Heska Corporation Signs Letter of Intent to Sell U.K. Diagnostic Laboratory

Fort Collins, Colo. (ots-PRNewswire) - Heska Corporation (Nasdaq:
HSKA), a leader in the companion animal health market, today announced that it has signed a letter of intent to sell its United Kingdom subsidiary, Heska UK Limited, formerly Bloxham Laboratories. Heska UK is a veterinary diagnostic laboratory that also provides veterinary allergy products and services to veterinarians and sells Heska's diagnostic and monitoring instruments in the U.K.

Robert Grieve, Chief Executive Officer of Heska, said, "After a thorough review and analysis of this business, we have concluded that continuing to be in the veterinary diagnostic laboratory business in the U.K. is not strategic to our future. Furthermore, this business has failed to meet our financial expectations. Therefore, we have entered into a letter of intent for the sale of the business. The letter of intent provides for Heska to retain its veterinary allergy business in the U.K. We plan to continue marketing our allergy-related products and services directly in the U.K. and to sell our veterinary medical instrumentation in the U.K. through an independent distributor network."

The Company expects to sign a definitive agreement and close the transaction in the first quarter of 2000. "The sale of this business is expected to reduce annual operating losses by approximately $1.0 million," said Grieve, "and will result in the Company taking a fourth quarter charge, currently estimated at less than $1.0 million."

"The pending sale of Heska UK is the latest in a series of actions taken to sharpen our strategic focus, improve operating efficiency and position the Company for improved performance. The past year has been a time of remarkable change for Heska," said Grieve. "In December of 1998, we initiated a cost reduction and restructuring plan designed to reduce 1999 operating expenses by approximately $8.0 million, and we remain generally on track for achieving that goal.

"Shortly after the restructuring was announced, the Company reorganized its executive management team. This reorganization of our executive ranks retained the entrepreneurial spirit and scientific talent upon which Heska was built, and complemented it with executives experienced in building and leading successful commercial organizations. I am personally delighted with the way in which this new management group is coming together as a team.

"Throughout the year, we have conducted a comprehensive review of our operations. Products which were not strategic to our operations or were not meeting acceptable gross profit targets were identified and evaluated. As a result of this review, we discontinued the sale of numerous low volume and low margin products. While it is always difficult to eliminate products that generate revenue, we are committed to build this business based on high quality and high margin products.

"In August, we announced the consolidation of our diagnostic equipment operations located in Waukesha, Wisconsin. This initiative was designed to reduce operating expenses, further integrate our sales and marketing activities into one location and better serve our growing customer base. We continue to expect that this consolidation will generate annual savings of approximately $2.0 million and improve operating efficiency.

"We are also announcing today that our allergy extract and treatment set manufacturing subsidiary, Center Laboratories in Port Washington, New York, is under strategic review. We are evaluating this business from both a strategic and operational perspective, and looking for opportunities to optimize the value of this business.

"Upon completion of this review, the actions taken to rationalize our business will be largely complete. I believe that the plan we have implemented during the past year has resulted in a stronger, leaner and more focused Company," said Grieve. "We enter the new year with a growing business and a solid foundation for continued commercial success."

Heska discovers, develops, manufactures and markets companion animal health products, primarily for dogs, cats and horses. Heska has a large and sophisticated scientific effort devoted to applying biotechnology to the large and growing companion animal health market. Heska also offers diagnostic and patient monitoring instrumentation and supplies, as well as laboratory diagnostic products and services in the United States and Europe to veterinarians, and operates USDA- and FDA-licensed facilities, which manufacture vaccine, pharmaceutical, and allergy immunotherapy products. For additional information on Heska and its products, visit the company's web site at www.heska.com.

With the exception of historical matters, this press release contains express or implied forward-looking information about Heska, including statements concerning the pending sale of its U.K. business, anticipated cost savings and increased operating efficiencies and the future prospects for the Company. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of Heska to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Heska's achievement of these results may be affected by many factors, including among others, the following: the ability to negotiate a definitive purchase agreement for the sale of the U.K. business; the ability to negotiate a continuing relationship with the purchaser for future consulting services in the U.K., the ability to identify independent distributors to sell Heska's medical instrumentation in the U.K. and negotiate satisfactory distribution agreements with these distributors, the ability to realize reduced operating losses, delays in or failure to achieve market acceptance of products, delays in or failure to achieve future product development, quality of management, competition, changes in business strategy or development plans, and the risks set forth in Heska's filings and future filings with the Securities and Exchange Commission, including those set forth under "Risk Factors" in the Prospectus dated December 1, 1999 contained in Heska's Form S-1 Registration Statement (File No 333-90433).

ots Original Text Service: Heska Corporation
Internet: http://www.newsaktuell.de

Contact: Ron Hendrick, Executive Vice President & CFO, 970-493-7272, or Robert Grieve, Chief Executive Officer, 970-493-7272, both of Heska Corporation

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