin Wilson, which was contingent on stockholder approval to approve an increase of 250,000 common shares available for awards under the 1997 Stock Incentive Plan, which was approved consistent with the grant date. The vesting of the performance-based restricted shares is subject to the achievement of certain Company performance conditions and, in some instances, a service period requirement. The shares are to be forfeited if the applicable performance or market condition is not met by the date in each fiscal year that the Company's independent registered public accountants issue their financial report on the Company's prior fiscal year financial statements in 2025. As of June 30, 2018, there was approximately $3.5 million of total unrecognized compensation cost related to restricted stock. The Company expects to recognize this expense over a weighted average period of 2.1 years. 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 affect 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. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME | ACCUMULATED OTHER COMPREHENSIVE INCOME Accumulated other comprehensive income consisted of the following (in thousands): Minimum Pension Liability Foreign Currency Translation Total Accumulated Other Comprehensive Income Balances at December 31, 2017 $ (489 ) $ 721 $ 232 Current period other comprehensive loss — (31 ) (31 ) Balances at June 30, 2018 $ (489 ) $ 690 $ 201 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES The Company holds certain rights to market and manufacture products developed or created under certain research, development, and licensing agreements with various entities. In connection with such agreements, the Company has agreed to pay the entities royalties on net product sales. In each of the three months ended June 30, 2018 and 2017 , royalties of $0.1 million became payable under these agreements. In each of the six months ended June 30, 2018 and 2017 , royalties of $0.2 million became payable under these agreements. From time to time, the Company may be involved in litigation relating to claims arising out of its operations. On March 12, 2015, a complaint was filed against us by Shaun Fauley in the United States District Court Northern District of Illinois alleging our transmittal of unauthorized faxes in violation of the federal Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005, as a class action seeking stated damages of the greater of actual monetary loss or five hundred dollars per violation. The Company intends to defend itself vigorously in this matter and at this time is unable to estimate a possible loss or range of loss. As of June 30, 2018 , the Company was not a party to any other legal proceedings that were expected, individually or in the aggregate, to have a material adverse effect on its business, financial condition, or operating results. The Company's current terms and conditions of sale include a limited warranty that its products and services will conform to published specifications at the time of shipment and a more extensive warranty related to certain of its products. The Company also sells a renewal warranty for certain of its products. The typical remedy for breach of warranty is to correct or replace any defective product, and if not possible or practical, the Company will accept the return of the defective product and refund the amount paid. Historically, the Company has incurred minimal warranty costs. The Company's warranty reserve was $0.2 million at both June 30, 2018 and December 31, 2017 . Off-Balance Sheet Commitments Unconditional Purchase Obligations The Company has contractual obligations with suppliers for unconditional annual minimum inventory purchases in the amounts of $29.8 million as of June 30, 2018 . Operating Leases The Company leases various equipment and facilities. The Company does not currently utilize any other off-balance sheet financing arrangements. As of June 30, 2018 , the Company's total future minimum lease payments under noncancelable operating leases were $10.6 million . |
INTEREST AND OTHER EXPENSE (INC
INTEREST AND OTHER EXPENSE (INCOME), NET | 6 Months Ended |
Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | |
INTEREST AND OTHER EXPENSE (INCOME), NET | INTEREST AND OTHER EXPENSE (INCOME), NET Interest and other expense (income), net, consisted of the following (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Interest income $ (63 ) $ (43 ) $ (119 ) $ (81 ) Interest expense 77 51 142 75 Other expense (income), net 78 (126 ) 65 (174 ) Total interest and other expense (income), net $ 92 $ (118 ) $ 88 $ (180 ) Cash paid for interest for the three months ended June 30, 2018 and 2017 was $58 thousand and $32 thousand , respectively. Cash paid for interest for the six months ended June 30, 2018 and 2017 was $85 thousand and $58 thousand , respectively. |
CREDIT FACILITY
CREDIT FACILITY | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
CREDIT FACILITY | CREDIT FACILITY On July 27, 2017, we entered into a Credit Agreement (the "Credit Agreement") with JPMorgan Chase Bank, N.A. ("Chase"), which was amended by us on May 11, 2018 (the "Facility Amendment") to allow us the additional flexibility to make potentially identified permitted investments, subject to agreed upon limitations. The Credit Agreement provides for a revolving credit facility up to $30.0 million (the "Credit Facility"), although the amount of the Credit Facility may be increased by an additional $20.0 million up to a total of $50.0 million subject to receipt of additional lender commitments and other conditions. Any interest on borrowings due is to be charged at either the (i) rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal offices in New York City, subject to a floor, minus 1.65% , or (ii) the interest rate per annum equal to (a) LIBOR for the interest period in effect multiplied by (b) Chase's Statutory Reserve Rate (as defined in the Credit Agreement), plus 1.10% and payable monthly. There is an annual minimum interest charge of $60 thousand under the Credit Agreement. Borrowings under the Credit Facility are subject to certain financial and non-financial covenants and are available for various corporate purposes, including general working capital, capital investments, and certain permitted acquisitions and investments. The Credit Agreement also permits us to issue letters of credit. The maturity date of the Credit Facility is July 27, 2020. The foregoing discussion of the Credit Facility is a summary only and is qualified in its entirety by reference to the full text of the Credit Agreement, a copy of which has been filed as an exhibit to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2017, and the Facility Amendment, a copy of which is filed as an exhibit to this Periodic Report on Form 10-Q. At June 30, 2018 , we had a $6.0 million line of credit outstanding under the Credit Facility and we were in compliance with all financial covenants. |
