Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Feb. 26, 2021 | Jun. 30, 2020 | |
Document Information [Line Items] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2020 | ||
Entity File Number | 001-38163 | ||
Entity Registrant Name | PetIQ, Inc. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 35-2554312 | ||
Entity Address, Address Line One | 923 S. Bridgeway Place | ||
Entity Address, City or Town | Eagle | ||
Entity Address, State or Province | ID | ||
Entity Address, Postal Zip Code | 83616 | ||
City Area Code | 208 | ||
Local Phone Number | 939-8900 | ||
Title of 12(b) Security | Class A Common Stock, $0.001 par value | ||
Trading Symbol | PETQ | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Central Index Key | 0001668673 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Public Float | $ 725.8 | ||
Class A common stock | |||
Document Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 26,048,033 | ||
Class B common stock | |||
Document Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 2,893,761 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 33,456 | $ 27,272 |
Accounts receivable, net | 102,755 | 71,377 |
Inventories | 97,773 | 79,703 |
Other current assets | 8,312 | 7,071 |
Total current assets | 242,296 | 185,423 |
Property, plant and equipment, net | 63,146 | 52,525 |
Operating lease right of use assets | 20,122 | 20,785 |
Deferred tax assets | 59,780 | |
Other non-current assets | 1,870 | 3,214 |
Intangible assets, net | 213,000 | 119,956 |
Goodwill | 231,158 | 231,045 |
Total assets | 771,592 | 672,728 |
Current liabilities | ||
Accounts payable | 68,131 | 51,538 |
Accrued wages payable | 10,540 | 9,082 |
Accrued interest payable | 903 | 83 |
Other accrued expenses | 8,815 | 3,871 |
Current portion of operating leases | 4,915 | 4,619 |
Current portion of long-term debt and finance leases | 7,763 | 3,821 |
Total current liabilities | 101,067 | 73,014 |
Operating leases, less current installments | 15,789 | 16,580 |
Long-term debt, less current installments | 355,979 | 251,376 |
Finance leases, less current installments | 3,338 | 3,331 |
Other non-current liabilities | 1,397 | 117 |
Total non-current liabilities | 376,503 | 271,404 |
Commitments and contingencies (Note 13) | ||
Equity | ||
Additional paid-in capital | 356,442 | 300,120 |
Accumulated deficit | (93,377) | (15,903) |
Accumulated other comprehensive loss | (686) | (1,131) |
Total stockholders' equity | 262,408 | 283,114 |
Non-controlling interest | 31,614 | 45,196 |
Total equity | 294,022 | 328,310 |
Total liabilities and equity | 771,592 | 672,728 |
Class A common stock | ||
Equity | ||
Common stock value | 26 | 23 |
Class B common stock | ||
Equity | ||
Common stock value | $ 3 | $ 5 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Oct. 01, 2018 |
Common stock authorized | 100,000,000 | |||
Common stock, shares outstanding | 25,711,000 | 23,554,000 | 21,620,000 | |
Class A common stock | ||||
Common stock, par value | $ 0.001 | $ 0.001 | ||
Common stock authorized | 125,000,000 | 125,000,000 | ||
Common Stock, Shares, Issued | 25,711,000 | 23,554,000 | 5,750,000 | |
Common stock, shares outstanding | 25,711,000 | 23,554,000 | ||
Class B common stock | ||||
Common stock, par value | $ 0.001 | $ 0.001 | ||
Common stock authorized | 100,000,000 | 100,000,000 | ||
Common Stock, Shares, Issued | 3,040,000 | 4,752,000 | ||
Common stock, shares outstanding | 3,040,000 | 4,752,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of (Loss) Income - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Total net sales | $ 780,051 | $ 709,431 | $ 528,614 |
Total cost of sales | 644,863 | 602,048 | 445,326 |
Gross profit | 135,188 | 107,383 | 83,288 |
Operating expenses | |||
General and administrative expenses | 138,375 | 103,200 | 72,260 |
Contingent note revaluations loss | 7,320 | 3,280 | |
Operating (loss) income | (3,187) | (3,137) | 7,748 |
Interest expense, net | (26,299) | (14,495) | (8,022) |
Foreign currency gain (loss), net | 109 | (151) | 45 |
Other income (expense), net | 571 | 172 | (345) |
Total other expense, net | (25,619) | (14,474) | (8,322) |
Pretax net (loss) income | (28,806) | (17,611) | (574) |
Income tax benefit (expense) | (52,216) | 3,309 | 661 |
Net (loss) income | (81,022) | (14,302) | 87 |
Net (loss) income attributable to non-controlling interest | (3,548) | (2,849) | 869 |
Net loss attributable to PetIQ, Inc | $ (77,474) | $ (11,453) | $ (782) |
Net loss per share attributable to PetIQ, Inc. Class A common stock | |||
Basic | $ (3.15) | $ (0.51) | $ (0.05) |
Diluted | $ (3.15) | $ (0.51) | $ (0.05) |
Weighted Average shares of Class A common stock outstanding | |||
Basic | 24,629 | 22,652 | 17,216 |
Diluted | 24,629 | 22,652 | 17,216 |
Product | |||
Total net sales | $ 725,705 | $ 617,118 | $ 450,229 |
Total cost of sales | 584,401 | 530,031 | 383,501 |
Services | |||
Total net sales | 54,346 | 92,313 | 78,385 |
Total cost of sales | $ 60,462 | $ 72,017 | $ 61,825 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Comprehensive Income | |||
Net (loss) income | $ (81,022) | $ (14,302) | $ 87 |
Foreign currency translation adjustment | 363 | 366 | (613) |
Comprehensive (loss) income | (80,659) | (13,936) | (526) |
Comprehensive (loss) income attributable to non-controlling interest | (3,525) | (2,777) | 697 |
Comprehensive loss attributable to PetIQ | $ (77,134) | $ (11,159) | $ (1,223) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities | |||
Net (loss) income | $ (81,022) | $ (14,302) | $ 87 |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||
Depreciation and amortization of intangible assets and loan fees | 30,975 | 16,509 | 12,467 |
Termination of supply agreement | 7,801 | 16 | |
Gain on disposition of property, plant, and equipment | (238) | (189) | (90) |
Stock based compensation expense | 9,170 | 7,355 | 3,812 |
Deferred tax adjustment | 51,511 | (3,458) | (843) |
Contingent note revaluation | 7,320 | 3,280 | |
Other non-cash activity | 164 | 405 | (334) |
Changes in assets and liabilities | |||
Accounts receivable | (31,652) | (14,123) | (14,209) |
Inventories | (17,846) | 30,448 | (36,610) |
Other assets | 556 | (1,619) | 1,423 |
Accounts payable | 17,435 | (7,595) | 15,701 |
Accrued wages payable | 1,424 | 2,800 | 1,979 |
Other accrued expenses | 7,121 | (2,718) | 908 |
Net cash (used in) provided by operating activities | (4,601) | 20,833 | (12,413) |
Cash flows from investing activities | |||
Proceeds from disposition of property, plant, and equipment | 442 | 340 | 229 |
Purchase of property, plant, and equipment | (22,392) | (10,276) | (7,178) |
Purchase of Capstar and related intangibles | (96,072) | ||
Business acquisitions (net of cash acquired) | (185,090) | (93,052) | |
Net cash used in investing activities | (118,022) | (195,026) | (100,001) |
Cash flows from financing activities | |||
Proceeds from issuance of convertible notes - liability | 90,465 | ||
Proceeds from issuance of convertible notes - equity | 53,285 | ||
Payment for Capped Call options | (14,821) | ||
Proceeds from issuance of long-term debt | 837,675 | 818,387 | 538,028 |
Principal payments on long-term debt | (838,073) | (676,509) | (466,912) |
Payment of financing fees on Convertible Notes | (5,884) | ||
Proceeds from Public Offering of Class A Shares, net of underwriting discounts and offering costs | 73,914 | ||
Tax distributions to LLC Owners | (47) | (1,686) | (1,485) |
Principal payments on finance lease obligations | (1,965) | (1,547) | (1,254) |
Payment of deferred financing fees and debt discount | (550) | (5,790) | (2,750) |
Tax withholding payments on Restricted Stock Units | (595) | (114) | |
Exercise of options to purchase class A common stock | 9,274 | 2,318 | 1,429 |
Net cash provided by financing activities | 128,764 | 135,059 | 140,970 |
Net change in cash and cash equivalents | 6,141 | (39,134) | 28,556 |
Effect of exchange rate changes on cash and cash equivalents | 43 | 46 | (92) |
Cash and cash equivalents, beginning of period | 27,272 | 66,360 | 37,896 |
Cash and cash equivalents, end of period | 33,456 | 27,272 | 66,360 |
Supplemental cash flow information | |||
Interest paid | 19,402 | 13,632 | 7,220 |
Net change in property, plant, and equipment acquired through accounts payable | 279 | (1,814) | 25 |
Finance lease additions | 2,019 | (3,006) | 656 |
Deferred tax liability created by convertible debt issuance | (8,197) | ||
Net change of deferred tax asset from step-up in basis | 12,381 | 36,882 | |
Income taxes paid, net of refunds | 130 | 249 | 640 |
Accrued tax distribution | (434) | $ 786 | 2,097 |
Issuance of note for termination, settlement, and asset acquisition agreement | 17,487 | ||
Purchase of intangible assets from note issuance | $ (9,686) | ||
Non cash consideration - Contingent notes | 6,900 | ||
Non cash consideration - Guarantee note | 10,000 | ||
Non cash consideration - Issuance of Class B common stock and LLC Interests | $ 103,004 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands | Class A common stockCommon Stock | Class B common stockCommon Stock | Accumulated Deficit | Accumulated Other Comprehensive Loss | Additional Paid-In Capital | Non-controlling Interest | Total |
Beginning Balance at Dec. 31, 2017 | $ 13 | $ 8 | $ (3,493) | $ (687) | $ 70,873 | $ 38,130 | $ 104,844 |
Beginning Balance (in shares) at Dec. 31, 2017 | 13,223 | 8,268 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Issuance of equity for business combination | $ 5 | 128 | 43,075 | 59,796 | 103,004 | ||
Issuance of equity for business combination (in shares) | 4,600 | ||||||
Exchange of LLC Interests held by LLC Owners | $ 6 | $ (6) | (290) | 47,458 | (47,168) | ||
Exchange of LLC Interests held by LLC Owners (in shares) | 6,321 | (6,321) | |||||
Net increase in deferred tax asset from LLC Interest transactions | 36,882 | 36,882 | |||||
Issuance of Class A Shares | $ 2 | 73,912 | 73,914 | ||||
Issuance of Class A Shares (in shares) | 2,000 | ||||||
Accrued tax distributions | (2,097) | (2,097) | |||||
Other comprehensive income (loss) | (441) | (172) | (613) | ||||
Equity shift as a result of the public offering | (26) | (13,914) | 13,940 | ||||
Stock based compensation expense | 2,504 | 1,308 | 3,812 | ||||
Exercise of Options to purchase Common Stock | 1,429 | $ 1,429 | |||||
Exercise of Options to purchase Common Stock (in shares) | 76 | 76 | |||||
Net (loss) income | (782) | 869 | $ 87 | ||||
Ending Balance at Dec. 31, 2018 | $ 22 | $ 7 | (4,450) | (1,316) | 262,219 | 64,496 | 320,977 |
Ending Balance (in shares) at Dec. 31, 2018 | 21,620 | 6,547 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
ASC 606 adoption, net of tax | (175) | (110) | (285) | ||||
Exchange of LLC Interests held by LLC Owners | $ 1 | $ (1) | (109) | 17,299 | (17,190) | ||
Exchange of LLC Interests held by LLC Owners (in shares) | 1,794 | (1,794) | |||||
Net increase in deferred tax asset from LLC Interest transactions | 12,381 | 12,381 | |||||
Accrued tax distributions | (786) | (786) | |||||
Other comprehensive income (loss) | 294 | 72 | 366 | ||||
Stock based compensation expense | 5,902 | 1,453 | 7,355 | ||||
Exercise of Options to purchase Common Stock | 2,318 | $ 2,318 | |||||
Exercise of Options to purchase Common Stock (in shares) | 119 | 119 | |||||
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares) | 21 | ||||||
Net (loss) income | (11,453) | (2,849) | $ (14,302) | ||||
Ending Balance at Dec. 31, 2019 | $ 23 | $ 5 | (15,903) | (1,131) | 300,120 | 45,196 | 328,310 |
Ending Balance (in shares) at Dec. 31, 2019 | 23,554 | 4,752 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Exchange of LLC Interests held by LLC Owners | $ 2 | $ (2) | 105 | 15,461 | (15,566) | ||
Exchange of LLC Interests held by LLC Owners (in shares) | 1,712 | (1,712) | |||||
Accrued tax distributions | 434 | 434 | |||||
Other comprehensive income (loss) | 340 | 23 | 363 | ||||
Stock based compensation expense | 7,921 | 1,249 | 9,170 | ||||
Equity component of convertible notes, net of tax | 37,064 | 5,843 | 42,907 | ||||
Payment for capped call share options | (12,803) | (2,018) | (14,821) | ||||
Exercise of Options to purchase Common Stock | 9,274 | $ 9,274 | |||||
Exercise of Options to purchase Common Stock (in shares) | 395 | 395 | |||||
Issuance of stock for vesting of RSU's, net of tax with holdings | (595) | $ (595) | |||||
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares) | 50 | ||||||
Net (loss) income | (77,474) | (3,548) | (81,022) | ||||
Ending Balance at Dec. 31, 2020 | $ 26 | $ 3 | $ (93,377) | $ (686) | $ 356,442 | $ 31,614 | $ 294,022 |
Ending Balance (in shares) at Dec. 31, 2020 | 25,711 | 3,040 |
Principal Business Activity and
Principal Business Activity and Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Principal Business Activity and Significant Accounting Policies | |
Principal Business Activity and Significant Accounting Policies | Note 1 – Principal Business Activity and Significant Accounting Policies Principal Business Activity and Principals of Consolidation PetIQ is a leading pet medication and wellness company delivering a smarter way for pet parents to help their pets live their best lives through convenient access to affordable veterinary products and services. The company engages with customers through points of distribution across retail channels with its branded distributed medications, which is further supported by its own world-class medications manufacturing facility in Omaha, Nebraska. The Company’s national service platform, VIP Petcare, operates retail partner locations providing cost effective and convenient veterinary wellness services. PetIQ has two reporting segments: (i) Products; and (ii) Services. The Products segment consists of our manufacturing and distribution business. The Services segments consists of veterinary services, and related product sales, provided by the Company directly to consumers. PetIQ is the managing member of PetIQ Holdings, LLC (“Holdco”), a Delaware limited liability company, which is the sole member of PetIQ, LLC (“Opco”) and, through Holdco, operate and control all the business and affairs of Opco. The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant, and equipment and intangible assets; the valuation of property, plant, and equipment, intangible assets and goodwill, the valuation of assets and liabilities in connection with acquisitions, the valuation of deferred tax assets, the valuation of inventories, and reserves for legal contingencies. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are at cost, which approximates fair value due to their relatively short maturities. The guarantee note is carried at cost, which approximates fair value due to the recent issuance of the note. Our term loan and revolving credit facility bear interest at a variable interest rate plus an applicable margin and, therefore, carrying amounts approximate fair value. A portion of the purchase price for the acquisition of Community Veterinary Clinics, LLC d/b/a VIP Petcare (“VIP” and such acquisition, the “VIP Acquisition”) was structured in the form of Contingent Notes (the “Contingent Notes”) that vest based on the combined Company EBITDA targets for the years ending December 31, 2018 and 2019 (“Measurement Dates”). See Note 2 – “Business Combinations” for more information regarding the VIP Acquisition. The liabilities related to the 2018 and 2019 Contingent Notes became fixed as of December 31, 2018 and 2019, respectively, and are carried at cost, which approximates fair value as the stated interest rate is consistent with current market rates. The Contingent Notes are included in long-term debt in the accompanying consolidated balance sheets. The Contingent Notes began bearing interest at a fixed rate of 6.75%, with the balance payable July 17, 2023. The following table summarizes the Level 3 activity related to the Contingent Notes for the twelve months ended December 31, 2019: $'s in 000's Balance at beginning of the period $ 2,680 Change in fair value of contingent consideration 7,320 Transfer out of level 3 (10,000) Balance at the end of the period $ — Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the date of acquisition. All credit card, debit card and electronic transfer transactions that process in less than seven days are classified as cash and cash equivalents. The Company maintains its cash accounts in various deposit accounts, the balances of which at times exceeded federal deposit insurance limits during the periods presented. Receivables and Credit Policy Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 45 days from the invoice date. Accounts receivable are stated at the amount billed to the customer, net of discounts and estimated deductions. The Company does not have a policy for charging interest on overdue customer account balances. The Company provides an allowance for credit losses equal to expected losses. The Company’s estimate is based on historical collection experience, a review of the current status of trade accounts receivable and known current economic conditions including the current and expected impact of COVID-19. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice. Other receivables consists of various receivables due from vendors, banking partners, and notes receivable from suppliers. Non-current portions of these other receivables are included in other non-current assets on the consolidated balance sheets. Accounts receivable consists of the following as of: $'s in 000's December 31, 2020 December 31, 2019 Trade receivables $ 96,381 $ 67,551 Other receivables 7,094 4,257 103,475 71,808 Less: Allowance for doubtful accounts (720) (431) Total accounts receivable, net $ 102,755 $ 71,377 Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in first-out (“FIFO”) method and includes estimated rebate amounts. The Company maintains reserves for estimated obsolete or unmarketable inventory based on the difference between the cost of inventory and its estimated net realizable value. In estimating the reserves, management considers factors such as excess or slow-moving inventories, product expiration dating, and market conditions. Changes in these conditions may result in additional reserves. Major components of inventories consist of the following as of: $'s in 000's December 31, 2020 December 31, 2019 Raw materials $ 15,761 $ 10,675 Work in progress 2,273 1,717 Finished goods 79,739 67,311 Total inventories $ 97,773 $ 79,703 Property, Plant, and Equipment Property, plant, and equipment are recorded at cost. Expenditures for improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation and amortization is provided using the straight-line method, based on estimated useful lives of the assets, except for leasehold improvements and finance leased assets which are depreciated over the shorter of the expected useful life or the lease term. Depreciation and amortization expense is recorded in cost of sales and general and administrative expenses in the consolidated statements of operations, depending on the use of the asset. The estimated useful lives of property, plant, and equipment are as follows: Computer equipment and software 3 years Vehicle and vehicle accessories 3 - 5 years Buildings 33 years Equipment 2 - 15 years Leasehold improvements 2 - 15 years Furniture and fixtures 5 - 10 years Goodwill and Intangible Assets Goodwill is the excess of the consideration paid over the fair value of specifically identifiable assets, liabilities and contingent liabilities in a business combination. Intangible assets acquired are recorded at estimated fair value. Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are tested for impairment annually during the fourth quarter, and at any time when events suggest an impairment more likely than not occurred. To assess goodwill for impairment, the Company, depending on relevant facts and circumstances, performs either a qualitative assessment or a quantitative analysis utilizing a discounted cash flow valuation model. In performing the qualitative assessment, the Company evaluates relevant factors such as macroeconomic conditions, industry and market considerations, cost factors and overall financial performance, as well as company and reporting unit specific items. If, after assessing these qualitative factors, the Company determines that it is more likely than not that the carrying value of the reporting unit is less than its fair value, then no further testing is required. In performing a quantitative analysis, the Company determines the fair value of a reporting unit using management’s assumptions about future cash flows based on long-range strategic plans. This approach incorporates many assumptions including discount rates and future growth rates. In the event the carrying amount of a reporting unit exceeded its fair value, an impairment loss would be recognized. Indefinite-lived intangible assets are tested for impairment utilizing either a qualitative assessment or a quantitative analysis. For a qualitative assessment, the Company identifies and considers relevant key factors, events, and circumstances to determine whether it is necessary to perform a quantitative impairment test. The key factors considered include macroeconomic, industry, and market conditions, as well as the asset's actual and forecasted results. For the quantitative impairment tests, the Company compares the carrying amounts to the current fair market values. Intangible assets with definite lives are amortized over their estimated useful lives to reflect the pattern over which the economic benefits of the intangible assets are consumed. Definite-lived intangible assets are also evaluated for impairment when impairment indicators are present. No impairment charge was recorded for the years ended December 31, 2020, 2019, and 2018. Convertible Debt On May 19, 2020, we issued $143.8 million aggregate principal amount of Convertible Notes due 2026 (the “Notes”). See Note 5 – “Debt”. We separately account for the liability and equity components of convertible debt instruments that can be settled in cash by allocating the proceeds from issuance between the liability component and the embedded conversion option in accordance with accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. The value of the equity component is calculated by first measuring the fair value of the liability component, using the interest rate of a similar liability that does not have a conversion feature, as of the issuance date. The difference between the proceeds from the convertible debt issuance and the amount measured as the liability component is recorded as the equity component with a corresponding discount recorded on the debt. We recognize amortization of the resulting discount using the effective interest method as interest expense in our consolidated statements of operations. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. We have allocated issuance costs to the liability and equity components. Issuance costs attributable to the liability component are being amortized to expense over the respective term of the Notes, and issuance costs attributable to the equity component were netted with the respective equity component in additional paid-in capital. Revenue Recognition When Performance Obligations Are Satisfied A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are product sales and the delivery of veterinary services. Revenue is generally recognized for product sales on a point in time basis when product control is transferred to the customer. In general, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time. The Company determined that certain products manufactured to a customer’s specifications do not have an alternative future use at a reasonable profit margin due to costs associated with reworking, transporting and repackaging these products. These products are produced subject to purchase orders that include an enforceable right to payment. Therefore the Company determined that revenue on these products would be recognized over time, as the products are produced. This represents a minor subset of the products the Company manufactures. Revenue for services is recognized over time as the service is delivered, typically over a single day. Payment is typically rendered at the time of service. Customer contracts generally do not include more than one performance obligation. When a contract does contain more than one performance obligation, we allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data. The performance obligations in our contracts are satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of December 31, 2020. Variable Consideration In addition to fixed contract consideration, most contracts include some form of variable consideration. The most common forms of variable consideration include discounts, rebates, and sales returns and allowances. Variable consideration is treated as a reduction in revenue when product revenue is recognized. Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration each period based on the terms of the agreements, historical experience, and any recent changes in the market. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe therefore not requiring any additional constraint on the variable consideration. Trade marketing expense, consisting primarily of customer pricing allowances and merchandising funds are offered through various programs to customers and are designed to promote our products. They include the cost of in-store product displays, feature pricing in retailers' advertisements and other temporary price reductions. These programs are offered to our customers both in fixed and variable (rate per case) amounts. The ultimate cost of these programs depends on retailer performance and is subject to management estimates. Certain retailers require the payment of product introductory fees in order to obtain space for the Company's products on the retailer's store shelves. This cost is typically a lump sum and is determined using the expected value based on the contract between the two parties. Both trade marketing expense and product introductory fees are recognized as reductions of revenue at the time the transfer of control of the associated products occurs. Accruals for expected payouts, or amounts paid in advance, under these programs are included as accounts payable or other current assets in the Consolidated Balance Sheets. Significant Payment Terms Our customer contracts identify the product, quantity, price, payment and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more extended, no terms beyond one year are granted at contract inception. As a result, we do not adjust the promised amount of consideration for the effects of a significant financing component because the period between our transfer of a promised good or service to a customer and the customer’s payment for that good or service will be one year or less. Shipping All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in the cost of sales. This includes shipping and handling costs after control over a product has transferred to a customer. Warranties & Returns PetIQ provides all customers with a standard or assurance type warranty. Either stated or implied, the Company provides assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No significant services beyond an assurance warranty are provided to customers. The Company does not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a reduction in revenue. This return estimate is reviewed and updated each period and is based on historical sales and return experience. Contract balances Contract asset and liability balances as of December 31, 2020 and 2019 are immaterial. The Company does not have significant deferred revenue or unbilled receivable balances. Cost of Services Cost of Services are comprised of all service and product costs related to the delivery of veterinary services, including but not limited to, salaries and contract costs of veterinarians, technicians and other clinic based personnel, transportation and delivery costs, rent, occupancy costs, supply costs, depreciation and amortization of clinic assets, certain marketing and promotional expenses and costs of goods sold. Research and Development and Advertising Costs Research and development and advertising costs are expensed as incurred and are included in general and administrative expenses. Research and development costs amounted to $2.3 million, $1.3 million, and $0.2 million and advertising costs were $10.1 million, $4.5 million, and $2.9 million for the years ended December 31, 2020, 2019, and 2018, respectively. Collaboration Agreements Through the Perrigo Animal Health Acquisition, we entered into a product development and asset purchase agreement with a third party for certain product formulations in development by the third party. The Company may make up to $20.5 million of payments over the course of the next several years contingent on achievement of certain development and regulatory approval milestones. Product development costs are expensed as incurred or as milestone payments become probable. There can be no assurance that these products will be approved by the U.S. Food and Drug Administration (“FDA”) on the anticipated schedule or at all. Consideration paid after FDA approval will be capitalized and amortized to cost of goods sold over the economic life of each product. The expenses paid prior to FDA approval will be included in General and Administrative expenses on the Consolidated Statements of Operations. There were no expenses incurred under the agreement for the periods ended December 31, 2020 and 2019. Litigation The Company is subject to various legal proceedings, claims, litigation, investigations and contingencies arising out of the ordinary course of business. If the likelihood of an adverse legal outcome is determined to be probable and the amount of loss is estimable, then a liability is accrued in accordance with accounting guidance for Contingencies. If the assessment indicates a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. The Company consults with both internal and external legal counsel related to litigation. See Note 13 for more information. Stock based compensation The Company expenses employee share-based awards under ASC Topic 718, Compensation—Stock Compensation, which requires compensation cost for the grant-date fair value of share-based awards to be recognized over the requisite service period. Stock options granted to executives and other employees are valued using the Black-Scholes option pricing model. See Note 9 for more information. Accounting for Income Taxes The Company uses the asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred taxes are measured using rates expected to apply to taxable income in years in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company uses a two-step process for the measurement of uncertain tax positions that have been taken or are expected to be taken in a tax return. The first step is a determination of whether the tax position should be recognized in the consolidated financial statements. The second step determines the measurement of the tax position. The Company records potential interest and penalties on uncertain tax positions as a component of income tax expense. Interest expense, net Interest expense, net, is comprised primarily of interest expense related to (i) our debt agreements, (ii) unused line fees, (iii) amortization of deferred loan fees and discounts, (iv) finance lease obligations and the mortgage note outstanding, offset by interest income earned on our demand deposits and other assets. Interest expense was $26.3 million, $14.9 million, and $8.3 million for the years ended December 31, 2020, 2019, and 2018, respectively, offset by $0.0 million, $0.4 million, and $0.3 million of interest income, respectively. Non-controlling interest The non-controlling interests on the consolidated statements of operations represents the portion of earnings or loss attributable to the economic interest in the Company’s subsidiary, Holdco, held by the non-controlling holders of Class B common stock and limited liability company interests in Holdco. Non-controlling interests on the consolidated balance sheet represents the portion of net assets of the Company attributable to the non-controlling holders of Class B common stock and Limited Liability Company interests in Holdco. Earnings Per Share Basic earnings per share is computed by dividing net loss attributable to PetIQ, Inc. by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net loss attributable to PetIQ, Inc., adjusted as necessary for the impact of potentially dilutive securities, by the weighted-average shares outstanding during the period and the impact of securities that would have a dilutive effect on earnings per share. See Note 8 for further discussion. Recently Issued Accounting Pronouncements / Adopted Accounting Standard Updates From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”). Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, "Financial Instruments - Credit Losses." This ASU requires an organization to measure all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable information. Organizations will now use forward-looking information to better estimate their credit losses. The Company adopted this ASU using a modified retrospective approach. Under this method of adoption, the Company determined that there was no cumulative-effect adjustment to beginning Retained earnings on the consolidated balance sheet. Adoption of this standard did not impact the Company’s net loss and had no impact on the consolidated statement of cash flows. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The purpose of ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In addition, ASU 2016-02 modifies the definition of a lease to clarify that an arrangement contains a lease when such arrangement conveys the right to control the use of an identified asset. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within the year of adoption. Originally under ASU 2016-02, an organization was required upon adoption to recognize and measure leases beginning in the earliest period presented using a modified retrospective approach and restate the financial statements for all periods presented. In July 2018, the FASB issued ASU 2018-11, which amends ASU 2016-02 to provide organizations with an additional (and optional) transition method whereby it may elect to recognize and measure leases by applying the cumulative impact of adopting ASU 2016-02 to the opening retained earnings balance in the period of adoption, thereby removing the requirement that the financial statements of prior periods by restated. The Company adopted the provisions of this guidance effective January 1, 2019, using the modified retrospective optional transition method. Therefore, the standard was applied beginning January 1, 2019 and prior periods were not restated. The adoption of the standard did not result in a cumulative-effect adjustment to the opening balance of accumulated deficit. The Company elected the package of practical expedients and implemented internal controls and system functionality to enable the preparation of financial information upon adoption. In addition, the Company has elected to apply the practical expedient to not separate the lease and non-lease components for all of the Company’s leases. The adoption of the new standard resulted in the recognition of a right of use asset and short-term and long-term liabilities recorded on the Company’s consolidated balance sheet related to operating leases. Accounting for finance leases remained substantially unchanged. In addition, the adoption of the standard did not have a material impact on the Company’s results of operations or cash flows. In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, we intend to adopt ASU 2020-06 using the full retrospective approach. We expect the adoption of the new standard to result in a decrease to stockholders equity of $51.4 million and a corresponding increase to convertible senior notes. Interest expense, net for the year ending December 31, 2020 will decrease approximately $4.0 million. Interest expense, net, recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. Additionally we expect that the change will result in significantly more dilutive shares outstanding. Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any of these accounting pronouncements had or will have a material impact on its consolidated financial statements. |
Business Combination
Business Combination | 12 Months Ended |
Dec. 31, 2020 | |
Business Combination | |
Business Combination | Note 2 – Business Combination and Asset Acquisition Perrigo Animal Health Acquisition On July 8, 2019, PetIQ, Inc., through its subsidiary PetIQ, LLC, completed the acquisition of all the outstanding stock of Sergeant’s Pet Care Products, Inc. (“Sergeant’s”), d/b/a Perrigo Animal Health, including any assets related to Perrigo Company plc’s animal health business (the “Perrigo Animal Health Acquisition”). Sergeant’s is now an indirect wholly-owned subsidiary of the Company. The fair value of the consideration is summarized as follows: $'s in 000's Fair Value Inventories $ 17,998 Property, plant and equipment 19,568 Other current assets 13,048 Other assets 9,680 Indefinite-lived intangible assets 23,040 Definite-lived intangible assets – 13 year weighted average life 14,480 Goodwill 105,838 Total assets 203,652 Liabilities assumed 19,259 Purchase price $ 184,393 Cash paid, net of cash acquired $ (185,090) Post-closing working capital adjustment 697 Fair value of total consideration transferred $ (184,393) The definite-lived intangibles primarily relate to trademarks, customer relationships, and developed technology and know-how. The $14.6 million represents the fair value and will be amortized over the estimated useful lives of the assets through June 2039. The indefinite-lived intangibles primarily relate to trademarks and in-process research and development. Goodwill represents the future economic benefits that do not qualify for separate recognition and primarily includes the assembled workforce and other non-contractual relationships, as well as expected future synergies. Approximately $105.8 million of goodwill is expected to be deductible for tax purposes. Goodwill was allocated to the Products segment. Transaction costs of $6.1 million were incurred in the year ended December 31, 2019, and are included in General and Administrative expenses on the Consolidated Statements of Operations. Capstar ® (nitenpyram) Acquisition On July 31, 2020 the Company completed the acquisition of Capstar® and CapAction® and related assets (the “Capstar Acquisition”) from Elanco US Inc. for $95 million, plus the cost of certain outstanding finished goods inventory in saleable condition, using cash on hand as a result of the issuance of the Notes in May 2020. The Capstar Acquisition was accounted for as an asset acquisition and certain transaction related costs of approximately $1.0 million were included in the cost of the acquired assets. The fair value assigned to trade names was based on the income approach using a relief from royalty methodology that assumes that the fair value of a trade name can be measured by estimating the cost of licensing and paying a royalty fee for the trade name that the owner of the trade name avoids. The estimated fair value of customer relationship was determined using an income approach, specifically a discounted cash flow analysis. The rate utilized to discount net cash flows to their present values was approximately 15% and was determined after consideration of the overall enterprise rate of return and the relative risk and importance of the assets to the generation of future cash flows. $'s in 000's Fair Value Amortizable intangibles Customer relationships $ 70,901 Patents and processes 9,895 Total amortizable intangibles 80,796 Non-amortizable intangibles Trademarks and other 15,276 Total purchased intangible assets $ 96,072 The weighted average amortization period of the amortizable intangible assets is approximately 11.8 years. Supplier Termination, Settlement and Asset Purchase Agreement: During July 2020, the Company entered into a Termination, Settlement and Asset Purchase Agreement (“Agreement”) with a supplier who alleged PetIQ had breached its supply agreement due to the acquisition of Perrigo Animal Health. The Agreement called for PetIQ to pay $20.6 million, $2.6 million at signing and $1.0 million per quarter thereafter. The Agreement terminated the supply agreement that was previously in place, settled all outstanding claims and operations, and allowed PetIQ to purchase certain intellectual property related assets. The Company has estimated the fair value of the payment obligation as $17.5 million, and determined the fair value of the acquired assets to be $9.7 million. The assets acquired are included within the patents and processes intangible assets category and will be amortized over 10 years. The assets were valued using the relief from royalty method. The remainder of the obligation is considered to be a payment to settle the alleged breach of the supply agreement, the termination expense is included in general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2020. The obligation is considered debt and is included in debt on the condensed consolidated balance sheet. See Note 5 – “Debt” for additional information. |
