Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Mar. 01, 2022 | Jun. 30, 2021 | |
Document Information [Line Items] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2021 | ||
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 | 230 East Riverside Drive | ||
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 | 2021 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Public Float | $ 1,030.5 | ||
Auditor Name | KPMG LLP | ||
Auditor Firm ID | 185 | ||
Auditor Location | Boise, ID | ||
Class A common stock | |||
Document Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 29,157,448 | ||
Class B common stock | |||
Document Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 252,540 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Current assets | ||
Cash and cash equivalents | $ 79,406 | $ 33,456 |
Accounts receivable, net | 113,947 | 102,755 |
Inventories | 96,440 | 97,773 |
Other current assets | 8,896 | 8,312 |
Total current assets | 298,689 | 242,296 |
Property, plant and equipment, net | 76,613 | 63,146 |
Operating lease right of use assets | 20,489 | 20,122 |
Other non-current assets | 2,024 | 1,870 |
Intangible assets, net | 190,662 | 213,000 |
Goodwill | 231,110 | 231,158 |
Total assets | 819,587 | 771,592 |
Current liabilities | ||
Accounts payable | 55,057 | 68,131 |
Accrued wages payable | 12,704 | 10,540 |
Accrued interest payable | 3,811 | 903 |
Other accrued expenses | 11,680 | 8,815 |
Current portion of operating leases | 6,500 | 4,915 |
Current portion of long-term debt and finance leases | 8,350 | 7,763 |
Total current liabilities | 98,102 | 101,067 |
Operating leases, less current installments | 14,843 | 15,789 |
Long-term debt, less current installments | 448,470 | 403,591 |
Finance leases, less current installments | 2,493 | 3,338 |
Other non-current liabilities | 459 | 1,397 |
Total non-current liabilities | 466,265 | 424,115 |
Equity | ||
Additional paid-in capital | 368,006 | 319,642 |
Accumulated deficit | (114,525) | (98,558) |
Accumulated other comprehensive loss | (684) | (686) |
Total stockholders' equity | 252,826 | 220,427 |
Non-controlling interest | 2,394 | 25,983 |
Total equity | 255,220 | 246,410 |
Total liabilities and equity | 819,587 | 771,592 |
Class A common stock | ||
Equity | ||
Common stock value | $ 29 | 26 |
Class B common stock | ||
Equity | ||
Common stock value | $ 3 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2021 | Dec. 31, 2020 |
Common stock, shares outstanding | 29,139,000 | 25,711,000 |
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 | 29,139,000 | 25,711,000 |
Common stock, shares outstanding | 29,139,000 | 25,711,000 |
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 | 272,000 | 3,040,000 |
Common stock, shares outstanding | 272,000 | 3,040,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Total net sales | $ 932,528 | $ 780,051 | $ 709,431 |
Total cost of sales | 746,135 | 644,863 | 602,048 |
Gross profit | 186,393 | 135,188 | 107,383 |
Operating expenses | |||
Selling, General and administrative expenses | 170,521 | 138,375 | 103,200 |
Contingent note revaluation loss | 7,320 | ||
Operating (loss) income | 15,872 | (3,187) | (3,137) |
Interest expense, net | 24,696 | 22,807 | 14,495 |
Foreign currency (gain) loss, net | 159 | (109) | 151 |
Loss on debt extinguishment | 5,453 | ||
Other (expense), net | (1,922) | (571) | (172) |
Total other expense, net | 28,386 | 22,127 | 14,474 |
Pretax net loss | (12,514) | (25,314) | (17,611) |
Income tax benefit (expense) | (3,869) | (60,413) | 3,309 |
Net loss | (16,383) | (85,727) | (14,302) |
Net loss attributable to non-controlling interest | (416) | (3,072) | (2,849) |
Net loss attributable to PetIQ, Inc. | $ (15,967) | $ (82,655) | $ (11,453) |
Net loss per share attributable to PetIQ, Inc. Class A common stock | |||
Basic | $ (0.57) | $ (3.36) | $ (0.51) |
Diluted | $ (0.57) | $ (3.36) | $ (0.51) |
Weighted average shares of Class A common stock outstanding | |||
Basic | 28,242 | 24,629 | 22,652 |
Diluted | 28,242 | 24,629 | 22,652 |
Product | |||
Total net sales | $ 825,395 | $ 725,705 | $ 617,118 |
Total cost of sales | 646,402 | 584,401 | 530,031 |
Services [Member] | |||
Total net sales | 107,133 | 54,346 | 92,313 |
Total cost of sales | $ 99,733 | $ 60,462 | $ 72,017 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Comprehensive Income | |||
Net loss income | $ (16,383) | $ (85,727) | $ (14,302) |
Foreign currency translation adjustment | (65) | 363 | 366 |
Comprehensive loss | (16,448) | (85,364) | (13,936) |
Comprehensive loss attributable to non-controlling interest | (417) | (3,049) | (2,777) |
Comprehensive loss attributable to PetIQ | $ (16,031) | $ (82,315) | $ (11,159) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities | |||
Net loss | $ (16,383) | $ (85,727) | $ (14,302) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||
Depreciation, amortization of intangible assets and loan fees | 39,300 | 27,483 | 16,509 |
Loss on debt extinguishment | 5,453 | ||
Gain on disposition of property, plant, and equipment | (1,183) | (238) | (189) |
Stock based compensation expense | 9,428 | 9,170 | 7,355 |
Deferred tax adjustment | 3,487 | 59,708 | (3,458) |
Termination of supply agreement | 7,801 | ||
Contingent note revaluation | 7,320 | ||
Other non-cash activity | 233 | 164 | 405 |
Changes in assets and liabilities | |||
Accounts receivable | (11,197) | (31,652) | (14,123) |
Inventories | 1,283 | (17,846) | 30,448 |
Other assets | (1,380) | 556 | (1,619) |
Accounts payable | (12,131) | 17,435 | (7,595) |
Accrued wages payable | 2,194 | 1,424 | 2,800 |
Other accrued expenses | 4,663 | 7,121 | (2,718) |
Net cash provided by (used in) operating activities | 23,767 | (4,601) | 20,833 |
Cash flows from investing activities | |||
Proceeds from disposition of property, plant, and equipment | 5,132 | 442 | 340 |
Purchase of property, plant, and equipment | (31,270) | (22,392) | (10,276) |
Purchase of Capstar and related intangibles | (96,072) | ||
Business acquisitions (net of cash acquired) | (185,090) | ||
Net cash used in investing activities | (26,138) | (118,022) | (195,026) |
Cash flows from financing activities | |||
Proceeds from issuance of convertible notes | 143,750 | ||
Payment for Capped Call options | (14,821) | ||
Proceeds from issuance of long-term debt | 642,568 | 837,675 | 818,387 |
Principal payments on long-term debt | (597,071) | (838,073) | (676,509) |
Payment of financing fees on Convertible Notes | (5,884) | ||
Tax distributions to LLC Owners | (70) | (47) | (1,686) |
Principal payments on finance lease obligations | (1,926) | (1,965) | (1,547) |
Payment of deferred financing fees and debt discount | (7,656) | (550) | (5,790) |
Tax withholding payments on Restricted Stock Units | (937) | (595) | (114) |
Exercise of options to purchase class A common stock | 13,426 | 9,274 | 2,318 |
Net cash provided by financing activities | 48,334 | 128,764 | 135,059 |
Net change in cash and cash equivalents | 45,963 | 6,141 | (39,134) |
Effect of exchange rate changes on cash and cash equivalents | (13) | 43 | 46 |
Cash and cash equivalents, beginning of period | 33,456 | 27,272 | 66,360 |
Cash and cash equivalents, end of period | 79,406 | 33,456 | 27,272 |
Supplemental cash flow information | |||
Interest paid | 19,189 | 19,402 | 13,632 |
Net change in property, plant, and equipment acquired through accounts payable | 735 | 279 | (1,814) |
Finance lease additions | 1,191 | 2,019 | 3,006 |
Net change of deferred tax asset from step-up in basis | 3,348 | 12,381 | |
Income taxes paid, net of refunds | 418 | 130 | 249 |
Accrued tax distribution | $ 7 | (434) | $ 786 |
Issuance of note for termination, settlement, and asset acquisition agreement | 17,487 | ||
Purchase of intangible assets from note issuance | $ (9,686) |
Consolidated Statements of Equi
Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands | Class A common stockCommon Stock | Class B common stockCommon Stock | Retained Earnings | Cumulative dividends and distributions | Additional Paid In Capital | Noncontrolling Interest in Consolidated Joint Venture | Total |
Beginning Balance at Dec. 31, 2018 | $ 22 | $ 7 | $ (4,450) | $ (1,316) | $ 262,219 | $ 64,496 | $ 320,977 |
Beginning Balance (in shares) at Dec. 31, 2018 | 21,620 | 6,547 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
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) | |||||
Deferred tax adjustment | 12,381 | 12,381 | |||||
Accrued tax distributions | (786) | (786) | |||||
Other comprehensive income | 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 | ||||||
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares) | 21 | ||||||
Net loss | (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 | 15,725 | (15,830) | ||
Exchange of LLC Interests held by LLC Owners (in shares) | 1,712 | (1,712) | |||||
Accrued tax distributions | 434 | 434 | |||||
Other comprehensive income | 340 | 23 | 363 | ||||
Stock based compensation expense | 7,921 | 1,249 | 9,170 | ||||
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 | (82,655) | (3,072) | (85,727) | ||||
Ending Balance at Dec. 31, 2020 | $ 26 | $ 3 | (98,558) | (686) | 319,642 | 25,983 | 246,410 |
Ending Balance (in shares) at Dec. 31, 2020 | 25,711 | 3,040 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Exchange of LLC Interests held by LLC Owners | $ 3 | $ (3) | 66 | 23,531 | (23,597) | ||
Exchange of LLC Interests held by LLC Owners (in shares) | 2,768 | (2,768) | |||||
Deferred tax adjustment | 3,235 | 113 | 3,348 | ||||
Accrued tax distributions | (7) | (7) | |||||
Other comprehensive income | (64) | (1) | (65) | ||||
Stock based compensation expense | 9,109 | 319 | 9,428 | ||||
Exercise of Options to purchase Common Stock | 13,426 | $ 13,426 | |||||
Exercise of Options to purchase Common Stock (in shares) | 583 | 583 | |||||
Issuance of stock for vesting of RSU's, net of tax with holdings | (937) | $ (937) | |||||
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares) | 77 | ||||||
Net loss | (15,967) | (416) | (16,383) | ||||
Ending Balance at Dec. 31, 2021 | $ 29 | $ (114,525) | $ (684) | $ 368,006 | $ 2,394 | $ 255,220 | |
Ending Balance (in shares) at Dec. 31, 2021 | 29,139 | 272 |
Principal Business Activity and
Principal Business Activity and Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2021 | |
