View Filing Data

Document and Entity Information - USD ($) $ in Thousands	12 Months Ended
Document and Entity Information - USD ($) $ in Thousands	Dec. 31, 2017	Mar. 12, 2018	Jun. 30, 2017
Entity Registrant Name	PetIQ, Inc.
Entity Central Index Key	0001668673
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Public Float			$ 0
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Class A
Entity Common Stock, Shares Outstanding		15,366,889
Class B common stock
Entity Common Stock, Shares Outstanding		8,072,886

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 37,896	$ 767
Accounts receivable, net of allowance for doubtful accounts	21,759	17,195
Inventories	44,056	34,232
Supplier prepayments	3,173	2,985
Other current assets	1,991	1,358
Total current assets	108,875	56,537
Property, plant and equipment, net	15,000	13,044
Restricted deposits	200	250
Deferred tax assets	5,994
Other non-current assets	2,446	2,826
Intangible assets, net of accumulated amortization	3,266	4,054
Goodwill	5,064	4,619
Total assets	140,845	81,330
Current liabilities
Accounts payable	14,234	9,333
Accrued wages payable	1,811	1,100
Accrued interest payable	115	44
Other accrued expenses	305	27
Current portion of deferred acquisition liability	1,575	250
Current portion of long-term debt and capital leases	151	2,321
Total current liabilities	18,191	13,075
Non-current liabilities
Long-term debt	17,183	25,158
Obligations under capital leases, less current installments	389	434
Deferred acquisition liability		1,303
Other non-current liabilities	238	378
Total non-current liabilities	17,810	27,273
Commitments and contingencies
Equity
Members equity		42,941
Additional Paid-in capital	70,873
Accumulated deficit	(3,493)
Accumulated other comprehensive loss	(687)	(1,940)
Total stockholders' / member's equity	66,714	41,001
Non-controlling interest	38,130	(19)
Total equity	104,844	40,982
Total liabilities and equity	140,845	$ 81,330
Class A
Equity
Common stock value	13
Class B common stock
Equity
Common stock value	$ 8

Consolidated Balance Sheets (Parenthetical)	Dec. 31, 2017 $ / shares shares
Common stock, shares outstanding	13,222,583
Class A
Common stock, par value \| $ / shares	$ 0.001
Common stock authorized	125,000,000
Common Stock, Shares, Issued	13,222,583
Common stock, shares outstanding	13,222,583
Class B common stock
Common stock, par value \| $ / shares	$ 0.001
Common stock authorized	8,401,521
Common Stock, Shares, Issued	8,268,188
Common stock, shares outstanding	8,268,188

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Operations
Net sales	$ 266,687	$ 200,162	$ 205,687
Cost of sales	215,493	167,615	166,529
Gross profit	51,194	32,547	39,158
Operating expenses
General and administrative expenses	37,905	31,845	35,588
Operating income	13,289	702	3,570
Interest expense, net	(1,563)	(3,058)	(3,545)
Foreign currency gain (loss), net	(140)	(24)	75
Loss on debt extinguishment		(1,681)	(1,449)
Other income, net	201	666
Total other expense, net	(1,502)	(4,097)	(4,919)
Pretax net income (loss)	11,787	(3,395)	(1,349)
Income tax expense	(3,970)
Net income (loss)	7,817	(3,395)	(1,349)
Net income (loss) attributable to noncontrolling interest	11,310	$ (3,395)	$ (1,349)
Net income attributable to PetIQ, Inc.	$ (3,493)
Net loss per share attributable to PetIQ, Inc. Class A common stock
Basic	$ (0.26)
Diluted	$ (0.26)
Weighted Average shares of Class A common stock outstanding
Basic	13,222,583
Diluted	13,222,583

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Comprehensive income/(loss)
Net income (loss)	$ 7,817	$ (3,395)	$ (1,349)
Foreign currency translation adjustment	823	(1,898)	(515)
Total other comprehensive income/(loss)	8,640	(5,293)	(1,864)
Comprehensive income (loss) attributable to noncontrolling interest	11,943	$ (5,293)	$ (1,864)
Comprehensive loss attributable to PetIQ, Inc.	$ (3,303)

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities
Net income (loss)	$ 7,817	$ (3,395)	$ (1,349)
Adjustments to reconcile net income to net cash used for operating activities
Depreciation and amortization of intangible assets and loan fees	3,614	4,074	3,140
Loss on disposition of property	20	42	28
Foreign exchange (gain) loss on liabilities	228	(28)	(300)
Stock based compensation expense	447
Deferred tax adjustment	3,690
Warranty settlement gain		(645)	1,449
Changes in assets and liabilities
Accounts receivable	(4,313)	(2,216)	(1,907)
Inventories	(9,718)	(542)	(10,399)
Prepaid expenses and other assets	(721)	2,037	(3,789)
Accounts payable	4,152	104	6,114
Accrued wages payable	694	(128)	827
Other accrued expenses	(28)	(229)	(229)
Net cash provided by (used in) operating activities	5,882	(926)	(6,415)
Cash flows from investing activities
Proceeds from disposition of property, plant, and equipment		1	12
Purchase of property, plant, and equipment and intangibles	(4,131)	(2,041)	(1,550)
Net cash used in investing activities	(4,131)	(2,040)	(1,538)
Cash flows from financing activities
Proceeds from issuance of long term debt	260,020	238,252	236,981
Principal payments on long term debt	(270,458)	(243,852)	(218,532)
Proceeds from Initial Public Offering (IPO) of Class A Shares, net of underwriting discounts and offering costs	104,010
Repayment of Preference notes	(55,960)
Change in restricted cash and deposits	50
Purchase of LLC units from Continuing LLC Owners	(2,133)	6,894	(6,944)
Principal payments on capital lease obligations	(116)	(93)	(382)
Payment of deferred financing fees and debt discount	(42)	(509)	(1,316)
Net cash provided by financing activities	35,371	692	9,807
Net change in cash and cash equivalents	37,122	(2,274)	1,854
Effect of exchange rate changes on cash and cash equivalents	7	(209)	26
Cash and cash equivalents, beginning of period	767	3,250	1,370
Cash and cash equivalents, end of period	37,896	767	3,250
Supplemental cash flow information
Interest paid	1,353	2,911	2,997
Property, plant, and equipment acquired through accounts payable	(80)	125	24
Capital lease additions	35	$ 188
Issuance of preference notes for LLC Interests	55,960
Non cash acquisition of intangibles			$ 350
Establishment of deferred tax asset from step-up in basis	9,441
Taxes paid	323
Accrued tax distribution	$ 597

Consolidated Statements of Members/Stockholders Equity - USD ($) $ in Thousands	Class A Common Stock [Member]	Class B common stock Common Stock [Member]	Member Equity [Member]	Retained Earnings (Accumulated Deficit) [Member]	Accumulated Distributions In Excess Of Net Income [Member]	Additional Paid In Capital [Member]	Noncontrolling Interest [Member]	Total
Beginning Balance at Dec. 31, 2014			$ 47,681		$ 473		$ (15)	$ 48,139
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(1,342)				(7)	(1,349)
Other comprehensive income					(515)			(515)
Ending Balance at Dec. 31, 2015			46,339		(42)		(22)	46,275
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(3,398)				3	(3,395)
Other comprehensive income					(1,898)			(1,898)
Ending Balance at Dec. 31, 2016			$ 42,941		(1,940)		(19)	40,982
Increase (Decrease) in Stockholders' Equity
Net income (loss)								7,817
Issuance of preference notes to affiliates								(55,960)
Stock based compensation expense								447
Ending Balance at Dec. 31, 2017	$ 13	$ 8		$ (3,493)	$ (687)	$ 70,873	$ 38,130	$ 104,844
Ending Balance (in shares) at Dec. 31, 2017	13,222,583	8,268,188

Principal Business Activity and Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

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, Inc and Subsidiaries (the Company) is a manufacturer and wholesale distributor of over-the-counter and prescription pet medications and pet wellness products to various retail customers and distributors throughout the United States and Europe. The Company is headquartered in Eagle, Idaho and manufactures and distributes products from facilities in Florida, Texas, Utah, and Europe.

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. 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; allowance for doubtful accounts; the valuation of property, plant, and equipment, intangible assets and goodwill, inventories and notes receivable; and reserves for legal contingencies.

Foreign Currencies

The Company operates subsidiaries in foreign countries who use the local currency as the functional currency. The Company translates its foreign subsidiaries’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in the cumulative translation account, a component of accumulated other comprehensive income. The Company records gains and losses from changes in exchange rates on transactions denominated in currencies other than each reporting location’s functional currency in net income (loss) for each period.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity of three months or less, excluding amounts restricted for various state licensing regulations. Restricted deposits are not considered 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 a set number 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 doubtful accounts equal to estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of trade accounts receivable. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice.

The Company also has notes receivable due from various suppliers included in accounts receivable. The notes bear interest at 0% to 4% and are repaid based on either amortization schedules or from certain sales to third parties. Non-current portions of these notes receivable are included in other non-current assets on the consolidated balance sheet. Interest income is included in interest expense, net on the consolidated statement of operations.

Accounts receivable consists of the following as of:


$'s in 000's	December 31, 2017		December 31, 2016
Trade receivables	$	22,189	$	18,086
Notes receivable		297		440
		22,486		18,526
Less: Allowance for doubtful accounts		(343)		(498)
Non-current portion of receivables		(384)		(833)
Total accounts receivable, net	$	21,759	$	17,195

Inventories

Inventories are stated at the lower of cost or net realizable value, which approximate the first-in first-out (“FIFO”) basis. 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 were as follows as of December 31, 2017 and 2016:


$'s in 000's	December 31, 2017		December 31, 2016
Raw materials and work in progress	$	4,004	$	5,924
Finished goods		40,052		28,308
Total inventories	$	44,056	$	34,232

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.

Depreciation and amortization is provided using the straight-line method, based on estimated useful lives of the assets, except for leasehold improvements and capital 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 or general and administrative expenses in the consolidated statements of comprehensive income, 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
Buildings			33 years
Equipment			3-15 years
Leasehold improvements			3-9 years
Furniture and fixtures			8-10 years

Intangible Assets

Indefinite lived intangible assets consist primarily of trademarks. Trademarks represent costs paid to legally register phrases and graphic designs that identify and distinguish products sold by the Company. Trademarks are not amortized, rather potential impairment is considered on an annual basis in the fourth quarter, or more frequently upon the occurrence of an event, when circumstances indicate that the book value of trademarks are greater than their fair value. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the indefinite lived intangible asset is less than the carrying value as a basis to determine whether further impairment testing under ASC 350 is necessary. No impairment charge was recorded for the years ended December 31, 2017, 2016, and 2015.

Definite-lived intangible assets consist of a distribution agreement, production certifications, patents and processes, customer relationships, and brand names. The assets are amortized on a straight-line basis over their expected useful lives. Useful lives vary by asset type and are determined based on the period over which the intangible asset is expected to contribute directly or indirectly to the company’s future cash flows. Useful lives range from 2 to 15 years.

Goodwill

Goodwill is the excess of the consideration paid over the fair value of specifically identifiable assets, liabilities and contingent liabilities in a business combination and relates to the future economic benefits arising from assets, which are not capable of being individually identified and separately recognized.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortized but is reviewed for impairment annually in the Company’s fourth quarter or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

The goodwill impairment test consists of a two-step process, if necessary. However, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC Topic 350. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary and goodwill is considered to be unimpaired. However, if based on the qualitative assessment the Company concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the two-step process will be carried out.

In step one, the Company determines the fair value of each reporting unit and compares it to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and no further testing is performed. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference.