Property, Plant, and Equipment
Property, Plant, and Equipment | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant, and Equipment | |
Property, Plant, and Equipment | Note 3 – Property, Plant, and Equipment Property, plant, and equipment consists of the following at: $'s in 000's December 31, 2020 December 31, 2019 Leasehold improvements $ 19,709 $ 15,517 Equipment 25,664 23,138 Vehicles and accessories 7,110 6,007 Computer equipment and software 10,858 8,070 Buildings 10,168 10,050 Furniture and fixtures 2,347 1,836 Land 7,067 4,557 Construction in progress 11,331 3,392 94,254 72,567 Less accumulated depreciation (31,108) (20,042) Total property, plant, and equipment $ 63,146 $ 52,525 Depreciation and amortization expense related to these assets total $12.1 million, $9.1 million, and $6.7 million for the years ended December 31, 2020, 2019, and 2018, respectively. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 12 Months Ended |
Dec. 31, 2020 | |
Intangible Assets and Goodwill | |
Intangible Assets and Goodwill | Note 4 – Intangible Assets and Goodwill Intangible assets consist of the following at: $'s in 000's Useful Lives December 31, 2020 December 31, 2019 Amortizable intangibles Certification 7 years $ 350 $ 350 Customer relationships 12 - 20 years 160,178 89,232 Patents and processes 5 - 10 years 14,905 4,928 Brand names 5 - 15 years 24,740 15,019 Total amortizable intangibles 200,173 109,529 Less accumulated amortization (25,984) (13,058) Total net amortizable intangibles 174,189 96,471 Non-amortizable intangibles Trademarks and other 33,341 18,016 In-process research and development 5,470 5,469 Intangible assets, net of accumulated amortization $ 213,000 $ 119,956 Certain intangible assets are denominated in currencies other than the U.S. Dollar; therefore, their gross and net carrying values are subject to foreign currency movements. Amortization expense for the years ended December 31, 2020, 2019, and 2018 was $12.8 million, $6.0 million, and $5.2 million, respectively. The in-process research and development (“IPRD”), intangible assets represent the value assigned to three acquired R&D projects that principally represent rights to develop and sell products that the Company has acquired which has not yet been completed or approved. The IPRD acquired as part of the Perrigo Animal Health Acquisition is accounted for as an indefinite-lived asset until the product is available for sale and regulatory approval is obtained, or abandonment of the associated research and development efforts. If the research and development efforts are successfully completed, the IPRD would be amortized over its then estimated useful life. The fair value of the IPRD was estimated using the multi-period excess earnings income method. The projected cash flows estimates for the future products were based on certain key assumptions including estimates of future revenues and expenses, taking into account the stage of development at the acquisition date and the resources needed to complete development. In the event that the efforts are not successful, the Company will write off the relevant IPRD in the period in which it is no longer considered feasible. Estimated future amortization expense for each of the following years is as follows: Years ending December 31, ($'s in 000's) 2021 $ 18,504 2022 18,310 2023 17,481 2024 15,078 2025 14,369 Thereafter 90,447 The following is a summary of the changes in the carrying value of goodwill for the years ended December 31, 2020 and 2019. Reporting Unit ($'s in 000's) Products Services Total Goodwill as of January 1, 2019 77,765 47,264 125,029 Foreign currency translation 178 — 178 Acquisitions 105,838 — 105,838 Goodwill as of December 31, 2019 183,781 47,264 231,045 Foreign currency translation 113 — 113 Goodwill as of December 31, 2020 $ 183,894 $ 47,264 $ 231,158 |
Debt
Debt | 12 Months Ended |
Dec. 31, 2020 | |
Debt | |
Debt | Note 5 – Debt Convertible Notes On May 19, 2020, the Company issued $143.8 million in aggregate principal amount of 4.00% Convertible Senior Notes due 2026 pursuant to the indenture (the “Indenture”), dated as of May 19, 2020. The total net proceeds from the Notes offering, after deducting debt issuance costs paid or payable by us, was $137.9 million. The Notes accrue interest at a rate of 4.00% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Notes will mature on June 1, 2026, unless earlier repurchased, redeemed or converted. Before January 15, 2026, holders will have the right to convert their Notes only upon the occurrence of certain events. From and after January 15, 2026, holders may convert their Notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its Class A common stock, or a combination of cash and shares of its Class A common stock, at its election. The initial conversion rate is 33.7268 shares of Class A common stock per $1,000 principal amount of Notes. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. The Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after June 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s Class A common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date the Company sends such notice. In addition, calling any Notes will constitute a Make-Whole Fundamental Change with respect to such Notes, which will result in an increase to the conversion rate if such Notes are converted after they are called for redemption. If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s Class A common stock. The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. The Notes contain customary events of default. In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated using a discount rate of 13%, which was determined by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The amount of the equity component representing the conversion option was $53.3 million and was determined by deducting the fair value of the liability component from the par value of the Notes. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, is amortized to interest expense at an annual effective interest rate over the contractual terms of the Notes. The Company has early adopted ASU 2020-06 as of January 1, 2021, which will impact the accounting for the Notes. The fair value of the Notes was $218.1 million as of December 31, 2020. The estimated fair value of the Notes is based on market rates and the closing trading price of the Convertible Notes as of December 31, 2020 and is classified as Level 2 in the fair value hierarchy. As of December 31, 2020 the if-converted value of the Notes did not exceed the principal amount. The net carrying amount of the liability component of the Notes was as follows: ($'s in 000's) December 31, 2020 Par value of the Notes $ 143,750 Unamortized debt discount (49,526) Unamortized debt issuance costs (3,441) Net carrying amount $ 90,783 The net carrying amount of the equity component of the Notes was as follows: ($'s in 000's) December 31, 2020 Proceeds allocated to the conversion option $ 53,285 Deferred tax affect (8,197) Issuance costs (2,181) Net carrying amount $ 42,907 The following table sets forth the interest expense recognized related to the Notes: For the Year Ended December 31, 2020 ($'s in 000's) Contractual interest expense $ 3,546 Amortization of debt discount 3,759 Amortization of debt issuance costs 261 Total $ 7,566 Effective interest rate of the liability component 13.0% Capped Call Transactions On May 14, 2020 and May 19, 2020, the Company entered into capped call transactions (the “Capped Call Transactions”) with two counterparties (the “Option Counterparties”). The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to the Notes, the underlying shares of Class A common stock and are intended to reduce, subject to a limit, the potential dilution with respect to the Class A common stock upon conversion of the Notes. The cap price of the Capped Call Transactions is $41.51 per share of Class A common stock, and is subject to certain adjustments under the terms of the Capped Call Transactions. The Company paid approximately $14.8 million for the Capped Call Transactions, which was recorded as additional paid-in capital, using a portion of the gross proceeds from the sale of the Notes. The capped call is expected to be tax deductible as the Company elected to integrate the capped call into the Notes for tax purposes. The tax effect on the equity component of the Convertible Notes of $8.2 million was recorded through additional paid-in capital. The Company has recorded a full valuation allowance against its deferred tax assets as of December 31, 2020, as a result, the $8.2 million deferred tax liability associated with the Capped Call Transactions will be offset by a reduction to the valuation allowance adjustment through continuing operations. A&R Credit Agreement The Company amended the existing revolving credit agreement of Opco and each of its domestic wholly-owned subsidiaries (the “Amended Revolving Credit Agreement”) on July 8, 2019. The Amended Revolving Credit Agreement provides for a secured revolving credit facility of $125 million that matures on July 8, 2024. The borrowers under the Amended Revolving Credit Facility incur fees between 0.375% and 0.50% as unused facility fees, dependent on the aggregate amount borrowed. On May 14, 2020, the Company amended the Amended Revolving Credit Agreement to allow for the Notes described above. Additionally the amendment instituted a Eurodollar floor of 1% to the agreement. All obligations under the Amended Revolving Credit Agreement are unconditionally guaranteed by HoldCo and, subject to certain exceptions, each of its material current and future domestic wholly-owned subsidiaries. All obligations under the Amended Revolving Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of each borrower and guarantor under the Amended Revolving Credit Agreement, subject to certain exceptions. The Amended Revolving Credit Agreement contains a number of covenants that, among other things, restrict the ability of the borrowers and guarantors thereunder to (subject to certain exceptions): (i) make investments, loans or advances; (ii) incur additional indebtedness; (iii) create liens on assets; (iv) engage in mergers or consolidations and/or sell assets; (v) pay dividends and distributions or repurchase our equity interests; (vi) repay subordinated indebtedness; (vii) make certain acquisitions; and (viii) other restrictions typical for a credit agreement of this type. As of December 31, 2020, the borrowers and guarantors thereunder were in compliance with these covenants. Although the Company currently expects continued compliance with debt covenants, the impact COVID-19 may negatively affect the Company’s ability to comply with these covenants. The Amended Revolving Credit Agreement also contains certain customary affirmative covenants and events of default (including change of control). In addition, the Amended Revolving Credit Agreement contains a minimum fixed charge coverage ratio covenant which is tested if availability under the Amended Revolving Credit Agreement falls below a certain level. As of December 31, 2020, the borrower and guarantors thereunder were in compliance with these covenants. As of December 31, 2020, $15.0 million was outstanding under the Amended Revolving Credit Agreement. The weighted average interest rate on the Amended Revolving Credit Agreement was 2.3% at December 31, 2020. A&R Term Loan Credit Agreement The Company amended and restated the existing term loan credit agreement of Opco (the “A&R Term Loan Credit Agreement”) on July 8, 2019. The $220.0 million A&R Term Loan Credit Agreement has an interest rate equal to the Eurodollar rate plus 5.00% . The A&R Term Loan Credit Agreement calls for 1% of the original loan balance to be paid annually via equal quarterly payments, with the balance of the loan due on the sixth anniversary of the agreement. All obligations under the A&R Term Loan Credit Agreement are unconditionally guaranteed by PetIQ Holdings, LLC and each of its domestic wholly-owned subsidiaries and, subject to certain exceptions, each of its material current and future domestic wholly-owned subsidiaries. All obligations under the A&R Term Loan Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of PetIQ, LLC and each guarantor under the A&R Term Loan Credit Agreement, subject to certain exceptions. The A&R Term Loan Credit Agreement contains a number of covenants that, among other things, restrict the ability of the borrower and guarantors thereunder to (subject to certain exceptions): (i) make investments, loans or advances; (ii) incur additional indebtedness; (iii) create liens on assets; (iv) engage in mergers or consolidations and/or sell assets; (v) pay dividends and distributions or repurchase our equity interests; (vi) repay subordinated indebtedness; (vii) make certain acquisitions; and (viii) other restrictions typical for a credit agreement of this type. The A&R Term Loan Credit Agreement also contains certain customary affirmative covenants and events of default (including change of control). In addition, the A&R Term Loan Credit Agreement includes a maintenance covenant that requires compliance with a maximum first lien net leverage ratio. The availability of certain baskets and the ability to enter into certain transactions (including our ability to pay dividends) may also be subject to compliance with secured leverage ratios. As of December 31, 2019, the borrower and guarantors thereunder were in compliance with these covenants. The A&R Term Loan Credit Agreement also contains certain customary affirmative covenants and events of default (including change of control). In addition, the A&R Term Loan Credit Agreement includes a maintenance covenant that requires compliance with a maximum first lien net leverage ratio. The availability of certain baskets and the ability to enter into certain transactions (including our ability to pay dividends) may also be subject to compliance with secured leverage ratios. As of December 31, 2020, the borrower and guarantors thereunder were in compliance with these covenants. As of December 31, 2020, $217.3 million was outstanding under the A&R Term Loan Credit Agreement. General Other Debt The Company entered into a mortgage with a local bank to finance $1.9 million of the purchase price of a commercial building in Eagle, Idaho, in July 2017. The mortgage bears interest at a fixed rate of 4.35% and utilizes a 25 year amortization schedule with a 10 year balloon payment of the balance due at that time. In July 2020, the Company entered into the Agreement. See Note 2 – “Business Combinations and Asset Acquisitions”. The Agreement called for PetIQ to pay $20.6 million, $2.6 million at signing and $1.0 million per quarter thereafter with no interest. The Company discounted the payment stream using a market interest rate of 8.3%, resulting in an obligation of $17.5 million. In connection with the VIP Acquisition, the Company entered into a guarantee note of $10.0 million. As of December 31, 2019, $7.5 million was payable pursuant to the 2018 Contingent Note and $10.0 million was payable pursuant to the 2019 Contingent Note. The guarantee note and the Contingent Notes, collectively, “Notes Payable – VIP Acquisition” of $27.5 million require quarterly interest payments of 6.75% with the balance payable July 17, 2023. The following represents the Company’s long-term debt as of: $'s in 000's December 31, 2020 December 31, 2019 Convertible Notes $ 143,750 $ — Term loans 217,250 220,000 Revolving credit facility 15,000 10,000 Notes Payable - VIP Acquisition 27,500 27,500 Other Debt 16,257 1,812 Net discount on debt and deferred financing fees (57,559) (5,688) $ 362,198 $ 253,624 Less current maturities of long-term debt (6,219) (2,248) Total long-term debt $ 355,979 $ 251,376 Future maturities of long-term debt, excluding net discount on debt and deferred financing fees, as of December 31, 2020, are as follows: ($'s in 000's) 2021 $ 6,219 2022 5,476 2023 33,255 2024 6,057 2025 2,259 Thereafter 366,491 The Company incurred debt issuance costs of $0.6 million related to the A&R Credit Agreement during the year ended December 31, 2020. The Company incurred debt issuance costs of $0.7 million during the year ended December 31, 2019 related to the A&R Credit Agreement and $5.1 million related to the A&R Term Loan Credit Agreement. The Company incurred debt issuance costs of $5.9 million in May 2020 in connection with the Notes. In accordance with FASB ASC 470, Debt, ($'s in 000's) Debt Discounts Debt Issuance Costs 2021 $ 6,761 $ 470 2022 7,684 534 2023 8,733 607 2024 9,925 690 2025 11,280 784 Thereafter 5,143 356 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2020 | |
Leases | |
Leases | Note 6 – Leases The Company leases certain real estate for commercial, production, and retail purposes, as well as equipment from third parties. Lease expiration dates are between 2021 and 2026. A portion of leases are denominated in foreign currencies. For both operating and finance leases, the Company recognizes a right-of-use asset, which represents the right to use the underlying asset for the lease term, and a lease liability, which represents the present value of our obligation to make payments arising over the lease term. We elected the short-term lease exemption for all leases that qualify. This means leases having an initial term of twelve months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the term of the lease. The Company’s leases may include options to extend or terminate the lease. Renewal options generally range from one The components of lease expense consists of the follow: For the Year Ended $'s in 000's December 31, 2020 December 31, 2019 Finance lease cost Amortization of right-of-use assets $ 1,681 $ 1,441 Interest on lease liabilities 315 308 Operating lease cost 5,831 4,833 Variable lease cost (1) 1,130 629 Short-term lease cost 34 41 Sublease income (528) (452) Total lease cost $ 8,463 $ 6,800 (1) Variable lease cost primarily relates to common area maintenance, property taxes and insurance on leased real estate. Other information related to leases was as follows as of: December 31, 2020 December 31, 2019 Weighted-average remaining lease term (years) Operating leases 4.41 5.15 Finance leases 2.38 2.73 Weighted-average discount rate Operating leases 5.3% 5.3% Finance leases 5.7% 5.7% Annual future commitments under non-cancelable leases as of December 31, 2020, consist of the following: Lease Obligations $'s in 000's Operating Leases Finance Leases 2021 $ 5,861 $ 1,757 2022 5,591 1,584 2023 4,789 1,580 2024 3,280 330 2025 2,357 20 Thereafter 1,365 — Total minimum future obligations $ 23,243 $ 5,271 Less interest (2,539) (367) Present value of net future minimum obligations 20,704 4,904 Less current lease obligations (4,915) (1,566) Long-term lease obligations $ 15,789 $ 3,338 Supplemental cash flow information: Year Ended Year Ended $'s in 000's December 31, 2020 December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ 315 $ 308 Operating cash flows from operating leases 5,668 4,568 Financing cash flows from finance leases 1,965 1,547 (Noncash) right-of-use assets obtained in exchange for lease obligations Operating leases 5,105 5,368 Finance leases 2,019 (3,006) Total operating lease expense for the year ended December 31, 2018, totaled $6.0 million. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Taxes | |