SEGMENT REPORTING
SEGMENT REPORTING | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | SEGMENT REPORTING The Company is composed of two reportable segments, CCA and OVP. The CCA segment includes Point of Care diagnostics laboratory instruments and consumables, and Point of Care digital imaging diagnostic instruments and software services as well as single use diagnostic and other tests, pharmaceuticals and vaccines, primarily for canine and feline use. 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 OVP 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 tables (in thousands): Three Months Ended June 30, 2018 Core Other Vaccines, Pharmaceuticals and Products Total revenue $ 26,644 $ 3,018 $ 29,662 Operating income (loss) 2,864 (660 ) 2,204 Income (loss) before income taxes 2,772 (660 ) 2,112 Capital purchases 39 397 436 Depreciation and amortization 838 300 1,138 Three Months Ended June 30, 2017 Core Other Vaccines, Pharmaceuticals and Products Total revenue $ 26,090 $ 7,315 $ 33,405 Operating income 2,549 2,011 4,560 Income before income taxes 2,683 1,995 4,678 Capital purchases 36 779 815 Depreciation and amortization 857 243 1,100 Six Months Ended June 30, 2018 Core Other Vaccines, Pharmaceuticals and Products Total revenue $ 53,463 $ 8,964 $ 62,427 Operating Income (loss) 4,787 (712 ) 4,075 Income (loss) before income taxes 4,699 (712 ) 3,987 Capital expenditures 96 715 811 Depreciation and amortization 1,746 587 2,333 Six Months Ended June 30, 2017 Core Other Vaccines, Pharmaceuticals and Products Total revenue $ 49,875 $ 13,089 $ 62,964 Operating income 3,695 3,653 7,348 Income before income taxes 3,897 3,631 7,528 Capital purchases 85 1,210 1,295 Depreciation and amortization 1,702 490 2,192 Asset information by reportable segment as of June 30, 2018 is as follows (in thousands): Core Companion Animal Health Other Vaccines, Pharmaceuticals and Products Total Total assets $ 118,074 $ 19,953 $ 138,027 Net assets 86,178 23,744 109,922 Asset information by reportable segment as of December 31, 2017 is as follows (in thousands): Core Companion Animal Health Other Vaccines, Pharmaceuticals and Products Total Total assets $ 111,968 $ 23,819 $ 135,787 Net assets 75,984 24,456 100,440 |
OPERATIONS AND SUMMARY OF SIG23
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Consolidation | In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the financial position of the Company as of June 30, 2018 and December 31, 2017 , the results of our operations for the three and six months ended June 30, 2018 and 2017 , and cash flows for the six months ended June 30, 2018 and 2017 . The unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. Our unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our wholly-owned subsidiaries since their respective dates of acquisitions. All intercompany accounts and transactions have been eliminated in consolidation. Where our ownership of a subsidiary was less than 100%, the non-controlling interest is reported on our Condensed Consolidated Balance Sheets. The non-controlling interest in our consolidated net income is reported as "Net loss attributable to non-controlling interest" on our Condensed Consolidated Statements of Income. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017 and other financial information filed with the SEC. |
Use of Estimates | The preparation of financial statements in conformity with U.S. GAAP 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are required when establishing the allowance for doubtful accounts and the provision for excess or obsolete inventory; determining future costs associated with warranties provided; determining the period over which our obligations are fulfilled under agreements to license product rights and/or technology rights; evaluating long-lived and intangible assets for impairment; estimating the useful lives of instruments under leasing arrangements; determining the allocation of purchase price under purchase accounting; estimating the expense associated with the granting of stock options; and determining the need for, and the amount of a valuation allowance on deferred tax assets. |
Recent Accounting Pronouncements | Adoption of New Accounting Pronouncements In August 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which became effective for us beginning January 1, 2018. The new standard made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. Adoption of this standard did not have a material impact on our financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers and has subsequently issued several supplemental and/or clarifying Accounting Standards Updates or ASUs (collectively “ASC 606”). ASC 606 prescribes a single common revenue standard that replaces most existing U.S. GAAP revenue recognition guidance. ASC 606 outlines a five-step model, under which Heska will recognize revenue as performance obligations within customer contracts are satisfied. ASC 606 is intended to provide more consistent interpretation and application of the principles outlined in the standard across filers in multiple industries and within the same industries compared to current practices, which should improve comparability. Along with the issuance of ASC 606, additional cost guidance was issued and codified under ASC 340-40 that outlines the requirement for capitalizing incremental costs of obtaining a contract and costs to fulfill a contract that meet certain capitalization criteria. On January 1, 2018, we adopted ASC 606 using the modified retrospective method for all customer contracts not yet completed as of the adoption date. Results for reporting periods beginning January 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605, Revenue Recognition . We recorded an increase to beginning retained earnings of $2.6 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606. The impact to beginning retained earnings was primarily driven by the capitalization of certain costs to obtain our customer contracts, which were primarily sales-related commissions. The adoption of ASC 606 did not have a significant impact on our Condensed Consolidated Financial