The Company performed its qualitative assessment during the fourth fiscal quarter of 2017 and concluded that it was more likely than not that the fair values of its reporting units were greater than their carrying amounts. After reaching this conclusion, the two-step impairment test was unnecessary and no further testing was performed. The qualitative factors that were considered included, but were not limited to, general economic conditions, outlook for the pet sector, market capitalization, consolidated company stock price, and recent and forecasted financial performance.

Goodwill impairment analysis and measurement is a process that requires significant judgment. If there are significant changes in market conditions or a future downturn in our business, or a future annual goodwill impairment test indicates an impairment of our goodwill, the Company may have to recognize impairment of its goodwill.

Deferred Acquisition Liability

The Company has a deferred acquisition liability related to an acquisition that occurred in 2013. The liability is denominated in Euros and requires annual payments based on a percentage of gross profit from the sales of certain products, and any amounts not repaid by the annual payments will be due in June 2018. The current balance recorded as of December 31, 2017 and December 31, 2016 was $1,575 thousand and $250 thousand, respectively, and is included in other accrued expenses. The non-current portion recorded as of December 31, 2017 and December 31, 2016 was zero and $1,303 thousand, respectively, and is included in deferred acquisition liability.

As discussed in Note 16, subsequent to December 31, 2017, the Company completed the VIP Acquisition, which included guarantee and contingent notes due to the sellers. See Note 16 for more information.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, product has been delivered, the price is fixed or determinable and collectability is reasonably assured. The Company generally records revenues from product sales when the goods are shipped to the customer. For customers with Free on Board (“FOB”) destination terms, a provision is recorded to exclude shipments determined to be in-transit to these customers at the end of the reporting period. A sales return allowance is recorded and accounts receivable are reduced as revenues are recognized for estimated losses on credit sales due to customer claims for discounts, returned goods and other items.

The Company offers a variety of trade promotions and incentives to our customers, such as cooperative advertising programs and in-store displays. Sales are recorded net of trade promotion spending, which is recognized at the later of the date on which the Company recognizes the related revenue or the date on which the Company offers the incentive. The Company’s net sales are periodically influenced by the timing, extent and amount of such trade promotions and incentives. Accruals for expected payouts under these programs are included in other accrued expenses.

Shipping and Handling Costs

Shipping and handling costs are recorded as cost of sales, and are not typically billed to customers.

Research and Development and Advertising Costs

Research and development and advertising costs are expensed as incurred and are included in general and administrative expenses. Research and development costs amounted to $514 thousand, $310 thousand, and $380 thousand and advertising costs were $2,229 thousand, $1,179 thousand, and $6,077 thousand for the years ended December 31, 2017, 2016, and 2015, respectively.

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. The Company consults with both internal and external legal counsel related to litigation.

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 8 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) amortization of deferred loan fees, and (iii) capital lease obligations and the mortgage note outstanding, offset by interest income earned on our demand deposits and other assets. Interest expense was $1,638 thousand, $3,078 thousand, and $3,567 thousand for the years ended December 31, 2017, 2016, and 2015, respectively, offset by $75 thousand, $20 thousand, and $22 thousand of interst income, respectively.

Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to PetIQ, Inc. by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to PetIQ, Inc., adjusted as necessary for the impact of potentially dilutive securities, by the weighted-average shares outstanding during the period and the impact of securities that would have a dilutive effect on earnings per share. See Note 7 for further discussion.

Reclassifications

Certain reclassifications have been made to the prior years’ consolidated financial statemetns to conform to current year presentation. These reclassifications had no impact on net income, shareholders’ equity, or cash flows as previously reported.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and subsequently issued several related Accounting Standards Updates (“ASUs”) (“Topic 606”), which provide guidance for recognizing revenue from contracts with customers. The core principle of Topic 606 is that revenue is recognized when promised goods or services are transferred to customers in an amount that reflects consideration for which entitlement is expected in exchange for those goods or services. Topic 606 will be effective commencing with our quarter ending March 31, 2018. We will adopt Topic 606 using the modified retrospective transition approach and expect the impact to be immaterial, with an estimated reduction of beginning accumulated deficit of $0.3 million.

During 2017, we completed our evaluation of Topic 606, including the impact on our business processes, systems and controls, and differences in the timing and/or method of revenue recognition. As a result of our evaluation, we identified changes to and modified certain of our accounting policies and practices. We also designed and implemented specific controls over our evaluation of the impact of Topic 606, including our calculation of the cumulative effect of adopting Topic 606. Although there were no significant changes to our accounting systems or controls upon adoption of Topic 606, we modified certain of our existing controls to incorporate the revisions we made to our accounting policies and practices.

Based on our evaluation of Topic 606, we will make the following changes:

Revenue is recognized as control transfers to the customer. As such, under the new standard, revenue for our contracts is general recognized at a point in time when goods are transferred to the customer, which can be upon shipment or upon delivery, depending on the terms of the specific contract. This is generally consistent with our current recognition policy and practice for most contracts based on the transfer of title and risk of loss, however, we do anticipate a change in timing of recognition for certain contracts based on our analysis of the timing of transfer of control of products to our customers;

Make a change in performance obligation in certain of our contracts, specifically the treatment of certain merchandising products and services we provide to our customers. Prior to the adoption of Topic 606, the Company treated certain merchandising activities as selling expenses within general and administrative expenses, with the expense recognized over the time period the activities occurred. Under Topic 606 those products and services are considered a separate performance obligation and allocated revenue, with the costs included in cost of sales at the time control transfers to the customer;

Alter the accounting for certain reductions in revenue. Previously the Company accounted for certain reductions in sales at the later of sale of goods or agreement with the customer. Under Topic 606, the Company will estimate all elements of variable consideration, without consideration as to the timing of the agreement with customers;

Adjust the manner in which we present our allowance for sales returns in our Consolidated Balance Sheets, to reflect a refund liability and a returns asset;and

Topic 606 also requires expanded disclosure regarding the nature, timing, and uncertainty of revenue, cash flow and customer contract balances, including how and when we satisfy our performance obligations and the relationship between revenue recognized and changes in contract balances during a reporting period. We have evaluated these disclosure requirements and incorporated the collection of relevant data into our reporting process.

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU is a comprehensive new leases standard that was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. This standard requires adoption based upon a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with optional practical expedients. Based on a preliminary assessment, the Company expects that most of its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption. The Company is currently making over $1,700 per year in operating lease payments, and the Company expects the majority of these leases to be classified as operating lease liabilities and right-of-use assets upon adoption. The Company is continuing its assessment, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This ASU requires entities to measure most inventory "at the lower of cost or net realizable value," thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The new standard is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of this standard in first quarter of 2017 did not have a material effect on our financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify and provide specific guidance on eight cash flow classification issues that are not currently addressed by current U.S. GAAP. This ASU will be effective

commencing with our quarter ending March 31, 2018. The Company does not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In March 2016, the FASB issued ASU” No. 2016-09, “Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting (Topic 718).” ASU No. 2016-09 simplifies the accounting for share-based payment transactions, including accounting for income taxes, forfeitures, statutory tax withholding requirements, and classification in the statement of cash flows. The amendments in this update are effective for fiscal years beginning after December 31, 2016, and interim periods beginning in the first interim period within the year of adoption. Any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company adopted the provisions of this standard effective January 1, 2017. The Company elected to continue to recognize estimated forfeitures over the term of the awards. The adoption of the standard did not have a material impact on the Company’s financial condition, results of operations, cash flows and disclosures.

In January 2017, the FASB issued ASU 2017-04, Goodwill and Other (Topic 350) (“ASU 2017-04”): Simplifying the Test for Goodwill Impairment. The amended guidance simplifies the accounting for goodwill impairment for all entities by eliminating the requirement to perform a hypothetical purchase price allocation. A goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill. The ASU is effective for interim and annual periods for the Company on January 1, 2020. with early adoption permitted. The Company expects to early adopt the the standard beginning with its annual goodwill impairment test in 2018.

Property, Plant, and equipment

12 Months Ended

Dec. 31, 2017

Property, Plant, and equipment

Property, Plant, and Equipment

Note 2 – Property, Plant, and Equipment

Property, plant, and equipment consists of the following at December 31:


$'s in 000's		2017		2016
Leasehold improvements	$	6,616	$	6,587
Equipment		10,665		9,512
Computer equipment ans software		927		896
Buildings		771		668
Furniture and fixtures		407		377
Land		660		-
Construction in progress		2,344		150
		22,390		18,190
Less accumulated depreciation		(7,390)		(5,146)
Total property, plant, and equipment		15,000		13,044

Depreciation and amortization expense related to these assets total $2,348 thousand, $1,915 thousand, and $1,842 thousand for the years ended December 31, 2017, 2016, and 2015, respectively.

Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2017

Intangible Assets and Goodwill

Intangible Assets and Goodwill

Note 3 – Intangible Assets and Goodwill

Intangible assets consist of the following at December 31:


$'s in 000's	Useful Lives		2017		2016
Amortizable Intangibles
Distribution agreement	2 years	$	3,021	$	3,021
Certification	7 years		350		350
Customer relationships	12 years		1,191		1,086
Patents and processes	10 years		1,998		1,797
Brand names	15 years		923		841
Total amortizable intangibles			7,483		7,095
Less accumulated amortization		$	(4,733)	$	(3,557)
Total net amortizable intangibles			2,750		3,538
Non-amortizable intangibles
Trademarks and other			516		516
Intangible assets, net of accumulated amortization		$	3,266	$	4,054

Certain intangible assets are denominated in currencies other than the U.S. Dollar; therefore, their gross and net carrying values are subject foreign currency movements. Amortization expense for the years ended December 31, 2017, 2016, and 2015 was $1,052 thousand, $1,067 thousand, and $735 thousand, respectively.

Estimated future amortization expense for each of the following years is as follows:


Years ending December 31, ($'s in 000's)
2018	$	407
2019		407
2020		407
2021		406
2022		402
Thereafter		721

The following is a summary of the changes in the carrying value of goodwill for the years ended December 31, 2017 and 2016.


($’s in 000’s)		Reporting Unit
		Domestic		International		Total
Goodwill as of January 1, 2016	$	5,221	$	359	$	5,580
Foreign currency translation		(900)		(61)		(961)
Goodwill as of December 31, 2016		4,321		298		4,619
Foreign currency translation		416		29		445
Goodwill as of December 31, 2017	$	4,737	$	327	$	5,064

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

Debt

12 Months Ended

Dec. 31, 2017

Debt

Debt

Note 4 – Debt

The Company entered into a credit agreement (the “Credit Agreement”) on December 21, 2016. The Credit Agreement provided for secured financing of $50 million in aggregate at either LIBOR or Base (prime) interest rates plus an applicable margin, consisting of

(i) $45 million revolving credit facility (“Revolver”) maturing on December 21, 2019; and

(ii) $5 million term loan (“Term Loans”), requiring equal amortizing payments for 24 months.

As of December 31, 2017, the Company had $0 outstanding as Term Loans and $15.3 million outstanding under the Revolver. The interest rate on the revolving credit facility was 5.00%, as a Base Rate loan. The Revolver contains a lockbox mechanism.

As of December 31, 2016, the Company had $5 million outstanding as Term Loans and $22.5 million outstanding under the Revolver. The interest rate on the Term Loans was 4.25% and the interest rate on the revolving credit facility was also 4.25%, both were Base Rate loans.