Income Taxes | Note 7 - Income Taxes The Company is the sole managing member of Holdco. Holdco is treated as a partnership for U.S. federal income tax purposes with the remaining partners of Holdco (the “LLC Owners”) owning a non-controlling interest. The LLC Owners have an exchange right which grants them the right to exchange a Holdco partnership interest and a PetIQ Class B Common Stock share for a PetIQ Class A Common Stock share. Upon such an exchange, the Company is treated as purchasing an additional interest in Holdco from the LLC Owners in a taxable exchange which generates deferred tax assets as a result of an increase in tax basis for the Company. As of December 31, 2020, the Company had $67.6M of deferred tax assets associated with these exchanges, which currently have a full valuation allowance against the deferred tax asset. The non-controlling interests totaled approximately 11% of the ownership of Holdco as of December 31, 2020. See Note 11 – Non-controlling interests for more information. HoldCo’s members, including the Company, are liable for federal, state, and local income taxes based on their share of HoldCo’s taxable income. Holdco makes cash distributions to members to pay taxes attributable to their allocable share of income earned. In the years ended December 31, 2020 and 2019, the Company made cash distributions of $0.05 million and $1.7 million, respectively. Additionally, Holdco accrues for distributions required to be made related to estimated income taxes. During the years ended December 31, 2020 and 2019, the Company relieved previously accrued distributions of $(0.4) The components of earnings before net loss taxes, determined by tax jurisdiction, are as follows: Years Ended December 31 $'s in 000's 2020 2019 2018 United States $ (29,239) $ (17,953) $ (1,116) Foreign 433 342 542 Total $ (28,806) $ (17,611) $ (574) The provision for income taxes for 2020, 2019, and 2018 consisted of the following: Years Ended December 31 $'s in 000's 2020 2019 2018 Current: Federal $ — $ — $ — State 327 317 148 Foreign 137 17 — $ 464 $ 334 $ 148 Deferred and other: Federal 40,598 (2,146) (751) State 11,175 (1,336) (135) Foreign (21) (161) 77 51,752 (3,643) (809) Total income tax expense (benefit) $ 52,216 $ (3,309) $ (661) Reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows: Years Ended December 31 2020 2019 2018 Income tax expense (benefit) at federal statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes net of federal tax benefit 2.4 1.3 (5.7) Non-controlling interest and nontaxable income (2.9) (4.0) 54.7 Deferred tax rate changes (1.3) (0.4) 37.2 Share-based compensation 0.6 0.1 18.3 Tax Cuts and Jobs Act of 2017 - - (13.1) Return-to-Provision (2.0) 0.8 13.4 Valuation Allowance (198.4) 0.4 0.7 Other (0.7) (0.4) (11.3) Effective income tax rate (181.3) % 18.8 % 115.2 % Our tax rate is affected primarily by the recognition of a valuation allowance during the year ended December 31, 2020 and the portion of income and expense allocated to the noncontrolling interest. It is also affected by discrete items that may occur in any given year such as stock based compensation, but are not consistent from year to year. As a result of the IPO and reorganization transactions, the Company has recorded deferred tax assets and liabilities based on the differences between the book value of assets and liabilities for financial reporting purposes and those amounts applicable for income tax purposes. Deferred tax assets have been recorded for the basis differences resulting from the purchase of LLC Interests from existing members and newly issued LLC Interests acquired directly from Holdco. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2020 and 2019 are as follows: $'s in 000's 2020 2019 Deferred tax assets Investment in partnership $ 53,294 $ 53,303 Fixed assets 32 29 Net operating loss carryforwards and tax credits 18,001 6,775 Other accruals and reversals 9 5 Subtotal 71,336 60,112 Less: valuation allowance (71,161) (143) Net deferred tax assets 175 59,969 Deferred tax liabilities Intangible assets $ (447) $ (293) Other (6) (5) Net deferred tax liabilities $ (453) $ (298) At December 31, 2020, the Company has federal net operating loss (“NOL”) carryforwards of $66.0 million, of which $1.9 million, generated in 2017 and prior, will expire in 2037, the remaining NOLs do not expire. The NOL generated in 2018 and after of $64.1 million will have an indefinite carryforward period but can generally only be used to offset 80% of taxable income in any particular year. The Company has a federal business interest expense carryover totaling $6.1 million as of December 31, 2020, which has an indefinite carryforward period but is limited in any particular year based on certain provisions. As of December 31, 2020, the Company has charitable contribution carryforwards of $1.0 million, which if unused will expire between 2021 and 2025. The Company has state NOL carryforwards of $384.7 million (tax effected $2.8 million) as of December 31, 2020 which expire between 2022 and 2038 and others that have an indefinite carryforward period. At December 31, 2020 the Company had foreign NOL carryforwards of $0.8 million which do not expire. The Company has assessed the realizability of the net deferred tax assets as of December 31, 2020 and in that analysis has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income to realize its deferred tax assets. The Company believes it is more likely than not that the benefit from the recorded deferred tax assets will not be realized. The Company has recorded a valuation allowance for deferred tax assets of $71.2 million and $0.1 million as of December 31, 2020 and 2019, respectively. In future periods, if we conclude we have future taxable income sufficient to recognize the deferred tax assets, we may reduce or eliminate the valuation allowance. The Company has not recognized any uncertain tax positions, penalties or interest as we have concluded that no such positions exist. Accordingly, no unrecognized tax benefit would impact the effective tax rate. If interest and penalties were accrued, we would recognize interest and penalties as income tax expense. We are subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2020, tax years from 2017 to present are subject to examination by the tax authorities. On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. The Company will benefit from the Employee Retention Credits and the payroll tax deferral. |
Loss per Share
Loss per Share | 12 Months Ended |
Dec. 31, 2020 | |
Loss per Share | |
Loss per Share | N ote 8 – Loss per Share Basic and Diluted Loss per share Basic loss per share of Class A common stock is computed by dividing net loss available to PetIQ, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net loss available to PetIQ, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities. The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock: Year ended December 31, (in 000's, except for per share amounts) 2020 2019 2018 Numerator: Net (loss) income $ (81,022) $ (14,302) $ 87 Less: net (loss) income attributable to non-controlling interests (3,548) (2,849) 869 Net loss attributable to PetIQ, Inc. — basic and diluted (77,474) (11,453) (782) Denominator: Weighted-average shares of Class A common stock outstanding -- basic 24,629 22,652 17,216 Dilutive effects of stock options that are convertible into Class A common stock — — — Dilutive effect of RSUs — — — Dilutive effect for conversion of Notes — — — Weighted-average shares of Class A common stock outstanding -- diluted 24,629 22,652 17,216 Loss per share of Class A common stock — basic $ (3.15) $ (0.51) $ (0.05) Loss per share of Class A common stock — diluted $ (3.15) $ (0.51) $ (0.05) Shares of the Company’s Class B common stock do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of the Company’s Class B common stock as well as all stock options and restricted stock units have not been included in the diluted loss per share calculation as they have been determined to be anti-dilutive under the if-converted method and treasury stock method, respectively. Additionally, all stock options and restricted stock units and convertible Notes have not been included in the diluted earnings per share calculation for the years ended December 31, 2020, 2019 and 2018, as they have been determined to be anti-dilutive under the treasury stock method. |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Dec. 31, 2020 | |
Stock Based Compensation | |
Stock Based Compensation | Note 9 – Stock Based Compensation PetIQ, Inc. Omnibus Incentive Plan The PetIQ, Inc. Omnibus Incentive Plan, as amended (the “Plan”), provides for the grant of various equity-based incentive awards to directors of the Company, employees, and consultants. The types of equity-based awards that may be granted under the Plan include: stock options, stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), and other stock-based awards. The Company has 3,914 thousand authorized shares under the Plan. As of December 31, 2020 and 2019, 1,293 thousand and 2,017 thousand shares were available for issuance under the Plan, respectively. All awards issued under the Plan may only be settled in shares of Class A common stock. Shares issued pursuant to awards under the incentive plans are from our authorized but unissued shares. PetIQ, Inc. 2018 Inducement and Retention Stock Plan for CVC Employees The PetIQ, Inc. 2018 Inducement and Retention Stock Plan for CVC Employees (the “Inducement Plan”) provides for the grant of stock options to employees hired in connection with the VIP Acquisition as employment inducement awards pursuant to NASDAQ Listing Rule 5635(c)(4). The Inducement Plan reserved 800 Stock Options The Company awards stock options to certain employees and directors under the Plan and previously issued stock options under the Inducement Plan, which are subject to time-based vesting conditions, typically 25% on each anniversary of the grant date until fully vested. Upon a termination of service relationship by the Company, all unvested options will be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The maximum contractual term for stock options is 10 years. The fair value of these equity awards is amortized to equity based compensation expense over the vesting period. Expense recognized totaled $6.5 million and $6.2 million for the years ended December 31, 2020, and 2019, respectively. All stock based compensation expense is included in general and administrative expenses based on the role of recipients. The fair value of the stock option awards was determined on the grant dates using the Black-Scholes valuation model based on the following weighted-average assumptions for the periods ended: December 31, 2020 December 31, 2019 Expected term (years) (1) 6.25 6.25 Expected volatility (2) 33.91 % 35.00 % Risk-free interest rate (3) 0.37 % 2.37 % Dividend yield (4) 0.00 % 0.00 % (1) The Company utilized the simplified method to determine the expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. (2) The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period consistent with the expected option term. (3) The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds to the expected term of the stock options. (4) The Company has not paid and does not anticipate paying a cash dividend on our common stock. The weighted average grant date fair value of stock options granted during the period ended December 31, 2020 and 2019 was $11.88 and $10.63, respectively, per option. The following table summarizes the activity of the Company’s unvested stock options for the period ended December 31, 2020: Weighted Average Weighted Aggregate Remaining Stock Average Intrinsic Contractual Options Exercise Value Life (in 000's) Price (in 000's) (years) Outstanding at December 31, 2017 599 $ 16.00 $ 3,496 9.5 Granted 1,617 25.74 Exercised (76) 18.83 Forfeited (195) 21.37 Cancelled/Expired — — Outstanding at December 31, 2018 1,945 $ 23.45 $ 5,527 9.1 Granted 423 27.54 Exercised (119) 19.51 Forfeited (168) 21.92 Cancelled/Expired (9) 25.70 Outstanding at December 31, 2019 2,072 $ 24.63 $ 6,266 8.0 Granted 505 20.22 Exercised (395) 23.48 $ 4,468 Forfeited (96) 21.42 Outstanding at December 31, 2020 2,086 $ 23.93 $ 30,302 7.2 Options exercisable at December 31, 2020 831 $ 11,778 5.9 At December 31, 2020, total unrecognized compensation cost related to unvested stock options was $8.4 million and is expected to be recognized over a weighted-average period of approximately 2.2 years. Restricted Stock Units The Company awards RSUs to certain employees and directors under the Plan, which are subject to time-based vesting conditions. Upon a termination of service relationship by the Company, all unvested RSUs will generally be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The fair value of RSUs are measured based on the closing fair market value of the Company’s common stock on the date of grant. At December 31, 2020, total unrecognized compensation cost related to unvested RSUs was $5.8 million and is expected to vest over a weighted average of 2.8 years. The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $2.6 million and $1.1 million for the years ended December 31, 2020 and 2019, respectively. All stock based compensation expense is included in general and administrative expenses based on the role of recipients. The following table summarizes the activity of the Company’s RSUs for the period ended December 31, 2020: Weighted Number of Average Shares Grant Date (in 000's) Fair Value Outstanding at December 31, 2018 51 $ 33.16 Granted 123 27.61 Settled (25) 30.43 Forfeited (15) 30.58 Outstanding at December 31, 2019 133 $ 28.85 Granted 271 20.73 Settled (70) 25.65 Forfeited (17) 23.34 Nonvested RSUs at December 31, 2020 317 $ 22.91 The total equity based compensation expense for these plans over the vesting period totaled $9.2 million, $7.4 million, and $3.8 million for the years ended December 31, 2020, 2019, and 2018, respectively. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $0.0 million, $1.4 million and $0.5 million for the years ended December 31, 2020, 2019, and 2018, respectively. |
Stockholder's Equity
Stockholder's Equity | 12 Months Ended |
Dec. 31, 2020 | |
Stockholder's Equity | |
Stockholder's Equity | Note 10 - Stockholders’ Equity Certificate of Incorporation The Company’s amended and restated certificate of incorporation, among other things, provides for the (i) authorization of 125,000,000 shares of Class A common stock with a par value of $0.001 per share; (ii) authorization of 100,000,000 shares of Class B common stock with a par value of $0.001 per share; (iii) authorization of 12,500,000 shares of blank check preferred stock; and (iv) establishment of a classified board of directors, divided into three classes, each of whose members will serve for staggered three-year terms. Each share of the Company’s Class A common stock and Class B common stock entitles its holders to one vote per share on all matters presented to the Company’s stockholders generally. Holders of the Company’s Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company. Shares of Class B common stock may only be issued to the extent necessary to maintain the one-to-one ratio between the number of LLC interests of HoldCo held by Continuing LLC Owners. Shares of Class B common stock are transferable only together with an equal number of LLC Interests. Shares of Class B common stock will be canceled on a one-for-one basis upon the redemption or exchange any of the outstanding LLC Interests held by the Continuing LLC Owners. The Company must, at all times, maintain a one-to-one ratio between the number of outstanding shares of Class A common stock and the number of LLC Interests owned by PetIQ (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities). 2018 Public Offering On October 1, 2018, the Company closed an underwritten public offering of 5,750 thousand shares of Class A common stock. The Company sold 2,000 thousand newly issued shares of Class A common stock and received net proceeds of approximately $73.9 million after deducting underwriting discounts and commissions and offering expenses. The remaining 3,750 thousand shares of Class A common stock were sold by selling stockholders and the Company did not receive any proceeds with respect hereto. In conjunction with the 2018 Public Offering, a number of holders of Class B common stock exchanged LLC Interests and corresponding Class B common shares for Class A common stock. The impact on non-controlling interest is shown along with other exchanges during the year in Note 11 – Non-Controlling Interests. |
Non-Controlling Interests
Non-Controlling Interests | 12 Months Ended |
Dec. 31, 2020 | |
Non-Controlling Interests | |
Non-Controlling Interests | Note 11 - Non-Controlling Interests The Company reports a non-controlling interest representing the LLC interests of HoldCo held by Continuing LLC Owners. Changes in PetIQ’s ownership interest in HoldCo while PetIQ retains its controlling interest in HoldCo will be accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC interests of HoldCo by the Continuing LLC Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when HoldCo has positive or negative net assets, respectively. The Company is also required to make tax distributions based on the LLC Agreement to Continuing LLC Members on a regular basis, these distributions will reduce the non-controlling interest. As of December 31, 2020, there were 28,751 thousand LLC Interests outstanding, of which PetIQ owned 25,711 LLC Interests held % of Total LLC LLC $'s in 000's Owners PetIQ, Inc. Total Owners PetIQ, Inc. As of January 1, 2019 6,547 21,620 28,167 23.2% 76.8% Stock based compensation adjustments — 140 140 Exchange transactions (1,794) 1,794 — As of December 31, 2019 4,752 23,554 28,306 16.8% 83.2% Stock based compensation adjustments — 445 445 Exchange transactions (1,712) 1,712 — As of December 31, 2020 3,040 25,711 28,751 10.6% 89.4% |
Customer Concentration
Customer Concentration | 12 Months Ended |
Dec. 31, 2020 | |
Customer Concentration | |
Customer Concentration | N ote 12 - Customer Concentration The Company has significant exposure to customer concentration. During each of the years ended December 31, 2020, 2019, and 2018, two , two , and one customers, respectively, accounted for more than 10% of sales individually and in aggregate accounted for 42%, 35% , and 18% of net sales, respectively. At December 31, 2020, one Products segment customer individually accounted for more than 10% of outstanding trade receivables, and accounted for 52% of outstanding trade receivables, net. At December 31, 2019 two Products segment customers individually accounted for more than 10% of outstanding trade receivables, and accounted for 61% of outstanding trade receivables, net. All of our customer concentration exists in our Products segment. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 13 - Commitments and Contingencies Litigation Contingencies During the years ended December 31, 2020 and 2019, the Company recorded liabilities of $7.8 million and $1.0 million, respectively, for contract termination costs, related to settlements for alleged breach of contract. The expense is included within General and Administrative expenses for the years ended December 31, 2020 and 2019. On April 4, 2018, Med Vets, Inc. and Bay Medical Solutions Inc. (collectively “Plaintiffs”) filed suit in the United States District Court for the Northern District of California against PetIQ and VIP Petcare Holdings, Inc. for alleged unlawful merger and other antitrust violations. On June 29, 2020, the 9 th en banc th The Company records a liability when a particular contingency is probable and estimable and provides disclosure for contingencies that are at least reasonably possible of resulting in a loss including an estimate which we currently cannot make. The Company has not accrued for any contingency, at December 31, 2020 as the Company does not consider any contingency to be probable or estimable. The Company expenses legal costs as incurred within general and administrative expenses on the consolidated statements of operations. Commitments We have commitments for leases and long-term debt that are discussed further in Note 5, Debt, and Note 6, Leases. In addition, we have purchase obligations for goods and services, capital expenditures, and raw materials entered into in the normal course of business. |
Segments
Segments | 12 Months Ended |
Dec. 31, 2020 | |
Segments | |