Statements as of and for the three and six month periods ended June 30, 2018. As a result, comparisons of revenues and operating profit performance between periods are not affected by the adoption of this ASU. Refer to Note 2 for additional disclosures required by ASC 606. We generate our Core Companion Animal (“CCA”) segment revenue through the sale of products, either by outright purchase by our customers or through a subscription agreement whereby our customers receive instruments and pay us a monthly fee for the usage of the instrument as well as the consumables needed to conduct testing. Outright sales to customers is the majority of both Point of Care imaging diagnostic transactions and the sale of pharmaceuticals and vaccines, while subscription placement is the majority of Point of Care diagnostic laboratory transactions. For outright sales of products, revenue is recognized when control of the promised products or services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606. For instruments, consumables, and most software licenses sold by the Company, control transfers to the customer at a point in time. To indicate the transfer of control, the Company must have a present right to payment, legal title must have passed to the customer, the customer must have the significant risks and rewards of ownership, and where acceptance is not a formality, the customer must have accepted the product or service. Heska’s principal terms of sale are FOB Shipping Point, or equivalent, and, as such, we primarily transfer control and record revenue for product sales upon shipment. If a performance obligation to the customer with respect to a sales transaction remains unfulfilled following shipment (typically owed installation or acceptance by the customer), revenue recognition for that performance obligation is deferred until such commitments have been fulfilled. We do not generally allow return of products or instruments. For extended warranty plans, control transfers to the customer over the term of the arrangement. Revenue for extended warranties is recognized based upon the period of time elapsed under the arrangement. Our revenue under subscription agreements relate to operating-type lease (“OTL”) arrangements or sales-type lease (“STL”) arrangements. A STL would result in earlier recognition of instrument revenue as compared to an OTL, which is generally upon installation of the instruments. The cost of the customer-leased instruments is removed from inventory and recognized in the Condensed Consolidated Statements of Income. Determination of an OTL or STL is primarily determined as a result of the length of the contract as compared to the estimated useful life of the instrument, among other factors. Leases are outside of the scope of ASC 606 and are therefore accounted for in accordance with ASC 840 , Leases . Instrument lease revenue for OTL agreements is recognized on a straight-line basis over the life of the lease, and the costs of customer-leased instruments are recorded within property and equipment in the accompanying Condensed Consolidated Balance Sheets and depreciated over the instrument’s estimated useful life. The depreciation expense is reflected in cost of revenue in the accompanying Condensed Consolidated Statements of Income. The OTLs and STLs are not cancellable until after an initial term. Under either type of lease, we often charge a subscription fee and provide a minimum supply credit. OTLs may include a minimum utilization rather than a minimum supply credit. For contracts with multiple performance obligations, the Company allocates the contracts' transaction price for each performance obligation on a relative standalone selling price basis using our best estimate of the standalone selling price of each distinct product or service in the contract. The primary method used to estimate the standalone selling price is the price observed in standalone sales to customers. However, when prices in standalone sales are not available, we may use a cost-plus margin approach. Allocation of the transaction price is determined at the contracts' inception. The Company does not adjust the transaction price for the effects of a significant financing component when the period between the transfer of the promised good or service to the customer and payment for that good or service by the customer is expected to be one year or less. This allocation approach also applies to contracts for which a portion of the contract relates to a lease component. We generate revenue within our Other Vaccines, Pharmaceuticals, and Products (“OVP”) segment through contract manufacturing contracts with customers. The timing of revenue recognition of our customer contracts are generally recognized upon shipment or acceptance by our customer, under the same guidelines noted above for other outright product sales. Heska assessed the over-time criteria within ASC 606 and concluded that because products within this segment have no alternative use to Heska, as Heska is contractually prohibited to redirect the product to other customers, Heska does not have right to payment for performance to date. Therefore, point in time revenue recognition has been determined to be appropriate. Revenue generated from licensing arrangements is recognized based on the underlying term of the contract. Accounting Pronouncements Not Yet Adopted In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718) , Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. ASU 2018-07 is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted but no earlier than an entity’s adoption date of Topic 606. We will adopt the provisions of this ASU in the first quarter of 2019. Adoption of the new standard is not expected to have a material impact on our Consolidated Financial Statements. In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . The ASU permits companies to elect a reclassification of the disproportionate tax effects in accumulated other comprehensive income ("AOCI") caused by the Tax Cuts and Jobs Act of 2017 to retained earnings. The ASU also requires additional disclosures. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted. We will adopt the provisions of this ASU in the first quarter of 2019. We are currently evaluating the effect of this ASU on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , which require that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The amendments in this update are effective for fiscal years beginning after December 15, 2019 and interim periods within those annual periods. Early adoption for fiscal year beginning after December 15, 2018 is permitted. We will adopt the provisions of this ASU in the first quarter of 2019. We are currently evaluating the effect of this update on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which supersedes ASC 840, Leases . This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. The accounting for lessors does not fundamentally change except for changes to conform and align guidance to the lessee guidance as well as to the new revenue recognition guidance in ASU 2014-09. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the effect of this update on our consolidated financial statements. |
