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|PetIQ, Inc. Enters Into Definitive Agreement to Acquire VIP Petcare|
Complementary Veterinary Services Business Expected to Significantly Expand
Acquisition Anticipated to Generate Approximately
PetIQ Provides Preliminary 2017 Unaudited Financial Outlook
“We look forward to working closely with
“We have developed a great working relationship with
Strategic and Financial Benefits
The transaction will create a larger and more diversified pet health and wellness company.
Under the terms of the transaction agreement, VIP will become a wholly-owned subsidiary of
In connection with execution of the transaction agreement,
Jefferies LLC is serving as financial advisor and Winston & Strawn LLP is acting as legal counsel to PetIQ. TM Capital Corp. is serving as financial advisor and Carle Mackie Power & Ross LLP is acting as legal counsel to VIP.
Preliminary 2017 Unaudited Financial Outlook
In addition, today PetIQ provided the following unaudited full year 2017 financial outlook for its stand-alone business of:
The Company will report fourth quarter and audited full year 2017 financial results in March 2018. PetIQ does not plan to provide preliminary financial information in the future other than in unique circumstances, or in the event of a material event that requires disclosure.
Initial 2018 Financial Commentary
PetIQ is providing the following initial fiscal 2018 financial commentary of the expected combined business and expects:
PetIQ expects incremental annual interest expense of $5.3 million associated with the financing of the transaction and also expects combined marginal federal and state tax rates for the VIP business of approximately 28% as their business is domestically based.
The Company does not provide guidance for the most directly comparable GAAP measure, net income, and similarly cannot provide a reconciliation between its forecasted adjusted EBITDA and net income metrics without unreasonable effort due to the unavailability of reliable estimates for certain items. These items are not within the Company’s control and may vary greatly between periods and could significantly impact future financial results.
Conference Call and Webcast Presentation
PetIQ will host a conference call and webcast with a supplemental presentation where members of the executive management team will discuss the VIP transaction with additional comments and details today, January 8, 2018, at 8:00 a.m. ET. The conference call and supplemental presentation will be available live over the Internet through the “Investors” section of the PetIQ’s website at www.PetIQ.com. To participate on the live call listeners in North America may dial 877-451-6152 and international listeners may dial 201-389-0882.
A replay of the conference call will be archived on PetIQ’s website and telephonic playback will be available from 10:00 a.m. ET, January 8, 2018, through January 22, 2018. North American listeners may dial 844-512-2921 and international listeners may dial 412-317-6671 the passcode is 13674898.
PetIQ is a rapidly growing pet health and wellness company, with a mission to make pet lives better by educating pet parents on the importance of regular Veterinary care and Veterinary-recommended pet products. PetIQ has given consumers convenient access and affordable choices to a broad portfolio of pet health and wellness products across a network of leading national retail stores in mass, club, grocery, pharmacy, and e-commerce channels. PetIQ believes that pets are an important part of the family and deserve the best pet care we can give them. For more information, visit www.PetIQ.com.
About VIP Petcare
VIP is dedicated to improving the lives of pets and the people who love them. Through our nationwide network of community clinics and wellness centers, VIP extends the availability of high value pet preventive and wellness veterinary services to all pet owners. The veterinary services and products VIP offers include diagnostic tests, vaccinations, prescription medications, microchipping and a wellness checks. VIP is committed to providing the best veterinary standard of care and protection against diseases and parasites such as parvo, rabies, Lyme, heartworm, intestinal parasites and feline leukemia. VIP’s microchipping includes free nationwide registration, helping pet owners find their pet family members and bring them safely home.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events, including statements regarding the proposed acquisition by PetIQ, the expected closing date of the acquisition and the potential benefits and synergies of the acquisition. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could" and similar expressions. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, our dependency on a limited number of customers; our ability to implement our growth strategy effectively; our ability to achieve or sustain profitability; competition from veterinarians and others in our industry; failure of the Fairness to Pet Owners Act of 2017 to become law; reputational damage to our brands; economic trends and spending on pets; the effectiveness of our marketing and trade promotion programs; recalls or withdrawals of our products or product liability claims; our ability to manage our manufacturing and supply chain effectively; disruptions in our manufacturing and distribution chains; our ability to successfully grow our business through acquisitions; our ability to introduce new products and improve existing products; our failure to protect our intellectual property; costs associated with governmental regulation; risks related to our international operations; our ability to keep and retain key employees; and the risks set forth under the "Risk Factors' section of the final prospectus for PetIQ, Inc., dated July 20, 2017, and filed with the SEC on July 21, 2017.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, including the VIP Petcare transaction and its potential impact, may cause actual results to differ materially from those contained in any forward-looking statements. Consequently, you should not place undue reliance on forward-looking statements.
Non-GAAP Financial Measures
In addition to unaudited preliminary financial outlook reported in accordance with U.S. GAAP, PetIQ references the following non-GAAP financial measures: Adjusted Net Income, EBITDA and Adjusted EBITDA.
Adjusted Net Income consists of GAAP Net income adjusted for tax expense, costs to become a public company, and stock based compensation expense.
EBITDA represents net income before interest, income taxes, and depreciation and amortization. Adjusted EBITDA represents EBITDA plus loss on debt extinguishment, management fees, stock based compensation expense, acquisition related expenses, and litigation expenses. Adjusted EBITDA adjusts for transactions that management does not believe are representative of our core ongoing business. Adjusted EBITDA is utilized by management: (i) as a factor in evaluating management's performance when determining incentive compensation and (ii) to evaluate the effectiveness of our business strategies. The Company presents EBITDA because it is a necessary component for computing Adjusted EBITDA.
We believe that the use of Adjusted Net Income, EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends. In addition, you should be aware when evaluating Adjusted Net Income, EBITDA and Adjusted EBITDA that in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by these or other unusual or non-recurring items. Our computation of Adjusted Net Income, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted Net Income, EBITDA and Adjusted EBITDA in the same manner. Our management does not, and you should not, consider Adjusted Net Income, EBITDA or Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of Adjusted Net Income, EBITDA and Adjusted EBITDA is that they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. See a reconciliation of Non-GAAP measures to net income, the most comparable GAAP measure, in the financial tables that accompany this release.
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