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. We engage with customers through more than 60,000 points of distribution across retail and e-commerce channels with our branded and distributed medications as well as health and wellness items, which are further supported by our world-class medications manufacturing facility in Omaha, Nebraska and health and wellness manufacturing facility in Springville, Utah. Our national veterinarian service platform operates in over 2,900 retail partner locations in 42 states providing cost effective and convenient veterinary wellness services. PetIQ believes that pets are an important part of the family and deserve the best products and care we can provide. PetIQ has two reporting segments: (i) Products; and (ii) Services. The Products segment consists of the manufacturing and distribution business. The Services segment 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. 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 began bearing interest at a fixed rate of 6.75%, with the balance payable July 17, 2023. The Company fully repaid the Contingent Notes as part of the refinance activity described in Note 5 – Debt. 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 government agencies. Accounts receivable consists of the following as of: $'s in 000's December 31, 2021 December 31, 2020 Trade receivables $ 108,049 $ 96,381 Other receivables 6,405 7,094 114,454 103,475 Less: Allowance for doubtful accounts (507) (720) Total accounts receivable, net $ 113,947 $ 102,755 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, 2021 December 31, 2020 Raw materials $ 16,564 $ 15,761 Work in progress 1,650 2,273 Finished goods 78,226 79,739 Total inventories $ 96,440 $ 97,773 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 selling, 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, 2021, 2020, and 2019. 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.” Simultaneously, with the issuance of the Notes, we bought capped call options from certain financial institutions to minimize the impact of potential dilution of our Class A common stock upon conversion of the Notes. The premium for the capped call options was recorded as additional paid-in capital in our consolidated balance sheets as the options are settleable in our Class A common stock. Effective January 1, 2021, we adopted ASU 2020-06 using the full retrospective approach. As a result of this adoption, we have de-recognized the equity component of the Notes and therefore no longer recognize any amortization of that component as interest expense (see below, Adopted Accounting Standard Update). 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 Company began offering subscription based veterinary service plans called Smart Care Plans to customers of the Services segment in 2021, however total activity during the year ended December 31, 2021 was immaterial. 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, 2021 and 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 and other costs 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. Sales tax collected from customers and remitted to governmental authorities is not included in revenue and is reflected as a liability on the Company’s consolidated balance sheets. 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, 2021 and 2020 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 selling, general and administrative expenses. Research and development costs amounted to $8.0 million, $2.3 million, and $1.3 million and advertising costs were $16.2 million, $10.1 million, and $4.5 million for the years ended December 31, 2021, 2020, and 2019, 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. During the year ended December 31, 2021, the Company opted out of the arrangement for two of the product formulations, which reduced the amount potentially payable under the agreement. The Company may make payments of up to $5.3 million over the course of the next several years contingent on achievement of certain development and regulatory approval milestones on the remaining product formulation in development. Product development costs are expensed as incurred or as milestone payments become probable. There can be no assurance that this product 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 selling, general and administrative expenses on the consolidated statements of operations. The Company accrued $2.0 million in research and development expense within accounts payable in the consolidated balance sheets related to the agreement as a milestone was determined to be probable during the year ended December 31, 2021. 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 $24.7 million, $22.8 million, and $14.9 million for the years ended December 31, 2021, 2020, and 2019, respectively, offset by $0.0 million, $0.0 million, and $0.4 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. Loss Per Share Basic loss per share is computed by dividing net loss attributable to PetIQ, Inc. by the weighted average shares outstanding during the period. Diluted loss 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 loss 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”). 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. On January 1, 2021, we adopted the ASU using the full retrospective method. Under the full retrospective method, the prior period consolidated financial statements have been retrospectively adjusted to reflect the adoption of the accounting standard in those periods. The adoption did not impact the year ended December 31, 2019 as the Company did not have any applicable instruments outstanding. The following tables show the impact of the adoption on our consolidated balance sheet and consolidated statement of operations. December 31, 2020 ASU 2020-06 December 31, 2020 As reported Adjustment As adjusted Liabilities Long-term debt, less current installments $ 355,979 $ 47,612 $ 403,591 Stockholders' Equity Additional Paid-in Capital 356,442 (36,800) 319,642 Non-controlling Interest 31,614 (5,631) 25,983 Accumulated Deficit (93,377) (5,181) (98,558) For the Year Ended December 31, 2020 ASU 2020-06 December 31, 2020 As reported Adjustment As adjusted Interest expense, net $ 26,299 $ (3,492) $ 22,807 Tax expense (52,216) (8,197) (60,413) Net loss (81,022) (4,705) (85,727) |
Business Combination and Asset
Business Combination and Asset Acquisition | 12 Months Ended |
Dec. 31, 2021 | |
Business Combination and Asset Acquisition | |
Business Combination and Asset Acquisition | Note 2 – Business Combination and Asset Acquisition 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 4.00% Convertible Senior Notes due 2026 (the “Notes”) in May 2020, See Note 5 – “Debt” 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 selling, 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 consolidated balance sheet. See Note 5 – “Debt” for additional information. |
Property, Plant, and Equipment
Property, Plant, and Equipment | 12 Months Ended |
Dec. 31, 2021 | |
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, 2021 December 31, 2020 Leasehold improvements $ 26,341 $ 19,709 Equipment 26,414 25,664 Vehicles and accessories 7,339 7,110 Computer equipment and software 15,418 10,858 Buildings 23,302 10,168 Furniture and fixtures 3,877 2,347 Land 8,934 7,067 Construction in progress 5,077 11,331 116,702 94,254 Less accumulated depreciation (40,089) (31,108) Total property, plant, and equipment $ 76,613 $ 63,146 Depreciation and amortization expense related to these assets total $14.4 million, $12.1 million, and $9.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. Depreciation for the year ended December 31, 2021 includes approximately $2.0 million of accelerated depreciation related to assets with shortened useful lives. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 12 Months Ended |
Dec. 31, 2021 | |
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, 2021 December 31, 2020 Amortizable intangibles Certification 7 years $ 350 $ 350 Customer relationships 12 - 20 years 160,167 160,178 Patents and processes 5 - 10 years 14,843 14,905 Brand names 5 - 15 years 24,731 24,740 Total amortizable intangibles 200,091 200,173 Less accumulated amortization (44,438) (25,984) Total net amortizable intangibles 155,653 174,189 Non-amortizable intangibles Trademarks and other 33,341 33,341 In-process research and development 1,668 5,470 Intangible assets, net of accumulated amortization $ 190,662 $ 213,000 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, 2021, 2020, and 2019 was $22.3 million, $12.8 million, and $6.0 million, respectively. The in-process research and development (“IPRD”), intangible assets represent the value assigned to 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. During the year ended December 31, 2021, the Company opted out of two of the acquired projects, effectively abandoning the associated research and development efforts. Accordingly, the Company wrote off the associated IPRD assets of $3.8 million, with the expense recorded as amortization expense included in selling, general, and administrative expenses on the consolidated statement of operations. Estimated future amortization expense for each of the following years is as follows: Years ending December 31, ($'s in 000's) 2022 17,966 2023 16,921 2024 14,554 2025 13,893 2026 13,303 Thereafter 79,016 The following is a summary of the changes in the carrying value of goodwill for the years ended December 31, 2021 and 2020. Reporting Unit ($'s in 000's) Products Services Total Goodwill as of January 1, 2020 183,781 47,264 231,045 Foreign currency translation 113 — 113 Goodwill as of December 31, 2020 183,894 47,264 231,158 Foreign currency translation (48) — (48) Goodwill as of December 31, 2021 $ 183,846 $ 47,264 $ 231,110 |
Debt
Debt | 12 Months Ended |
Dec. 31, 2021 | |
Debt | |
Debt | Note 5 – Debt On April 13, 2021, the Company entered into the ABL Facility and the Term Loan B (each as defined below), which replaced both the Amended Revolving Credit Agreement and A&R Term Loan Agreement as well as fully repaid $27.5 million of the Notes Payable – VIP Acquisition (as defined below). As part of the termination of the Amended Revolving Credit Agreement and the A&R Term Loan Credit agreement, and the repayment in full of the Notes Payable – VIP Acquisition, the Company wrote off $5.5 million in deferred financing fees to loss on debt extinguishment and incurred an additional $0.9 million in costs related to the transaction which are included in selling, general and administrative expenses. Senior Secured Asset-Based Revolving Credit Facility – ABL On April 13, 2021, Opco entered into an asset-based revolving credit agreement with KeyBank National Association, as administrative agent and collateral agent, and the lenders’ party thereto, that provides revolving credit commitments of $125.0 million, subject to a borrowing base limitation (the “ABL Facility”). The borrowing base for the ABL Facility at any time equals the sum of: (i) 90% of eligible investment-grade accounts; plus (ii) 85% of eligible other accounts; plus, (iii) 85% of the net orderly liquidation value of the cost of certain eligible on-hand and in-transit inventory; plus, (iv) at the option of Opco, 100% of qualified cash; minus (v) reserves. The ABL Facility bears interest at a variable rate plus a margin, with the variable rate being based on a base rate or LIBOR at the option of the Company. The rate at December 31, 2021 was . The Company also pays a commitment fee on unused borrowings at a rate of . The ABL Facility is secured by substantially all the assets of PetIQ Holdings, LLC and its wholly-owned domestic subsidiaries including a first-priority security interest in personal property consisting of accounts receivable, inventory, cash, and deposit accounts (such collateral subject to such first-priority security interest, “ABL Priority Collateral”), and a second-priority security interest in all other personal and real property of PetIQ Holdings, LLC and its wholly-owned domestic subsidiaries (such collateral subject to such second-priority security interest, “Term Priority Collateral”), in each case, subject to customary exceptions. The ABL contains customary representations and warranties, affirmative and negative covenants and events of default, including negative covenants that restrict the ability of PetIQ Holdings, LLC and its restricted subsidiaries to incur additional indebtedness, pay dividends, make investments, loans, and acquisitions, among other restrictions. Senior Secured Term Loan Facility – Term Loan B On April 13, 2021, Opco entered into a term credit agreement with Jefferies Finance LLC, as administrative agent and collateral agent, and the lenders’ party thereto, that provides senior secured term loans of $300.0 million (the “Term Loan B”). The Term Loan B bears interest at a variable rate (with the variable rate being based on a base rate or LIBOR at the option of the Company) plus a margin of 3.25% in the case of base rate loans, or 4.25% in the case of LIBOR loans. LIBOR rates are subject to a 0.50% floor. The interest rate at December 31, 2021 was 4.25%. The Term Loan B requires quarterly amortization payments of 0.25% of the original principal amount, with the balance due on the seventh anniversary of the closing date. The Term Loan B is secured by substantially all the assets of PetIQ Holdings, LLC and its wholly-owned domestic subsidiaries, subject to customary exceptions customary representations and warranties, affirmative and negative covenants and events of default, including PetIQ Holdings, LLC and its restricted subsidiaries Convertible Notes On May 19, 2020, the Company issued $143.8 million in aggregate principal amount of 4.00% Convertible Senior Notes due 2026 (the “Notes”) 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 (ii) 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. The fair value of the Notes was $169.0 million as of December 31, 2021. The estimated fair value of the Notes is based on market rates at the closing trading price of the Convertible Notes as of December 31, 2021 and is classified as Level 2 in the fair value hierarchy. 