REVENUE (Tables)
REVENUE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Timing of Revenue Expected to be Recognized | As of June 30, 2018 , the Company expects to recognize revenue as follows (in thousands): Year Ending December 31, Revenue 2018 (remaining) $ 11,535 2019 19,807 2020 16,206 2021 12,510 2022 9,373 Thereafter 8,344 $ 77,775 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of components of income tax expense | Our total income tax expense (benefit) and the effective tax rate for our income before income taxes were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Income before income taxes $ 2,112 $ 4,678 $ 3,987 $ 7,528 Total income tax expense (benefit) 215 1,539 (65 ) 86 Effective tax rate 10.2 % 32.9 % (1.6 )% 1.1 % |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Reconciliation of basic and diluted earnings per share | The following is a reconciliation of the weighted-average shares outstanding used in the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2018 and 2017 (in thousands, except per share data): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Net income attributable to Heska $ 1,897 $ 3,333 $ 4,052 $ 7,940 Basic weighted-average common shares outstanding 7,226 7,069 7,146 6,967 Assumed exercise of dilutive stock options and restricted shares 624 563 635 603 Diluted weighted-average common shares outstanding 7,850 7,632 7,781 7,570 Basic earnings per share attributable to Heska $ 0.26 $ 0.47 $ 0.57 $ 1.14 Diluted earnings per share attributable to Heska $ 0.24 $ 0.44 $ 0.52 $ 1.05 |
Schedule of antidilutive securities excluded from computation of earnings per share | The following stock options and restricted shares were excluded from the computation of diluted earnings per share because they would have been anti-dilutive (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Stock options 169 25 238 132 |
GOODWILL AND OTHER INTANGIBLES
GOODWILL AND OTHER INTANGIBLES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of changes in goodwill | The following summarizes the change in goodwill during the six months ended June 30, 2018 (in thousands): Carrying amount, December 31, 2017 $ 26,687 Foreign currency adjustments (14 ) Carrying amount, June 30, 2018 $ 26,673 |
Schedule of other intangible assets | Other intangibles consisted of the following (in thousands): June 30, December 31, 2018 2017 Gross carrying amount $ 3,309 $ 3,309 Accumulated amortization (1,545 ) (1,351 ) Net carrying amount $ 1,764 $ 1,958 |
Schedule of amortization expense on intangible assets | Amortization expense relating to other intangibles was as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Amortization expense $ 97 $ 97 $ 194 $ 194 |
Schedule of estimated future amortization expense | Estimated amortization expense related to intangibles for each of the five years from 2018 (remaining) through 2022 and thereafter is as follows (in thousands): Year Ending December 31, 2018 (remaining) $ 194 2019 388 2020 388 2021 384 2022 378 Thereafter 32 $ 1,764 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment, net, consisted of the following (in thousands): June 30, December 31, 2018 2017 Land $ 377 $ 377 Building 2,978 2,868 Machinery and equipment 39,131 38,432 Leasehold and building improvements 9,866 8,156 Construction in progress 1,201 3,531 53,553 53,364 Less accumulated depreciation (36,966 ) (36,033 ) Total property and equipment, net $ 16,587 $ 17,331 |
INVENTORIES, NET (Tables)
INVENTORIES, NET (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | Inventories, net, consisted of the following (in thousands): June 30, December 31, 2018 2017 Raw materials $ 17,037 $ 18,465 Work in process 4,186 4,296 Finished goods 9,225 11,465 Allowance for excess or obsolete inventory (1,575 ) (1,630 ) Total inventory, net $ 28,873 $ 32,596 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities | Accrued liabilities consisted of the following (in thousands): June 30, December 31, Accrued payroll and employee benefits $ 891 $ 1,209 Accrued purchases 371 695 Accrued property taxes 394 661 Other 1,487 1,852 Total accrued liabilities $ 3,143 $ 4,417 |
CAPITAL STOCK (Tables)
CAPITAL STOCK (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of weighted average valuation assumptions | 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 and six months ended June 30, 2018 and 2017 . Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Risk-free interest rate 2.76% 1.75% 2.64% 1.75% Expected lives 4.9 years 4.9 years 4.9 years 4.9 years Expected volatility 40% 41% 40% 41% Expected dividend yield 0% 0% 0% 0% |
Schedule of stock options plans | A summary of our stock option plans is as follows: Six Months Ended June 30, Year Ended December 31, 2018 2017 Weighted Average Exercise Price Weighted Average Exercise Price Outstanding at beginning of period 630,847 $ 29.312 829,617 $ 23.203 Granted at market 131,000 $ 69.887 27,050 $ 99.087 Canceled (19,374 ) $ 52.158 (18,331 ) $ 57.197 Exercised (45,657 ) $ 27.533 (207,489 ) $ 11.520 Outstanding at end of period 696,816 $ 36.421 630,847 $ 29.312 Exercisable at end of period 449,097 $ 19.854 456,802 $ 18.316 |
Schedule of shares authorized under stock options plans by exercise price | The following table summarizes information about stock options outstanding and exercisable at June 30, 2018 : Options Outstanding Options Exercisable Exercise Prices Number of Weighted Average Remaining Contractual Life in Years Weighted Average Exercise Price Number of Weighted Average Exercise Price $ 4.40 - $ 6.90 92,535 2.14 $ 5.378 92,535 $ 5.378 $ 6.91 - $ 8.55 158,623 5.08 $ 7.771 158,623 $ 7.771 $ 8.56 - $ 39.56 130,030 6.57 $ 22.467 117,582 $ 22.650 $ 39.57 - $ 69.77 207,950 8.86 $ 58.575 45,578 $ 39.858 $ 69.78 - $ 108.25 107,678 8.62 $ 79.372 34,779 $ 77.817 $ 4.40 - $ 108.25 696,816 6.64 $ 36.421 449,097 $ 19.854 |