The Company refinanced its credit facility in March 2016 with an amended and restated credit agreement (the “Amended Credit Agreement”). The Amended Credit Agreement provided for secured financing of $48,000 in the aggregate, consisting of

(i) $3 million in aggregate principal amount of term loans maturing on December 31, 2016 (the “Term B Loans”);

(ii) $20 million in aggregate principal amount of term loans maturing on March 16, 2018 (the “Term A Loans”); and

(iii) a $25 million revolving credit facility maturing on March 16, 2018.

On July 24, 2017, the Company entered into a mortgage with a local bank to provide financing for the purchase of a commercial building. The mortgage bears interest at 4.35% and requires monthly principal and interest payments, with the balance of the loan due on July 25, 2027.

The Credit Agreement and Amended Credit Agreement both contained certain covenants and restrictions including a fixed charge coverage ratio and a minimum EBITDA target and is secured by collateral consisting of a percentage of eligible accounts receivable, inventories, and machinery and equipment. As of December 31, 2017, the Company was in compliance with these covenants.

The following represents the Company’s long-term debt as of December 31, 2017 and December 31, 2016:


$'s in 000's	December 31, 2017		December 31, 2016
Term loans	$	—	$	5,000
Revolving credit facility		15,325		22,473
Mortgage		1,902		—
Net discount on debt and deferred financing fees		—		(92)
	$	17,227	$	27,381
Less current maturities of long-term debt		(44)		(2,223)
Total long-term debt	$	17,183	$	25,158

Future maturities of long-term debt, excluding the net discount on debt and deferred financing fees, as of December 31, 2017 are as follows:


($'s in 000's)
2018	$	44
2019		15,372
2020		48
2021		50
2022		52
Thereafter		1,661

The Company incurred debt issuance costs of $218 related to the Amended Credit Agreement during the first quarter of 2016. The debt transaction resulted in a loss on debt extinguishment of $993 thousand, which included the write off of unamortized debt issuance costs and debt discount, early termination fees, and legal costs.

The Company incurred debt issuance costs of $261 thousand related to the New Credit Agreement during 2016. This second refinancing transaction resulted in a loss on extinguishment of $688 thousand, which included the write off of unamortized debt issuance costs and debt discount, early termination fees, and legal costs.

Leases

12 Months Ended

Dec. 31, 2017

Leases

Leases

Note 5 - Leases

The Company leases certain real estate, both office and production facilities, as well as equipment from third parties. Lease expiration dates are between 2018 and 2025. A portion of capital leases are denominated in foreign currencies. Many of these leases include renewal options and in some cases options to purchase.

Annual future commitments under non-cancelable leases as of December 31, 2017, consist of the following:


	Lease Obligations
$'s in 000's	Operating Leases		Capital Leases
2018	$	2,053	$	113
2019		937		110
2020		353		96
2021		176		93
2022		176		72
Thereafter		127		27
Total minimum future obligations	$	3,822	$	511
Less interest				(15)
Present value of net future minimum obligations				496
Less current capital lease obligations				(107)
Long-term capital lease obligations			$	389

The net book value of assets under capital lease was $850 thousand and $775 thousand as of December 31, 2017 and 2016, respectively. Total operating lease expense for the years ended December 31, 2017, 2016, and 2015 totaled $1,716 thousand, $1,718 thousand, and $1,627 thousand, respectively.

Income Taxes

12 Months Ended

Dec. 31, 2017

Income Taxes

Income Taxes

Note 6 - Income Taxes

As a result of the IPO and related reorganization transactions completed in July 2017, the Company holds an economic interest of approximately 62% in HoldCo and consolidates the financial position and results of HoldCo. The approximate 38% of HoldCo not held by the Company is considered non-controlling interest. HoldCo is treated as a partnership for income tax reporting. HoldCo’s members, including the Company, are liable for federal, state, and local income taxes based on their share of HoldCo’s taxable income.

Prior to the IPO, the Company’s predecessor for financial reporting purposes was Opco, which is a limited liability company, and the majority of Opco’s businesses and assets are held and operated by limited liability companies, which are not subject to entity-level federal or state income taxation. Opco makes cash distributions to permit the member to pay these taxes as needed by the member’s tax situation. In the years ended December 31, 2017 and 2016, the Company did not make any cash distributions. In the year ended December 31, 2017 Opco accrued $597 thousand for anticipated tax distributions to Continuing LLC Owners. This liability is included in accounts payable on the consolidated balance sheet.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code which impacted 2017 including, but not limited to, reducing the U.S. federal corporate tax rate from 35 to 21 percent and requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries. U.S. GAAP requires the impact of tax legislation to be recorded in the period of enactment. Staff Accounting Bulletin (SAB) 118 establishes a one-year measurement period to complete the accounting for the ASC 740 income tax effects of the Tax Act. An entity recognizes the impact of those amounts for which the accounting is complete. For matters that have not been completed, provisional amounts are recorded to the extent they can be reasonably estimated. For amounts for which a reasonable estimate cannot be determined, no adjustment is made until such estimate can be completed.

The Company was able to make reasonable estimates of the impact of the Tax Act and have recorded provisional amounts for the deemed repatriation tax, and the remeasurement of deferred taxes. We recorded a provisional net tax expense of $3.6 million in the period ended December 31, 2017 attributable to the Tax Act. This net expense consists of an expense of $0.2 million for the Company’s allocated share of the one-time transition tax on unrepatriated earnings of foreign subsidiaries and a net expense of $3.4 million primarily due to the remeasurement of deferred tax assets associated with the corporate rate reduction.

These estimates may be impacted as we further analyze available tax accounting methods and elections, earnings and profits computations, state tax conformity to federal tax changes and guidance issued by standard-setting bodies that provide interpretative guidance of the Tax Act.

The components of earnings before income taxes, determined by tax jurisdiction, are as follows:


		Years Ended December 31
$'s in 000's		2017		2016		2015
United States	$	11,479	$	(3,634)	$	(1,209)
Foreign		308		239		(140)
Total	$	11,787	$	(3,395)	$	(1,349)

The provision for income taxes for 2017, 2016, and 2015 consisted of the following:


		Years Ended December 31
$'s in 000's		2017		2016		2015
Current:
Federal	$	(10)	$	-	$	-
State		63		-		-
Foreign		-		-		-
	$	53	$	-	$	-
Deferred and other:
Federal		3,708		-		-
State		19		-		-
Foreign		190		-		-
		3,917		-		-
Total tax expense	$	3,970	$	-	$	-

Reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows:


	Years Ended December 31
$'s in 000's	2017		2016		2015
Income tax expense (benefit) at federal statutory rate	35.0	%	35.0	%	35.0
State and local income taxes net of federal tax benefit	-		-		(43)
Non-controlling interest and nontaxable income	(33.2)		(37.4)		-
Tax Cuts and Jobs Act of 2017	30.7		-		-
Nondeductible/nontaxable items	1.2		2.4		8
Income tax expense (benefit)	33.7	%	-		-

Our effective income tax rate differs from statutory rates primarily due to our pass-through entity structure for U.S. income tax purposes.

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, 2017 and 2016 are as follows:



$'s in 000's		2017		2016
Investment in partnership	$	5,855	$	-
Net operating loss carryforwards and tax credits		536		520
Other		66		47
Subtotal		6,457		567
Less: valuation allowance	$	(237)	$	(91)
Total net deferred tax assets		6,220		476
Intangible assets		(412)		(476)
Other		(5)		-
Total deferred tax liabilities		(417)		-
Net deferred tax asset	$	5,803	$	-

The Company has a valuation allowance for certain deferred tax assets of $237 thousand and $91 thousand, as of December 31, 2017 and December 31, 2016, respectively. The valuation allowance pertains to certain international loss carryforwards, some of which have no expiration and others that would expire beginning in 2018.

The Tax Act contains a new law that requires a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations, also known as the tax on global intangible low taxed income (GILTI), beginning in 2018. The FASB has provided that companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences, including outside basis differences, expected to reverse as GILTI. Due to the complexity of the new GILTI rules, we are continuing to evaluate this provision of the Tax Act. We have not recorded any provisional amounts as of December 31, 2017 nor have we made an accounting policy choice of including taxable income related to GILTI as either a current period tax expense or factoring such amounts into our measurement of deferred taxes.

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, 2017, tax years for 2014, 2015, and 2016 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2017, we are no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2014.

Earnings (loss) per Share

12 Months Ended

Dec. 31, 2017

Earnings (loss) per Share

Earnings per share

Note 7 – Earnings (loss) per Share

Basic and Diluted Earnings (loss) per Share

Basic earnings (loss) per share of Class A common stock is computed by dividing net income (loss) available to PetIQ, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income 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.

As described in Note 9 — Stockholders’ Equity, on July 20, 2017, the PetIQ Holdings, LLC Agreement (“LLC Agreement”) was amended and restated to, among other things, (i) provide for a new single class of common membership interests, the LLC Interests of HoldCo, and (ii) exchange all of the then-existing membership interests of the Continuing LLC Owners for common units of HoldCo. This Recapitalization changed the relative membership rights of the Continuing LLC Owners such that retroactive application of the Recapitalization to periods prior to the IPO for the purposes of calculating earnings (loss) per share would not be appropriate.

Prior to the IPO, the PetIQ, LLC membership structure included several different types of LLC interests including ownership interests and profits interests. The Company analyzed the calculation of earnings per unit for periods prior to the IPO using the two-class method and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements. Therefore, earnings (loss) per share information has not been presented for periods prior to the IPO on July 20, 2017. The basic and diluted earnings (loss) per share represent only the the period July 20, 2017 to December 31, 2017.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock:



($'s in 000's, except for per share amounts)	December 31, 2017
Numerator:
Net income	$	7,817
Less: net income attributable to non-controlling interests		(11,310)
Net loss attributable to PetIQ, Inc. — basic		(3,493)
Denominator:
Weighted-average shares of Class A common stock outstanding (in 000's)-- basic		13,223
Dilutive stock options that are convertible into Class A common stock		—
Weighted-average shares of Class A common stock outstanding (in 000's)-- diluted		13,223

Earnings per share of Class A common stock — basic	$	(0.26)
Earnings per share of Class A common stock — diluted	$	(0.26)

Shares of the Company’s Class B common stock do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.

Shares of the Company’s Class B common stock as well as stock options have not been included in the diluted earnings (loss) per share calculation as they have been determined to be anti-dilutive under the if-converted method and treasury stock method, respectively.

Stock Based Compensation

12 Months Ended

Dec. 31, 2017

Stock Based Compensation

Stock Based Compensation

Note 8 – Stock Based Compensation

Stock based compensation expense is recorded within general and administrative expenses.

PetIQ, Inc. Omnibus Incentive Plan

The PetIQ, Inc. Omnibus Incentive Plan (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 initially reserved 1,914,047 registered shares of Class A common stock for issuance under the Plan. As of December 31, 2017, 1,315,403 shares were available for issuance under the Plan. All awards issued under the Plan may only be settled in shares of Class A common stock.

Stock Options

The Company awards stock options to certain employees and directors under the Plan, which are subject to time-based vesting conditions, typically 25% on each anniversary of the grant date until fully vested. Upon a termination of service relationship by the Company, all unvested options will be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The maximum contractual term for stock options is 10 years.

The fair value of these equity awards is amortized to compensation expense over the vesting period, which totaled $447 thousand for the year ended December 31, 2017. All stock based compensation expense is included in general and administrative expenses based on the role of recipients. The fair value of the stock option awards was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions for the period ended December 31:


	2017
Expected term (years) (1)		6.25
Expected volatility (2)		35.00	%
Risk-free interest rate (3)		1.98	%
Dividend yield (4)		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 following table summarizes the activity of the Company’s unvested stock options for the period ended December 31, 2017: The grant date fair value of stock options granted during the period ended December 31, 2017 was $6.08 per option.