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. Amended & Restated Credit Agreement OpCo entered into an Amended Revolving Credit Agreement on July 8, 2019 (the “Amended Revolving Credit Agreement”). All obligations under the Amended Revolving Credit Agreement were 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, were 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 was fully repaid and terminated in April 2021. Amended & Restated Term Loan Credit Agreement OpCo entered into an Amended and Restated Term Loan Credit Agreement on July 8, 2019 (the “A&R Term Loan Credit Agreement”). The $220.0 million A&R Term Loan Credit Agreement had an interest rate equal to the Eurodollar rate plus 5.00% . The A&R Term Loan Credit Agreement called 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 were 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, were secured by substantially all of the assets of OpCo and each guarantor under the A&R Term Loan Credit Agreement, subject to certain exceptions. The A&R Term Loan Credit Agreement was fully repaid and terminated in April 2021. General Other Debt The Company entered into a mortgage with Huntington Bank to finance a commercial building in Eagle, Idaho, in December 2021. The mortgage bears interest at a fixed rate of 2.0% plus LIBOR and utilizes a 10 year amortization schedule with a balloon payment of the balance due at that time. The rate at December 31, 2021 was 2.10% . The Company entered into a mortgage with a local bank to finance 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. The Company entered into an agreement to sell the commercial building in Eagle, Idaho, which closed in the third quarter of 2021. The Company used the proceeds from the sale to repay the mortgage on August 2, 2021. In July 2020, the Company entered into the Agreement. See Note 2 – “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 at the time it was entered into. In connection with the acquisition of Community Veterinary Clinics, LLC d/b/a, VIP Petcare (the “VIP Acquisition”), the Company entered into a guarantee note of $10.0 million and contingent Notes that were subsequently earned. As of December 31, 2020 $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 required quarterly interest payments of 6.75% with the balance payable July 17, 2023. These Notes Payable – VIP Acquisition were fully repaid in April 2021. The following represents the Company’s long-term debt as of: As adjusted (Note1) $'s in 000's December 31, 2021 December 31, 2020 Convertible Notes $ 143,750 $ 143,750 Term loans 298,500 217,250 Revolving credit facility — 15,000 Notes Payable - VIP Acquisition — 27,500 Other Debt 23,518 16,257 Net discount on debt and deferred financing fees (10,418) (9,947) $ 455,350 $ 409,810 Less current maturities of long-term debt (6,880) (6,219) Total long-term debt $ 448,470 $ 403,591 Future maturities of long-term debt, excluding net discount on debt and deferred financing fees, as of December 31, 2021, are as follows: ($'s in 000's) 2022 6,880 2023 7,099 2024 7,339 2025 4,600 2026 147,350 Thereafter 292,500 The Company incurred $6.4 million in debt issuance costs related to the Term Loan B, $1.0 million related to the ABL, and $0.2 million related to the new mortgage during the year ended December 31, 2021. The Company incurred debt issuance costs of |
Leases
Leases | 12 Months Ended |
Dec. 31, 2021 | |
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 2022 and 2027. 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 following: For the Year Ended $'s in 000's December 31, 2021 December 31, 2020 December 31, 2019 Finance lease cost Amortization of right-of-use assets $ 2,215 $ 1,681 $ 1,441 Interest on lease liabilities 338 315 308 Operating lease cost 5,556 5,831 4,833 Variable lease cost (1) 1,283 1,130 629 Short-term lease cost 13 34 41 Sublease income (238) (528) (452) Total lease cost $ 9,167 $ 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, 2021 December 31, 2020 Weighted-average remaining lease term (years) Operating leases 3.86 4.41 Finance leases 2.59 2.38 Weighted-average discount rate Operating leases 4.9% 5.3% Finance leases 4.6% 5.7% Annual future commitments under non-cancelable leases as of December 31, 2021, consist of the following: Lease Obligations $'s in 000's Operating Leases Finance Leases 2022 $ 6,951 $ 1,622 2023 6,139 1,696 2024 4,581 609 2025 3,629 225 2026 2,029 78 Thereafter 56 — Total minimum future obligations $ 23,385 $ 4,230 Less interest (2,042) (267) Present value of net future minimum obligations 21,343 3,963 Less current lease obligations (6,500) (1,470) Long-term lease obligations $ 14,843 $ 2,493 Supplemental cash flow information: For the Year Ended $'s in 000's December 31, 2021 December 31, 2020 December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ 338 $ 315 $ 308 Operating cash flows from operating leases 3,928 5,668 4,568 Financing cash flows from finance leases 1,926 1,965 1,547 (Noncash) right-of-use assets obtained in exchange for lease obligations Operating leases 5,212 5,105 5,368 Finance leases 1,191 2,019 (3,006) |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2021 | |
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, 2021, the Company had $82.8M 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 0.9% of the ownership of Holdco as of December 31, 2021. 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. The components of earnings before net loss taxes, determined by tax jurisdiction, are as follows: Years Ended December 31 As adjusted (Note1) $'s in 000's 2021 2020 2019 United States $ (12,816) $ (25,747) $ (17,953) Foreign 302 433 342 Total $ (12,514) $ (25,314) $ (17,611) The provision for income taxes for 2021, 2020, and 2019 consisted of the following: Years Ended December 31 As adjusted (Note1) $'s in 000's 2021 2020 2019 Current: Federal $ — $ — $ — State 323 327 317 Foreign 26 137 17 $ 349 $ 464 $ 334 Deferred and other: Federal 2,661 47,048 (2,146) State 717 12,922 (1,336) Foreign 142 (21) (161) 3,520 59,949 (3,643) Total income tax expense (benefit) $ 3,869 $ 60,413 $ (3,309) Reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows: Years Ended December 31 As adjusted (Note1) 2021 2020 2019 Income tax expense (benefit) at federal statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes net of federal tax benefit (0.2) 0.6 1.3 Non-controlling interest and nontaxable income (0.1) (2.4) (4.0) Deferred tax rate changes 1.0 (0.6) (0.4) Share-based compensation 6.8 0.6 0.1 Return-to-Provision (15.7) (2.3) 0.8 Valuation Allowance (42.9) (255.2) 0.4 Other (0.8) (0.4) (0.4) Effective income tax rate (30.9) % (238.7) % 18.8 % Our tax rate is affected primarily by the changes in valuation allowance during the year ended December 31, 2021 and the portion of income and expense allocated to the non-controlling 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, 2021 and 2020 are as follows: As adjusted (Note1) $'s in 000's 2021 2020 Deferred tax assets Investment in partnership $ 77,306 $ 63,439 Fixed assets 43 44 Net operating loss carryforwards and tax credits 25,888 15,382 Disallowed business interest carryforward 3,169 1,678 Other accruals and reversals 5 9 Subtotal 106,411 80,552 Less: valuation allowance (106,258) (80,355) Net deferred tax assets 153 197 Deferred tax liabilities Fixed Assets $ (151) $ (12) Intangible assets (454) (456) Other (7) (6) Net deferred tax liabilities $ (612) $ (474) At December 31, 2021, the Company has federal net operating loss (“NOL”) carryforwards of $103.6 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 $101.7 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 $15.1 million as of December 31, 2021, which has an indefinite carryforward period but is limited in any particular year based on certain provisions. As of December 31, 2021, the Company has charitable contribution carryforwards of $0.6 million, which if unused will expire between 2022 and 2026. The Company has state NOL carryforwards of $499.5 million (tax effected $4.6 million) as of December 31, 2021 which expire between 2022 and 2039 and others that have an indefinite carryforward period. At December 31, 2021 the Company had foreign NOL carryforwards of $0.6 million which do not expire. The Company has assessed the realizability of the net deferred tax assets as of December 31, 2021 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 in the United States and Ireland will not be realized. The Company has recorded a valuation allowance for these deferred tax assets of $106.3 million and $80.4 million as of December 31, 2021 and 2020, respectively. Additionally, the Company has recorded a net deferred tax liability related to its indefinite lived intangible assets in the United States. 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, 2021, tax years from 2018 to present are subject to examination by the tax authorities. |
Loss per Share
Loss per Share | 12 Months Ended |
Dec. 31, 2021 | |
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 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 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 loss per share of Class A common stock: Year ended December 31, As Adjusted (Note 1) (in 000's, except for per share amounts) 2021 2020 2019 Numerator: Net loss $ (16,383) $ (85,727) $ (14,302) Less: net loss attributable to non-controlling interests (416) (3,072) (2,849) Net loss attributable to PetIQ, Inc. — basic and diluted (15,967) (82,655) (11,453) Denominator: Weighted-average shares of Class A common stock outstanding — basic 28,242 24,629 22,652 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 28,242 24,629 22,652 Loss per share of Class A common stock — basic $ (0.57) $ (3.36) $ (0.51) Loss per share of Class A common stock — diluted $ (0.57) $ (3.36) $ (0.51) 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 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. 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, 2021, 2020 and 2019, as they have been determined to be anti-dilutive under the treasury stock method and if-converted method, as applicable. |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Dec. 31, 2021 | |