Schedule of pricing models | The weighted average assumptions used for the periods presented were as follows: Three Months Ended Six Months Ended June 30, 2018 2017 2018 2017 Risk-free interest rate 1.09% 0.70% 1.06% 0.67% Expected lives 1.2 years 1.2 years 1.2 years 1.2 years Expected volatility 44% 45% 44% 45% Expected dividend yield 0% 0% 0% 0% |
ACCUMULATED OTHER COMPREHENSI32
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Schedule of accumulated other comprehensive income (loss) | Accumulated other comprehensive income consisted of the following (in thousands): Minimum Pension Liability Foreign Currency Translation Total Accumulated Other Comprehensive Income Balances at December 31, 2017 $ (489 ) $ 721 $ 232 Current period other comprehensive loss — (31 ) (31 ) Balances at June 30, 2018 $ (489 ) $ 690 $ 201 |
INTEREST AND OTHER EXPENSE (I33
INTEREST AND OTHER EXPENSE (INCOME), NET (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Schedule of interest expense (income) and other income, net | Interest and other expense (income), net, consisted of the following (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Interest income $ (63 ) $ (43 ) $ (119 ) $ (81 ) Interest expense 77 51 142 75 Other expense (income), net 78 (126 ) 65 (174 ) Total interest and other expense (income), net $ 92 $ (118 ) $ 88 $ (180 ) |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Reconciliation of other significant reconciling items from segments to consolidated | Summarized financial information concerning the Company's reportable segments is shown in the following tables (in thousands): Three Months Ended June 30, 2018 Core Other Vaccines, Pharmaceuticals and Products Total revenue $ 26,644 $ 3,018 $ 29,662 Operating income (loss) 2,864 (660 ) 2,204 Income (loss) before income taxes 2,772 (660 ) 2,112 Capital purchases 39 397 436 Depreciation and amortization 838 300 1,138 Three Months Ended June 30, 2017 Core Other Vaccines, Pharmaceuticals and Products Total revenue $ 26,090 $ 7,315 $ 33,405 Operating income 2,549 2,011 4,560 Income before income taxes 2,683 1,995 4,678 Capital purchases 36 779 815 Depreciation and amortization 857 243 1,100 Six Months Ended June 30, 2018 Core Other Vaccines, Pharmaceuticals and Products Total revenue $ 53,463 $ 8,964 $ 62,427 Operating Income (loss) 4,787 (712 ) 4,075 Income (loss) before income taxes 4,699 (712 ) 3,987 Capital expenditures 96 715 811 Depreciation and amortization 1,746 587 2,333 Six Months Ended June 30, 2017 Core Other Vaccines, Pharmaceuticals and Products Total revenue $ 49,875 $ 13,089 $ 62,964 Operating income 3,695 3,653 7,348 Income before income taxes 3,897 3,631 7,528 Capital purchases 85 1,210 1,295 Depreciation and amortization 1,702 490 2,192 |
Schedule of revenue from external customers and long-lived assets, by geographical areas | Asset information by reportable segment as of June 30, 2018 is as follows (in thousands): Core Companion Animal Health Other Vaccines, Pharmaceuticals and Products Total Total assets $ 118,074 $ 19,953 $ 138,027 Net assets 86,178 23,744 109,922 Asset information by reportable segment as of December 31, 2017 is as follows (in thousands): Core Companion Animal Health Other Vaccines, Pharmaceuticals and Products Total Total assets $ 111,968 $ 23,819 $ 135,787 Net assets 75,984 24,456 100,440 |
OPERATIONS AND SUMMARY OF SIG35
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands | Dec. 31, 2017USD ($) |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |
Adoption of accounting standards | $ 2,635 |
Accumulated Deficit | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |
Adoption of accounting standards | $ 2,635 |
REVENUE (Details)
REVENUE (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | $ 29,662 | $ 33,405 | $ 62,427 | $ 62,964 | |
Remaining performance obligation | 77,775 | 77,775 | |||
Contract liabilities, current | 10,300 | 10,300 | $ 12,300 | ||
Deferred revenue, net of current portion, and other | 8,530 | 8,530 | 9,621 | ||
Contract liabilities, revenue recognized | 2,600 | ||||
Contract liabilities, increase due to additional deferred sales | 600 | ||||
Capitalized contract costs | 2,500 | 2,500 | $ 2,400 | ||
Capitalized contract costs, amortization | 500 | ||||
Operating Type Lease and Sales Type Lease | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 1,800 | 3,300 | |||
Laboratory Instruments | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 1,300 | 2,100 | |||
Laboratory Supplies | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 11,500 | 22,300 | |||
Other Services | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 400 | 900 | |||
Point of Care Imaging Products for Instruments and Software | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 3,600 | 8,700 | |||
Rental Agreements | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 400 | 600 | |||
Service Revenue | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 500 | 1,100 | |||
Single-Use Diagnostic and Other Tests, Pharmaceuticals and Biologicals, Research and Development and Loyalty and Royalty Income | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 7,100 | 14,300 | |||
License and Royalty Income | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 100 | 200 | |||
Contract Manufacturing Contracts | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 2,900 | 100 | |||
Other License and Research and Development | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | $ 8,700 | $ 300 |
REVENUE - Performance Obligatio
REVENUE - Performance Obligations (Details) $ in Thousands | Jun. 30, 2018USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 77,775 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 11,535 |
Expected timing of satisfaction | 6 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 19,807 |
Expected timing of satisfaction | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 16,206 |
Expected timing of satisfaction | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 12,510 |
Expected timing of satisfaction | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 9,373 |
Expected timing of satisfaction | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 8,344 |
Expected timing of satisfaction |
ACQUISITION AND RELATED PARTY38
ACQUISITION AND RELATED PARTY ITEMS (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Feb. 24, 2013 | |
Business Acquisition [Line Items] | ||||
Distributions to non-controlling interest members | $ 1,000 | $ 100 | ||
Heska Imaging | Affiliated Entity | ||||
Business Acquisition [Line Items] | ||||
Related party - amount of transaction | $ 2,900 | |||