							Weighted
							Average
			Weighted				Remaining
			Average		Aggregate		Contractual
	Stock		Exercise		Intrinsic		Life
	Options		Price		Value		(years)
Outstanding at December 31, 2016		—
Granted		804,049	$	16
Exercised		—
Forfeited		(205,405)		16
Cancelled		—
Outstanding at December 31, 2017		598,644	$	16	$	3,496		9.5
Options exercisable at December 31, 2017		—

At December 31, 2017, total unrecognized compensation cost related to unvested stock options was $3.2 million and is expected to be recognized over a weighted-average period of approximately 3.5 years.

Stockholder's Equity

12 Months Ended

Dec. 31, 2017

Stockholder's Equity

Stockholder's Equity

Note 9 - Stockholders’ Equity

Reorganization Transactions

In connection with the IPO on July 20, 2017, the Company completed the following Reorganization Transactions:

The Company amended and restated its certificate of incorporation (see “Amendment and Restatement of Certificate of Incorporation” below);

PetIQ Holdings, LLC (“HoldCo”) amended and restated its limited liability company agreement (the “LLC Agreement”) (see “HoldCo Recapitalization” below);

The Company acquired, by the contribution by certain sponsors, three entities (“Sponsor Corps”) that were owned by former indirect members of HoldCo (the “Sponsors”), for which the Company issued 5,615,981 shares of Class A common stock and Preference Notes equal to $30.5 million as merger consideration (the “Merger”). The only significant asset held by the Sponsor Corps prior to the Merger was 7,523,839 LLC Interests. Upon consummation of the Merger, the Company recognized the 7,523,839 LLC Interests at carrying value, as the contribution was considered to be a transaction between entities under common control;

The Company acquired 419,102 LLC interests in exchange for an equal number of Class A common stock from certain employee owners;

The Company purchased from Continuing LLC Owners 1,589,642 LLC Interests in exchange for $25.4 million in preference notes;

The Company purchased from Continuing LLC Owners 133,334 LLC Interests in exchange for $2.1 million.

Following the completion of the Reorganization Transactions and IPO, PetIQ owned 61.5% of HoldCo. The remaining 38.5% of HoldCo was held by the “Continuing LLC Owners,” whom the Company defines as all remaining direct and indirect owners of HoldCo except for PetIQ. As a result of the Reorganization Transactions, PetIQ became the sole managing member of HoldCo and has the sole voting power in, and controls the management of, HoldCo. Accordingly, the Company consolidated the financial results of HoldCo and reported a non-controlling interest in its consolidated financial statements. As the Reorganization Transactions are considered transactions between entities under common control, the financial statements for the previously separate entities have been combined for presentation purposes.

Immediately following the Reclassification, PetIQ became a holding company and our principal asset is the LLC interests. As the sole managing member of HoldCo, PetIQ operates and controls all of the business and affairs of HoldCo and, through HoldCo and its subsidiaries, conducts business. In addition, PetIQ controls the management of, and has a controlling interest in, HoldCo and, therefore, PetIQ is the primary beneficiary of HoldCo. As a result, the Company consolidates the financial results of Holdco pursuant to the variable-interest entity (“VIE”) accounting model, and a portion of net income (loss) is allocated to the non-controlling interest to reflect the entitlement of Continuing LLC Owners to a portion of Holdco’s net income (loss).

Other than its purchase of LLC Interests with the net proceeds the IPO, PetIQ has not provided any financial or other support to HoldCo. PetIQ is not required to provide financial or other support for HoldCo, though it will control HoldCo’s business and other activities through its managing member interest in HoldCo. Because PetIQ is not a guarantor or obligor with respect to any of the liabilities of HoldCo, absent any such arrangement, the creditors of HoldCo will not have any recourse to the general credit of PetIQ. Nevertheless, because PetIQ will have no material assets other than its interests in HoldCo, any change in HoldCo’s financial condition could result in PetIQ recognizing a loss.

Amendment and Restatement of Certificate of Incorporation

On July 20, 2017, the Company amended and restated its certificate of incorporation to, among other things, provide 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 8,401,521 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).

Initial Public Offering

On July 20, 2017, the Company completed an IPO of 7,187,500 shares of the Company’s Class A common stock at a public offering price of $16.00 per share, inclusive of the contemporaneous exercise of the underwriters option to purchase additional shares. The Company received $104.0 million in proceeds, net of underwriting discounts, commissions and offering costs, which were used repay $56.0 million in preference notes, to purchase 3,556,666 newly-issued LLC Interests from HoldCo at a price per unit equal to the initial public offering price per share of Class A common stock in the IPO less underwriting discounts and commissions, and to purchase 133,334 LLC Interests and corresponding Class B common shares from entities affiliated with the Company’s CEO and President.

Immediately following the completion of the IPO and the underwriters’ exercise of their option to purchase additional shares of Class A common stock, there were 13,222,583 shares of Class A common stock outstanding and 8,268,188 shares of Class B common stock outstanding.

PetIQ Holdings, LLC Recapitalization

On July 20, 2017, HoldCo amended and restated the LLC Agreement (the “Recapitalization”) to, among other things, (i) provide for a new single class of common membership interests in HoldCo, the LLC Interests, (ii) exchange all of the then-existing membership interests for LLC Interests of HoldCo and (iii) appoint the Company as the sole managing member of HoldCo.

The LLC Agreement also provides that the Continuing LLC Owners may from time to time at each of their options require HoldCo to exchange all or a portion of their LLC Interests in exchange for, at the Company’s election (determined solely by the Company’s board of directors, which includes directors who hold LLC Interests or are otherwise affiliated with holders of LLC interests), shares of the Company’s Class A common stock on a one-for-one basis or a cash payment equal to a volume weighted average market price of one share of Class A common stock for each LLC interest exchanged, in each case in accordance with the terms of the LLC Agreement; provided that, at the Company’s election (determined solely by the Company’s board of directors, which includes directors who hold LLC interests or are otherwise affiliated with holders of LLC interests), the Company may effect a direct exchange of such Class A common stock or such cash, as applicable, for such LLC interests. The Continuing LLC Owners may exercise such redemption right for as long as their LLC interests remain outstanding. Simultaneously with the payment of cash or shares of Class A common stock, as applicable, in connection with a redemption or exchange of LLC interests pursuant to the terms of the LLC Agreement, a number of shares of the Company’s Class B common stock will be cancelled for no consideration on a one-for-one basis with the number of LLC interests so redeemed or exchanged.

The amendment also requires that HoldCo, at all times, maintain (i) a one-to-one ratio between the number of outstanding shares of Class A common stock and the number of LLC interests of HoldCo owned by PetIQ, Inc. and (ii) a one-to-one ratio between the number of shares of Class B common stock owned by Continuing LLC Owners and the number of LLC Interests of HoldCo owned by the Continuing LLC Owners.

Non-Controlling Interests

12 Months Ended

Dec. 31, 2017

Non-Controlling Interests

Non-controlling interest

Note 10 - Non-Controlling Interests

In connection with the Reorganization Transactions described in Note 9 — Stockholders’ Equity, PetIQ became the sole managing member of HoldCo and, as a result, consolidates the financial results of HoldCo.

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.

The Company used the net proceeds from its IPO to purchase 3,556,666 newly-issued LLC Interests of HoldCo and 133,334 LLC Interests from Continuing LLC Owners. Additionally, in connection with the Reorganization Transactions, the Company acquired 9,532,583 LLC Interests of HoldCo.

As of December 31, 2017, there were 21,490,771 LLC Interests outstanding, of which PetIQ owned 13,222,583, representing a 61.5% ownership interest in HoldCo.

LLC Interests held

% of Total

Continuing LLC

Owners

PetIQ, Inc.

Total

Owners

PetIQ, Inc.

As of December 31, 2017

8,268,188

13,222,583

21,490,771

38.5%

61.5%

Customer Concentration	12 Months Ended
Customer Concentration	Dec. 31, 2017
Customer Concentration
Customer Concentration	Note 11 - Customer Concentration The Company has significant exposure to customer concentration. During each of the years ended December 31, 2017, 2016, and 2015, three customers, respectively, accounted for more than 10% of sales individually. In total for the years ended December 31, 2017, 2016, and 2015, the three customers accounted for 61%, 70%, and 74% of net sales, respectively. At December 31, 2017 and December 31, 2016, three and four customers, respectively, individually accounted for more than 10% of outstanding trade receivables, and in aggregate accounted for 48% and 60%, respectively, of outstanding trade receivables, net. The customers are customers of our Domestic segment.

Commitments and Contingencies	12 Months Ended
Commitments and Contingencies	Dec. 31, 2017
Commitments and Contingencies
Commitments and Contingencies Disclosure [Text Block]	Note 12 - Commitments and Contingencies Litigation Contingencies In May 2017, Bayer Healthcare LLC and its affiliates (collectively “Bayer”) filed suit in the United States District Court for the District of Delaware, against CAP IM Supply, Inc. (“CAP IM”), our supplier of Advecta 3 and PetLock MAX, which we began to sell in 2017 as our value-branded alternatives to Bayer’s K9 Advantix II. Bayer alleges that Advecta 3 and PetLock MAX infringe a patent relating to K9 Advantix II. Bayer seeks unspecified monetary damages and an injunction against future sales by CAP IM of Advecta 3 and PetLock MAX to the Company. Bayer has filed a motion for preliminary injunction, which motion was argued in February 2018. Although we have not been named in the suit, our license and supply agreement with CAP IM requires us to share with CAP IM the payment of defense and settlement costs of such litigation and allows us to control the defense of the proceeding. CAP IM intends to vigorously defend this case and we believe that CAP IM has meritorious defenses. However, because of the inherent uncertainties of litigation, we can provide no assurance of an outcome favorable to CAP IM. The case is presently scheduled for trial in February 2019. The Company records a liability when a particular contingency is probable and estimable and provides disclosure for contingencies that are at least reasonably possible of resulting in a loss including an estimate which we currently cannot make. The Company has not accrued for any contingency at December 31, 2017 and December 31, 2016, as the Company does not consider any contingency to be probable or estimable. The Company expenses legal costs as incurred within general and administrative expenses on the consolidated statements of operations.

Segments

12 Months Ended

Dec. 31, 2017

Segments

Segments

Note 13 - Segments

The Company has two operating segments, and thus two reportable segments, which are the procurement, packaging, and distribution of pet health and wellness products in the Domestic markets (U.S. and Canada) and in the International markets (primarily Europe). The determination of the operating segments is based on the level at which the chief operating decision maker reviews discrete financial information to assess performance and make resource allocation decisions, which is done based on these two geographic areas.