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, 2021 and 2020, 771 thousand and 1,293 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 Company estimates future forfeitures and updates those estimates for actual experience as the awards vest, forfeiture estimates were not material for any period presented. The fair value of these equity awards is amortized to equity based compensation expense over the vesting period. Expense recognized totaled $5.2 million, $6.5 million, and $6.2 million for the years ended December 31, 2021, 2020, and 2019, respectively. All stock based compensation expense is included in selling, 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, 2021 December 31, 2020 Expected term (years) (1) 6.17 6.25 Expected volatility (2) 33.45 % 33.91 % Risk-free interest rate (3) 0.89 % 0.37 % 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, 2021 and 2020 was $12.39 and $11.88, respectively, per option. The following table summarizes the activity of the Company’s unvested stock options for the period ended December 31, 2021: Weighted Average Weighted Aggregate Remaining Stock Average Intrinsic Contractual Options Exercise Value Life (in 000's) Price (in 000's) (years) Outstanding at January 1, 2020 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 Granted 354 35.66 Exercised (583) 23.05 $ 8,499 Forfeited (64) 24.84 Cancelled (25) 25.70 Outstanding at December 31, 2021 1,768 $ 26.51 $ 2,897 7.3 Options exercisable at December 31, 2021 755 At December 31, 2021, total unrecognized compensation cost related to unvested stock options was $7.0 million and is expected to be recognized over a weighted-average period of approximately 2.3 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, 2021, total unrecognized compensation cost related to unvested RSUs was $11.2 million and is expected to vest over a weighted average of 2.7 years. The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $4.3 million, $2.6 million, and $1.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. All stock based compensation expense is included in selling, general and administrative expenses based on the role of recipients. The Company estimates future forfeitures and updates those estimates for actual experience as the awards vest. The following table summarizes the activity of the Company’s RSUs for the period ended December 31, 2021: Weighted Number of Average Shares Grant Date (in 000's) Fair Value Outstanding at January 1, 2020 133 $ 28.85 Granted 271 20.73 Settled (70) 25.65 Forfeited (17) 23.34 Outstanding at December 31, 2020 317 $ 22.91 Granted 268 37.91 Settled (103) 24.81 Forfeited (23) 26.02 Nonvested RSUs at December 31, 2021 459 $ 31.08 The total income tax benefit recognized in the income statement for share-based compensation arrangements was $0.0 million, $0.0 million and $1.4 million for the years ended December 31, 2021, 2020, and 2019, respectively. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2021 | |
Stockholders' Equity | |
Stockholders' 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). |
Non-Controlling Interests
Non-Controlling Interests | 12 Months Ended |
Dec. 31, 2021 | |
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, 2021, there were 29,411 thousand LLC Interests outstanding, of which PetIQ owned 29,139 LLC Interests held % of Total LLC LLC $'s in 000's Owners PetIQ, Inc. Total Owners PetIQ, Inc. As of January 1, 2020 4,752 23,554 28,306 16.8% 83.2% Stock based compensation transactions — 445 445 Exchange transactions (1,712) 1,712 — As of December 31, 2020 3,040 25,711 28,751 10.6% 89.4% Stock based compensation transactions — 660 660 Exchange transactions (2,768) 2,768 — As of December 31, 2021 272 29,139 29,411 0.9% 99.1% |
Customer Concentration
Customer Concentration | 12 Months Ended |
Dec. 31, 2021 | |
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, 2021, 2020, and 2019, one , two , and two customers, respectively, accounted for more than 10% of sales individually and in aggregate, which accounted for 26%, 42% , and 35% of net sales, respectively. At December 31, 2021, one Products segment customer individually accounted for more than 10% of outstanding trade receivables, and accounted for 47% of outstanding trade receivables, net. At December 31, 2020 one Products segment customers individually accounted for more than 10% of outstanding trade receivables, and accounted for 52% 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, 2021 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 13 - Commitments and Contingencies Litigation Contingencies During the years ended December 31, 2021, 2020, and 2019, the Company recorded liabilities of $3.5 million, $7.8 million, and $1.0 million respectively, for contract termination costs and other litigation related matters. The expense is included within selling, general and administrative expenses for the years ended December 31, 2021, 2020, and 2019. During the year ended December 31, 2021, the Company entered into mediation with a third party who had filed a class action lawsuit against the Company. As a result of that mediation, the Company accrued the expected settlement of million. Final settlement and payment is expected to occur in 2022. Additionally, during the year ended December 31, 2021, the Company continued to evaluate a lawsuit brought by a former supplier to the Company related to the redemption of ownership interests. The plaintiff has alleged actual damages of approximately $3.0 million and has claimed additional punitive damages that could result in treble damages. The Company believes the range of outcomes is between $2.0 million and the amount alleged by the plaintiff, and as no amount within the range is more likely than any other, the Company has accrued an obligation of $2.0 million as of December 31, 2021. There is no assurance that the Company’s defense will be successful, and as such the Company will continue to monitor the expected outcome of the matter. 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 other than those noted above, at December 31, 2021 as the Company does not consider any other contingency to be probable or estimable. The Company expenses legal costs as incurred within selling, 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, 2021 | |
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, 2021 Products Services Corporate Consolidated Net Sales $ 825,395 $ 107,133 $ — $ 932,528 Adjusted EBITDA 149,321 11,742 (68,171) 92,892 Depreciation expense 3,857 6,510 3,999 14,366 Capital expenditures 1,884 10,537 18,849 31,270 $'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 The following table reconciles Segment Adjusted EBITDA to Net Loss for the periods presented. For the years ended $'s in 000's December 31, 2021 December 31, 2020 December 31, 2019 Adjusted EBITDA: Product $ 149,321 $ 117,216 $ 73,537 Services 11,742 3,387 20,045 Unallocated Corporate (68,171) (52,811) (32,907) Total Consolidated 92,892 67,792 60,675 Adjustments: Depreciation (14,366) (12,082) (9,139) Amortization (22,336) (12,815) (5,994) Interest (24,696) (22,807) (14,495) Loss on debt extinguishment and related costs (6,438) — — Acquisition costs (1) (92) (2,620) (6,147) Stock based compensation expense (9,428) (9,170) (7,355) Purchase accounting adjustment to inventory (2) — — (4,805) SKU rationalization (3) — — (6,482) Non same-store adjustment (4) (23,159) (16,354) (12,232) Fair value adjustment of contingent note — — (7,320) Integration costs 142 (9,776) (3,788) Litigation expenses (4,105) (1,006) (529) COVID-19 related costs (5) — (6,476) — CFO Transition (928) — — Pretax net loss $ (12,514) $ (25,314) $ (17,611) Income tax benefit (expense) (3,869) (60,413) 3,309 Net loss $ (16,383) $ (85,727) $ (14,302) (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. The amounts relate to the Perrigo Animal Health Acquisition and are part of the Products segment. (3) 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. (4) 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 quarters of operating results. This includes clinic launch expenses. (5) 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, 2021 $'s in 000's U.S. Foreign Total Product sales $ 818,593 $ 6,802 $ 825,395 Service revenue 107,133 — 107,133 Total net sales $ 925,726 $ 6,802 $ 932,528 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 The net book value of property plant and equipment, by geographic location was as follows as of: December 31, 2021 December 31, 2020 United States $ 75,315 $ 61,807 Europe 1,298 1,339 Total $ 76,613 $ 63,146 |
Related Parties
Related Parties | 12 Months Ended |
Dec. 31, 2021 | |
Related Parties | |
Related Parties | Note 15 - Related Parties 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, which is paid at a variety of times throughout the year, and is generally paid directly to the relevant insurance company, amounted to $6.9 million in 2021. Amounts paid to Moreton and subsequently transferred to insurance providers, was $2.8 million and $2.3 million in 2020 and 2019.Mr. Chris Christensen earns various forms of compensation based on the specifics of each policy. In August 2021, the Company sold its prior corporate office in Eagle, Idaho for $4.8 million. The Company utilized Colliers International (“Colliers”) as a broker with Mike Christensen, the brother of CEO, McCord Christensen, as agent. The Company paid approximately million in commissions to Colliers as a result of the sale. In December 2021, the Company purchased a parcel of land for million. Total commission paid to Colliers was approximately Katie Turner, the spouse of CEO, McCord Christensen, is the owner of Acadia Investor Relations LLC, (“Acadia”) which acts as the Company’s investor relations consultant. Acadia has been paid $0.2 million for the year ending December 31, 2021. |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2021 | |
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 $1.1 million, $0.9 million, and $0.6 million, respectively, for the years ended December 31, 2021, 2020 and 2019. |
Principal Business Activity a_2
Principal Business Activity and Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
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. 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 began bearing interest at a fixed rate of 6.75%, with the balance payable July 17, 2023. The Company fully repaid the Contingent Notes as part of the refinance activity described in Note 5 – Debt. |
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 government agencies. Accounts receivable consists of the following as of: $'s in 000's December 31, 2021 December 31, 2020 Trade receivables $ 108,049 $ 96,381 Other receivables 6,405 7,094 114,454 103,475 Less: Allowance for doubtful accounts (507) (720) Total accounts receivable, net $ 113,947 $ 102,755 |
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, 2021 December 31, 2020 Raw materials $ 16,564 $ 15,761 Work in progress 1,650 2,273 Finished goods 78,226 79,739 Total inventories $ 96,440 $ 97,773 |
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 selling, 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, 2021, 2020, and 2019. |
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.” Simultaneously, with the issuance of the Notes, we bought capped call options from certain financial institutions to minimize the impact of potential dilution of our Class A common stock upon conversion of the Notes. The premium for the capped call options was recorded as additional paid-in capital in our consolidated balance sheets as the options are settleable in our Class A common stock. Effective January 1, 2021, we adopted ASU 2020-06 using the full retrospective approach. As a result of this adoption, we have de-recognized the equity component of the Notes and therefore no longer recognize any amortization of that component as interest expense (see below, Adopted Accounting Standard Update). |
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 Company began offering subscription based veterinary service plans called Smart Care Plans to customers of the Services segment in 2021, however total activity during the year ended December 31, 2021 was immaterial. 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, 2021 and 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 and other costs 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. Sales tax collected from customers and remitted to governmental authorities is not included in revenue and is reflected as a liability on the Company’s consolidated balance sheets. 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, 2021 and 2020 are immaterial. The Company does not have significant deferred revenue or unbilled receivable 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 selling, general and administrative expenses. Research and development costs amounted to $8.0 million, $2.3 million, and $1.3 million and advertising costs were $16.2 million, $10.1 million, and $4.5 million for the years ended December 31, 2021, 2020, and 2019, 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. During the year ended December 31, 2021, the Company opted out of the arrangement for two of the product formulations, which reduced the amount potentially payable under the agreement. The Company may make payments of up to $5.3 million over the course of the next several years contingent on achievement of certain development and regulatory approval milestones on the remaining product formulation in development. Product development costs are expensed as incurred or as milestone payments become probable. There can be no assurance that this product 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 selling, general and administrative expenses on the consolidated statements of operations. The Company accrued $2.0 million in research and development expense within accounts payable in the consolidated balance sheets related to the agreement as a milestone was determined to be probable during the year ended December 31, 2021. There were no expenses incurred under the agreement for the periods ended December 31, 2020 and 2019. |