Segments | Note 14 - Segments The Company has two operating segments: Products and Services. The Products segment consists of the Company’s manufacturing and distribution business. The Services segment consists of the Company’s veterinary services, and related product sales, provided by the Company directly to consumers. The segments are based on the discrete financial information reviewed by the Chief Operating Decision Maker (“CODM”) to make resource allocation decisions and to evaluate performance. We measure and evaluate our reportable segments based on net sales and segment Adjusted EBITDA. We exclude from our segments certain corporate costs and expenses, such as accounting, legal, human resources, information technology and corporate headquarters expenses as our corporate functions do not meet the definition of a segment as defined in the accounting guidance related to segment reporting. Financial information relating to the Company’s operating segments for the years ended: $'s in 000's Unallocated December 31, 2020 Products Services Corporate Consolidated Net Sales $ 725,705 $ 54,346 $ — $ 780,051 Adjusted EBITDA 117,216 3,387 (52,811) 67,792 Depreciation expense 4,810 3,775 3,497 12,082 Capital expenditures 13,394 7,373 1,625 22,392 $'s in 000's Unallocated December 31, 2019 Products Services Corporate Consolidated Net Sales $ 617,118 $ 92,313 $ — $ 709,431 Adjusted EBITDA 73,537 20,045 (32,907) 60,675 Depreciation expense 3,552 3,170 2,417 9,139 Capital expenditures 1,297 6,409 2,570 10,276 $'s in 000's Unallocated December 31, 2018 Products Services Corporate Consolidated Net Sales $ 450,229 $ 78,385 $ — $ 528,614 Adjusted EBITDA 52,185 15,246 (25,892) 41,539 Depreciation expense 2,343 2,326 1,988 6,657 Capital expenditures 1,339 3,440 2,399 7,178 The following table reconciles Segment Adjusted EBITDA to Net (Loss) income for the periods presented. For the years ended $'s in 000's December 31, 2020 December 31, 2019 December 31, 2018 Adjusted EBITDA: Product $ 117,216 $ 73,537 $ 52,185 Services 3,387 20,045 15,246 Unallocated Corporate (52,811) (32,907) (25,892) Total Consolidated 67,792 60,675 41,539 Adjustments: Depreciation (12,082) (9,139) (6,657) Amortization (12,815) (5,994) (5,210) Interest (26,299) (14,495) (8,022) Acquisition costs (1) (2,620) (6,147) (3,787) Stock based compensation expense (9,170) (7,355) (3,812) Purchase accounting adjustment to inventory (2) — (4,805) (2,149) Non same-store revenue (3) 8,987 8,088 3,967 Non same-store costs (3) (22,256) (19,553) (10,345) Fair value adjustment of contingent note — (7,320) (3,280) Integration costs and costs of discontinued clinics (4) (9,776) (3,788) (998) Clinic launch expenses (5) (3,085) (767) (1,380) Non-recurring royalty settlement (6) — — (440) SKU Rationalization (7) — (6,482) — Litigation expenses (1,006) (529) — COVID-19 related costs (8) (6,476) — — Pretax net loss $ (28,806) $ (17,611) $ (574) Income tax benefit (expense) (52,216) 3,309 661 Net (loss) income $ (81,022) $ (14,302) $ 87 (1) Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket costs related to completed and contemplated acquisitions. (2) Purchase accounting adjustment to inventory represents the portion of costs of sales related to the fair value of inventory adjusted as part of the purchase price allocation. During 2019 the amounts relate to the Perrigo Animal Health Acquisition and are part of the Products segment. During 2018 the costs relate to the VIP Acquisition which are part of the Services Segment and the HBH Acquisition, which is part of the Products Segment. (3) Non same-store revenue and costs relate to our Services segment and are from wellness centers, host partners, and regions with less than six full trailing quarters of operating results. (4) Integration costs and costs of discontinued clinics represent costs related to integrating the acquired businesses, such as personnel costs like severance and signing bonuses, consulting work, contract termination, and IT conversion costs. These costs are primarily in the Products segment and the corporate segment for personnel costs, legal and consulting expenses, and IT costs. (5) Clinic launch expenses relate to our Services segment and represent the nonrecurring costs to open new veterinary wellness centers, primarily employee costs, training, marketing, and rent prior to opening for business. (6) Non-recurring royalty settlement represents a settlement paid to a supplier related to a royalty agreement in place since 2013. (7) SKU rationalization relates to the disposal of or reserve to estimated net realizable value for inventory that will either no longer be sold, or will be de-emphasized, as the Company aligns brands between Legacy PetIQ brands and brands acquired as part of the Perrigo Animal Health Acquisition. All costs are included in the Products segment gross margin. (8) Costs related to maintaining service segment infrastructure, staffing, and overhead related to clinics and wellness centers closed due to COVID-19 related health and safety initiatives. Product segment and unallocated corporate costs related to incremental wages paid to essential workers and sanitation costs due to COVID . Supplemental geographic disclosures are below. Year ended December 31, 2020 $'s in 000's U.S. Foreign Total Product sales $ 719,282 $ 6,423 $ 725,705 Service revenue 54,346 — 54,346 Total net sales $ 773,628 $ 6,423 $ 780,051 Year ended December 31, 2019 $'s in 000's U.S. Foreign Total Product sales $ 610,986 $ 6,132 $ 617,118 Service revenue 92,313 — 92,313 Total net sales $ 703,299 $ 6,132 $ 709,431 Year ended December 31, 2018 $'s in 000's U.S. Foreign Total Product sales $ 444,364 $ 5,865 $ 450,229 Service revenue 78,385 — 78,385 Total net sales $ 522,749 $ 5,865 $ 528,614 The net book value of property plant and equipment, by geographic location was as follows as of: December 31, 2020 December 31, 2019 United States $ 61,807 $ 51,397 Europe 1,339 1,128 Total $ 63,146 $ 52,525 |
Related Parties
Related Parties | 12 Months Ended |
Dec. 31, 2020 | |
Related Parties | |
Related Parties | Note 15 - Related Parties As discussed in Note 7– Income taxes, the Company has accrued tax distributions that are payable to Continuing LLC Owners to facilitate the Continuing LLC Owners periodic estimated tax obligations. At December 31, 2020 and 2019, the Company had paid $0.03 million in advance on required tax distributions and accrued $0.4 million, respectively, for estimated tax distributions, which are included in accounts payable on the consolidated balance sheets. As discussed in Note 5– Debt, the Company has notes payable to the Sellers of VIP, who are significant shareholders of the Company, of $27.5 million. The Company had $0.5 million and $0.3 million of accrued interest on these notes as of December 31, 2020, and 2019, respectively. The Company paid $1.7 million and $1.3 million of interest for the years ended December 31, 2020 and 2019, respectively, and paid no interest for the year ended December 31, 2018. Will Santana, a former owner of VIP and board member of PetIQ until July 1, 2020, was one of the main beneficiaries of the VIP Notes. Mr. Santana has sold a sizable portion of his ownership in PetIQ and resigned from the board during 2020, as such he will no longer be considered a related party. The Company leases office and warehouse space from a company under common control of the sellers of VIP, commencing on January 17, 2018. The Company incurred rent expenses of $0.4 million in each of the years ending December 31, 2020, 2019, and 2018, respectively. The lease ended January 5, 2021. Chris Christensen, the brother of CEO, McCord Christensen, acts as the Company’s agent at Moreton Insurance (“Moreton”), which acts as a broker for a number of the Company’s insurance policies. The Company’s annual premium expense, paid to Moreton and subsequently transferred to insurance providers, was $2.8 million, $2.3 million and $1.5 million in 2020, 2019 and 2018, respectively. Mr. Christensen was paid a commission of approximately $0.1 million in each of the years ending December 31, 2020, 2019, and 2018, respectively, by Moreton for the sale of such insurance policies to the Company. In April 2020, the Company purchased a parcel of land for $2.5 million. The broker for the Company was Colliers International, and the agent was Mike Christensen, the brother of CEO McCord Christensen. Total commission paid to Colliers was approximately $75 thousand. |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2020 | |
Employee Benefit Plans | |
Employee Benefit Plans | Note 16 – Employee Benefit Plans The Company sponsors 401(k) defined contribution plans at certain subsidiaries. Participants may elect to defer up to 100% of compensation. The Company makes matching contributions of 100% of the employee deferrals up to 3% of compensation. The Company may also make discretionary profit sharing contributions each year, which are allocated to each eligible participant based on compensation. The Company made matching contributions of $0.9 million, $0.6 million, and $0.3 million, respectively, for the years ended December 31, 2020, 2019 and 2018. |
Principal Business Activity a_2
Principal Business Activity and Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Principal Business Activity and Significant Accounting Policies | |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant, and equipment and intangible assets; the valuation of property, plant, and equipment, intangible assets and goodwill, the valuation of assets and liabilities in connection with acquisitions, the valuation of deferred tax assets, the valuation of inventories, and reserves for legal contingencies. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are at cost, which approximates fair value due to their relatively short maturities. The guarantee note is carried at cost, which approximates fair value due to the recent issuance of the note. Our term loan and revolving credit facility bear interest at a variable interest rate plus an applicable margin and, therefore, carrying amounts approximate fair value. A portion of the purchase price for the acquisition of Community Veterinary Clinics, LLC d/b/a VIP Petcare (“VIP” and such acquisition, the “VIP Acquisition”) was structured in the form of Contingent Notes (the “Contingent Notes”) that vest based on the combined Company EBITDA targets for the years ending December 31, 2018 and 2019 (“Measurement Dates”). See Note 2 – “Business Combinations” for more information regarding the VIP Acquisition. The liabilities related to the 2018 and 2019 Contingent Notes became fixed as of December 31, 2018 and 2019, respectively, and are carried at cost, which approximates fair value as the stated interest rate is consistent with current market rates. The Contingent Notes are included in long-term debt in the accompanying consolidated balance sheets. The Contingent Notes began bearing interest at a fixed rate of 6.75%, with the balance payable July 17, 2023. The following table summarizes the Level 3 activity related to the Contingent Notes for the twelve months ended December 31, 2019: $'s in 000's Balance at beginning of the period $ 2,680 Change in fair value of contingent consideration 7,320 Transfer out of level 3 (10,000) Balance at the end of the period $ — |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the date of acquisition. All credit card, debit card and electronic transfer transactions that process in less than seven days are classified as cash and cash equivalents. The Company maintains its cash accounts in various deposit accounts, the balances of which at times exceeded federal deposit insurance limits during the periods presented. |
Receivables and Credit Policy | Receivables and Credit Policy Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 45 days from the invoice date. Accounts receivable are stated at the amount billed to the customer, net of discounts and estimated deductions. The Company does not have a policy for charging interest on overdue customer account balances. The Company provides an allowance for credit losses equal to expected losses. The Company’s estimate is based on historical collection experience, a review of the current status of trade accounts receivable and known current economic conditions including the current and expected impact of COVID-19. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice. Other receivables consists of various receivables due from vendors, banking partners, and notes receivable from suppliers. Non-current portions of these other receivables are included in other non-current assets on the consolidated balance sheets. Accounts receivable consists of the following as of: $'s in 000's December 31, 2020 December 31, 2019 Trade receivables $ 96,381 $ 67,551 Other receivables 7,094 4,257 103,475 71,808 Less: Allowance for doubtful accounts (720) (431) Total accounts receivable, net $ 102,755 $ 71,377 |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in first-out (“FIFO”) method and includes estimated rebate amounts. The Company maintains reserves for estimated obsolete or unmarketable inventory based on the difference between the cost of inventory and its estimated net realizable value. In estimating the reserves, management considers factors such as excess or slow-moving inventories, product expiration dating, and market conditions. Changes in these conditions may result in additional reserves. Major components of inventories consist of the following as of: $'s in 000's December 31, 2020 December 31, 2019 Raw materials $ 15,761 $ 10,675 Work in progress 2,273 1,717 Finished goods 79,739 67,311 Total inventories $ 97,773 $ 79,703 |
Property, Plant, and Equipment | Property, Plant, and Equipment Property, plant, and equipment are recorded at cost. Expenditures for improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation and amortization is provided using the straight-line method, based on estimated useful lives of the assets, except for leasehold improvements and finance leased assets which are depreciated over the shorter of the expected useful life or the lease term. Depreciation and amortization expense is recorded in cost of sales and general and administrative expenses in the consolidated statements of operations, depending on the use of the asset. The estimated useful lives of property, plant, and equipment are as follows: Computer equipment and software 3 years Vehicle and vehicle accessories 3 - 5 years Buildings 33 years Equipment 2 - 15 years Leasehold improvements 2 - 15 years Furniture and fixtures 5 - 10 years |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill is the excess of the consideration paid over the fair value of specifically identifiable assets, liabilities and contingent liabilities in a business combination. Intangible assets acquired are recorded at estimated fair value. Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are tested for impairment annually during the fourth quarter, and at any time when events suggest an impairment more likely than not occurred. To assess goodwill for impairment, the Company, depending on relevant facts and circumstances, performs either a qualitative assessment or a quantitative analysis utilizing a discounted cash flow valuation model. In performing the qualitative assessment, the Company evaluates relevant factors such as macroeconomic conditions, industry and market considerations, cost factors and overall financial performance, as well as company and reporting unit specific items. If, after assessing these qualitative factors, the Company determines that it is more likely than not that the carrying value of the reporting unit is less than its fair value, then no further testing is required. In performing a quantitative analysis, the Company determines the fair value of a reporting unit using management’s assumptions about future cash flows based on long-range strategic plans. This approach incorporates many assumptions including discount rates and future growth rates. In the event the carrying amount of a reporting unit exceeded its fair value, an impairment loss would be recognized. Indefinite-lived intangible assets are tested for impairment utilizing either a qualitative assessment or a quantitative analysis. For a qualitative assessment, the Company identifies and considers relevant key factors, events, and circumstances to determine whether it is necessary to perform a quantitative impairment test. The key factors considered include macroeconomic, industry, and market conditions, as well as the asset's actual and forecasted results. For the quantitative impairment tests, the Company compares the carrying amounts to the current fair market values. Intangible assets with definite lives are amortized over their estimated useful lives to reflect the pattern over which the economic benefits of the intangible assets are consumed. Definite-lived intangible assets are also evaluated for impairment when impairment indicators are present. No impairment charge was recorded for the years ended December 31, 2020, 2019, and 2018. |
Convertible debt | Convertible Debt On May 19, 2020, we issued $143.8 million aggregate principal amount of Convertible Notes due 2026 (the “Notes”). See Note 5 – “Debt”. We separately account for the liability and equity components of convertible debt instruments that can be settled in cash by allocating the proceeds from issuance between the liability component and the embedded conversion option in accordance with accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. The value of the equity component is calculated by first measuring the fair value of the liability component, using the interest rate of a similar liability that does not have a conversion feature, as of the issuance date. The difference between the proceeds from the convertible debt issuance and the amount measured as the liability component is recorded as the equity component with a corresponding discount recorded on the debt. We recognize amortization of the resulting discount using the effective interest method as interest expense in our consolidated statements of operations. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. |
Revenue Recognition | Revenue Recognition When Performance Obligations Are Satisfied A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are product sales and the delivery of veterinary services. Revenue is generally recognized for product sales on a point in time basis when product control is transferred to the customer. In general, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time. The Company determined that certain products manufactured to a customer’s specifications do not have an alternative future use at a reasonable profit margin due to costs associated with reworking, transporting and repackaging these products. These products are produced subject to purchase orders that include an enforceable right to payment. Therefore the Company determined that revenue on these products would be recognized over time, as the products are produced. This represents a minor subset of the products the Company manufactures. Revenue for services is recognized over time as the service is delivered, typically over a single day. Payment is typically rendered at the time of service. Customer contracts generally do not include more than one performance obligation. When a contract does contain more than one performance obligation, we allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data. The performance obligations in our contracts are satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of December 31, 2020. Variable Consideration In addition to fixed contract consideration, most contracts include some form of variable consideration. The most common forms of variable consideration include discounts, rebates, and sales returns and allowances. Variable consideration is treated as a reduction in revenue when product revenue is recognized. Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration each period based on the terms of the agreements, historical experience, and any recent changes in the market. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe therefore not requiring any additional constraint on the variable consideration. Trade marketing expense, consisting primarily of customer pricing allowances and merchandising funds are offered through various programs to customers and are designed to promote our products. They include the cost of in-store product displays, feature pricing in retailers' advertisements and other temporary price reductions. These programs are offered to our customers both in fixed and variable (rate per case) amounts. The ultimate cost of these programs depends on retailer performance and is subject to management estimates. Certain retailers require the payment of product introductory fees in order to obtain space for the Company's products on the retailer's store shelves. This cost is typically a lump sum and is determined using the expected value based on the contract between the two parties. Both trade marketing expense and product introductory fees are recognized as reductions of revenue at the time the transfer of control of the associated products occurs. Accruals for expected payouts, or amounts paid in advance, under these programs are included as accounts payable or other current assets in the Consolidated Balance Sheets. Significant Payment Terms Our customer contracts identify the product, quantity, price, payment and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more extended, no terms beyond one year are granted at contract inception. As a result, we do not adjust the promised amount of consideration for the effects of a significant financing component because the period between our transfer of a promised good or service to a customer and the customer’s payment for that good or service will be one year or less. Shipping All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in the cost of sales. This includes shipping and handling costs after control over a product has transferred to a customer. Warranties & Returns PetIQ provides all customers with a standard or assurance type warranty. Either stated or implied, the Company provides assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No significant services beyond an assurance warranty are provided to customers. The Company does not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a reduction in revenue. This return estimate is reviewed and updated each period and is based on historical sales and return experience. Contract balances |