Cuattro Veterinary USA, LLC | ||||
Business Acquisition [Line Items] | ||||
Percentage of voting interest acquired | 54.60% | |||
Minority interest subject to purchase (as a percent) | 45.40% | |||
Heska Imaging | ||||
Business Acquisition [Line Items] | ||||
Put option, maximum valuation | 13,800 | |||
Cuattro, LLC | Affiliated Entity | ||||
Business Acquisition [Line Items] | ||||
Related party - amount of transaction | $ 0 | 67 | ||
Cuattro, LLC | Global Imaging | Affiliated Entity | ||||
Business Acquisition [Line Items] | ||||
Related party - amount of transaction | $ 8,600 | |||
Cuattro, LLC | Kevin S. Willson, Shawna M. Wilson and Trusts for their Children and Family | Chief Executive Officer | ||||
Business Acquisition [Line Items] | ||||
General Partner Interest (as a percent) | 100.00% | |||
Cuattro Software, LLC | Kevin S. Willson, Shawna M. Wilson and Trusts for their Children and Family | Chief Executive Officer | ||||
Business Acquisition [Line Items] | ||||
General Partner Interest (as a percent) | 100.00% | |||
Heska Imaging | ||||
Business Acquisition [Line Items] | ||||
Distributions to non-controlling interest members | $ 2,100 | 300 | ||
Heska Imaging | Affiliated Entity | ||||
Business Acquisition [Line Items] | ||||
Due to related parties | $ 400 | 1,700 | ||
Heska Imaging | Cuattro, LLC | Affiliated Entity | ||||
Business Acquisition [Line Items] | ||||
Ownership percentage | 0.05% | |||
Related party - amount of transaction | $ 2,300 | |||
Heska Imaging | Shawna M. Wilson | Immediate Family Member of Management or Principal Owner | ||||
Business Acquisition [Line Items] | ||||
Ownership percentage | 29.75% | |||
Heska Imaging | Clint Roth | ||||
Business Acquisition [Line Items] | ||||
Ownership percentage | 8.39% | |||
Heska Imaging | Steven M. Asakowicz | Executive Officer | ||||
Business Acquisition [Line Items] | ||||
Ownership percentage | 4.09% | |||
Heska Imaging | Rodney A. Lippincott | Executive Officer | ||||
Business Acquisition [Line Items] | ||||
Ownership percentage | 3.07% | |||
Heska Imaging | Kevin S. Wilson | Chief Executive Officer | ||||
Business Acquisition [Line Items] | ||||
Ownership percentage | 0.05% | |||
Heska Corporation | Cuattro, LLC | ||||
Business Acquisition [Line Items] | ||||
Accounts payable, related parties | $ 0 | $ 1 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||||
Income before income taxes | $ 2,112 | $ 4,678 | $ 3,987 | $ 7,528 |
Total income tax expense (benefit) | $ 215 | $ 1,539 | $ (65) | $ 86 |
Effective tax rate | 10.20% | 32.90% | (1.60%) | 1.10% |
Cash paid for income taxes | $ 12 | $ 144 | $ 30 | $ 206 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2010 | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017USD ($)$ / sharesshares | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017USD ($)$ / sharesshares | |
Earnings Per Share [Abstract] | |||||
Reverse stock split conversion ratio | 0.10 | ||||
Net income attributable to Heska | $ | $ 1,897 | $ 3,333 | $ 4,052 | $ 7,940 | |
Basic weighted-average common shares outstanding (in shares) | 7,226 | 7,069 | 7,146 | 6,967 | |
Assumed exercise of dilutive stock options and restricted shares | 624 | 563 | 635 | 603 | |
Diluted weighted-average common shares outstanding | 7,850 | 7,632 | 7,781 | 7,570 | |
Basic earnings per share attributable to Heska (in dollars per share) | $ / shares | $ 0.26 | $ 0.47 | $ 0.57 | $ 1.14 | |
Diluted earnings per share attributable to Heska (in dollars per share) | $ / shares | $ 0.24 | $ 0.44 | $ 0.52 | $ 1.05 | |
Stock Options And Restricted Units | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Stock options and restricted units excluded from computation of earnings per share | 169 | 25 | 238 | 132 |
GOODWILL AND OTHER INTANGIBLE41
GOODWILL AND OTHER INTANGIBLES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Goodwill [Roll Forward] | |||||
Carrying amount, December 31, 2017 | $ 26,687 | ||||
Foreign currency adjustments | (14) | ||||
Carrying amount, June 30, 2018 | $ 26,673 | 26,673 | |||
Finite-Lived Intangible Assets, Net [Abstract] | |||||
Gross carrying amount | 3,309 | 3,309 | $ 3,309 | ||
Accumulated amortization | (1,545) | (1,545) | (1,351) | ||
Net carrying amount | 1,764 | 1,764 | 1,958 | ||
Amortization expense | 97 | $ 97 | 194 | $ 194 | |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |||||
2018 (remaining) | 194 | 194 | |||
2,019 | 388 | 388 | |||
2,020 | 388 | 388 | |||
2,021 | 384 | 384 | |||
2,022 | 378 | 378 | |||
Thereafter | 32 | 32 | |||
Net carrying amount | $ 1,764 | $ 1,764 | $ 1,958 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 53,553 | $ 53,553 | $ 53,364 | ||
Less accumulated depreciation | (36,966) | (36,966) | (36,033) | ||
Total property and equipment, net | 16,587 | 16,587 | 17,331 | ||
Depreciation and amortization | 1,000 | $ 1,000 | 2,100 | $ 2,000 | |
Operating leases, gross | 10,500 | 10,500 | 10,800 | ||
Operating leases, accumulated depreciation | 5,600 | 5,600 | 5,000 | ||
Operating leases, net | 4,900 | 4,900 | 5,800 | ||
Land | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 377 | 377 | 377 | ||
Building | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 2,978 | 2,978 | 2,868 | ||
Machinery and equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 39,131 | 39,131 | 38,432 | ||
Leasehold and building improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 9,866 | 9,866 | 8,156 | ||
Construction in progress | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 1,201 | $ 1,201 | $ 3,531 | ||
Machinery and equipment | Minimum | |||||
Property, Plant and Equipment [Line Items] | |||||
Property plant and equipment, useful life | 5 years | ||||
Machinery and equipment | Maximum | |||||
Property, Plant and Equipment [Line Items] | |||||
Property plant and equipment, useful life | 7 years |
INVENTORIES, NET (Details)
INVENTORIES, NET (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 17,037 | $ 18,465 |
Work in process | 4,186 | 4,296 |
Finished goods | 9,225 | 11,465 |
Allowance for excess or obsolete inventory | (1,575) | (1,630) |
Total inventory, net | $ 28,873 | $ 32,596 |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Accrued payroll and employee benefits | $ 891 | $ 1,209 |
Accrued purchases | 371 | 695 |
Accrued property taxes | 394 | 661 |
Other | 1,487 | 1,852 |
Total accrued liabilities | $ 3,143 | $ 4,417 |
CAPITAL STOCK - OPTION ACTIVITY
CAPITAL STOCK - OPTION ACTIVITY (Details) - $ / shares | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | |
