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  "documentTitle": "Heska Corporation (HSKA)",
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  "authorName": "Spruce Point Capital Management",
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  "presentationDate": "2021-10-25 00:00:00",
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  "notes": "The slide uses a red flag icon to highlight the negative revenue trend and a callout box to emphasize the contradiction in goodwill allocation.",
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      "kind": "callout",
      "text": "Why did Heska allocate 19% of scil goodwill to its North America segment when we estimate that scil's Canada revenue was less than 15% of total revenues?",
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      "text": "We believe German entity revenues declined approximately 23% in 2020 based on disclosure in Heska's 2020 10-K. While German entity financials are not available for 2020, the following disclosure in their 2019 report telegraphed a material issue: \"For the 2020 financial year, we are planning an 8% decline in sales. The scil International Group is planning an 11% decline in sales in 2020 compared to the previous year. The reason for this is the expected discontinuation of a supplier, as he wants to sell his products directly.\"",
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      "kind": "callout",
      "text": "We believe German entity revenues declined approximately 23% in 2020 based on disclosure in Heska's 2020 10-K.",
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      "text": "revenue: 23%",
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      "kind": "paragraph",
      "text": "scil country subsidiary financial filings show little or negative revenue growth in recent years. More importantly, as of their 2019 annual financial filing in Germany, scil management provided guidance for a revenue decline in 2020 due to the loss of an OEM supplier that decided to bypass scil and sell direct to customers, a risk Heska downplays.",
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      "kind": "quote",
      "text": "\"Of the goodwill acquired, $37.3 million is allocated to our International segment and $8.7 million is allocated to our North America segment.\" Heska 2020 10-K",
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      "kind": "quote",
      "text": "For the 2020 financial year, we are planning an 8% decline in sales. The scil International Group is planning an 11% decline in sales in 2020 compared to the previous year. The reason for this is the expected discontinuation of a supplier, as he wants to sell his products directly. — Heska 2019 Report",
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      "kind": "source-note",
      "text": "Source: Heska 2020 10-K, scil animal care company GmbH 2017, 2018, 2019 filings with Unternehmensregister, SCIL ANIMAL CARE COMPANY FRANCE RAPPORT DU COMMISSAIRE AUX COMPTES SUR LES COMPTES ANNUELS 2018, 2019, 2020, scil animal care company S.R.L. 2020 filings in Italy, scil animal care company S.L. 2018, 2019, 2020 filings in Spain",
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      "kind": "table",
      "text": "scil animal care Country Entity Revenue Analysis (millions)",
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      "kind": "title",
      "text": "scil Experienced Declining Revenue In 2020 In Every Country Subsidiary Except Canada",
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