Cost of Services | Cost of Services Cost of Services are comprised of all service and product costs related to the delivery of veterinary services, including but not limited to, salaries and contract costs of veterinarians, technicians and other clinic based personnel, transportation and delivery costs, rent, occupancy costs, supply costs, depreciation and amortization of clinic assets, certain marketing and promotional expenses and costs of goods sold. |
Research and Development and Advertising Costs | Research and Development and Advertising Costs Research and development and advertising costs are expensed as incurred and are included in general and administrative expenses. Research and development costs amounted to $2.3 million, $1.3 million, and $0.2 million and advertising costs were $10.1 million, $4.5 million, and $2.9 million for the years ended December 31, 2020, 2019, and 2018, respectively. |
Collaboration Agreements | Collaboration Agreements Through the Perrigo Animal Health Acquisition, we entered into a product development and asset purchase agreement with a third party for certain product formulations in development by the third party. The Company may make up to $20.5 million of payments over the course of the next several years contingent on achievement of certain development and regulatory approval milestones. Product development costs are expensed as incurred or as milestone payments become probable. There can be no assurance that these products will be approved by the U.S. Food and Drug Administration (“FDA”) on the anticipated schedule or at all. Consideration paid after FDA approval will be capitalized and amortized to cost of goods sold over the economic life of each product. The expenses paid prior to FDA approval will be included in General and Administrative expenses on the Consolidated Statements of Operations. There were no expenses incurred under the agreement for the periods ended December 31, 2020 and 2019. |
Stock based compensation | Stock based compensation The Company expenses employee share-based awards under ASC Topic 718, Compensation—Stock Compensation, which requires compensation cost for the grant-date fair value of share-based awards to be recognized over the requisite service period. Stock options granted to executives and other employees are valued using the Black-Scholes option pricing model. See Note 9 for more information. |
Accounting for Income taxes | Accounting for Income Taxes The Company uses the asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred taxes are measured using rates expected to apply to taxable income in years in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company uses a two-step process for the measurement of uncertain tax positions that have been taken or are expected to be taken in a tax return. The first step is a determination of whether the tax position should be recognized in the consolidated financial statements. The second step determines the measurement of the tax position. The Company records potential interest and penalties on uncertain tax positions as a component of income tax expense. |
Interest expense, net | Interest expense, net Interest expense, net, is comprised primarily of interest expense related to (i) our debt agreements, (ii) unused line fees, (iii) amortization of deferred loan fees and discounts, (iv) finance lease obligations and the mortgage note outstanding, offset by interest income earned on our demand deposits and other assets. Interest expense was $26.3 million, $14.9 million, and $8.3 million for the years ended December 31, 2020, 2019, and 2018, respectively, offset by $0.0 million, $0.4 million, and $0.3 million of interest income, respectively. |
Non-controlling interest | Non-controlling interest |
Litigation | Litigation The Company is subject to various legal proceedings, claims, litigation, investigations and contingencies arising out of the ordinary course of business. If the likelihood of an adverse legal outcome is determined to be probable and the amount of loss is estimable, then a liability is accrued in accordance with accounting guidance for Contingencies. If the assessment indicates a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. The Company consults with both internal and external legal counsel related to litigation. See Note 13 for more information. |
Earnings Per Share | Earnings Per Share Basic earnings per share is computed by dividing net loss attributable to PetIQ, Inc. by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net loss attributable to PetIQ, Inc., adjusted as necessary for the impact of potentially dilutive securities, by the weighted-average shares outstanding during the period and the impact of securities that would have a dilutive effect on earnings per share. See Note 8 for further discussion. |
Recently Issued Accounting Pronouncements / Adopted Accounting Standard Updates | From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”). Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, "Financial Instruments - Credit Losses." This ASU requires an organization to measure all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable information. Organizations will now use forward-looking information to better estimate their credit losses. The Company adopted this ASU using a modified retrospective approach. Under this method of adoption, the Company determined that there was no cumulative-effect adjustment to beginning Retained earnings on the consolidated balance sheet. Adoption of this standard did not impact the Company’s net loss and had no impact on the consolidated statement of cash flows. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The purpose of ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In addition, ASU 2016-02 modifies the definition of a lease to clarify that an arrangement contains a lease when such arrangement conveys the right to control the use of an identified asset. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within the year of adoption. Originally under ASU 2016-02, an organization was required upon adoption to recognize and measure leases beginning in the earliest period presented using a modified retrospective approach and restate the financial statements for all periods presented. In July 2018, the FASB issued ASU 2018-11, which amends ASU 2016-02 to provide organizations with an additional (and optional) transition method whereby it may elect to recognize and measure leases by applying the cumulative impact of adopting ASU 2016-02 to the opening retained earnings balance in the period of adoption, thereby removing the requirement that the financial statements of prior periods by restated. The Company adopted the provisions of this guidance effective January 1, 2019, using the modified retrospective optional transition method. Therefore, the standard was applied beginning January 1, 2019 and prior periods were not restated. The adoption of the standard did not result in a cumulative-effect adjustment to the opening balance of accumulated deficit. The Company elected the package of practical expedients and implemented internal controls and system functionality to enable the preparation of financial information upon adoption. In addition, the Company has elected to apply the practical expedient to not separate the lease and non-lease components for all of the Company’s leases. The adoption of the new standard resulted in the recognition of a right of use asset and short-term and long-term liabilities recorded on the Company’s consolidated balance sheet related to operating leases. Accounting for finance leases remained substantially unchanged. In addition, the adoption of the standard did not have a material impact on the Company’s results of operations or cash flows. In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, we intend to adopt ASU 2020-06 using the full retrospective approach. We expect the adoption of the new standard to result in a decrease to stockholders equity of $51.4 million and a corresponding increase to convertible senior notes. Interest expense, net for the year ending December 31, 2020 will decrease approximately $4.0 million. Interest expense, net, recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. Additionally we expect that the change will result in significantly more dilutive shares outstanding. Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any of these accounting pronouncements had or will have a material impact on its consolidated financial statements. |
Principal Business Activity a_3
Principal Business Activity and Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Principal Business Activity and Significant Accounting Policies | |
Summary of Level 3 activity related to the contingent consideration | $'s in 000's Balance at beginning of the period $ 2,680 Change in fair value of contingent consideration 7,320 Transfer out of level 3 (10,000) Balance at the end of the period $ — |
Schedule of accounts receivable | $'s in 000's December 31, 2020 December 31, 2019 Trade receivables $ 96,381 $ 67,551 Other receivables 7,094 4,257 103,475 71,808 Less: Allowance for doubtful accounts (720) (431) Total accounts receivable, net $ 102,755 $ 71,377 |
Schedule of components of inventories | $'s in 000's December 31, 2020 December 31, 2019 Raw materials $ 15,761 $ 10,675 Work in progress 2,273 1,717 Finished goods 79,739 67,311 Total inventories $ 97,773 $ 79,703 |
Schedule of estimated useful lives of property, plant, and equipment | Computer equipment and software 3 years Vehicle and vehicle accessories 3 - 5 years Buildings 33 years Equipment 2 - 15 years Leasehold improvements 2 - 15 years Furniture and fixtures 5 - 10 years |
Business Combination (Tables)
Business Combination (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Capstar Acquisition | |
Schedule of fair value of purchased assets | $'s in 000's Fair Value Amortizable intangibles Customer relationships $ 70,901 Patents and processes 9,895 Total amortizable intangibles 80,796 Non-amortizable intangibles Trademarks and other 15,276 Total purchased intangible assets $ 96,072 |
Perrigo Animal Health Acquisition | |
Summary of preliminary estimated fair value of the consideration | $'s in 000's Fair Value Inventories $ 17,998 Property, plant and equipment 19,568 Other current assets 13,048 Other assets 9,680 Indefinite-lived intangible assets 23,040 Definite-lived intangible assets – 13 year weighted average life 14,480 Goodwill 105,838 Total assets 203,652 Liabilities assumed 19,259 Purchase price $ 184,393 Cash paid, net of cash acquired $ (185,090) Post-closing working capital adjustment 697 Fair value of total consideration transferred $ (184,393) |
Property, Plant, and Equipment
Property, Plant, and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant, and Equipment | |
Property, Plant, and Equipment | $'s in 000's December 31, 2020 December 31, 2019 Leasehold improvements $ 19,709 $ 15,517 Equipment 25,664 23,138 Vehicles and accessories 7,110 6,007 Computer equipment and software 10,858 8,070 Buildings 10,168 10,050 Furniture and fixtures 2,347 1,836 Land 7,067 4,557 Construction in progress 11,331 3,392 94,254 72,567 Less accumulated depreciation (31,108) (20,042) Total property, plant, and equipment $ 63,146 $ 52,525 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Intangible Assets and Goodwill | |
Schedule of intangible assets | $'s in 000's Useful Lives December 31, 2020 December 31, 2019 Amortizable intangibles Certification 7 years $ 350 $ 350 Customer relationships 12 - 20 years 160,178 89,232 Patents and processes 5 - 10 years 14,905 4,928 Brand names 5 - 15 years 24,740 15,019 Total amortizable intangibles 200,173 109,529 Less accumulated amortization (25,984) (13,058) Total net amortizable intangibles 174,189 96,471 Non-amortizable intangibles Trademarks and other 33,341 18,016 In-process research and development 5,470 5,469 Intangible assets, net of accumulated amortization $ 213,000 $ 119,956 |
Estimated future amortization expense | Years ending December 31, ($'s in 000's) 2021 $ 18,504 2022 18,310 2023 17,481 2024 15,078 2025 14,369 Thereafter 90,447 |
Schedule of Goodwill | Reporting Unit ($'s in 000's) Products Services Total Goodwill as of January 1, 2019 77,765 47,264 125,029 Foreign currency translation 178 — 178 Acquisitions 105,838 — 105,838 Goodwill as of December 31, 2019 183,781 47,264 231,045 Foreign currency translation 113 — 113 Goodwill as of December 31, 2020 $ 183,894 $ 47,264 $ 231,158 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Schedule of components of long term debt | $'s in 000's December 31, 2020 December 31, 2019 Convertible Notes $ 143,750 $ — Term loans 217,250 220,000 Revolving credit facility 15,000 10,000 Notes Payable - VIP Acquisition 27,500 27,500 Other Debt 16,257 1,812 Net discount on debt and deferred financing fees (57,559) (5,688) $ 362,198 $ 253,624 Less current maturities of long-term debt (6,219) (2,248) Total long-term debt $ 355,979 $ 251,376 |
Summary of debt interest expense | For the Year Ended December 31, 2020 ($'s in 000's) Contractual interest expense $ 3,546 Amortization of debt discount 3,759 Amortization of debt issuance costs 261 Total $ 7,566 Effective interest rate of the liability component 13.0% |
Future maturities of long-term debt, excluding the net discount on debt, deferred financing fees and contingent notes | ($'s in 000's) 2021 $ 6,219 2022 5,476 2023 33,255 2024 6,057 2025 2,259 Thereafter 366,491 |
Convertible Notes [Member] | |
Convertible notes summary | ($'s in 000's) December 31, 2020 Par value of the Notes $ 143,750 Unamortized debt discount (49,526) Unamortized debt issuance costs (3,441) Net carrying amount $ 90,783 |
Schedule of net carrying amount of the equity component of notes | ($'s in 000's) December 31, 2020 Proceeds allocated to the conversion option $ 53,285 Deferred tax affect (8,197) Issuance costs (2,181) Net carrying amount $ 42,907 |
Schedule of amortization expense debt discount and debt issuance costs | ($'s in 000's) Debt Discounts Debt Issuance Costs 2021 $ 6,761 $ 470 2022 7,684 534 2023 8,733 607 2024 9,925 690 2025 11,280 784 Thereafter 5,143 356 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases | |
Schedule of components of lease expense | For the Year Ended $'s in 000's December 31, 2020 December 31, 2019 Finance lease cost Amortization of right-of-use assets $ 1,681 $ 1,441 Interest on lease liabilities 315 308 Operating lease cost 5,831 4,833 Variable lease cost (1) 1,130 629 Short-term lease cost 34 41 Sublease income (528) (452) Total lease cost $ 8,463 $ 6,800 (1) Variable lease cost primarily relates to common area maintenance, property taxes and insurance on leased real estate. |
Schedule of other information related to leases | December 31, 2020 December 31, 2019 Weighted-average remaining lease term (years) Operating leases 4.41 5.15 Finance leases 2.38 2.73 Weighted-average discount rate Operating leases 5.3% 5.3% Finance leases 5.7% 5.7% |
Summary of annual future commitments under non-cancelable leases | Lease Obligations $'s in 000's Operating Leases Finance Leases 2021 $ 5,861 $ 1,757 2022 5,591 1,584 2023 4,789 1,580 2024 3,280 330 2025 2,357 20 Thereafter 1,365 — Total minimum future obligations $ 23,243 $ 5,271 Less interest (2,539) (367) Present value of net future minimum obligations 20,704 4,904 Less current lease obligations (4,915) (1,566) Long-term lease obligations $ 15,789 $ 3,338 |
Supplemental cash flow information | Year Ended Year Ended $'s in 000's December 31, 2020 December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ 315 $ 308 Operating cash flows from operating leases 5,668 4,568 Financing cash flows from finance leases 1,965 1,547 (Noncash) right-of-use assets obtained in exchange for lease obligations Operating leases 5,105 5,368 Finance leases 2,019 (3,006) |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Taxes | |
Schedule of components of earnings before net loss taxes, by tax jurisdiction | Years Ended December 31 $'s in 000's 2020 2019 2018 United States $ (29,239) $ (17,953) $ (1,116) Foreign 433 342 542 Total $ (28,806) $ (17,611) $ (574) |
Schedule of provision for income taxes | Years Ended December 31 $'s in 000's 2020 2019 2018 Current: Federal $ — $ — $ — State 327 317 148 Foreign 137 17 — $ 464 $ 334 $ 148 Deferred and other: Federal 40,598 (2,146) (751) State 11,175 (1,336) (135) Foreign (21) (161) 77 51,752 (3,643) (809) Total income tax expense (benefit) $ 52,216 $ (3,309) $ (661) |
Schedule of reconciliation between effective tax rate and statutory tax rate | Years Ended December 31 2020 2019 2018 Income tax expense (benefit) at federal statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes net of federal tax benefit 2.4 1.3 (5.7) Non-controlling interest and nontaxable income (2.9) (4.0) 54.7 Deferred tax rate changes (1.3) (0.4) 37.2 Share-based compensation 0.6 0.1 18.3 Tax Cuts and Jobs Act of 2017 - - (13.1) Return-to-Provision (2.0) 0.8 13.4 Valuation Allowance (198.4) 0.4 0.7 Other (0.7) (0.4) (11.3) Effective income tax rate (181.3) % 18.8 % 115.2 % |
Schedule of tax effects of temporary differences of deferred tax assets and liabilities | $'s in 000's 2020 2019 Deferred tax assets Investment in partnership $ 53,294 $ 53,303 Fixed assets 32 29 Net operating loss carryforwards and tax credits 18,001 6,775 Other accruals and reversals 9 5 Subtotal 71,336 60,112 Less: valuation allowance (71,161) (143) Net deferred tax assets 175 59,969 Deferred tax liabilities Intangible assets $ (447) $ (293) Other (6) (5) Net deferred tax liabilities $ (453) $ (298) |
Loss per Share (Tables)
Loss per Share (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Loss per Share | |
Reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock | Year ended December 31, (in 000's, except for per share amounts) 2020 2019 2018 Numerator: Net (loss) income $ (81,022) $ (14,302) $ 87 Less: net (loss) income attributable to non-controlling interests (3,548) (2,849) 869 Net loss attributable to PetIQ, Inc. — basic and diluted (77,474) (11,453) (782) Denominator: Weighted-average shares of Class A common stock outstanding -- basic 24,629 22,652 17,216 Dilutive effects of stock options that are convertible into Class A common stock — — — Dilutive effect of RSUs — — — Dilutive effect for conversion of Notes — — — Weighted-average shares of Class A common stock outstanding -- diluted 24,629 22,652 17,216 Loss per share of Class A common stock — basic $ (3.15) $ (0.51) $ (0.05) Loss per share of Class A common stock — diluted $ (3.15) $ (0.51) $ (0.05) |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stock Based Compensation | |
Fair value of the stock option awards was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions | December 31, 2020 December 31, 2019 Expected term (years) (1) 6.25 6.25 Expected volatility (2) 33.91 % 35.00 % Risk-free interest rate (3) 0.37 % 2.37 % Dividend yield (4) 0.00 % 0.00 % (1) The Company utilized the simplified method to determine the expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. (2) The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period consistent with the expected option term. (3) The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds to the expected term of the stock options. (4) The Company has not paid and does not anticipate paying a cash dividend on our common stock. |
Summary of the activity of the Company's unvested stock options | Weighted Average Weighted Aggregate Remaining Stock Average Intrinsic Contractual Options Exercise Value Life (in 000's) Price (in 000's) (years) Outstanding at December 31, 2017 599 $ 16.00 $ 3,496 9.5 Granted 1,617 25.74 Exercised (76) 18.83 Forfeited (195) 21.37 Cancelled/Expired — — Outstanding at December 31, 2018 1,945 $ 23.45 $ 5,527 9.1 Granted 423 27.54 Exercised (119) 19.51 Forfeited (168) 21.92 Cancelled/Expired (9) 25.70 Outstanding at December 31, 2019 2,072 $ 24.63 $ 6,266 8.0 Granted 505 20.22 Exercised (395) 23.48 $ 4,468 Forfeited (96) 21.42 Outstanding at December 31, 2020 2,086 $ 23.93 $ 30,302 7.2 Options exercisable at December 31, 2020 831 $ 11,778 5.9 |