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. |
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 $24.7 million, $22.8 million, and $14.9 million for the years ended December 31, 2021, 2020, and 2019, respectively, offset by $0.0 million, $0.0 million, and $0.4 million of interest income, respectively. |
Non-controlling interest | 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. |
Loss Per Share | Loss Per Share Basic loss per share is computed by dividing net loss attributable to PetIQ, Inc. by the weighted average shares outstanding during the period. Diluted loss 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 loss per share. See Note 8 for further discussion. |
Recently Issued Accounting Pronouncements / Adopted Accounting Standard Updates | 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”). 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. On January 1, 2021, we adopted the ASU using the full retrospective method. Under the full retrospective method, the prior period consolidated financial statements have been retrospectively adjusted to reflect the adoption of the accounting standard in those periods. The adoption did not impact the year ended December 31, 2019 as the Company did not have any applicable instruments outstanding. The following tables show the impact of the adoption on our consolidated balance sheet and consolidated statement of operations. December 31, 2020 ASU 2020-06 December 31, 2020 As reported Adjustment As adjusted Liabilities Long-term debt, less current installments $ 355,979 $ 47,612 $ 403,591 Stockholders' Equity Additional Paid-in Capital 356,442 (36,800) 319,642 Non-controlling Interest 31,614 (5,631) 25,983 Accumulated Deficit (93,377) (5,181) (98,558) For the Year Ended December 31, 2020 ASU 2020-06 December 31, 2020 As reported Adjustment As adjusted Interest expense, net $ 26,299 $ (3,492) $ 22,807 Tax expense (52,216) (8,197) (60,413) Net loss (81,022) (4,705) (85,727) |
Principal Business Activity a_3
Principal Business Activity and Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Schedule of accounts receivable | $'s in 000's December 31, 2021 December 31, 2020 Trade receivables $ 108,049 $ 96,381 Other receivables 6,405 7,094 114,454 103,475 Less: Allowance for doubtful accounts (507) (720) Total accounts receivable, net $ 113,947 $ 102,755 |
Schedule of components of inventories | $'s in 000's December 31, 2021 December 31, 2020 Raw materials $ 16,564 $ 15,761 Work in progress 1,650 2,273 Finished goods 78,226 79,739 Total inventories $ 96,440 $ 97,773 |
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 |
ASU 2020-06 | |
Schedule of impact of the adoption | December 31, 2020 ASU 2020-06 December 31, 2020 As reported Adjustment As adjusted Liabilities Long-term debt, less current installments $ 355,979 $ 47,612 $ 403,591 Stockholders' Equity Additional Paid-in Capital 356,442 (36,800) 319,642 Non-controlling Interest 31,614 (5,631) 25,983 Accumulated Deficit (93,377) (5,181) (98,558) For the Year Ended December 31, 2020 ASU 2020-06 December 31, 2020 As reported Adjustment As adjusted Interest expense, net $ 26,299 $ (3,492) $ 22,807 Tax expense (52,216) (8,197) (60,413) Net loss (81,022) (4,705) (85,727) |
Business Combination and Asse_2
Business Combination and Asset Acquisition (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
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 |
Property, Plant, and Equipment
Property, Plant, and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant, and Equipment | |
Summary of Property, Plant, and Equipment | $'s in 000's December 31, 2021 December 31, 2020 Leasehold improvements $ 26,341 $ 19,709 Equipment 26,414 25,664 Vehicles and accessories 7,339 7,110 Computer equipment and software 15,418 10,858 Buildings 23,302 10,168 Furniture and fixtures 3,877 2,347 Land 8,934 7,067 Construction in progress 5,077 11,331 116,702 94,254 Less accumulated depreciation (40,089) (31,108) Total property, plant, and equipment $ 76,613 $ 63,146 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Intangible Assets and Goodwill | |
Schedule of intangible assets | $'s in 000's Useful Lives December 31, 2021 December 31, 2020 Amortizable intangibles Certification 7 years $ 350 $ 350 Customer relationships 12 - 20 years 160,167 160,178 Patents and processes 5 - 10 years 14,843 14,905 Brand names 5 - 15 years 24,731 24,740 Total amortizable intangibles 200,091 200,173 Less accumulated amortization (44,438) (25,984) Total net amortizable intangibles 155,653 174,189 Non-amortizable intangibles Trademarks and other 33,341 33,341 In-process research and development 1,668 5,470 Intangible assets, net of accumulated amortization $ 190,662 $ 213,000 |
Estimated future amortization expense | Years ending December 31, ($'s in 000's) 2022 17,966 2023 16,921 2024 14,554 2025 13,893 2026 13,303 Thereafter 79,016 |
Schedule of Goodwill | Reporting Unit ($'s in 000's) Products Services Total Goodwill as of January 1, 2020 183,781 47,264 231,045 Foreign currency translation 113 — 113 Goodwill as of December 31, 2020 183,894 47,264 231,158 Foreign currency translation (48) — (48) Goodwill as of December 31, 2021 $ 183,846 $ 47,264 $ 231,110 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Debt | |
Schedule of components of long term debt | As adjusted (Note1) $'s in 000's December 31, 2021 December 31, 2020 Convertible Notes $ 143,750 $ 143,750 Term loans 298,500 217,250 Revolving credit facility — 15,000 Notes Payable - VIP Acquisition — 27,500 Other Debt 23,518 16,257 Net discount on debt and deferred financing fees (10,418) (9,947) $ 455,350 $ 409,810 Less current maturities of long-term debt (6,880) (6,219) Total long-term debt $ 448,470 $ 403,591 |
Schedule of future maturities of long-term debt, excluding net discount on debt and deferred financing fees | ($'s in 000's) 2022 6,880 2023 7,099 2024 7,339 2025 4,600 2026 147,350 Thereafter 292,500 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Leases | |
Schedule of components of lease expense | For the Year Ended $'s in 000's December 31, 2021 December 31, 2020 December 31, 2019 Finance lease cost Amortization of right-of-use assets $ 2,215 $ 1,681 $ 1,441 Interest on lease liabilities 338 315 308 Operating lease cost 5,556 5,831 4,833 Variable lease cost (1) 1,283 1,130 629 Short-term lease cost 13 34 41 Sublease income (238) (528) (452) Total lease cost $ 9,167 $ 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, 2021 December 31, 2020 Weighted-average remaining lease term (years) Operating leases 3.86 4.41 Finance leases 2.59 2.38 Weighted-average discount rate Operating leases 4.9% 5.3% Finance leases 4.6% 5.7% |
Summary of annual future commitments under non-cancelable leases | Lease Obligations $'s in 000's Operating Leases Finance Leases 2022 $ 6,951 $ 1,622 2023 6,139 1,696 2024 4,581 609 2025 3,629 225 2026 2,029 78 Thereafter 56 — Total minimum future obligations $ 23,385 $ 4,230 Less interest (2,042) (267) Present value of net future minimum obligations 21,343 3,963 Less current lease obligations (6,500) (1,470) Long-term lease obligations $ 14,843 $ 2,493 |
Supplemental cash flow information | For the Year Ended $'s in 000's December 31, 2021 December 31, 2020 December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ 338 $ 315 $ 308 Operating cash flows from operating leases 3,928 5,668 4,568 Financing cash flows from finance leases 1,926 1,965 1,547 (Noncash) right-of-use assets obtained in exchange for lease obligations Operating leases 5,212 5,105 5,368 Finance leases 1,191 2,019 (3,006) |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Taxes | |
Schedule of components of earnings before net loss taxes, by tax jurisdiction | Years Ended December 31 As adjusted (Note1) $'s in 000's 2021 2020 2019 United States $ (12,816) $ (25,747) $ (17,953) Foreign 302 433 342 Total $ (12,514) $ (25,314) $ (17,611) |
Schedule of provision for income taxes | Years Ended December 31 As adjusted (Note1) $'s in 000's 2021 2020 2019 Current: Federal $ — $ — $ — State 323 327 317 Foreign 26 137 17 $ 349 $ 464 $ 334 Deferred and other: Federal 2,661 47,048 (2,146) State 717 12,922 (1,336) Foreign 142 (21) (161) 3,520 59,949 (3,643) Total income tax expense (benefit) $ 3,869 $ 60,413 $ (3,309) |
Schedule of reconciliation between effective tax rate and statutory tax rate | Years Ended December 31 As adjusted (Note1) 2021 2020 2019 Income tax expense (benefit) at federal statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes net of federal tax benefit (0.2) 0.6 1.3 Non-controlling interest and nontaxable income (0.1) (2.4) (4.0) Deferred tax rate changes 1.0 (0.6) (0.4) Share-based compensation 6.8 0.6 0.1 Return-to-Provision (15.7) (2.3) 0.8 Valuation Allowance (42.9) (255.2) 0.4 Other (0.8) (0.4) (0.4) Effective income tax rate (30.9) % (238.7) % 18.8 % |
Schedule of tax effects of temporary differences of deferred tax assets and liabilities | As adjusted (Note1) $'s in 000's 2021 2020 Deferred tax assets Investment in partnership $ 77,306 $ 63,439 Fixed assets 43 44 Net operating loss carryforwards and tax credits 25,888 15,382 Disallowed business interest carryforward 3,169 1,678 Other accruals and reversals 5 9 Subtotal 106,411 80,552 Less: valuation allowance (106,258) (80,355) Net deferred tax assets 153 197 Deferred tax liabilities Fixed Assets $ (151) $ (12) Intangible assets (454) (456) Other (7) (6) Net deferred tax liabilities $ (612) $ (474) |
Loss per Share (Tables)
Loss per Share (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Loss per Share | |
Reconciliations of the numerators and denominators used to compute basic and diluted loss per share of Class A common stock | Year ended December 31, As Adjusted (Note 1) (in 000's, except for per share amounts) 2021 2020 2019 Numerator: Net loss $ (16,383) $ (85,727) $ (14,302) Less: net loss attributable to non-controlling interests (416) (3,072) (2,849) Net loss attributable to PetIQ, Inc. — basic and diluted (15,967) (82,655) (11,453) Denominator: Weighted-average shares of Class A common stock outstanding — basic 28,242 24,629 22,652 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 28,242 24,629 22,652 Loss per share of Class A common stock — basic $ (0.57) $ (3.36) $ (0.51) Loss per share of Class A common stock — diluted $ (0.57) $ (3.36) $ (0.51) |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
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, 2021 December 31, 2020 Expected term (years) (1) 6.17 6.25 Expected volatility (2) 33.45 % 33.91 % Risk-free interest rate (3) 0.89 % 0.37 % 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 January 1, 2020 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 Granted 354 35.66 Exercised (583) 23.05 $ 8,499 Forfeited (64) 24.84 Cancelled (25) 25.70 Outstanding at December 31, 2021 1,768 $ 26.51 $ 2,897 7.3 Options exercisable at December 31, 2021 755 |
Summary of RSU activity | Weighted Number of Average Shares Grant Date (in 000's) Fair Value Outstanding at January 1, 2020 133 $ 28.85 Granted 271 20.73 Settled (70) 25.65 Forfeited (17) 23.34 Outstanding at December 31, 2020 317 $ 22.91 Granted 268 37.91 Settled (103) 24.81 Forfeited (23) 26.02 Nonvested RSUs at December 31, 2021 459 $ 31.08 |