Financial information relating to the Company’s operating segments for the years ended December 31:


$'s in 000's	Domestic		International		Consolidated
2017
Net Sales	$	261,526	$	5,161	$	266,687
Gross profit		48,997		2,197		51,194
General and administrative expenses		36,053		1,852		37,905
Operating income		12,944		345		13,289
Interest expense		—		—		(1,563)
Other income, net		—		—		201
Foreign currency loss, net		—		—		(140)
Identifiable assets	$	134,841	$	6,004	$	140,845
Depreciation expense	$	2,209	$	139	$	2,348
Amortization expense	$	797	$	255	$	1,052
Capital expenditures	$	4,011	$	120	$	4,131


($’s in 000’s)	Domestic		International		Consolidated
2016
Net Sales	$	195,698	$	4,464	$	200,162
Gross profit		30,683		1,864		32,547
General and administrative expenses		30,127		1,718		31,845
Operating income		556		146		702
Interest expense		—		—		(3,058)
Other income, net		—		—		666
Loss on debt extinguishment		—		—		(1,681)
Foreign currency loss, net		—		—		(24)
Identifiable assets	$	76,270	$	5,060	$	81,330
Depreciation expense	$	1,877	$	38	$	1,915
Amortization expense	$	798	$	269	$	1,067
Capital expenditures	$	1,892	$	149	$	2,041


($’s in 000’s)	Domestic		International		Consolidated
2015
Net Sales	$	202,092	$	3,595	$	205,687
Gross profit		37,582		1,576		39,158
General and administrative expenses		33,926		1,662		35,588
Operating income (loss)		3,656		(86)		3,570
Interest expense		—		—		(3,545)
Loss on debt extinguishment		—		—		(1,449)
Foreign currency gain, net		—		—		75
Identifiable assets	$	86,531	$	5,804	$	92,335
Depreciation expense	$	1,800	$	42	$	1,842
Amortization expense	$	330	$	405	$	735
Capital expenditures	$	1,479	$	71	$	1,550

Related Parties	12 Months Ended
Related Parties	Dec. 31, 2017
Related Parties
Related Parties	Note 14 - Related Parties Opco had entered into management consulting services agreements with members of HoldCo. The services were related to financial transactions and other senior management matters related to business administration. Those agreements provided for the Company to pay base annual management fees plus expenses, typically paid quarterly. These expenses were recorded in general and administrative expenses in the consolidated statement of operations. The Company recorded $610 thousand, $864 thousand and $462 thousand for the year ended December 31, 2017, 2016, and 2015, respectively. Upon consummation of the recapitalization and IPO transactions, these agreements were terminated. As discussed in Note 6– Income taxes, the Company has accrued tax distributions that are payable to Continuing LLC Owners to facilitate the Continuing LLC Owners periodic estimated tax obligations. At December 31, 2017, the Company had accrued $597 thousand for estimated tax distributions, which are included in accounts payable on the consolidated balance sheets. Chris Christensen, the brother of CEO, McCord Christensen, acts as the Company’s agent at Moreton Insurance (“Moreton”), which acts as a broker for a number of the Company’s insurance policies. The Company’s annual premium expense, paid to Moreton and subsequently transferred to insurance providers, was $1.1 million in 2017. Mr. Christensen was paid a commission of approximately $60 thousand by Moreton for the sale of such insurance policies to the Company.

Quarterly information (unaudited)

12 Months Ended

Dec. 31, 2017

Quarterly information (unaudited)

Quarterly information (unaudited)

Note 15 – Quarterly information (unaudited)


($’s in 000’s except per share amounts)		Quarter 1		Quarter 2		Quarter 3		Quarter 4
2017:
Net sales	$	67,029	$	87,178	$	60,554	$	51,926
Gross profit		12,200		15,951		12,517		10,526
Selling, general, and administrative expenses		7,405		9,277		10,739		10,484
Operating income		4,795		6,674		1,778		42
Net income		4,279		6,070		859		(3,391)
Basic net income per common share(1)		-		-	$	(0.02)	$	(0.25)
Diluted net income per common share(1)		-		-	$	(0.02)	$	(0.25)
Basic weighted average shares(1)		-		-		13,222,583		13,222,583
Diluted weighted average shares(1)		-		-		13,222,583		13,222,583
		March 31, 2016		June 30, 2016		September 30, 2016		December 31, 2016
2016:
Net sales	$	52,298	$	61,280	$	41,671	$	44,913
Gross profit		9,772		8,961		6,160		7,654
Selling, general, and administrative expenses		8,063		8,302		7,942		7,538
Operating income		1,709		659		(1,782)		116
Net income		(304)		598		(2,512)		(1,177)
Basic net income per common share(1)		-		-		-		-
Diluted net income per common share(1)		-		-		-		-
Basic weighted average shares(1)		-		-		-		-
Diluted weighted average shares(1)		-		-		-		-

⁽¹⁾

Number of shares out standing and earnings per share prior to our IPO on July 26, 2017 are not reported, see Note 7 in the accompanying consolidated financial statements.

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2017
Subsequent Events
Subsequent Events	Note 16 – Subsequent Events On January 17, 2018, we acquired Community Veterinary Clinics, LLC d/b/a VIP Petcare (“VIP”). The aggregate consideration, comprised of (i) $100 million of cash, (ii) 4,200,000 LLC Interests of PetIQ Holdings, LLC, 4,200,000 shares of Class B common stock, (iii) promissory notes consisting of (A) a $10.0 million note payable 5 years and 6 months after the closing, which shall accrue interest quarterly in arrears at a rate of 6.75% per annum, (B) a $10.0 million note payable 5 years and 6 months after the closing if PetIQ and its consolidated subsidiaries have EBITDA of $40.0 million for the year ending December 31, 2018, which, if payable, shall accrue interest quarterly in arrears at a rate of 6.75% per annum beginning on the first anniversary of the closing, and (C) a $10.0 million note payable 5 years and 6 months after the closing if PetIQ and its consolidated subsidiaries have EBITDA of $50.0 million for the year ending December 31, 2019, which, if payable, shall accrue interest quarterly in arrears at a rate of 6.75% per annum beginning on the second anniversary of the closing; provided that such note shall also become payable if PetIQ and its consolidated subsidiaries have EBITDA of $50.0 million for the year ending December 31, 2018. In connection with the VIP Acquisition, the Company amended and restated their existing revolving credit agreement (the “A&R Credit Agreement”) on January 17, 2018. The A&R Credit Agreement provides for a secured revolving credit facility of $50 million in the aggregate, at either LIBOR or Base (prime) interest rates plus an applicable margin. All obligations under the A&R Credit Agreement are unconditionally guaranteed by HoldCo 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 Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of each borrower and guarantor under the A&R Credit Agreement, subject to certain exceptions. Also in connection with the closing of the VIP Acquisition, the Company entered into a term loan credit agreement (the “Term Loan Credit Agreement”). The Term Loan Credit Agreement provides for a secured term loan credit facility of $75 million in aggregate at either LIBOR or Base (prime) interest rates plus an applicable margin. In connection with execution of the Unit Purchase Agreement to acquire VIP, options to purchase an aggregate 800,000 shares of Class A Common Stock of the Company (the “Inducement Awards”) were issued to 30 employees hired in connection with the transaction as employment inducement awards. The awards vest quarterly on each of the first four anniversaries of the closing date of the acquisition, generally subject to continued employment through each vesting date.

Principal Business Activity and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Principal Business Activity and Significant Accounting Policies

Use of Estimates

Foreign Currencies

Cash and Cash Equivalents

Receivables and Credit Policy

Accounts receivable consists of the following as of:


$'s in 000's	December 31, 2017		December 31, 2016
Trade receivables	$	22,189	$	18,086
Notes receivable		297		440
		22,486		18,526
Less: Allowance for doubtful accounts		(343)		(498)
Non-current portion of receivables		(384)		(833)
Total accounts receivable, net	$	21,759	$	17,195

Inventories


$'s in 000's	December 31, 2017		December 31, 2016
Raw materials and work in progress	$	4,004	$	5,924
Finished goods		40,052		28,308
Total inventories	$	44,056	$	34,232

Property, Plant, and Equipment


Computer equipment and software			3 years
Buildings			33 years
Equipment			3-15 years
Leasehold improvements			3-9 years
Furniture and fixtures			8-10 years

Intangible Assets

Goodwill

Deferred Acquisition Liability

Revenue Recognition

Shipping and Handling Costs

Shipping and handling costs are recorded as cost of sales, and are not typically billed to customers.

Research and Development and Advertising Costs

Litigation

Stock based compensation

Accounting for Income Taxes

Interest expense, net

Earnings Per Share

Reclassifications

Recently Issued Accounting Pronouncements

Based on our evaluation of Topic 606, we will make the following changes:

Adjust the manner in which we present our allowance for sales returns in our Consolidated Balance Sheets, to reflect a refund liability and a returns asset;and

commencing with our quarter ending March 31, 2018. The Company does not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

Principal Business Activity and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Principal Business Activity and Significant Accounting Policies

Schedule of accounts receivable


$'s in 000's	December 31, 2017		December 31, 2016
Trade receivables	$	22,189	$	18,086
Notes receivable		297		440
		22,486		18,526
Less: Allowance for doubtful accounts		(343)		(498)
Non-current portion of receivables		(384)		(833)
Total accounts receivable, net	$	21,759	$	17,195

Schedule of components of inventories


$'s in 000's	December 31, 2017		December 31, 2016
Raw materials and work in progress	$	4,004	$	5,924
Finished goods		40,052		28,308
Total inventories	$	44,056	$	34,232

Schedule of estimated useful lives of property, plant, and equipment


Computer equipment and software			3 years
Buildings			33 years
Equipment			3-15 years
Leasehold improvements			3-9 years
Furniture and fixtures			8-10 years

Property, Plant, and equipment (Tables)

12 Months Ended

Dec. 31, 2017

Property, Plant, and equipment

Property, Plant, and Equipment


$'s in 000's		2017		2016
Leasehold improvements	$	6,616	$	6,587
Equipment		10,665		9,512
Computer equipment ans software		927		896
Buildings		771		668
Furniture and fixtures		407		377
Land		660		-
Construction in progress		2,344		150
		22,390		18,190
Less accumulated depreciation		(7,390)		(5,146)
Total property, plant, and equipment		15,000		13,044

Intangible Assets and Goodwill (Tables)

12 Months Ended

Dec. 31, 2017

Intangible Assets and Goodwill

Schedule of intangible assets


$'s in 000's	Useful Lives		2017		2016
Amortizable Intangibles
Distribution agreement	2 years	$	3,021	$	3,021
Certification	7 years		350		350
Customer relationships	12 years		1,191		1,086
Patents and processes	10 years		1,998		1,797
Brand names	15 years		923		841
Total amortizable intangibles			7,483		7,095
Less accumulated amortization		$	(4,733)	$	(3,557)
Total net amortizable intangibles			2,750		3,538
Non-amortizable intangibles
Trademarks and other			516		516
Intangible assets, net of accumulated amortization		$	3,266	$	4,054

Estimated future amortization expense


Years ending December 31, ($'s in 000's)
2018	$	407
2019		407
2020		407
2021		406
2022		402
Thereafter		721

Schedule of Goodwill


($’s in 000’s)		Reporting Unit
		Domestic		International		Total
Goodwill as of January 1, 2016	$	5,221	$	359	$	5,580
Foreign currency translation		(900)		(61)		(961)
Goodwill as of December 31, 2016		4,321		298		4,619
Foreign currency translation		416		29		445
Goodwill as of December 31, 2017	$	4,737	$	327	$	5,064

Debt (Tables)

12 Months Ended

Dec. 31, 2017

Debt

Schedule of components of long term debt


$'s in 000's	December 31, 2017		December 31, 2016
Term loans	$	—	$	5,000
Revolving credit facility		15,325		22,473
Mortgage		1,902		—
Net discount on debt and deferred financing fees		—		(92)
	$	17,227	$	27,381
Less current maturities of long-term debt		(44)		(2,223)
Total long-term debt	$	17,183	$	25,158

Future maturities of long term debt, excluding the net discount on debt and deferred financing fees


($'s in 000's)
2018	$	44
2019		15,372
2020		48
2021		50
2022		52
Thereafter		1,661

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=84159872&loc=d3e21475-112644

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 470
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=64930739&loc=d3e28878-108400

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=84159872&loc=d3e21538-112644

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=84159872&loc=d3e21506-112644