Summary of RSU activity | Weighted Number of Average Shares Grant Date (in 000's) Fair Value Outstanding at December 31, 2018 51 $ 33.16 Granted 123 27.61 Settled (25) 30.43 Forfeited (15) 30.58 Outstanding at December 31, 2019 133 $ 28.85 Granted 271 20.73 Settled (70) 25.65 Forfeited (17) 23.34 Nonvested RSUs at December 31, 2020 317 $ 22.91 |
Non-Controlling Interests (Tabl
Non-Controlling Interests (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Non-Controlling Interests | |
Summary of noncontrolling interest | LLC Interests held % of Total LLC LLC $'s in 000's Owners PetIQ, Inc. Total Owners PetIQ, Inc. As of January 1, 2019 6,547 21,620 28,167 23.2% 76.8% Stock based compensation adjustments — 140 140 Exchange transactions (1,794) 1,794 — As of December 31, 2019 4,752 23,554 28,306 16.8% 83.2% Stock based compensation adjustments — 445 445 Exchange transactions (1,712) 1,712 — As of December 31, 2020 3,040 25,711 28,751 10.6% 89.4% |
Segments (Tables)
Segments (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Segments | |
Summary of financial information relating to the Company's operating segments | $'s in 000's Unallocated December 31, 2020 Products Services Corporate Consolidated Net Sales $ 725,705 $ 54,346 $ — $ 780,051 Adjusted EBITDA 117,216 3,387 (52,811) 67,792 Depreciation expense 4,810 3,775 3,497 12,082 Capital expenditures 13,394 7,373 1,625 22,392 $'s in 000's Unallocated December 31, 2019 Products Services Corporate Consolidated Net Sales $ 617,118 $ 92,313 $ — $ 709,431 Adjusted EBITDA 73,537 20,045 (32,907) 60,675 Depreciation expense 3,552 3,170 2,417 9,139 Capital expenditures 1,297 6,409 2,570 10,276 $'s in 000's Unallocated December 31, 2018 Products Services Corporate Consolidated Net Sales $ 450,229 $ 78,385 $ — $ 528,614 Adjusted EBITDA 52,185 15,246 (25,892) 41,539 Depreciation expense 2,343 2,326 1,988 6,657 Capital expenditures 1,339 3,440 2,399 7,178 |
Summary of reconciles segment adjusted ebitda to pretax net income | |
Summary of net book value of property plant and equipment, net by location | Year ended December 31, 2020 $'s in 000's U.S. Foreign Total Product sales $ 719,282 $ 6,423 $ 725,705 Service revenue 54,346 — 54,346 Total net sales $ 773,628 $ 6,423 $ 780,051 Year ended December 31, 2019 $'s in 000's U.S. Foreign Total Product sales $ 610,986 $ 6,132 $ 617,118 Service revenue 92,313 — 92,313 Total net sales $ 703,299 $ 6,132 $ 709,431 Year ended December 31, 2018 $'s in 000's U.S. Foreign Total Product sales $ 444,364 $ 5,865 $ 450,229 Service revenue 78,385 — 78,385 Total net sales $ 522,749 $ 5,865 $ 528,614 The net book value of property plant and equipment, by geographic location was as follows as of: December 31, 2020 December 31, 2019 United States $ 61,807 $ 51,397 Europe 1,339 1,128 Total $ 63,146 $ 52,525 |
Principal Business Activity a_4
Principal Business Activity and Significant Accounting Policies - (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2020segment | May 19, 2020USD ($) | |
Principal Business Activity and Significant Accounting Policies | ||
Number of reportable segments | segment | 2 | |
Debt Instrument, Face Amount | $ | $ 143.8 |
Principal Business Activity a_5
Principal Business Activity and Significant Accounting Policies - Fair value on a recurring basis (Details) | Dec. 31, 2020 | Jul. 31, 2017 |
Fair Value of Financial Instruments | ||
Fixed interest rate | 4.35% | |
Contingent notes | ||
Fair Value of Financial Instruments | ||
Fixed interest rate | 6.75% |
Principal Business Activity a_6
Principal Business Activity and Significant Accounting Policies - Fair value on a contingent consideration (Details) - VIP - Level 3 $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Business Acquisition, Contingent Consideration [Line Items] | |
Balance at beginning of the period | $ 2,680 |
Change in fair value of contingent consideration | 7,320 |
Transfer out of level 3 | $ (10,000) |
Principal Business Activity a_7
Principal Business Activity and Significant Accounting Policies - Receivables and Credit Policy (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Receivables and Credit Policy | ||
Accounts receivable, gross | $ 103,475 | $ 71,808 |
Less: Allowance for credit losses | (720) | (431) |
Total accounts receivable, net | 102,755 | 71,377 |
Trade receivables | ||
Receivables and Credit Policy | ||
Accounts receivable, gross | 96,381 | 67,551 |
Other receivables | ||
Receivables and Credit Policy | ||
Accounts receivable, gross | $ 7,094 | $ 4,257 |
Principal Business Activity a_8
Principal Business Activity and Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Inventories | ||
Raw materials | $ 15,761 | $ 10,675 |
Work in progress | 2,273 | 1,717 |
Finished goods | 79,739 | 67,311 |
Total inventories | $ 97,773 | $ 79,703 |
Principal Business Activity a_9
Principal Business Activity and Significant Accounting Policies - Property, Plant, and Equipment (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Computer equipment and software | |
Property, Plant, and Equipment | |
Estimated useful life | 3 years |
Vehicle and vehicle accessories | Minimum | |
Property, Plant, and Equipment | |
Estimated useful life | 3 years |
Vehicle and vehicle accessories | Maximum | |
Property, Plant, and Equipment | |
Estimated useful life | 5 years |
Buildings | |
Property, Plant, and Equipment | |
Estimated useful life | 33 years |
Equipment | Minimum | |
Property, Plant, and Equipment | |
Estimated useful life | 2 years |
Equipment | Maximum | |
Property, Plant, and Equipment | |
Estimated useful life | 15 years |
Leasehold improvements | Minimum | |
Property, Plant, and Equipment | |
Estimated useful life | 2 years |
Leasehold improvements | Maximum | |
Property, Plant, and Equipment | |
Estimated useful life | 15 years |
Furniture and fixtures | Minimum | |
Property, Plant, and Equipment | |
Estimated useful life | 5 years |
Furniture and fixtures | Maximum | |
Property, Plant, and Equipment | |
Estimated useful life | 10 years |
Principal Business Activity _10
Principal Business Activity and Significant Accounting Policies - Intangible Assets (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Finite-Lived Intangible Assets [Line Items] | |||
Impairment charge | $ 0 | $ 0 | $ 0 |
Principal Business Activity _11
Principal Business Activity and Significant Accounting Policies - Convertible Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | May 19, 2020 |
Debt Instrument [Line Items] | ||
Debt Instrument, Face Amount | $ 143,800 | |
Convertible Notes [Member] | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Face Amount | $ 143,750 |
Principal Business Activity _12
Principal Business Activity and Significant Accounting Policies - Disaggregation of revenue (Details) | Dec. 31, 2020 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Disaggregation of revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year |
Principal Business Activity _13
Principal Business Activity and Significant Accounting Policies - Research and Development and Advertising Costs (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Research and Development and Advertising Costs | |||
Research and development costs | $ 2.3 | $ 1.3 | $ 0.2 |
Advertising costs | $ 10.1 | $ 4.5 | $ 2.9 |
Principal Business Activity _14
Principal Business Activity and Significant Accounting Policies - Collaboration Agreements (Details) $ in Millions | Dec. 31, 2020USD ($) |
Principal Business Activity and Significant Accounting Policies | |
Collaboration agreements, contingent payments to be made | $ 20.5 |
Principal Business Activity _15
Principal Business Activity and Significant Accounting Policies - Interest expense, net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Interest expense, net | |||
Interest expense | $ 26.3 | $ 14.9 | $ 8.3 |
Interest and other income | $ 0 | $ 0.4 | $ 0.3 |
Principal Business Activity _16
Principal Business Activity and Significant Accounting Policies - Non-controlling interest (Details) | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Continuing LLC Owners | |||
Noncontrolling Interest [Line Items] | |||
Interest held by non-controlling owners | 10.60% | 16.80% | 23.20% |
Principal Business Activity _17
Principal Business Activity and Significant Accounting Policies - Recent accounting pronouncements (Details) - ASU 2020-06 $ in Millions | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Increase Decrease To Interest Expense | $ 4 |
Stockholders' Equity, Period Increase (Decrease) | $ 51.4 |
Business Combination - Narrativ
Business Combination - Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Business Combination | |||
Intangible assets, net of accumulated amortization | $ 174,189 | $ 96,471 | |
Acquisition costs | 2,620 | 6,147 | $ 3,787 |
Goodwill not deductible for tax purposes | 105,800 | ||
Perrigo Animal Health Acquisition | |||
Business Combination | |||
Intangible assets, net of accumulated amortization | $ 14,600 | ||
Acquisition costs | $ 6,100 |
Business Combination - Total co
Business Combination - Total consideration (Details) - USD ($) $ in Thousands | Jul. 08, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Preliminary estimated fair value of the consideration | ||||
Goodwill | $ 231,158 | $ 231,045 | $ 125,029 | |
Cash paid, net of cash acquired | $ 185,090 | $ 93,052 | ||
Perrigo Animal Health Acquisition | ||||
Preliminary estimated fair value of the consideration | ||||
Inventories | $ 17,998 | |||
Property, plant, and equipment | 19,568 | |||
Other current assets | 13,048 | |||
Other assets | 9,680 | |||
Indefinite-lived intangible assets | 23,040 | |||
Definite-lived intangible assets | 14,480 | |||
Goodwill | 105,838 | |||
Total assets | 203,652 | |||
Liabilities assumed | 19,259 | |||
Purchase price | 184,393 | |||
Cash paid, net of cash acquired | (185,090) | |||
Post-closing working capital adjustment | 697 | |||
Fair value of total consideration transferred | $ 184,393 | |||
Finite-Lived Intangible Asset, Useful Life | 13 years |
Business Combination - Capstar
Business Combination - Capstar Acquisition (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Jul. 31, 2020USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Business Acquisition [Line Items] | ||||
Acquisition Price | $ 22,392 | $ 10,276 | $ 7,178 | |
Capitalized asset acquisition cost | $ 1,000 | |||
Fair value measurement input | 15 | |||
Amortizable Intangibles | $ 80,796 | |||
Total purchased intangible assets | $ 96,072 | |||
Weighted average amortization period | 11 years 9 months 18 days | |||
Trademarks and other | ||||
Business Acquisition [Line Items] | ||||
Non-Amortizable Intangibles | $ 15,276 | |||
Customer relationships | ||||
Business Acquisition [Line Items] | ||||
Amortizable Intangibles | 70,901 | |||
Patents and processes | ||||
Business Acquisition [Line Items] | ||||
Amortizable Intangibles | $ 9,895 | |||
Capstar Acquisition | ||||
Business Acquisition [Line Items] | ||||
Acquisition Price | $ 95,000 |
Business Combination - Supplier
Business Combination - Supplier Termination, Settlement and Asset Purchase Agreement (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Jul. 31, 2020 | Jul. 31, 2017 | Dec. 31, 2020 | |
Business Acquisition [Line Items] | |||
Amount required to pay pursuant to settlement agreement | $ 20,600 | $ 20,600 | |
Payment on signing | 2,600 | 2,600 | |
Payment per quarter | 1,000 | 1,000 | |
Estimated fair value of the payment obligation | 17,500 | $ 17,500 | |
Fair value of assets acquired | $ 9,700 | $ 9,686 | |
Patents and processes | |||
Business Acquisition [Line Items] | |||
Amortizable Intangibles, useful lives | 10 years |
Property, Plant, and Equipmen_2
Property, Plant, and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | $ 94,254 | $ 72,567 | |
Less accumulated depreciation | (31,108) | (20,042) | |
Property, Plant and Equipment, Net, Total | 63,146 | 52,525 | |
Depreciation and amortization expense | 12,082 | 9,139 | $ 6,657 |
Leasehold improvements | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 19,709 | 15,517 | |
Equipment | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 25,664 | 23,138 | |
Vehicles and accessories | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 7,110 | 6,007 | |
Computer equipment and software | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 10,858 | 8,070 | |
Buildings | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 10,168 | 10,050 | |
Furniture and fixtures | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 2,347 | 1,836 | |
Land | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 7,067 | 4,557 | |
Construction in Progress | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | $ 11,331 | $ 3,392 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill - Intangible Assets (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020USD ($)project | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Intangible Assets and Goodwill | |||
Amortizable Intangibles, gross | $ 200,173 | $ 109,529 | |
Less accumulated amortization | (25,984) | (13,058) | |
Total net amortizable intangibles | 174,189 | 96,471 | |
Intangible assets, net of accumulated amortization | 213,000 | 119,956 | |
Amortization expense | 12,800 | 6,000 | $ 5,200 |
Trademarks and other | |||
Intangible Assets and Goodwill | |||
Non-amortizable intangibles | 33,341 | 18,016 | |
IPRD | |||
Intangible Assets and Goodwill | |||
Non-amortizable intangibles | $ 5,470 | 5,469 | |
Number of acquired R&D projects | project | 3 | ||
Certification | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 7 years | ||
Amortizable Intangibles, gross | $ 350 | 350 | |
Customer relationships | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, gross | $ 160,178 | 89,232 | |
Patents and processes | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 10 years | ||
Amortizable Intangibles, gross | $ 14,905 | 4,928 | |
Brand names | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, gross | $ 24,740 | $ 15,019 | |
Minimum | Customer relationships | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 12 years | ||
Minimum | Patents and processes | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 5 years | ||
Minimum | Brand names | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 5 years | ||
Maximum | Customer relationships | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 20 years | ||
Maximum | Patents and processes | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 10 years | ||
Maximum | Brand names | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 15 years |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill - Estimated future amortization expense (Details) $ in Thousands | Dec. 31, 2020USD ($) |
Intangible Assets and Goodwill | |
2021 | $ 18,504 |
2022 | 18,310 |
2023 | 17,481 |
2024 | 15,078 |
2025 | 14,369 |
Thereafter | $ 90,447 |
Intangible Assets and Goodwil_4
Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Goodwill, Beginning Balance | $ 231,045 | $ 125,029 |
Foreign currency translation | 113 | 178 |
Acquisition | 105,838 | |
Goodwill, Ending Balance | 231,158 | 231,045 |
Product | ||
Goodwill, Beginning Balance | 183,781 | 77,765 |
Foreign currency translation | 113 | 178 |
Acquisition | 105,838 | |
Goodwill, Ending Balance | 183,894 | 183,781 |
Services | ||
Goodwill, Beginning Balance | 47,264 | 47,264 |
Goodwill, Ending Balance | $ 47,264 | $ 47,264 |
Debt - Convertible Notes (Detai
Debt - Convertible Notes (Details) $ / shares in Units, $ in Thousands | May 19, 2020USD ($)D | Dec. 31, 2020USD ($)$ / shares | Dec. 31, 2019$ / shares | Jul. 31, 2017 |
Debt Instrument [Line Items] | ||||
Aggregate principal amount | $ 143,800 | |||
Interest rate | 4.35% | |||
Convertible Notes [Member] | ||||
Debt Instrument [Line Items] | ||||
Aggregate principal amount | $ 143,750 | |||
Amount issued | 90,783 | |||
Interest rate | 4.00% | |||
Carrying amount of the equity component representing the conversion option | $ 42,907 | |||
Class A common stock | ||||
Debt Instrument [Line Items] | ||||
Common stock par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | ||
Class A common stock | Convertible Notes [Member] | Maximum | ||||
Debt Instrument [Line Items] | ||||
Aggregate principal amount | $ 143,800 | |||
Net proceeds from the debt | $ 137,900 | |||
Interest rate | 4.00% | |||
Conversion ratio | 33.7268 | |||
Denomination for conversion of debt | $ 1 | |||
Premium percentage on conversion price | 130.00% | |||
Threshold trading days | D | 20 | |||
Threshold consecutive trading days | D | 30 | |||
Discount rate (as a percent) | 13.00% | |||
Carrying amount of the equity component representing the conversion option | $ 53,300 | |||
Fair value of our convertible notes | $ 218,100 |
Debt - Convertible Notes - Summ
Debt - Convertible Notes - Summary (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | May 19, 2020 |
Debt Instrument [Line Items] | ||
Par value of the Convertible Notes | $ 143,800 | |
Convertible Notes [Member] | ||
Debt Instrument [Line Items] | ||
Par value of the Convertible Notes | $ 143,750 | |
Unamortized debt discounts | (49,526) | |
Unamortized debt issuance costs | (3,441) | |
Net Carrying value of Convertible Notes | $ 90,783 |
Debt - Convertible Notes - Net
Debt - Convertible Notes - Net Carrying Amount (Details) - Convertible Notes [Member] $ in Thousands | Dec. 31, 2020USD ($) |
Debt Instrument [Line Items] | |
Proceeds allocated to the Conversion Option | $ 53,285 |
Deferred tax affect | (8,197) |
Less: Issuance Costs | (2,181) |
Carrying amount of the equity component | $ 42,907 |
Debt - Convertible Notes - Inte
Debt - Convertible Notes - Interest Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Jul. 31, 2017 | |
Debt | ||
Contractual interest expense | $ 3,546 | |
Amortization of Debt Issuance Costs | 3,759 | |
Amortization of debt discount | 261 | |
Interest Expense, Debt, Total | $ 7,566 | |
Debt Instrument, Interest Rate, Effective Percentage | 13.00% | 8.30% |
Debt - Capped Call Transactions
Debt - Capped Call Transactions (Details) $ / shares in Units, $ in Thousands | May 14, 2020USD ($)item | Dec. 31, 2020USD ($)$ / shares |
Debt Instrument [Line Items] | ||
Number of option counterparties | item | 2 | |
Derivative Cap Price Per Share | $ / shares | $ 41.51 | |
Payment for Capped Call Options | $ 14,821 | |
Tax effect on the equity component of the Convertible Notes | 42,907 | |
Capped Call Transactions | ||
Debt Instrument [Line Items] | ||
Deferred tax liability | $ 8,200 | |
Class A common stock | Capped Call Transactions | ||
Debt Instrument [Line Items] | ||
Payment for Capped Call Options | $ 14,800 | |
Tax effect on the equity component of the Convertible Notes | $ 8,200 |
Debt - A&R (Details)
Debt - A&R (Details) - USD ($) $ in Thousands | May 14, 2020 | Jul. 08, 2019 | Jul. 31, 2020 | May 31, 2020 | Jul. 31, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | May 19, 2020 |
Debt | |||||||||
Aggregate principal amount | $ 143,800 | ||||||||
Purchase price of a commercial building | $ 1,900 | ||||||||
Fixed interest rate | 4.35% | ||||||||
Earn-outs payments based on achievement of company Adjusted EBITDA targets | $ 7,500 | ||||||||
Earn-outs payments based on achievement of company Adjusted EBITDA targets for 2019 | 10,000 | ||||||||
Amortization schedule | 25 years | ||||||||
Amount required to pay pursuant to settlement agreement | $ 20,600 | $ 20,600 | |||||||
Payment on signing | 2,600 | 2,600 | |||||||
Payment per quarter | 1,000 | $ 1,000 | |||||||
Market interest rate | 8.30% | 13.00% | |||||||
Estimated fair value of the payment obligation | $ 17,500 | $ 17,500 | |||||||
Balloon payment | 10 years | ||||||||
Other Debt | $ 16,257 | 1,812 | |||||||
Net discount on debt and deferred financing fees | (57,559) | (5,688) | |||||||
Long-term Debt, Total | 362,198 | 253,624 | |||||||
Less current maturities of long-term debt | (6,219) | (2,248) | |||||||
Long-term debt, less current installments | 355,979 | 251,376 | |||||||
Future maturities of long-term debt | |||||||||
2021 | 6,219 | ||||||||
2022 | 5,476 | ||||||||
2023 | 33,255 | ||||||||
2024 | 6,057 | ||||||||
2025 | 2,259 | ||||||||
Thereafter | 366,491 | ||||||||
Debt issuance costs | $ 5,900 | 550 | 5,790 | $ 2,750 | |||||
Debt Issuance Costs Recorded To Additional Paid In Capital | 2,200 | ||||||||
Net Debt Issuance Costs Net Carrying Value | $ 3,700 | ||||||||
Convertible Notes | |||||||||
Debt | |||||||||
Outstanding balance | 143,750 | ||||||||
Revolving credit facility | |||||||||
Debt | |||||||||
Maximum borrowing capacity | $ 125,000 | ||||||||