Non-Controlling Interests (Tabl
Non-Controlling Interests (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
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, 2020 4,752 23,554 28,306 16.8% 83.2% Stock based compensation transactions — 445 445 Exchange transactions (1,712) 1,712 — As of December 31, 2020 3,040 25,711 28,751 10.6% 89.4% Stock based compensation transactions — 660 660 Exchange transactions (2,768) 2,768 — As of December 31, 2021 272 29,139 29,411 0.9% 99.1% |
Segments (Tables)
Segments (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Segments | |
Summary of financial information relating to the Company's operating segments | $'s in 000's Unallocated December 31, 2021 Products Services Corporate Consolidated Net Sales $ 825,395 $ 107,133 $ — $ 932,528 Adjusted EBITDA 149,321 11,742 (68,171) 92,892 Depreciation expense 3,857 6,510 3,999 14,366 Capital expenditures 1,884 10,537 18,849 31,270 $'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 |
Summary of reconciles segment adjusted ebitda to pretax net income | For the years ended $'s in 000's December 31, 2021 December 31, 2020 December 31, 2019 Adjusted EBITDA: Product $ 149,321 $ 117,216 $ 73,537 Services 11,742 3,387 20,045 Unallocated Corporate (68,171) (52,811) (32,907) Total Consolidated 92,892 67,792 60,675 Adjustments: Depreciation (14,366) (12,082) (9,139) Amortization (22,336) (12,815) (5,994) Interest (24,696) (22,807) (14,495) Loss on debt extinguishment and related costs (6,438) — — Acquisition costs (1) (92) (2,620) (6,147) Stock based compensation expense (9,428) (9,170) (7,355) Purchase accounting adjustment to inventory (2) — — (4,805) SKU rationalization (3) — — (6,482) Non same-store adjustment (4) (23,159) (16,354) (12,232) Fair value adjustment of contingent note — — (7,320) Integration costs 142 (9,776) (3,788) Litigation expenses (4,105) (1,006) (529) COVID-19 related costs (5) — (6,476) — CFO Transition (928) — — Pretax net loss $ (12,514) $ (25,314) $ (17,611) Income tax benefit (expense) (3,869) (60,413) 3,309 Net loss $ (16,383) $ (85,727) $ (14,302) (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. The amounts relate to the Perrigo Animal Health Acquisition and are part of the Products segment. (3) 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. (4) 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 quarters of operating results. This includes clinic launch expenses. (5) 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 . |
Summary of net book value of property plant and equipment, net by location | Year ended December 31, 2021 $'s in 000's U.S. Foreign Total Product sales $ 818,593 $ 6,802 $ 825,395 Service revenue 107,133 — 107,133 Total net sales $ 925,726 $ 6,802 $ 932,528 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 The net book value of property plant and equipment, by geographic location was as follows as of: December 31, 2021 December 31, 2020 United States $ 75,315 $ 61,807 Europe 1,298 1,339 Total $ 76,613 $ 63,146 |
Principal Business Activity a_4
Principal Business Activity and Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2021itemstatesegmentlocation | |
Principal Business Activity and Significant Accounting Policies | |
Number of points of distribution | item | 60,000 |
Number of retail pharmacy locations | location | 2,900 |
Number of states in which the entity provides veterinary services to pet owners | state | 42 |
Number of reportable segments | segment | 2 |
Principal Business Activity a_5
Principal Business Activity and Significant Accounting Policies - Fair value on a recurring basis (Details) | Dec. 31, 2021 | Jul. 31, 2017 |
Fair Value of Financial Instruments | ||
Fixed interest rate | 2.00% | 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 - Receivables and Credit Policy (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Receivables and Credit Policy | ||
Accounts receivable, gross | $ 114,454 | $ 103,475 |
Less: Allowance for doubtful accounts | (507) | (720) |
Total accounts receivable, net | 113,947 | 102,755 |
Trade receivables | ||
Receivables and Credit Policy | ||
Accounts receivable, gross | 108,049 | 96,381 |
Other receivables | ||
Receivables and Credit Policy | ||
Accounts receivable, gross | $ 6,405 | $ 7,094 |
Principal Business Activity a_7
Principal Business Activity and Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Inventories | ||
Raw materials | $ 16,564 | $ 15,761 |
Work in progress | 1,650 | 2,273 |
Finished goods | 78,226 | 79,739 |
Total inventories | $ 96,440 | $ 97,773 |
Principal Business Activity a_8
Principal Business Activity and Significant Accounting Policies - Property, Plant, and Equipment (Details) | 12 Months Ended |
Dec. 31, 2021 | |
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 a_9
Principal Business Activity and Significant Accounting Policies - Goodwill and Intangible Assets (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Principal Business Activity and Significant Accounting Policies | |||
Impairment charge | $ 0 | $ 0 | $ 0 |
Principal Business Activity _10
Principal Business Activity and Significant Accounting Policies - Convertible Debt (Details) $ in Millions | May 19, 2020USD ($) |
Convertible Notes | |
Debt Instrument [Line Items] | |
Aggregate principal amount | $ 143.8 |
Principal Business Activity _11
Principal Business Activity and Significant Accounting Policies - Disaggregation of revenue (Details) | Dec. 31, 2021 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Disaggregation of revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year |
Principal Business Activity _12
Principal Business Activity and Significant Accounting Policies - Research and Development and Advertising Costs (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Research and Development and Advertising Costs | |||
Research and development costs | $ 8 | $ 2.3 | $ 1.3 |
Advertising costs | $ 16.2 | $ 10.1 | $ 4.5 |
Principal Business Activity _13
Principal Business Activity and Significant Accounting Policies - Collaboration Agreements (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2021USD ($)product | |
Collaboration Agreements | |
Number of product opted out | product | 2 |
Collaboration agreements, contingent payments to be made | $ 5.3 |
Collaboration Agreement, Probable Milestone Payments | $ 2 |
Principal Business Activity _14
Principal Business Activity and Significant Accounting Policies - Interest expense, net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Interest expense, net | |||
Interest expense | $ 24.7 | $ 22.8 | $ 14.9 |
Interest and other income | $ 0 | $ 0 | $ 0.4 |
Principal Business Activity _15
Principal Business Activity and Significant Accounting Policies - Adopted Accounting Standard Updates (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Liabilities | |||
Long-term debt, less current installments | $ 448,470 | $ 403,591 | |
Stockholder's Equity | |||
Additional Paid in Capital | 368,006 | 319,642 | |
Non-controlling Interest | 2,394 | 25,983 | |
Accumulated deficit | (114,525) | (98,558) | |
Consolidated Statements of Operations | |||
Interest expense, net | 24,696 | 22,807 | $ 14,495 |
Income tax benefit (expense) | (3,869) | (60,413) | 3,309 |
Net loss | $ (16,383) | (85,727) | $ (14,302) |
As reported | ASU 2020-06 | |||
Liabilities | |||
Long-term debt, less current installments | 355,979 | ||
Stockholder's Equity | |||
Additional Paid in Capital | 356,442 | ||
Non-controlling Interest | 31,614 | ||
Accumulated deficit | (93,377) | ||
Consolidated Statements of Operations | |||
Interest expense, net | 26,299 | ||
Income tax benefit (expense) | (52,216) | ||
Net loss | (81,022) | ||
Adjustment | ASU 2020-06 | |||
Liabilities | |||
Long-term debt, less current installments | 47,612 | ||
Stockholder's Equity | |||
Additional Paid in Capital | (36,800) | ||
Non-controlling Interest | (5,631) | ||
Accumulated deficit | (5,181) | ||
Consolidated Statements of Operations | |||
Interest expense, net | (3,492) | ||
Income tax benefit (expense) | (8,197) | ||
Net loss | $ (4,705) |
Business Combination and Asse_3
Business Combination and Asset Acquisition - Capstar Acquisition (Details) $ in Thousands | Jul. 31, 2020USD ($) | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | May 31, 2020 | May 19, 2020 | Jul. 31, 2017 |
Business Acquisition [Line Items] | |||||||
Acquisition Price | $ 31,270 | $ 22,392 | $ 10,276 | ||||
Interest rate | 2.00% | 4.35% | |||||
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 | ||||||
Convertible Notes | |||||||
Business Acquisition [Line Items] | |||||||
Interest rate | 4.00% | 4.00% | |||||
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 and Asse_4
Business Combination and Asset Acquisition - Supplier Termination, Settlement and Asset Purchase Agreement (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Jul. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |
Business Acquisition [Line Items] | |||
Amount required to pay pursuant to settlement agreement | $ 20,600 | ||
Payment on signing | 2,600 | ||
Payment per quarter | 1,000 | ||
Estimated fair value of the payment obligation | 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, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | $ 116,702 | $ 94,254 | |
Less accumulated depreciation | (40,089) | (31,108) | |
Total property, plant, and equipment | 76,613 | 63,146 | |
Depreciation and amortization expense | 14,366 | 12,082 | $ 9,139 |
Accelerated depreciation | 2,000 | ||
Leasehold improvements | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 26,341 | 19,709 | |
Equipment | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 26,414 | 25,664 | |
Vehicles and accessories | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 7,339 | 7,110 | |
Computer equipment and software | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 15,418 | 10,858 | |
Buildings | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 23,302 | 10,168 | |
Furniture and fixtures | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 3,877 | 2,347 | |
Land | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | 8,934 | 7,067 | |
Construction in Progress | |||
Property, Plant, and Equipment | |||
Property, plant and equipment, gross | $ 5,077 | $ 11,331 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill - Intangible Assets (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021USD ($)project | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Intangible Assets and Goodwill | |||
Amortizable Intangibles, gross | $ 200,091 | $ 200,173 | |
Less accumulated amortization | (44,438) | (25,984) | |
Total net amortizable intangibles | 155,653 | 174,189 | |
Intangible assets, net of accumulated amortization | 190,662 | 213,000 | |
Amortization expense | $ 22,300 | 12,800 | $ 6,000 |
Number of acquired R&D projects opted out | project | 2 | ||
General and administrative expenses | $ 170,521 | 138,375 | $ 103,200 |
Trademarks and other | |||
Intangible Assets and Goodwill | |||
Non-amortizable intangibles | 33,341 | 33,341 | |
IPRD | |||
Intangible Assets and Goodwill | |||
Non-amortizable intangibles | 1,668 | 5,470 | |
General and administrative expenses | $ 3,800 | ||
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 | $ 160,167 | 160,178 | |
Patents and processes | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, useful lives | 10 years | ||
Amortizable Intangibles, gross | $ 14,843 | 14,905 | |
Brand names | |||
Intangible Assets and Goodwill | |||
Amortizable Intangibles, gross | $ 24,731 | $ 24,740 | |
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, 2021USD ($) |
Intangible Assets and Goodwill | |
2022 | $ 17,966 |
2023 | 16,921 |
2024 | 14,554 |
2025 | 13,893 |
2026 | 13,303 |
Thereafter | $ 79,016 |
Intangible Assets and Goodwil_4
Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Goodwill, Beginning Balance | $ 231,158 | $ 231,045 |
Foreign currency translation | (48) | 113 |
Goodwill, Ending Balance | 231,110 | 231,158 |