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=64930785&loc=d3e28541-108399

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=64930785&loc=d3e28551-108399

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=84159872&loc=d3e21521-112644

+ Details

Leases (Tables)

12 Months Ended

Dec. 31, 2017

Leases

Summary of annual future commitments under non-cancelable leases


	Lease Obligations
$'s in 000's	Operating Leases		Capital Leases
2018	$	2,053	$	113
2019		937		110
2020		353		96
2021		176		93
2022		176		72
Thereafter		127		27
Total minimum future obligations	$	3,822	$	511
Less interest				(15)
Present value of net future minimum obligations				496
Less current capital lease obligations				(107)
Long-term capital lease obligations			$	389

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Taxes

Schedule of components of earnings before income taxes, by tax jurisdiction


		Years Ended December 31
$'s in 000's		2017		2016		2015
United States	$	11,479	$	(3,634)	$	(1,209)
Foreign		308		239		(140)
Total	$	11,787	$	(3,395)	$	(1,349)

Schedule of provision for income taxes


		Years Ended December 31
$'s in 000's		2017		2016		2015
Current:
Federal	$	(10)	$	-	$	-
State		63		-		-
Foreign		-		-		-
	$	53	$	-	$	-
Deferred and other:
Federal		3,708		-		-
State		19		-		-
Foreign		190		-		-
		3,917		-		-
Total tax expense	$	3,970	$	-	$	-

Schedule of reconciliation between effective tax rate and statutory tax rate


	Years Ended December 31
$'s in 000's	2017		2016		2015
Income tax expense (benefit) at federal statutory rate	35.0	%	35.0	%	35.0
State and local income taxes net of federal tax benefit	-		-		(43)
Non-controlling interest and nontaxable income	(33.2)		(37.4)		-
Tax Cuts and Jobs Act of 2017	30.7		-		-
Nondeductible/nontaxable items	1.2		2.4		8
Income tax expense (benefit)	33.7	%	-		-

Schedule of tax effects of temporary differences of deferred tax assets and liabilities



$'s in 000's		2017		2016
Investment in partnership	$	5,855	$	-
Net operating loss carryforwards and tax credits		536		520
Other		66		47
Subtotal		6,457		567
Less: valuation allowance	$	(237)	$	(91)
Total net deferred tax assets		6,220		476
Intangible assets		(412)		(476)
Other		(5)		-
Total deferred tax liabilities		(417)		-
Net deferred tax asset	$	5,803	$	-

Earnings (loss) per Share (Tables)

12 Months Ended

Dec. 31, 2017

Earnings (loss) per Share

Reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock



($'s in 000's, except for per share amounts)	December 31, 2017
Numerator:
Net income	$	7,817
Less: net income attributable to non-controlling interests		(11,310)
Net loss attributable to PetIQ, Inc. — basic		(3,493)
Denominator:
Weighted-average shares of Class A common stock outstanding (in 000's)-- basic		13,223
Dilutive stock options that are convertible into Class A common stock		—
Weighted-average shares of Class A common stock outstanding (in 000's)-- diluted		13,223

Earnings per share of Class A common stock — basic	$	(0.26)
Earnings per share of Class A common stock — diluted	$	(0.26)

Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2017

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


	2017
Expected term (years) (1)		6.25
Expected volatility (2)		35.00	%
Risk-free interest rate (3)		1.98	%
Dividend yield (4)		0.00	%

⁽¹⁾

⁽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				Remaining
			Average		Aggregate		Contractual
	Stock		Exercise		Intrinsic		Life
	Options		Price		Value		(years)
Outstanding at December 31, 2016		—
Granted		804,049	$	16
Exercised		—
Forfeited		(205,405)		16
Cancelled		—
Outstanding at December 31, 2017		598,644	$	16	$	3,496		9.5
Options exercisable at December 31, 2017		—

Non-Controlling Interests (Tables)

12 Months Ended

Dec. 31, 2017

Non-Controlling Interests

Summary of noncontrolling interest

LLC Interests held

% of Total

Continuing LLC

Owners

PetIQ, Inc.

Total

Owners

PetIQ, Inc.

As of December 31, 2017

8,268,188

13,222,583

21,490,771

38.5%

61.5%

Segments (Tables)

12 Months Ended

Dec. 31, 2017

Segments

Summary of financial information relating to the Company’s operating segments


$'s in 000's	Domestic		International		Consolidated
2017
Net Sales	$	261,526	$	5,161	$	266,687
Gross profit		48,997		2,197		51,194
General and administrative expenses		36,053		1,852		37,905
Operating income		12,944		345		13,289
Interest expense		—		—		(1,563)
Other income, net		—		—		201
Foreign currency loss, net		—		—		(140)
Identifiable assets	$	134,841	$	6,004	$	140,845
Depreciation expense	$	2,209	$	139	$	2,348
Amortization expense	$	797	$	255	$	1,052
Capital expenditures	$	4,011	$	120	$	4,131


($’s in 000’s)	Domestic		International		Consolidated
2016
Net Sales	$	195,698	$	4,464	$	200,162
Gross profit		30,683		1,864		32,547
General and administrative expenses		30,127		1,718		31,845
Operating income		556		146		702
Interest expense		—		—		(3,058)
Other income, net		—		—		666
Loss on debt extinguishment		—		—		(1,681)
Foreign currency loss, net		—		—		(24)
Identifiable assets	$	76,270	$	5,060	$	81,330
Depreciation expense	$	1,877	$	38	$	1,915
Amortization expense	$	798	$	269	$	1,067
Capital expenditures	$	1,892	$	149	$	2,041


($’s in 000’s)	Domestic		International		Consolidated
2015
Net Sales	$	202,092	$	3,595	$	205,687
Gross profit		37,582		1,576		39,158
General and administrative expenses		33,926		1,662		35,588
Operating income (loss)		3,656		(86)		3,570
Interest expense		—		—		(3,545)
Loss on debt extinguishment		—		—		(1,449)
Foreign currency gain, net		—		—		75
Identifiable assets	$	86,531	$	5,804	$	92,335
Depreciation expense	$	1,800	$	42	$	1,842
Amortization expense	$	330	$	405	$	735
Capital expenditures	$	1,479	$	71	$	1,550

Quarterly information (unaudited) (Tables)

12 Months Ended

Dec. 31, 2017

Quarterly information (unaudited)

Quarterly Financial Information

($’s in 000’s except per share amounts)		Quarter 1		Quarter 2		Quarter 3		Quarter 4
2017:
Net sales	$	67,029	$	87,178	$	60,554	$	51,926
Gross profit		12,200		15,951		12,517		10,526
Selling, general, and administrative expenses		7,405		9,277		10,739		10,484
Operating income		4,795		6,674		1,778		42
Net income		4,279		6,070		859		(3,391)
Basic net income per common share(1)		-		-	$	(0.02)	$	(0.25)
Diluted net income per common share(1)		-		-	$	(0.02)	$	(0.25)
Basic weighted average shares(1)		-		-		13,222,583		13,222,583
Diluted weighted average shares(1)		-		-		13,222,583		13,222,583
		March 31, 2016		June 30, 2016		September 30, 2016		December 31, 2016
2016:
Net sales	$	52,298	$	61,280	$	41,671	$	44,913
Gross profit		9,772		8,961		6,160		7,654
Selling, general, and administrative expenses		8,063		8,302		7,942		7,538
Operating income		1,709		659		(1,782)		116
Net income		(304)		598		(2,512)		(1,177)
Basic net income per common share(1)		-		-		-		-
Diluted net income per common share(1)		-		-		-		-
Basic weighted average shares(1)		-		-		-		-
Diluted weighted average shares(1)		-		-		-		-

⁽¹⁾

Number of shares out standing and earnings per share prior to our IPO on July 26, 2017 are not reported, see Note 7 in the accompanying consolidated financial statements.

Principal Business Activity and Significant Accounting Policies - Receivables (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Receivables and Credit Policy
Accounts receivable, gross	$ 22,486	$ 18,526
Less: Allowance for doubtful accounts	(343)	(498)
Non-current portion of receivables	(384)	(833)
Total accounts receivable, net	21,759	17,195
Trade receivables
Receivables and Credit Policy
Accounts receivable, gross	22,189	18,086
Notes receivable
Receivables and Credit Policy
Accounts receivable, gross	$ 297	$ 440
Notes receivable \| Maximum
Receivables and Credit Policy
Fixed interest rate	4.00%
Notes receivable \| Minimum
Receivables and Credit Policy
Fixed interest rate	0.00%

Principal Business Activity and Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Inventories
Raw materials and work in progress	$ 4,004	$ 5,924
Finished goods	40,052	28,308
Total inventories	$ 44,056	$ 34,232

Principal Business Activity and Significant Accounting Policies - PPNE (Details)	12 Months Ended
	Dec. 31, 2017
Computer equipment and software
Property, Plant, and Equipment
Estimated useful life	3 years
Buildings
Property, Plant, and Equipment
Estimated useful life	33 years
Equipment \| Minimum
Property, Plant, and Equipment
Estimated useful life	3 years
Equipment \| Maximum
Property, Plant, and Equipment
Estimated useful life	15 years
Leasehold improvements \| Minimum
Property, Plant, and Equipment
Estimated useful life	3 years
Leasehold improvements \| Maximum
Property, Plant, and Equipment
Estimated useful life	9 years
Furniture and fixtures \| Minimum
Property, Plant, and Equipment
Estimated useful life	8 years
Furniture and fixtures \| Maximum
Property, Plant, and Equipment
Estimated useful life	10 years

Principal Business Activity and Significant Accounting Policies - Intangible Assets (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Intangible asset impairment charge	$ 0	$ 0	$ 0
Minimum
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	2 years
Maximum
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	15 years

Principal Business Activity and Significant Accounting Policies - Others (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Jul. 20, 2017
Deferred Acquisition Liability
Current portion of deferred acquisition liability	$ 1,575	$ 250
Non current portion of deferred acquisition liability		1,303
Research and Development and Advertising Costs
Research and development costs	514	310	$ 380
Advertising costs	2,229	1,179	6,077
Interest Expense [Abstract]
Interest Expense	163	3,078	3,567
Interest and Other Income	$ 75	20	$ 22
Non-Controlling Interests
Interest held by parent	61.50%			61.50%
Interest held by non-controlling owners	38.50%			38.50%
Other accrued expenses
Deferred Acquisition Liability
Current portion of deferred acquisition liability	$ 1,575	250
Deferred acquisition liability
Deferred Acquisition Liability
Non current portion of deferred acquisition liability	$ 0	$ 1,303

Principal Business Activity and Significant Accounting Policies - Recent accounting pronouncements (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Revenue, Initial Application Period Cumulative Effect Transition [Abstract]
Accumulated deficit	$ (3,493)
Recast \| ASU 2016-02
Revenue, Initial Application Period Cumulative Effect Transition [Abstract]
Operating lease liabilities	1,700
Right-of-use asset	$ 1,700

Property, Plant, and equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 22,390	$ 18,190
Less accumulated depreciation	(7,390)	(5,146)
Property, Plant and Equipment, Net, Total	15,000	13,044
Depreciation and amortization expense	2,348	1,915	$ 1,842
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	6,616	6,587
Equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	10,665	9,512
Computer equipment and software
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	927	896
Buildings
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	771	668
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	407	377
Land
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	660
Construction in Progress
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 2,344	$ 150