Employee Stock Option | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Risk-free interest rate (as a percent) | 2.76% | 1.75% | 2.64% | 1.75% | ||
Expected lives (in years) | 4 years 10 months 18 days | 4 years 10 months 24 days | 4 years 10 months 18 days | 4 years 10 months 24 days | ||
Expected volatility (as a percent) | 40.00% | 41.00% | 40.00% | 41.00% | ||
Expected dividend rate (as a percent) | 0.00% | 0.00% | 0.00% | 0.00% | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||||
Outstanding at beginning of period | 630,847 | 829,617 | ||||
Granted at market | 131,000 | 27,050 | ||||
Canceled | (19,374) | (18,331) | ||||
Exercised | (45,657) | (207,489) | ||||
Outstanding at end of period | 696,816 | 696,816 | 829,617 | |||
Exercisable at end of period | 449,097 | 449,097 | 456,802 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||||||
Outstanding at beginning of period (in dollars per share) | $ 29.312 | $ 23.203 | ||||
Granted at Market (in dollars per share) | 69.887 | $ 99.087 | ||||
Cancelled (in dollars per share) | 52.158 | 57.197 | ||||
Exercised (in dollars per share) | 27.533 | 11.520 | ||||
Outstanding at ending of period (in dollars per share) | $ 36.421 | 36.421 | $ 23.203 | |||
Exercisable at end of period (in dollars per share) | $ 19.854 | $ 19.854 | $ 18.316 | |||
Employee Stock | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Risk-free interest rate (as a percent) | 1.09% | 0.70% | 1.06% | 0.67% | ||
Expected lives (in years) | 1 year 2 months 18 days | 1 year 2 months 18 days | 1 year 2 months 18 days | 1 year 2 months 18 days | ||
Expected volatility (as a percent) | 44.00% | 45.00% | 44.00% | 45.00% | ||
Expected dividend rate (as a percent) | 0.00% | 0.00% | 0.00% | 0.00% |
CAPITAL STOCK - NARRATIVE (Deta
CAPITAL STOCK - NARRATIVE (Details) $ / shares in Units, $ in Millions | May 03, 2018shares | Mar. 17, 2018shares | Mar. 07, 2018trancheshares | Jun. 15, 2017shares | May 31, 2017shares | May 01, 2017shares | Mar. 26, 2017trancheshares | Mar. 02, 2016shares | Mar. 17, 2015shares | Mar. 26, 2014trancheshares | Dec. 31, 2010 | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017$ / sharesshares | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017USD ($)$ / sharesshares | May 07, 2018shares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Reverse stock split conversion ratio | 0.10 | |||||||||||||||
Fair value of stock options granted during period | $ | $ 3.5 | $ 0.9 | ||||||||||||||
Weighted average grant date fair value | $ / shares | $ 26.74 | $ 37.37 | ||||||||||||||
Intrinsic value of options exercised | $ | $ 3.1 | $ 12.4 | ||||||||||||||
Proceeds from stock options exercised | $ | $ 1.3 | $ 1.3 | ||||||||||||||
Weighted average purchase price of shares purchased | $ / shares | $ 17.98 | $ 18.67 | $ 15.86 | $ 15.63 | ||||||||||||
Stockholder ownership percentage, threshold for restrictions | 5.00% | |||||||||||||||
Non-employee director | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period | 4,230 | |||||||||||||||
Award vesting period | 1 year | |||||||||||||||
Share Purchase Plan 1997 | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period under options | 130,000 | |||||||||||||||
Share Purchase Plan 1997 | Non-employee director | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period under options | 120,000 | |||||||||||||||
Employee Stock Option | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Intrinsic value of options exercised | $ | $ 37.7 | |||||||||||||||
Total unrecognized compensation expense related to outstanding stock options | $ | $ 5.7 | $ 5.7 | ||||||||||||||
Period for recognition of unrecognized compensation expense | 1 year 11 months 23 days | |||||||||||||||
Intrinsic value of options outstanding | $ | $ 46.9 | $ 46.9 | ||||||||||||||
Employee Stock | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period | 2,327 | 2,339 | 5,454 | 5,543 | ||||||||||||
Restricted Stock | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Total unrecognized compensation expense related to outstanding stock options | $ | $ 3.5 | $ 3.5 | ||||||||||||||
Period for recognition of unrecognized compensation expense | 2 years 1 month 18 days | |||||||||||||||
Number of tranches in share-based payment award | tranche | 3 | |||||||||||||||
Equity instruments other than options, shares tied to S&P 500 Index | 27,539 | |||||||||||||||
Restricted Stock | Minimum | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Equity instruments other than options, performance period | 2 years | |||||||||||||||
Restricted Stock | Maximum | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Equity instruments other than options, performance period | 4 years | |||||||||||||||
Restricted Stock | Non-employee director | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period | 2,720,000 | |||||||||||||||
Restricted Stock | Kevin S. Wilson | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period | 27,500 | 110,000 | ||||||||||||||
Number of tranches in share-based payment award | tranche | 4 | 4 | ||||||||||||||
Performance Shares | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period | 23,700,000 | 52,956 | ||||||||||||||
Performance Shares | Management Incentive Plan Grants 2015 | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares vested during period | 52,956 | |||||||||||||||
Performance shares canceled | 0 | |||||||||||||||
Shares withheld for income tax expense | 14,334 | |||||||||||||||
Performance Shares | Management Incentive Plan (MIP) Grants 2016 | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period | 15,000 | |||||||||||||||
Shares vested during period | 14,629 | |||||||||||||||
Performance shares canceled | 371 | |||||||||||||||
Shares withheld for income tax expense | 4,133 | |||||||||||||||
Performance Shares | Management Incentive Plan (MIP) Grants 2017 | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period | 6,594,000 | |||||||||||||||
Performance Shares | Kevin S. Wilson | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period | 33,000 | |||||||||||||||
Performance Restricted Common Stock and Stock Options | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period under options | 128,500 | |||||||||||||||
Performance Restricted Common Stock and Stock Options | Share Purchase Plan 1997 | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||
Shares issued during period under options | 118,500 |
CAPITAL STOCK - EXERCISE PRICE
CAPITAL STOCK - EXERCISE PRICE (Details) | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