Product | ||
Goodwill, Beginning Balance | 183,894 | 183,781 |
Foreign currency translation | (48) | 113 |
Goodwill, Ending Balance | 183,846 | 183,894 |
Services [Member] | ||
Goodwill, Beginning Balance | 47,264 | 47,264 |
Goodwill, Ending Balance | $ 47,264 | $ 47,264 |
Debt - Narrative (Details)
Debt - Narrative (Details) - USD ($) $ in Millions | Apr. 13, 2021 | Dec. 31, 2021 |
Notes Payable VIP Acquisition | ||
Debt Instrument [Line Items] | ||
Repayment of debt | $ 27.5 | |
Wrote off deferred financing fees to loss on debt extinguishment | 5.5 | |
Transaction cost on termination of debt instrument | 0.9 | |
Senior Secured Asset-Based Revolving Credit Facility - ABL | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 125 | |
Eligible investment - grade accounts | 90.00% | |
Percentage of eligible investment other accounts | 85.00% | |
Percentage of net orderly liquidation value of cost of certain eligible on hand and in transit inventory | 85.00% | |
Percentage of qualified cash | 100.00% | |
Line of credit facility, interest rate at period end | 2.37% | |
Unused facility fee (as a percent) | 0.35% | |
Senior Secured Term Loan Facility - Term Loan B | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 300 | |
Line of credit facility, interest rate at period end | 4.25% | |
Floor rate | 0.50% | |
Debt instrument, frequency of periodic payment | quarterly | |
Percentage of periodic payment, principal | 0.25% | |
Senior Secured Term Loan Facility - Term Loan B | Base Rate | ||
Debt Instrument [Line Items] | ||
Variable interest rate, basis points spread over variable reference rate (as a percent) | 3.25% | |
Senior Secured Term Loan Facility - Term Loan B | LIBOR | ||
Debt Instrument [Line Items] | ||
Variable interest rate, basis points spread over variable reference rate (as a percent) | 4.25% |
Debt - Convertible Notes (Detai
Debt - Convertible Notes (Details) $ in Thousands | May 19, 2020USD ($)D | Dec. 31, 2021USD ($) | May 31, 2020 | Jul. 31, 2017 |
Debt Instrument [Line Items] | ||||
Interest rate | 2.00% | 4.35% | ||
Convertible Notes | ||||
Debt Instrument [Line Items] | ||||
Aggregate principal amount | $ 143,800 | |||
Interest rate | 4.00% | 4.00% | ||
Class A common stock | Convertible Notes | Maximum | ||||
Debt Instrument [Line Items] | ||||
Aggregate principal amount | $ 143,800 | |||
Interest rate | 4.00% | |||
Net proceeds from the debt | $ 137,900 | |||
Conversion ratio | 33.7268 | |||
Denomination for conversion of debt | $ 1,000 | |||
Premium percentage on conversion price | 130.00% | |||
Threshold trading days | D | 20 | |||
Threshold consecutive trading days | D | 30 | |||
Fair value of our convertible notes | $ 169,000 |
Debt - Capped Call Transactions
Debt - Capped Call Transactions (Details) $ / shares in Units, $ in Thousands | May 14, 2020USD ($)item | Dec. 31, 2021$ / shares | Dec. 31, 2020USD ($) |
Debt Instrument [Line Items] | |||
Number of option counterparties | item | 2 | ||
Payment for Capped Call Options | $ 14,821 | ||
Class A common stock | |||
Debt Instrument [Line Items] | |||
Derivative cap price per share | $ / shares | $ 41.51 | ||
Class A common stock | Capped Call Transactions | |||
Debt Instrument [Line Items] | |||
Payment for Capped Call Options | $ 14,800 |
Debt - A&R and General Other De
Debt - A&R and General Other Debt (Details) - USD ($) $ in Thousands | Apr. 13, 2021 | May 14, 2020 | Jul. 08, 2019 | Jul. 31, 2020 | Jul. 31, 2017 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Debt | ||||||||
Fixed interest rate | 4.35% | 2.00% | ||||||
Amortization schedule | 25 years | 10 years | ||||||
Market interest rate | 8.30% | 2.10% | ||||||
Balloon payment | 10 years | |||||||
Amount required to pay pursuant to settlement agreement | $ 20,600 | |||||||
Payment on signing | 2,600 | |||||||
Payment per quarter | 1,000 | |||||||
Estimated fair value of the payment obligation | $ 17,500 | |||||||
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 | |||||||
Other Debt | $ 23,518 | 16,257 | ||||||
Net discount on debt and deferred financing fees | (10,418) | (9,947) | ||||||
Long term debt | 455,350 | 409,810 | ||||||
Less current maturities of long-term debt | (6,880) | (6,219) | ||||||
Long-term debt, less current installments | 448,470 | 403,591 | ||||||
Future maturities of long-term debt | ||||||||
2022 | 6,880 | |||||||
2023 | 7,099 | |||||||
2024 | 7,339 | |||||||
2025 | 4,600 | |||||||
2026 | 147,350 | |||||||
Thereafter | 292,500 | |||||||
Debt issuance costs | 7,656 | 550 | $ 5,790 | |||||
Convertible Notes [Member] | ||||||||
Debt | ||||||||
Outstanding balance | 143,750 | 143,750 | ||||||
Revolving credit facility | ||||||||
Debt | ||||||||
Maximum borrowing capacity | $ 125,000 | |||||||
Outstanding balance | 15,000 | |||||||
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 | 298,500 | 217,250 | ||||||
New Mortgage | ||||||||
Future maturities of long-term debt | ||||||||
Debt issuance costs | $ 200 | |||||||
A&R Credit Agreement | ||||||||
Future maturities of long-term debt | ||||||||
Debt issuance costs | 600 | 700 | ||||||
A&R Credit Agreement | Euro dollar | ||||||||
Debt | ||||||||
Unused facility fee (as a percent) | 1.00% | |||||||
A&R Term Loan Credit Agreement | ||||||||
Debt | ||||||||
Maximum borrowing capacity | $ 220,000 | |||||||
Future maturities of long-term debt | ||||||||
Debt issuance costs | $ 5,100 | |||||||
A&R Term Loan Credit Agreement | Euro dollar | ||||||||
Debt | ||||||||
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 | 27,500 | |||||||
Guaranteed note | ||||||||
Debt | ||||||||
Long term debt | $ 10,000 | |||||||
Senior Secured Asset-Based Revolving Credit Facility - ABL | ||||||||
Debt | ||||||||
Maximum borrowing capacity | $ 125,000 | |||||||
Unused facility fee (as a percent) | 0.35% | |||||||
Future maturities of long-term debt | ||||||||
Debt issuance costs | $ 1,000 | |||||||
Senior Secured Term Loan Facility - Term Loan B | ||||||||
Debt | ||||||||
Maximum borrowing capacity | $ 300,000 | |||||||
Future maturities of long-term debt | ||||||||
Debt issuance costs | $ 6,400 | |||||||
Senior Secured Term Loan Facility - Term Loan B | LIBOR | ||||||||
Debt | ||||||||
Variable interest rate, basis points spread over variable reference rate (as a percent) | 4.25% | |||||||
Notes Payable | ||||||||
Future maturities of long-term debt | ||||||||
Debt issuance costs | $ 5,900 |
Leases - Narrative (Details)
Leases - Narrative (Details) | Dec. 31, 2021 |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Renewal options term | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Renewal options term | 10 years |
Leases - Components of lease ex
Leases - Components of lease expense and other information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Lease cost | |||
Amortization of right-of-use assets | $ 2,215 | $ 1,681 | $ 1,441 |
Interest on lease liabilities | 338 | 315 | 308 |
Operating lease cost | 5,556 | 5,831 | 4,833 |
Variable lease cost | 1,283 | 1,130 | 629 |
Short-term lease cost | 13 | 34 | 41 |
Sublease income | (238) | (528) | (452) |
Total lease cost | $ 9,167 | $ 8,463 | $ 6,800 |
Weighted-average remaining lease term (years), Operating leases | 3 years 10 months 9 days | 4 years 4 months 28 days | |
Weighted-average remaining lease term (years), Finance leases | 2 years 7 months 2 days | 2 years 4 months 17 days | |
Weighted-average discount rate, Operating leases | 4.90% | 5.30% | |
Weighted-average discount rate, Finance leases | 4.60% | 5.70% |
Leases - Annual future commitme
Leases - Annual future commitments under non-cancelable leases (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Lease Obligations, Operating Leases | ||
2022 | $ 6,951 | |
2023 | 6,139 | |
2024 | 4,581 | |
2025 | 3,629 | |
2026 | 2,029 | |
Thereafter | 56 | |
Total minimum future obligations | 23,385 | |
Less interest | (2,042) | |
Present value of net future minimum obligations | 21,343 | |
Less current lease obligations | (6,500) | $ (4,915) |
Long-term lease obligations | 14,843 | 15,789 |
Lease Obligations, Finance Leases | ||
2022 | 1,622 | |
2023 | 1,696 | |
2024 | 609 | |
2025 | 225 | |
2026 | 78 | |
Total minimum future obligations | 4,230 | |
Less interest | (267) | |
Present value of net future minimum obligations | 3,963 | |
Less current lease obligations | $ (1,470) | |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | Long Term Debt And Finance Leases Current | |
Long-term lease obligations | $ 2,493 | $ 3,338 |
Leases - Supplemental cash flow
Leases - Supplemental cash flow information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Leases | |||
Operating cash flows from finance leases | $ 338 | $ 315 | $ 308 |
Operating cash flows from operating leases | 3,928 | 5,668 | 4,568 |
Financing cash flows from finance leases | 1,926 | 1,965 | 1,547 |
Operating leases | 5,212 | 5,105 | 5,368 |
Finance leases | $ 1,191 | $ 2,019 | $ (3,006) |
Income Taxes (Details)
Income Taxes (Details) $ in Millions | Dec. 31, 2021USD ($) |
Deferred tax assets | $ 82.8 |
Continuing LLC Owners | |
Interest held by parent | 0.90% |
Income Taxes - Components of ea
Income Taxes - Components of earnings before income taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Components of earnings before income taxes | |||
United States | $ (12,816) | $ (25,747) | $ (17,953) |
Foreign | 302 | 433 | 342 |
Pretax net loss | $ (12,514) | $ (25,314) | $ (17,611) |
Income Taxes - Provision for in
Income Taxes - Provision for income taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Current: | |||
State | $ 323 | $ 327 | $ 317 |
Foreign | 26 | 137 | 17 |
Total current | 349 | 464 | 334 |
Deferred and other: | |||
Federal | 2,661 | 47,048 | (2,146) |
State | 717 | 12,922 | (1,336) |
Foreign | 142 | (21) | (161) |
Total deferred and other | 3,520 | 59,949 | (3,643) |
Total income tax expense (benefit) | $ 3,869 | $ 60,413 | $ (3,309) |
Income Taxes - Effective Income
Income Taxes - Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
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 | (0.20%) | 0.60% | 1.30% |
Non-controlling interest and nontaxable income | (0.10%) | (2.40%) | (4.00%) |
Deferred tax rate changes | 1.00% | (0.60%) | (0.40%) |
Share-based compensation | 6.80% | 0.60% | 0.10% |
Return-to-Provision | (15.70%) | (2.30%) | 0.80% |
Valuation Allowance | (42.90%) | (255.20%) | 0.40% |
Other | (0.80%) | (0.40%) | (0.40%) |
Effective income tax rate | (30.90%) | (238.70%) | 18.80% |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Tax effects of temporary differences: | ||
Investment in partnership | $ 77,306 | $ 63,439 |
Fixed Assets | 43 | 44 |
Net operating loss carryforwards and tax credits | 25,888 | 15,382 |
Disallowed business interest carryforward | 3,169 | 1,678 |
Other accruals and reversals | 5 | 9 |
Subtotal | 106,411 | 80,552 |
Less: valuation allowance | (106,258) | (80,355) |
Total net deferred tax assets | 153 | 197 |
Fixed Assets | (151) | (12) |
Intangible assets | (454) | (456) |
Other | (7) | (6) |
Total deferred tax liabilities | $ (612) | $ (474) |
Income Taxes - Valuation allowa
Income Taxes - Valuation allowance and NOL (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Taxes | ||
Federal net operating loss carryforwards | $ 103,600 | |
Federal net operating loss carryforwards that will expire in 2037 | 1,900 | |
Federal net operating loss carryforwards indefinite carryforward period | $ 101,700 | |
Percentage of taxable income offset against net operating carryforward | 80.00% | |
Federal interest expense carryover | $ 15,100 | |
Charitable contribution carryforwards | 600 | |
State net operating loss carryforwards | 499,500 | |
State NOL, tax effected | 4,600 | |
Foreign net operating loss carryforwards indefinite carryforward period | 600 | |
Deferred tax assets | 106,258 | $ 80,355 |
Unrecognized tax benefit would impact the effective tax rate | $ 0 |
Loss per Share (Details)
Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Numerator: | |||
Net loss | $ (16,383) | $ (85,727) | $ (14,302) |