Intangible Assets and Goodwill - Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Less accumulated amortization	$ (4,733)	$ (3,557)
Total net amortizable intangibles	2,750	3,538
Intangible assets, net of accumulated amortization	3,266	4,054
Amortization expense	1,052	1,067	$ 735
Trademarks and other
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Non-amortizable intangibles	$ 516	516
Distribution agreement
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amorizable Intangibles, useful lives	2 years
Amorizable Intangibles, gross	$ 3,021	3,021
Certification
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amorizable Intangibles, useful lives	7 years
Amorizable Intangibles, gross	$ 350	350
Customer relationships
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amorizable Intangibles, useful lives	12 years
Amorizable Intangibles, gross	$ 1,191	1,086
Patents and processes
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amorizable Intangibles, useful lives	10 years
Amorizable Intangibles, gross	$ 1,998	1,797
Brand names
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amorizable Intangibles, useful lives	15 years
Amorizable Intangibles, gross	$ 923	$ 841

Intangible Assets and Goodwill - Estimated future amortization expense (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Intangible Assets and Goodwill
2018	$ 407
2019	407
2020	407
2021	406
2022	402
Thereafter	$ 721

Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Goodwill, Beginning Balance	$ 4,619	$ 5,580
Foreign currency translation	445	(961)
Goodwill, Ending Balance	5,064	4,619
Domestic
Goodwill, Beginning Balance	4,321	5,221
Foreign currency translation	416	(900)
Goodwill, Ending Balance	4,737	4,321
International
Goodwill, Beginning Balance	298	359
Foreign currency translation	29	(61)
Goodwill, Ending Balance	$ 327	$ 298

Debt (Details) - USD ($)	3 Months Ended	12 Months Ended
Debt (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Jul. 24, 2017	Dec. 21, 2016
Debt
Maximum borrowing capacity						$ 50,000,000
Net discount on debt and deferred financing fees			$ (92,000)
Long-term Debt, Total		$ 17,227,000	27,381,000
Less current maturities of long-term debt		(44,000)	(2,223,000)
Long-term debt		17,183,000	25,158,000
Long-term Debt, Fiscal Year Maturity [Abstract]
2018		44,000
2019		15,372,000
2020		48,000
2021		50,000
2022		52,000
Thereafter		1,661,000
Loss on debt extinguishment			(1,681,000)	$ (1,449,000)
Revolving credit facility
Debt
Maximum borrowing capacity						45,000,000
Aggregate principal amount		25,000,000
Outstanding balance		$ 15,325,000	22,473,000
Variable interest rate, basis points spread over variable reference rate (as a percent)		5.00%
Term loans
Debt
Maximum borrowing capacity						$ 5,000,000
Aggregate principal amount	$ 48,000
Outstanding balance		$ 0	$ 5,000,000
Variable interest rate, basis points spread over variable reference rate (as a percent)			4.25%
Term B Loans
Debt
Aggregate principal amount			$ 3,000,000
Term A Loans
Debt
Aggregate principal amount		20,000,000
Mortgage
Debt
Mortgage		$ 1,902,000
Fixed interest rate					4.35%
Amended Credit Agreement
Long-term Debt, Fiscal Year Maturity [Abstract]
Debt issuance costs	218,000
Loss on debt extinguishment	$ 993,000
New Credit Agreement
Long-term Debt, Fiscal Year Maturity [Abstract]
Debt issuance costs			261,000
Loss on debt extinguishment			$ 688,000

Leases (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Operating Leases
2018	$ 2,053
2019	937
2020	353
2021	176
2022	176
Thereafter	127
Operating Leases, Total minimum future obligations	3,822
Capital Leases
2018	113
2019	110
2020	96
2021	93
2022	72
Thereafter	27
Capital Leases, Total minimum future obligations	511
Less Interest	(15)
Present value of net future minimum obligations	496
Less current capital lease obligations	(107)
Long-term capital lease obligations	$ 389

Leases - Narrative (Details) - USD ($) $ in Thousands	12 Months Ended
Leases - Narrative (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Leases
Net book value of equipment under capital lease	$ 850	$ 775
Total operating lease expense	$ 1,716	$ 1,718	$ 1,627

Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Jul. 20, 2017
Income Taxes
Interest held by parent	61.50%			61.50%
Interest held by non-controlling owners	38.50%			38.50%
Effective tax rate	33.70%
Anticipated Tax Distributions	$ 597
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%	35.00%	35.00%
Deferred tax assets	$ 6,220	$ 476

Income Taxes - comprehensive tax (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		35.00%	35.00%	35.00%
Provisional net tax expenses		$ 3.6
One-time transition tax on unrepatriated earnings of foreign subsidiaries		0.2
Net expenses due to remeasurement of deferred tax assets		$ 3.4
Scenario, Forecast
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%

Income Taxes - Components of earnings before income taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Components of earnings before income taxes
United States	$ 11,479	$ (3,634)	$ (1,209)
Foreign	308	239	(140)
Pretax net income (loss)	$ 11,787	$ (3,395)	$ (1,349)

Income Taxes - Provision for income taxes (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Current:
Federal	$ (10)
State	63
Total current	53
Deferred and other:
Federal	3,708
State	19
Foreign	190
Total deferred and other	3,917
Total tax expense	$ 3,970

Income Taxes - Effective Income Tax Rate Reconciliation (Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation:
Income tax expense (benefit) at federal statutory rate	35.00%	35.00%	35.00%
State and local income taxes net of federal tax benefit			(43.00%)
Noncontrolling interest and nontaxable income	(33.20%)	(37.40%)
Tax Cuts and Jobs Act of 2017	30.70%
Nondeductible/nontaxable items	1.20%	2.40%	8.00%
Income tax expense (benefit)	33.70%

Income Taxes - Deferred Tax Assets Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Tax effects of temporary differences:
Investment in partnership	$ 5,855
Net operating loss carryforwards and tax credits	536	$ 520
other	66	47
Subtotal	6,457	567
Less: valuation allowance	(237)	(91)
Total net deferred tax assets	6,220	476
Intangible assets	(412)	$ (476)
Other	(5)
Total deferred tax liabilities	(417)
Net deferred tax assets	$ 5,803

Income Taxes - Valuation allowance (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Income Taxes
Unrecognized tax benefit would impact the effective tax rate	$ 0

Earnings (loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								5 Months Ended	7 Months Ended	12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Jul. 20, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Numerator:
Net income (loss)									$ (3,344)	$ 11,161	$ 7,817	$ (3,395)	$ (1,349)
Less: net income attributable to non-controlling interests											(11,310)	$ 3,395	$ 1,349
Net income attributable to PetIQ, Inc.	$ (3,391)	$ 859	$ 6,070	$ 4,279	$ (1,177)	$ (2,512)	$ 598	$ (304)			$ (3,493)
Denominator:
Basic weighted average shares	13,222,583,000	13,222,583,000									13,222,583
Weighted Average Number of Shares Outstanding, Diluted, Total	13,222,583,000	13,222,583,000									13,222,583
Basic net income per common share	$ (0.25)	$ (0.02)									$ (0.26)
Diluted net income per common share	$ (0.25)	$ (0.02)									$ (0.26)

Stock Based Compensation (Details) $ / shares in Units, $ in Thousands	5 Months Ended	12 Months Ended
	Dec. 31, 2017 USD ($) shares	Dec. 31, 2017 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage on each anniversary of the grant date		25.00%
Maximum term for stock options		6 years 3 months
Stock based compensation expense \| $	$ 447	$ 447
Grant date fair value of stock options granted \| $ / shares		$ 6.08
Unrecognized compensation cost related to unvested stock options \| $	$ 3,200	$ 3,200
Unrecognized compensation cost related to unvested options, recognized weighted-average period		3 years 6 months
Class A \| Omnibus Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance \| shares	1,914,047	1,914,047
Share available for issuance \| shares	1,315,403	1,315,403
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum term for stock options		10 years

Stock Based Compensation - Weighted Average Assumptions (Details)	12 Months Ended
	Dec. 31, 2017
Stock Based Compensation
Expected term (years)	6 years 3 months
Expected volatility	35.00%
Risk-free interest rate	1.98%
Dividend yield	0.00%

Stock Based Compensation - Summary of Unvested Stock Options (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares shares
Stock Based Compensation
Stock Options Outstanding - Beginning Balance
Stock Options Granted (in shares)	804,049
Stock Options Forfeited (in shares)	(205,405)
Stock Options Outstanding - Ending Balance	598,644
Weighted Average Exercise Price - Granted \| $ / shares	$ 16
Weighted Average Exercise Price - Forfeited \| $ / shares	16
Weighted Average Exercise Price Outstanding - Ending Balance \| $ / shares	$ 16
Aggregate Intrinsic Value \| $	$ 3,496
Weighted Average Remaining Contractual Life (years)	9 years 6 months

Stockholder's Equity - Reorganization and amendment (Details) $ / shares in Units, $ in Millions	Jul. 20, 2017 USD ($) Vote class $ / shares shares	Dec. 31, 2017 $ / shares shares	Jul. 19, 2017 shares
Class of Stock [Line Items]
Ownership interest in Holdco	61.50%	61.50%
Ownership interest by continuing LLC owners	38.50%	38.50%
Pet, LLC and Subsidiaries (the "Company")
Class of Stock [Line Items]
Number of shares purchased		3,556,666
Sponsor Corps
Class of Stock [Line Items]
LLC interests held			7,523,839
Continuing LLC Owners
Class of Stock [Line Items]
Common unit issued in exchange of shares (in shares)	133,334
Cash paid \| $	$ 2.1
Continuing LLC Owners \| Pet, LLC and Subsidiaries (the "Company")
Class of Stock [Line Items]
Number of shares purchased		133,334
Class A
Class of Stock [Line Items]
Common Stock, Shares, Issued		13,222,583
Common stock authorized		125,000,000
Common stock, par value \| $ / shares		$ 0.001
Class A \| IPO
Class of Stock [Line Items]
Common Stock, Shares, Issued	7,187,500
Class A \| IPO \| Holdco
Class of Stock [Line Items]
Number of shares purchased	3,556,666
Class A \| Sponsor Corps \| IPO
Class of Stock [Line Items]
Common Stock, Shares, Issued	5,615,981
Class B common stock
Class of Stock [Line Items]
Common Stock, Shares, Issued		8,268,188
Common stock authorized		8,401,521
Common stock, par value \| $ / shares		$ 0.001
Amended Holdco LLC Agreement
Class of Stock [Line Items]
Ownership interest in Holdco		61.50%
Blank check preferred stock, authorized	12,500,000
Number of classes of directors \| class	3
Staggered service term	3 years
Number of vote per share \| Vote	1
Amended Holdco LLC Agreement \| Holdco
Class of Stock [Line Items]
Number of shares purchased		9,532,583
Amended Holdco LLC Agreement \| Sponsor Corps
Class of Stock [Line Items]
Preference notes payable \| $	$ 30.5
Amended Holdco LLC Agreement \| Continuing LLC Owners
Class of Stock [Line Items]
Preference notes payable \| $	$ 25.4
Common unit issued in exchange of shares (in shares)	1,589,642
Amended Holdco LLC Agreement \| Class A
Class of Stock [Line Items]
Common stock authorized	125,000,000
Common stock, par value \| $ / shares	$ 0.001
Conversion ratio	1
Amended Holdco LLC Agreement \| Class A \| Certain Employee Owners
Class of Stock [Line Items]
Common unit issued in exchange of shares (in shares)	419,102
Amended Holdco LLC Agreement \| Class B common stock
Class of Stock [Line Items]
Common stock authorized	8,401,521
Common stock, par value \| $ / shares	$ 0.001
Conversion ratio	1
Cancellation ratio	1