$ 4.40 - $ 6.90 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Number of Options Outstanding at June 30, 2018 | shares | 92,535 |
Weighted Average Remaining Contractual Life in Years | 2 years 1 month 20 days |
Weighted Average Exercise Price | $ 5.378 |
Number of Options Exercisable at June 30, 2018 | shares | 92,535 |
Weighted Average Exercise Price | $ 5.378 |
Exercise price range, lower (in dollars per share) | 4.40 |
Exercise price range, upper (in dollars per share) | $ 6.90 |
$ 6.91 - $ 8.55 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Number of Options Outstanding at June 30, 2018 | shares | 158,623 |
Weighted Average Remaining Contractual Life in Years | 5 years 29 days |
Weighted Average Exercise Price | $ 7.771 |
Number of Options Exercisable at June 30, 2018 | shares | 158,623 |
Weighted Average Exercise Price | $ 7.771 |
Exercise price range, lower (in dollars per share) | 6.91 |
Exercise price range, upper (in dollars per share) | $ 8.55 |
$ 8.56 - $ 39.56 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Number of Options Outstanding at June 30, 2018 | shares | 130,030 |
Weighted Average Remaining Contractual Life in Years | 6 years 6 months 26 days |
Weighted Average Exercise Price | $ 22.467 |
Number of Options Exercisable at June 30, 2018 | shares | 117,582 |
Weighted Average Exercise Price | $ 22.650 |
Exercise price range, lower (in dollars per share) | 8.56 |
Exercise price range, upper (in dollars per share) | $ 39.56 |
$ 39.57 - $ 69.77 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Number of Options Outstanding at June 30, 2018 | shares | 207,950 |
Weighted Average Remaining Contractual Life in Years | 8 years 10 months 11 days |
Weighted Average Exercise Price | $ 58.575 |
Number of Options Exercisable at June 30, 2018 | shares | 45,578 |
Weighted Average Exercise Price | $ 39.858 |
Exercise price range, lower (in dollars per share) | 39.57 |
Exercise price range, upper (in dollars per share) | $ 69.77 |
$ 69.78 - $ 108.25 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Number of Options Outstanding at June 30, 2018 | shares | 107,678 |
Weighted Average Remaining Contractual Life in Years | 8 years 7 months 15 days |
Weighted Average Exercise Price | $ 79.372 |
Number of Options Exercisable at June 30, 2018 | shares | 34,779 |
Weighted Average Exercise Price | $ 77.817 |
Exercise price range, lower (in dollars per share) | 69.78 |
Exercise price range, upper (in dollars per share) | $ 108.25 |
$ 4.40 - $ 108.25 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Number of Options Outstanding at June 30, 2018 | shares | 696,816 |
Weighted Average Remaining Contractual Life in Years | 6 years 7 months 22 days |
Weighted Average Exercise Price | $ 36.421 |
Number of Options Exercisable at June 30, 2018 | shares | 449,097 |
Weighted Average Exercise Price | $ 19.854 |
Exercise price range, lower (in dollars per share) | 4.40 |
Exercise price range, upper (in dollars per share) | $ 108.25 |
ACCUMULATED OTHER COMPREHENSI48
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | |
Beginning balance | $ 103,075 |
Ending balance | 109,922 |
Total Accumulated Other Comprehensive Income | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | |
Beginning balance | 232 |
Current period other comprehensive loss | (31) |
Ending balance | 201 |
Minimum Pension Liability | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | |
Beginning balance | (489) |
Current period other comprehensive loss | 0 |
Ending balance | (489) |
Foreign Currency Translation | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | |
Beginning balance | 721 |
Current period other comprehensive loss | (31) |
Ending balance | $ 690 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |||||
Increase in royalties payable | $ 0.1 | $ 0.1 | $ 0.2 | $ 0.2 | |
Warranty reserve | 0.2 | 0.2 | $ 0.2 | ||
Unconditional purchase obligations | 29.8 | ||||
Operating lease payments under noncancelable operating leases | $ 10.6 | $ 10.6 |
INTEREST AND OTHER EXPENSE (I50
INTEREST AND OTHER EXPENSE (INCOME), NET (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Other Income and Expenses [Abstract] | ||||
Interest income | $ (63) | $ (43) | $ (119) | $ (81) |
Interest expense | 77 | 51 | 142 | 75 |
Other, net | 78 | (126) | 65 | (174) |
Total interest and other expense (income), net | 92 | (118) | 88 | (180) |
Cash paid for interest | $ 58 | $ 32 | $ 85 | $ 58 |
CREDIT FACILITY (Details)
CREDIT FACILITY (Details) - Line of Credit - Revolving Credit Facility - USD ($) | Jul. 27, 2017 | Jun. 30, 2018 |
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 30,000,000 | |
Additional maximum borrowing capacity increase | 20,000,000 | |
Contingent maximum borrowing capacity | $ 50,000,000 | |
Basis spread on variable rate | 1.10% | |
Minimum annual interest charge | $ 60,000 | |
Long-term line of credit | $ 6,000,000 | |
London Interbank Offered Rate (LIBOR) | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 1.65% |
SEGMENT REPORTING - NARRATIVE (
SEGMENT REPORTING - NARRATIVE (Details) | 6 Months Ended |
Jun. 30, 2018segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Segment Reporting, Other Significant Reconciling Item [Line Items] | |||||
Total revenue | $ 29,662 | $ 33,405 | $ 62,427 | $ 62,964 | |
Operating income | 2,204 | 4,560 | 4,075 | 7,348 | |
Income before income taxes | 2,112 | 4,678 | 3,987 | 7,528 | |
Capital expenditures | 436 | 815 | 811 | 1,295 | |
Depreciation and amortization | 1,138 | 1,100 | 2,333 | 2,192 | |
Assets | 138,027 | 138,027 | $ 135,787 | ||
Net Assets | 109,922 | 109,922 | 100,440 | ||
Operating Segments | Core Companion Animal Health | |||||
Segment Reporting, Other Significant Reconciling Item [Line Items] | |||||
Total revenue | 26,644 | 26,090 | 53,463 | 49,875 | |
Operating income | 2,864 | 2,549 | 4,787 | 3,695 | |
Income before income taxes | 2,772 | 2,683 | 4,699 | 3,897 | |
Capital expenditures | 39 | 36 | 96 | 85 | |
Depreciation and amortization | 838 | 857 | 1,746 | 1,702 | |
Assets | 118,074 | 118,074 | 111,968 | ||
Net Assets | 86,178 | 86,178 | 75,984 | ||
Operating Segments | Other Vaccines, Pharmaceuticals and Products | |||||
Segment Reporting, Other Significant Reconciling Item [Line Items] | |||||
Total revenue | 3,018 | 7,315 | 8,964 | 13,089 | |
Operating income | (660) | 2,011 | (712) | 3,653 | |
Income before income taxes | (660) | 1,995 | (712) | 3,631 | |
Capital expenditures | 397 | 779 | 715 | 1,210 | |
Depreciation and amortization | 300 | $ 243 | 587 | $ 490 | |
Assets | 19,953 | 19,953 | 23,819 | ||
Net Assets | $ 23,744 | $ 23,744 | $ 24,456 |