Less: net loss attributable to non-controlling interests | (416) | (3,072) | (2,849) |
Net loss attributable to PetIQ, Inc. | $ (15,967) | $ (82,655) | $ (11,453) |
Denominator: | |||
Weighted-average shares of Class A common stock outstanding -- basic (in shares) | 28,242 | 24,629 | 22,652 |
Weighted-average shares of Class A common stock outstanding - diluted (in shares) | 28,242 | 24,629 | 22,652 |
Loss per share of Class A common stock - basic | $ (0.57) | $ (3.36) | $ (0.51) |
Loss per share of Class A common stock - diluted | $ (0.57) | $ (3.36) | $ (0.51) |
Stock Based Compensation (Detai
Stock Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Stock Based Compensation | |||
Stock based compensation expense | $ 9,428 | $ 9,170 | $ 7,355 |
Stock Options Granted (in shares) | 354 | 505 | |
Vesting percentage on each anniversary of the grant date | 25.00% | ||
Maximum term for stock options | 6 years 2 months 1 day | 6 years 3 months | |
Weighted average grant date fair value of stock options granted | $ 12.39 | $ 11.88 | |
Unrecognized compensation cost related to unvested stock options | $ 7,000 | ||
Unrecognized compensation cost related to unvested options, recognized weighted-average period | 2 years 3 months 18 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 | 771 | 1,293 | |
Maximum | |||
Stock Based Compensation | |||
Maximum term for stock options | 10 years | ||
Stock options | |||
Stock Based Compensation | |||
Stock based compensation expense | $ 5,200 | $ 6,500 | $ 6,200 |
Stock Based Compensation - Weig
Stock Based Compensation - Weighted Average Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Stock Based Compensation | ||
Expected term (years) | 6 years 2 months 1 day | 6 years 3 months |
Expected volatility | 33.45% | 33.91% |
Risk-free interest rate | 0.89% | 0.37% |
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, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Stock Based Compensation | |||
Stock Options Outstanding - Beginning Balance | 2,086 | 2,072 | |
Stock Options Granted (in shares) | 354 | 505 | |
Stock option Exercised (in shares) | (583) | (395) | |
Stock Options Forfeited (in shares) | (64) | (96) | |
Stock Options Cancelled (in shares) | (25) | ||
Stock Options Outstanding - Ending Balance | 1,768 | 2,086 | 2,072 |
Options exercisable - Ending Balance | 755 | ||
Weighted Average Exercise Price Outstanding - Beginning Balance | $ 23.93 | $ 24.63 | |
Weighted Average Exercise Price - Granted | 35.66 | 20.22 | |
Weighted Average Exercise Price - Exercised | 23.05 | 23.48 | |
Weighted Average Exercise Price - Forfeited | 24.84 | 21.42 | |
Weighted Average Exercise Price - Cancelled | 25.70 | ||
Weighted Average Exercise Price Outstanding - Ending Balance | $ 26.51 | $ 23.93 | $ 24.63 |
Aggregate Intrinsic Value | $ 2,897 | $ 30,302 | $ 6,266 |
Aggregate Intrinsic Value - Exercised | $ 8,499 | $ 4,468 | |
Weighted Average Remaining Contractual Life (years) | 7 years 3 months 18 days | 7 years 2 months 12 days | 8 years |
Stock Based Compensation - Rest
Stock Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Unrecognized compensation cost related to unvested stock options | $ 7,000 | ||
Share-based Compensation | 9,428 | $ 9,170 | $ 7,355 |
Income Tax Expense | 3,869 | 60,413 | (3,309) |
RSU | |||
Unrecognized compensation cost related to unvested stock options | $ 11,200 | ||
Vesting period | 2 years 8 months 12 days | ||
Share-based Compensation | $ 4,300 | 2,600 | 1,100 |
Income Tax Expense | $ 0 | $ 0 | $ 1,400 |
Number of Shares | |||
Beginning Balance | 317 | 133 | |
Granted (in shares) | 268 | 271 | |
Settled (in shares) | (103) | (70) | |
Forfeited (in shares) | (23) | (17) | |
Ending balance | 459 | 317 | 133 |
Weighted Average Grant Date Fair Value | |||
Beginning Balance | $ 22.91 | $ 28.85 | |
Granted (per share) | 37.91 | 20.73 | |
Settled (per share) | 24.81 | 25.65 | |
Forfeited (per share) | 26.02 | 23.34 | |
Ending balance | $ 31.08 | $ 22.91 | $ 28.85 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 12 Months Ended | |
Dec. 31, 2021Vote$ / sharesshares | Dec. 31, 2020$ / sharesshares | |
Class of Stock [Line Items] | ||
Blank check preferred stock, authorized | 12,500,000 | |
Staggered term (in years) | 3 years | |
Number of votes per share | Vote | 1 | |
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 |
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 |
Non-Controlling Interests (Deta
Non-Controlling Interests (Details) - shares shares in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Common Stock, Shares, Outstanding, Beginning Balance | 25,711 | 23,554 | |
Stock based compensation transactions | 660 | 445 | |
Exchange transactions | 2,768 | 1,712 | |
Common Stock, Shares, Outstanding, Ending Balance | 29,139 | 25,711 | |
Continuing LLC Owners | |||
Common Stock, Shares, Outstanding, Beginning Balance | 3,040 | 4,752 | |
Exchange transactions | (2,768) | (1,712) | |
Common Stock, Shares, Outstanding, Ending Balance | 272 | 3,040 | |
Amended Holdco LLC Agreement | |||
Common Stock, Shares, Outstanding, Beginning Balance | 28,751 | 28,306 | |
Stock based compensation transactions | 660 | 445 | |
Common Stock, Shares, Outstanding, Ending Balance | 29,411 | 28,751 | |
Holdco | |||
Weighted average ownership percentage in Holdco | 96.60% | 86.40% | |
Continuing LLC Owners | |||
Ownership interest by continuing LLC owners | 0.90% | 10.60% | 16.80% |
Ownership interest in Holdco | 0.90% | ||
PetIQ | |||
Ownership interest in Holdco | 99.10% | 89.40% | 83.20% |
Customer Concentration (Details
Customer Concentration (Details) - customer | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Customer concentrations | Sales | |||
Customer Concentration | |||
Number of customers accounted for more than 10% of sales individually | 1 | 2 | 2 |
Customer concentrations | Sales | One Customer | |||
Customer Concentration | |||
Concentration risk | 26.00% | ||
Customer concentrations | Sales | Two Customers | |||
Customer Concentration | |||
Concentration risk | 42.00% | 35.00% | |
Customer concentrations | Accounts receivable | |||
Customer Concentration | |||
Number of customers accounted for more than 10% of sales individually | 1 | 1 | |
Credit concentrations | Accounts receivable | One Customer | |||
Customer Concentration | |||
Concentration risk | 47.00% | 52.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | ||
Jul. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Litigation Contingencies | ||||
Loss Contingency, Damages Sought, Value | $ 20.6 | |||
Med Vets, Inc. and Bay Medical Solutions Inc | ||||
Litigation Contingencies | ||||
Liability recorded | $ 3.5 | $ 7.8 | $ 1 | |
Mediation With Third Party | ||||
Litigation Contingencies | ||||
Liability recorded | 1.4 | |||
Lawsuit By Former Supplier For Redemption Of Ownership Interest | ||||
Litigation Contingencies | ||||
Liability recorded | 2 | |||
Loss Contingency, Damages Sought, Value | 3 | |||
Lawsuit By Former Supplier For Redemption Of Ownership Interest | Minimum | ||||
Litigation Contingencies | ||||
Loss Contingency, Estimate of Possible Loss | $ 2 |
Segments (Details)
Segments (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021USD ($)segment | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Segments | |||
Number of operating segments | segment | 2 | ||
Financial information relating to the Company's operating segments | |||
Net Sales | $ 932,528 | $ 780,051 | $ 709,431 |
Adjusted EBITDA | 92,892 | 67,792 | 60,675 |
Depreciation expense | 14,366 | 12,082 | 9,139 |
Capital expenditures | 31,270 | 22,392 | 10,276 |
Property, plant and equipment | 76,613 | 63,146 | |
United States | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 925,726 | 773,628 | 703,299 |
Property, plant and equipment | 75,315 | 61,807 | |
Foreign | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 6,802 | 6,423 | 6,132 |
Europe | |||
Financial information relating to the Company's operating segments | |||
Property, plant and equipment | 1,298 | 1,339 | |
Products | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 825,395 | 725,705 | 617,118 |
Products | United States | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 818,593 | 719,282 | 610,986 |
Products | Foreign | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 6,802 | 6,423 | 6,132 |
Services | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 107,133 | 54,346 | 92,313 |
Services | United States | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 107,133 | 54,346 | 92,313 |
Operating Segments | Products | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 825,395 | 725,705 | 617,118 |
Adjusted EBITDA | 149,321 | 117,216 | 73,537 |
Depreciation expense | 3,857 | 4,810 | 3,552 |
Capital expenditures | 1,884 | 13,394 | 1,297 |
Operating Segments | Services | |||
Financial information relating to the Company's operating segments | |||
Net Sales | 107,133 | 54,346 | 92,313 |
Adjusted EBITDA | 11,742 | 3,387 | 20,045 |
Depreciation expense | 6,510 | 3,775 | 3,170 |
Capital expenditures | 10,537 | 7,373 | 6,409 |
Corporate, Non-Segment | Unallocated Corporate | |||
Financial information relating to the Company's operating segments | |||
Adjusted EBITDA | (68,171) | (52,811) | (32,907) |
Depreciation expense | 3,999 | 3,497 | 2,417 |
Capital expenditures | $ 18,849 | $ 1,625 | $ 2,570 |
Segments - Reconciliation (Deta
Segments - Reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | |||
Adjusted EBITDA | $ 92,892 | $ 67,792 | $ 60,675 |
Depreciation | (14,366) | (12,082) | (9,139) |
Amortization | (22,336) | (12,815) | (5,994) |
Interest | (24,696) | (22,807) | (14,495) |
Loss on debt extinguishment and related costs | (6,438) | ||
Acquisition costs | (92) | (2,620) | (6,147) |
Stock based compensation expense | (9,428) | (9,170) | (7,355) |
Purchase accounting adjustment to inventory | (4,805) | ||
SKU Rationalization | (6,482) | ||
Non same-store adjustment | (23,159) | (16,354) | (12,232) |
Fair value adjustment of contingent note | (7,320) | ||
Integration costs | 142 | (9,776) | (3,788) |
Litigation expenses | (4,105) | (1,006) | (529) |
COVID-19 related costs | (6,476) | ||
CFO Transition | (928) | ||
Pretax net loss | (12,514) | (25,314) | (17,611) |
Income tax benefit (expense) | (3,869) | (60,413) | 3,309 |
Net loss | (16,383) | (85,727) | (14,302) |
Products | Operating Segments | |||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | |||
Adjusted EBITDA | 149,321 | 117,216 | 73,537 |
Services | Operating Segments | |||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | |||
Adjusted EBITDA | 11,742 | 3,387 | 20,045 |
Unallocated Corporate | Corporate, Non-Segment | |||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | |||
Adjusted EBITDA | $ (68,171) | $ (52,811) | $ (32,907) |
Related Parties (Details)
Related Parties (Details) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | ||
Dec. 31, 2021 | Aug. 31, 2021 | Apr. 30, 2020 | Dec. 31, 2021 | |
Insurance Policies With Chris Christensen | ||||
Related Parties | ||||
Premium expense | $ 6.9 | |||
Insurance Policies With Chris Christensen | Colliers International | ||||
Related Parties | ||||
Payments to acquire land | $ 2.5 | |||
Payment of Broker's Commission | $ 0.1 | |||
Insurance Policies With Chris Christensen | Colliers International | Corporate Office in Eagle Idaho | ||||
Related Parties | ||||
Commission paid | $ 0.1 | |||
Real Estate Held-for-sale | $ 4.8 | |||
Acadia Investor Relations L LC | ||||
Related Parties | ||||
Related party transaction, expenses from transactions with Related Party | $ 0.2 | |||
Mike Christensen | Insurance Policies With Chris Christensen | Colliers International | ||||
Related Parties | ||||
Payments to acquire land | $ 2.5 | |||
Payment of Broker's Commission | $ 0.1 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Employee Benefit Plans | |||
Employee contribution | 100.00% | ||
Employer contribution | 100.00% | ||
Employer contribution, percent of match | 3.00% | ||
Employer matching contribution | $ 1.1 | $ 0.9 | $ 0.6 |