Outstanding balance | 15,000 | 10,000 | |||||||
Revolving credit facility | Minimum | |||||||||
Debt | |||||||||
Unused facility fee (as a percent) | 0.375% | ||||||||
Revolving credit facility | Maximum | |||||||||
Debt | |||||||||
Unused facility fee (as a percent) | 0.50% | ||||||||
Term loans | |||||||||
Debt | |||||||||
Outstanding balance | 217,250 | 220,000 | |||||||
A&R Term Loan Credit Agreement | |||||||||
Debt | |||||||||
Maximum borrowing capacity | $ 220,000 | ||||||||
Outstanding balance | $ 217,300 | ||||||||
Future maturities of long-term debt | |||||||||
Debt issuance costs | 5,100 | ||||||||
A&R Term Loan Credit Agreement | Euro dollar | |||||||||
Debt | |||||||||
Unused facility fee (as a percent) | 1.00% | ||||||||
Variable interest rate, basis points spread over variable reference rate (as a percent) | 5.00% | ||||||||
Earned Contingent Note | |||||||||
Debt | |||||||||
Fixed interest rate | 6.75% | ||||||||
Contingent notes | $ 27,500 | ||||||||
Long-term Debt, Total | 27,500 | 27,500 | |||||||
Guaranteed note | |||||||||
Debt | |||||||||
Long-term Debt, Total | 10,000 | ||||||||
Amended Credit Agreement | |||||||||
Debt | |||||||||
Outstanding balance | $ 15,000 | ||||||||
Weighted average interest rate | 2.30% | ||||||||
Future maturities of long-term debt | |||||||||
Debt issuance costs | $ 600 | $ 700 |
Debt - Amortization (Details)
Debt - Amortization (Details) $ in Thousands | Dec. 31, 2020USD ($) |
Debt Discounts | |
2021 | $ 6,761 |
2022 | 7,684 |
2023 | 8,733 |
2024 | 9,925 |
2025 | 11,280 |
Thereafter | 5,143 |
Debt issuance costs | |
2021 | 470 |
2022 | 534 |
2023 | 607 |
2024 | 690 |
2025 | 784 |
Thereafter | $ 356 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2020 | |
Lessee, Lease, Description [Line Items] | ||
Total operating lease expense | $ 6 | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Renewal options term | 10 years | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Renewal options term | 1 year |
Leases - Components of lease ex
Leases - Components of lease expense and other information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Lease cost | ||
Amortization of right-of-use assets | $ 1,681 | $ 1,441 |
Interest on lease liabilities | 315 | 308 |
Operating lease cost | 5,831 | 4,833 |
Variable lease cost | 1,130 | 629 |
Short-term lease cost | 34 | 41 |
Sublease income | (528) | (452) |
Total lease cost | $ 8,463 | $ 6,800 |
Weighted-average remaining lease term (years), Operating leases | 4 years 4 months 28 days | 5 years 1 month 24 days |
Weighted-average remaining lease term (years), Finance leases | 2 years 4 months 17 days | 2 years 8 months 23 days |
Weighted-average discount rate, Operating leases | 5.30% | 5.30% |
Weighted-average discount rate, Finance leases | 5.70% | 5.70% |
Leases - Annual future commitme
Leases - Annual future commitments under non-cancelable leases (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Lease Obligations, Operating Leases | ||
2021 | $ 5,861 | |
2022 | 5,591 | |
2023 | 4,789 | |
2024 | 3,280 | |
2025 | 2,357 | |
Thereafter | 1,365 | |
Total minimum future obligations | 23,243 | |
Less interest | (2,539) | |
Present value of net future minimum obligations | 20,704 | |
Less current lease obligations | (4,915) | $ (4,619) |
Long-term lease obligations | 15,789 | 16,580 |
Lease Obligations, Finance Leases | ||
2021 | 1,757 | |
2022 | 1,584 | |
2023 | 1,580 | |
2024 | 330 | |
2025 | 20 | |
Total minimum future obligations | 5,271 | |
Less interest | (367) | |
Present value of net future minimum obligations | 4,904 | |
Less current lease obligations | (1,566) | |
Long-term lease obligations | $ 3,338 | $ 3,331 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Leases | |||
Operating cash flows from finance leases | $ 315 | $ 308 | |
Operating cash flows from operating leases | 5,668 | 4,568 | |
Financing cash flows from finance leases | 1,965 | 1,547 | |
Operating leases | 5,105 | 5,368 | |
Finance lease additions | $ 2,019 | $ (3,006) | $ 656 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Deferred tax assets | $ 67,600 | ||
Deferred Tax Assets, Valuation Allowance | $ 71,161 | $ 143 | |
Continuing LLC Owners | |||
Interest held by non-controlling owners | 10.60% | 16.80% | 23.20% |
Interest held by parent | 11.00% | ||
PetIQ | |||
Interest held by parent | 89.40% | 83.20% | 76.80% |
Holdco | |||
Cash distributions | $ 50 | $ 1,700 | |
Accrued estimated income tax | $ (400) | $ 800 |
Income Taxes - Components of ea
Income Taxes - Components of earnings before income taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Components of earnings before income taxes | |||
United States | $ (29,239) | $ (17,953) | $ (1,116) |
Foreign | 433 | 342 | 542 |
Pretax net (loss) income | $ (28,806) | $ (17,611) | $ (574) |
Income Taxes - Provision for in
Income Taxes - Provision for income taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Current: | |||
State | $ 327 | $ 317 | $ 148 |
Foreign | 137 | 17 | |
Total current | 464 | 334 | 148 |
Deferred and other: | |||
Federal | 40,598 | (2,146) | (751) |
State | 11,175 | (1,336) | (135) |
Foreign | (21) | (161) | 77 |
Total deferred and other | 51,752 | (3,643) | (809) |
Total tax expense (benefit) | $ 52,216 | $ (3,309) | $ (661) |
Income Taxes - Effective Income
Income Taxes - Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Reconciliation: | |||
Income tax expense (benefit) at federal statutory rate | 21.00% | 21.00% | 21.00% |
State and local income taxes net of federal tax benefit | 2.40% | 1.30% | (5.70%) |
Noncontrolling interest and nontaxable income | (2.90%) | (4.00%) | 54.70% |
Deferred tax rate changes | (1.30%) | (0.40%) | 37.20% |
Share-based compensation | 0.60% | 0.10% | 18.30% |
Tax Cuts and Jobs Act of 2017 | (13.10%) | ||
Return-to-Provision | (2.00%) | 0.80% | 13.40% |
Valuation Allowance | (198.40%) | 0.40% | 0.70% |
Other | (0.70%) | (0.40%) | (11.30%) |
Income tax expense (benefit) | (181.30%) | 18.80% | 115.20% |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Tax effects of temporary differences: | ||
Investment in partnership | $ 53,294 | $ 53,303 |
Fixed Assets | 32 | 29 |
Net operating loss carryforwards and tax credits | 18,001 | 6,775 |
Other accruals and reversals | 9 | 5 |
Subtotal | 71,336 | 60,112 |
Less: valuation allowance | (71,161) | (143) |
Total net deferred tax assets | 175 | 59,969 |
Intangible assets | (447) | (293) |
Other | (6) | (5) |
Total deferred tax liabilities | $ (453) | $ (298) |
Income Taxes - Valuation allowa
Income Taxes - Valuation allowance and NOL (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Income Taxes | |
Unrecognized tax benefit would impact the effective tax rate | $ 0 |
Federal net operating loss carryforwards | 66,000 |
Federal net operating loss carryforwards that will expire in 2037 | 1,900 |
Federal net operating loss carryforwards indefinite carryforward period | $ 64,100 |
Percentage of taxable income offset against net operating carryforward | 80.00% |
Federal interest expense carryover | $ 6,100 |
Charitable contribution carryforwards | 1,000 |
State net operating loss carryforwards | 384,700 |
State NOL, tax effected | 2,800 |
Foreign net operating loss carryforwards indefinite carryforward period | $ 800 |
Loss per Share (Details)
Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Numerator: | |||
Net (loss) income | $ (81,022) | $ (14,302) | $ 87 |
Less: net (loss) income attributable to non-controlling interests | (3,548) | (2,849) | 869 |
Net loss attributable to PetIQ, Inc | $ (77,474) | $ (11,453) | $ (782) |
Denominator: | |||
Basic weighted average shares (in shares) | 24,629 | 22,652 | 17,216 |
Weighted-average shares of Class A common stock outstanding - diluted (in shares) | 24,629 | 22,652 | 17,216 |
Basic net income (loss) per common share | $ (3.15) | $ (0.51) | $ (0.05) |
Diluted net income (loss) per common share | $ (3.15) | $ (0.51) | $ (0.05) |
Stock Based Compensation (Detai
Stock Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Stock Based Compensation | |||
Share-based Compensation | $ 9,170 | $ 7,355 | $ 3,812 |
Stock Options Granted (in shares) | 505 | 423 | 1,617 |
Vesting percentage on each anniversary of the grant date | 25.00% | ||
Maximum term for stock options | 6 years 3 months | 6 years 3 months | |
Grant date fair value of stock options granted | $ 11.88 | $ 10.63 | |
Unrecognized compensation cost related to unvested stock options | $ 8,400 | ||
Unrecognized compensation cost related to unvested options, recognized weighted-average period | 2 years 2 months 12 days | ||
Omnibus Plan | |||
Stock Based Compensation | |||
Share available for issuance | 0 | ||
Class A common stock | |||
Stock Based Compensation | |||
Number of shares reserved | 800 | ||
Class A common stock | Omnibus Plan | |||
Stock Based Compensation | |||
Shares reserved for future issuance | 3,914 | ||
Share available for issuance | 1,293 | 2,017 | |
Maximum | |||
Stock Based Compensation | |||
Maximum term for stock options | 10 years | ||
Stock options | |||
Stock Based Compensation | |||
Share-based Compensation | $ 6,500 | $ 6,200 |
Stock Based Compensation - Weig
Stock Based Compensation - Weighted Average Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Stock Based Compensation | ||
Expected term (years) | 6 years 3 months | 6 years 3 months |
Expected volatility | 33.91% | 35.00% |
Risk-free interest rate | 0.37% | 2.37% |
Dividend yield | 0.00% | 0.00% |
Stock Based Compensation - Summ
Stock Based Compensation - Summary of Unvested Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Stock Based Compensation | ||||
Stock Options Outstanding - Beginning Balance | 2,072 | 1,945 | 599 | |
Stock Options Granted (in shares) | 505 | 423 | 1,617 | |
Stock option Exercised (in shares) | (395) | (119) | (76) | |
Stock Options Forfeited (in shares) | (96) | (168) | (195) | |
Stock Options Cancelled (in shares) | (9) | |||
Stock Options Outstanding - Ending Balance | 2,086 | 2,072 | 1,945 | 599 |
Options exercisable - Ending Balance | 831 | |||
Weighted Average Exercise Price Outstanding - Beginning Balance | $ 24.63 | $ 23.45 | $ 16 | |
Weighted Average Exercise Price - Granted | 20.22 | 27.54 | 25.74 | |
Weighted Average Exercise Price - Exercised | 23.48 | 19.51 | 18.83 | |
Weighted Average Exercise Price - Forfeited | 21.42 | 21.92 | 21.37 | |
Weighted Average Exercise Price - Expired | 25.70 | |||
Weighted Average Exercise Price Outstanding - Ending Balance | $ 23.93 | $ 24.63 | $ 23.45 | $ 16 |
Aggregate Intrinsic Value | $ 30,302 | $ 6,266 | $ 5,527 | $ 3,496 |
Weighted Average Remaining Contractual Life (years) | 7 years 2 months 12 days | 8 years | 9 years 1 month 6 days | 9 years 6 months |
Aggregate Intrinsic Value - Exercised | $ 4,468 | |||
Options Exercisable, Aggregate Intrinsic Value | $ 11,778 | |||
Options Exercisable, Weighted Average Remaining Contractual Life (years) | 5 years 10 months 24 days |
Stock Based Compensation - Rest
Stock Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Unrecognized compensation cost related to unvested stock options | $ 8,400 | ||
Share-based Compensation | 9,170 | $ 7,355 | $ 3,812 |
Income Tax Expense (Benefit) | 52,216 | (3,309) | (661) |
RSU | |||
Unrecognized compensation cost related to unvested stock options | $ 5,800 | ||
Vesting period | 2 years 9 months 18 days | ||
Share-based Compensation | $ 2,600 | 1,100 | |
Income Tax Expense (Benefit) | $ 0 | $ 1,400 | $ 500 |
Number of Shares | |||
Beginning Balance | 133 | 51 | |
Granted (in shares) | 271 | 123 | |
Settled (in shares) | (70) | (25) | |
Forfeited (in shares) | (17) | (15) | |
Ending balance | 317 | 133 | 51 |
Weighted Average Grant Date Fair Value | |||
Beginning Balance | $ 28.85 | $ 33.16 | |
Granted (per share) | 20.73 | 27.61 | |
Settled (per share) | 25.65 | 30.43 | |
Forfeited (per share) | 23.34 | 30.58 | |
Ending balance | $ 22.91 | $ 28.85 | $ 33.16 |
Stockholder's Equity (Details)
Stockholder's Equity (Details) $ / shares in Units, $ in Thousands | Oct. 01, 2018USD ($)shares | Dec. 31, 2020Vote$ / sharesshares | Dec. 31, 2019$ / sharesshares | Dec. 31, 2018USD ($)shares |
Class of Stock [Line Items] | ||||
Common stock authorized | 100,000,000 | |||
Blank check preferred stock, authorized | 12,500,000 | |||
Staggered term (in years) | 3 years | |||
Number of votes per share | Vote | 1 | |||
Proceeds from Public Offering of Class A Shares, net of underwriting discounts and offering costs | $ | $ 73,914 | |||
Common stock, shares outstanding | 25,711,000 | 23,554,000 | 21,620,000 | |
Exchange of common shares | 1,712,000 | 1,794,000 | ||
Class A common stock | ||||
Class of Stock [Line Items] | ||||
Common stock authorized | 125,000,000 | 125,000,000 | ||
Common stock, par value | $ / shares | $ 0.001 | $ 0.001 | ||
Common Stock, Shares, Issued | 5,750,000 | 25,711,000 | 23,554,000 | |
Common stock, shares outstanding | 25,711,000 | 23,554,000 | ||
Class A common stock | IPO | ||||
Class of Stock [Line Items] | ||||
Issuance of Class A Shares (in shares) | 2,000,000 | |||
Proceeds from issuance of shares after deducting underwriting discounts and commissions and offering expenses | $ | $ 73,900 | |||
Class A common stock | Over allotment | ||||
Class of Stock [Line Items] | ||||
Issuance of Class A Shares (in shares) | 3,750 | |||
Class B common stock | ||||
Class of Stock [Line Items] | ||||
Common stock authorized | 100,000,000 | 100,000,000 | ||
Common stock, par value | $ / shares | $ 0.001 | $ 0.001 | ||
Share ratio | 1 | |||
Common Stock, Shares, Issued | 3,040,000 | 4,752,000 | ||
Common stock, shares outstanding | 3,040,000 | 4,752,000 | ||
Amended Holdco LLC Agreement | ||||
Class of Stock [Line Items] | ||||
Common stock, shares outstanding | 28,751,000 | 28,306,000 | 28,167,000 |
Non-Controlling Interests (Deta
Non-Controlling Interests (Details) - shares shares in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Common Stock, Shares, Outstanding, Beginning Balance | 23,554 | 21,620 | |
Stock based compensation adjustments | 445 | 140 | |
Exchange transactions | 1,712 | 1,794 | |
Common Stock, Shares, Outstanding, Ending Balance | 25,711 | 23,554 | 21,620 |
Continuing LLC Owners | |||
Common Stock, Shares, Outstanding, Beginning Balance | 4,752 | 6,547 | |
Exchange transactions | (1,712) | (1,794) | |
Common Stock, Shares, Outstanding, Ending Balance | 3,040 | 4,752 | 6,547 |
Amended Holdco LLC Agreement | |||
Common Stock, Shares, Outstanding, Beginning Balance | 28,306 | 28,167 | |
Stock based compensation adjustments | 445 | 140 | |
Common Stock, Shares, Outstanding, Ending Balance | 28,751 | 28,306 | 28,167 |
Holdco | |||
Weighted average ownership percentage in Holdco | 86.40% | 80.20% | |
Continuing LLC Owners | |||
Ownership interest by continuing LLC owners | 10.60% | 16.80% | 23.20% |
Ownership interest in Holdco | 11.00% | ||
PetIQ | |||
Ownership interest in Holdco | 89.40% | 83.20% | 76.80% |
Customer Concentration (Details
Customer Concentration (Details) - customer | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Customer concentrations | Sales | |||
Customer Concentration | |||
Number of customers accounted for more than 10% of sales individually | 2 | 2 | 1 |
Concentration risk | 42.00% | 35.00% | 18.00% |
Customer concentrations | Accounts receivable | |||
Customer Concentration | |||
Number of customers accounted for more than 10% of sales individually | 1 | 2 | |
Credit concentrations | Accounts receivable | |||
Customer Concentration | |||
Concentration risk | 52.00% | 61.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - Med Vets, Inc. and Bay Medical Solutions Inc - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Litigation Contingencies | ||
Liability recorded | $ 7.8 | $ 1 |
Litigation reserve accrued | $ 0 |
Segments (Details)
Segments (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020USD ($)segment | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Segments | |||
Number of operating segments | segment | 2 | ||
Number of reportable segments | segment | 2 | ||
Financial information relating to the Company's operating segments | |||
Net Sales | $ 780,051 | $ 709,431 | $ 528,614 |
Adjusted EBITDA | 67,792 | 60,675 | 41,539 |
Property, plant and equipment, net | 63,146 | 52,525 | |
Depreciation expense | 12,082 | 9,139 | 6,657 |
Capital Expenditures | 22,392 | 10,276 | 7,178 |
United States | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 773,628 | 703,299 | 522,749 |
Property, plant and equipment, net | 61,807 | 51,397 | |
Foreign | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 6,423 | 6,132 | 5,865 |
Europe | |||
Financial information relating to the Company's operating segments | |||
Property, plant and equipment, net | 1,339 | 1,128 | |
Products | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 725,705 | 617,118 | 450,229 |
Products | United States | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 719,282 | 610,986 | 444,364 |
Products | Foreign | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 6,423 | 6,132 | 5,865 |
Services | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 54,346 | 92,313 | 78,385 |
Services | United States | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 54,346 | 92,313 | 78,385 |
Operating Segments | Products | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 725,705 | 617,118 | 450,229 |
Adjusted EBITDA | 117,216 | 73,537 | 52,185 |
Depreciation expense | 4,810 | 3,552 | 2,343 |
Capital Expenditures | 13,394 | 1,297 | 1,339 |
Operating Segments | Services | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 54,346 | 92,313 | 78,385 |
Adjusted EBITDA | 3,387 | 20,045 | 15,246 |
Depreciation expense | 3,775 | 3,170 | 2,326 |
Capital Expenditures | 7,373 | 6,409 | 3,440 |
Corporate, Non-Segment | Unallocated Corporate | |||
Financial information relating to the Company's operating segments | |||
Adjusted EBITDA | (52,811) | (32,907) | (25,892) |
Depreciation expense | 3,497 | 2,417 | 1,988 |
Capital Expenditures | $ 1,625 | $ 2,570 | $ 2,399 |
Segments - Reconciliation (Deta
Segments - Reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | |||
Adjusted EBITDA | $ 67,792 | $ 60,675 | $ 41,539 |
Depreciation | (12,082) | (9,139) | (6,657) |
Amortization | (12,815) | (5,994) | (5,210) |
Interest expense, net | (26,299) | (14,495) | (8,022) |
Acquisition costs | (2,620) | (6,147) | (3,787) |
Stock based compensation expense | (9,170) | (7,355) | (3,812) |
Purchase accounting adjustment to inventory | (4,805) | (2,149) | |
Non same-store revenue | 8,987 | 8,088 | 3,967 |
Non same-store costs | (22,256) | (19,553) | (10,345) |
Fair value adjustment of contingent note | (7,320) | (3,280) | |
Integration costs and costs of discontinued clinics | (9,776) | (3,788) | (998) |
Clinic launch expenses | (3,085) | (767) | (1,380) |
Non-recurring royalty settlement | (440) | ||
SKU Rationalization | (6,482) | ||
Litigation expenses | (1,006) | (529) | |
COVID-19 related costs | (6,476) | ||
Pretax net (loss) income | (28,806) | (17,611) | (574) |
Income tax benefit (expense) | (52,216) | 3,309 | 661 |
Net (loss) income | (81,022) | (14,302) | 87 |
Products | Operating Segments | |||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | |||
Adjusted EBITDA | 117,216 | 73,537 | 52,185 |
Services | Operating Segments | |||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | |||
Adjusted EBITDA | 3,387 | 20,045 | 15,246 |
Unallocated Corporate | Corporate, Non-Segment | |||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | |||
Adjusted EBITDA | $ (52,811) | $ (32,907) | $ (25,892) |
Related Parties (Details)
Related Parties (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Apr. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Related Parties | ||||
Advance paid on required tax distributions | $ 30,000 | |||
Accrued estimated tax distributions | $ 400,000 | |||
Notes payable to Seller's of VIP | 27,500,000 | |||
Accrued interest | 500,000 | 300,000 | ||
Payment of interest | 1,700,000 | 1,300,000 | $ 0 | |
Rent expense | 400,000 | 400,000 | 400,000 | |
Colliers International | ||||
Related Parties | ||||
Payment of Broker's Commission | $ 75,000 | |||
Chris Christensen | ||||
Related Parties | ||||
Payment of premium expenses | 2,800,000 | 2,300,000 | 1,500,000 | |
Commission paid | $ 100,000 | $ 100,000 | $ 100,000 | |
Mike Christensen | Colliers International | ||||
Related Parties | ||||
Payments to acquire land | $ 2,500,000 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Employee Benefit Plans | |||
Employee contribution | 100.00% | ||
Employer contribution | 100.00% | ||
Employer contribution, percent of match | 3.00% | ||
Employer matching contribution | $ 0.9 | $ 0.6 | $ 0.3 |