Stockholder's Equity - Initial public offering (Details) $ / shares in Units, $ in Thousands		5 Months Ended	12 Months Ended
	Jul. 20, 2017 USD ($) $ / shares shares	Dec. 31, 2017 USD ($) shares	Dec. 31, 2017 USD ($) shares
Class of Stock [Line Items]
Proceeds from Initial Public Offering (IPO) of Class A Shares, net of underwriting discounts and offering costs \| $			$ 104,010
Repayments of Notes Payable \| $		$ 55,960	$ 55,960
Common stock, shares outstanding		13,222,583	13,222,583
Pet, LLC and Subsidiaries (the "Company")
Class of Stock [Line Items]
Number of shares purchased		3,556,666	3,556,666
Pet, LLC and Subsidiaries (the "Company") \| IPO
Class of Stock [Line Items]
Repayments of Notes Payable \| $	$ 56,000
Class A
Class of Stock [Line Items]
Common Stock, Shares, Issued		13,222,583	13,222,583
Common stock, shares outstanding		13,222,583	13,222,583
Class A \| IPO
Class of Stock [Line Items]
Common Stock, Shares, Issued	7,187,500
Share Price \| $ / shares	$ 16.00
Proceeds from Initial Public Offering (IPO) of Class A Shares, net of underwriting discounts and offering costs \| $	$ 104,000
Class A \| Holdco \| IPO
Class of Stock [Line Items]
Number of shares purchased	3,556,666
Class B common stock
Class of Stock [Line Items]
Common Stock, Shares, Issued		8,268,188	8,268,188
Common stock, shares outstanding		8,268,188	8,268,188
Certain Executives \| Class B common stock
Class of Stock [Line Items]
Number of shares purchased	133,334
Amended Holdco LLC Agreement
Class of Stock [Line Items]
Common stock, shares outstanding		21,490,771	21,490,771
Amended Holdco LLC Agreement \| Holdco
Class of Stock [Line Items]
Number of shares purchased		9,532,583	9,532,583
Amended Holdco LLC Agreement \| Class A
Class of Stock [Line Items]
Stockholders' Equity Note, Stock Split, Conversion Ratio	1
Amended Holdco LLC Agreement \| Class B common stock
Class of Stock [Line Items]
Stockholders' Equity Note, Stock Split, Conversion Ratio	1

Non-Controlling Interests (Details) - shares	Dec. 31, 2017	Jul. 20, 2017
LLC Interests outstanding	13,222,583
Ownership interest by continuing LLC owners	38.50%	38.50%
Ownership interest in Holdco	61.50%	61.50%
Continuing LLC Owners
LLC Interests outstanding	8,268,188
Amended Holdco LLC Agreement
LLC Interests outstanding	21,490,771
Ownership interest in Holdco	61.50%
Pet, LLC and Subsidiaries (the "Company")
Number of shares purchased	3,556,666
Pet, LLC and Subsidiaries (the "Company") \| Continuing LLC Owners
Number of shares purchased	133,334
Holdco \| Amended Holdco LLC Agreement
Number of shares purchased	9,532,583

Customer Concentration (Details) - customer	12 Months Ended
Customer Concentration (Details) - customer	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Customer concentrations \| Sales
Concentration Risk [Line Items]
Concentration risk	61.00%	70.00%	74.00%
Credit concentrations \| Accounts receivable
Concentration Risk [Line Items]
Concentration risk	48.00%	60.00%
Domestic
Concentration Risk [Line Items]
Number of customers accounted for more than 10% of sales individually	3	4

Segments (Details) $ in Thousands	3 Months Ended								12 Months Ended
Segments (Details) $ in Thousands	Dec. 31, 2017 USD ($)	Sep. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2017 USD ($) segment	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments \| segment									2
Number of reportable segments \| segment									2
Financial information relating to the Company’s operating segments
Net Sales									$ 266,687	$ 200,162	$ 205,687
Gross profit	$ 10,526	$ 12,517	$ 15,951	$ 12,200	$ 7,654	$ 6,160	$ 8,961	$ 9,772	51,194	32,547	39,158
General and administrative expenses	10,484	10,739	9,277	7,405	7,538	7,942	8,302	8,063	37,905	31,845	35,588
Operating income (loss)	42	$ 1,778	$ 6,674	$ 4,795	116	$ (1,782)	$ 659	$ 1,709	13,289	702	3,570
Interest expense									(1,563)	(3,058)	(3,545)
Other income, net									201	666
Loss on debt extinguishment										(1,681)	(1,449)
Foreign currency gain (loss), net									(140)	(24)	75
Identifiable assets	140,845				81,330				140,845	81,330	92,335
Depreciation expense									2,348	1,915	1,842
Amortization expense									1,052	1,067	735
Capital expenditures									4,131	2,041	1,550
Domestic
Financial information relating to the Company’s operating segments
Net Sales									261,526	195,698	202,092
Gross profit									48,997	30,683	37,582
General and administrative expenses									36,053	30,127	33,926
Operating income (loss)									12,944	556	3,656
Identifiable assets	134,841				76,270				134,841	76,270	86,531
Depreciation expense									2,209	1,877	1,800
Amortization expense									797	798	330
Capital expenditures									4,011	1,892	1,479
International
Financial information relating to the Company’s operating segments
Net Sales									5,161	4,464	3,595
Gross profit									2,197	1,864	1,576
General and administrative expenses									1,852	1,718	1,662
Operating income (loss)									345	146	(86)
Identifiable assets	$ 6,004				$ 5,060				6,004	5,060	5,804
Depreciation expense									139	38	42
Amortization expense									255	269	405
Capital expenditures									$ 120	$ 149	$ 71

Related Parties (Details) - USD ($) $ in Thousands	12 Months Ended
Related Parties (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Related Parties
Related party expenses	$ 610	$ 864	$ 462
Accrued estimated tax distributions	$ 597

Quarterly information (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Quarterly information (unaudited)
Net sales	$ 51,926	$ 60,554	$ 87,178	$ 67,029	$ 44,913	$ 41,671	$ 61,280	$ 52,298	$ 266,687	$ 200,162	$ 205,687
Gross profit	10,526	12,517	15,951	12,200	7,654	6,160	8,961	9,772	51,194	32,547	39,158
Selling, general, and administrative expenses	10,484	10,739	9,277	7,405	7,538	7,942	8,302	8,063	37,905	31,845	35,588
Operating income	42	1,778	6,674	4,795	116	(1,782)	659	1,709	13,289	$ 702	$ 3,570
Net income	$ (3,391)	$ 859	$ 6,070	$ 4,279	$ (1,177)	$ (2,512)	$ 598	$ (304)	$ (3,493)
Basic net income per common share	$ (0.25)	$ (0.02)							$ (0.26)
Diluted net income per common share	$ (0.25)	$ (0.02)							$ (0.26)
Basic weighted average shares	13,222,583,000	13,222,583,000							13,222,583
Diluted weighted average shares(	13,222,583,000	13,222,583,000							13,222,583

Subsequent Events (Details) $ in Millions	Jan. 17, 2018 USD ($) employee shares	Dec. 21, 2016 USD ($)
Maximum borrowing capacity		$ 50.0
Subsequent event \| Inducement Award [Member]
Number of employees hired \| employee	30
Subsequent event \| Holdco
EBITDA	$ 50.0
Subsequent event \| Holdco \| After closing
Term	5 years 6 months
Interest rate	6.75%
Subsequent event \| Holdco \| After closing with EBITDA $40.0 million in year 2018
Term	5 years 6 months
EBITDA	$ 40.0
Interest rate	6.75%
Subsequent event \| Holdco \| After closing with EBITDA $50.0 million in year 2018 and 2019
Term	5 years 6 months
EBITDA	$ 50.0
Interest rate	6.75%
Subsequent event \| Holdco \| Notes Payable \| After closing
Face amount	$ 10.0
Subsequent event \| Holdco \| Notes Payable \| After closing with EBITDA $40.0 million in year 2018
Face amount	10.0
Subsequent event \| Holdco \| Notes Payable \| After closing with EBITDA $50.0 million in year 2018 and 2019
Face amount	$ 10.0
Subsequent event \| LLC Interests \| Holdco
Number of shares issued in consideration \| shares	4,200,000
Subsequent event \| Class B common stock \| Holdco
Number of shares issued in consideration \| shares	4,200,000
Subsequent event \| VIP
Cash payment	$ 100.0
Subsequent event \| VIP \| Class A
Shares issued \| shares	800,000
Subsequent event \| VIP \| Term Loan Credit Agreement
Maximum borrowing capacity	$ 75.0
Subsequent event \| VIP \| A&R Credit Agreement
Maximum borrowing capacity	$ 50.0

Label	Element	Value
Accrued Tax Distribution Prior to Recapitalization	petq_AccruedTaxDistributionPriorToRecapitalization	$ (591,000)
Stock Issued During Period, Value, New Issues	us-gaap_StockIssuedDuringPeriodValueNewIssues	104,010,000
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests	us-gaap_MinorityInterestDecreaseFromRedemptions	2,133,000
Other Comprehensive Income (Loss), Net of Tax	us-gaap_OtherComprehensiveIncomeLossNetOfTax	515,000
Other Comprehensive Income (Loss), Net of Tax	us-gaap_OtherComprehensiveIncomeLossNetOfTax	308,000
Stock Issued During Period Value New Issues Recapitalization for Merger	petq_StockIssuedDuringPeriodValueNewIssuesRecapitalizationForMerger	6,000
Accrued Tax Distributions	petq_AccruedTaxDistributions	(6,000)
Stock Issued During Period, Value, New Issues, Recapitalization	petq_StockIssuedDuringPeriodValueNewIssuesRecapitalization	8,000
Adjustments to Additional Paid in Capital, Increase in Deferred Tax Asset from Step-up in Tax Basis	petq_AdjustmentsToAdditionalPaidInCapitalIncreaseInDeferredTaxAssetFromStepUpInTaxBasis	9,441,000
Retained Earnings [Member]
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	(3,493,000)
Additional Paid In Capital [Member]
Stock Issued During Period, Value, New Issues	us-gaap_StockIssuedDuringPeriodValueNewIssues	104,003,000
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests	us-gaap_MinorityInterestDecreaseFromRedemptions	15,345,000
Allocated Share-based Compensation Expense	us-gaap_AllocatedShareBasedCompensationExpense	275,000
Exchange of LLC Interest Held	petq_ExchangeOfLlcInterestHeld	28,459,000
Repayments of Notes Payable	us-gaap_RepaymentsOfNotesPayable	55,960,000
Adjustments to Additional Paid in Capital, Increase in Deferred Tax Asset from Step-up in Tax Basis	petq_AdjustmentsToAdditionalPaidInCapitalIncreaseInDeferredTaxAssetFromStepUpInTaxBasis	9,441,000
Member Units [Member]
Accrued Tax Distribution Prior to Recapitalization	petq_AccruedTaxDistributionPriorToRecapitalization	(591,000)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	11,165,000
Exchange of LLC Interest Held	petq_ExchangeOfLlcInterestHeld	(53,515,000)
Noncontrolling Interest [Member]
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests	us-gaap_MinorityInterestDecreaseFromRedemptions	(13,332,000)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	(4,000)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	us-gaap_ProfitLoss	149,000
Allocated Share-based Compensation Expense	us-gaap_AllocatedShareBasedCompensationExpense	172,000
Other Comprehensive Income (Loss), Net of Tax	us-gaap_OtherComprehensiveIncomeLossNetOfTax	119,000
Exchange of LLC Interest Held	petq_ExchangeOfLlcInterestHeld	24,388,000
Accrued Tax Distributions	petq_AccruedTaxDistributions	(6,000)
Accumulated Distributions In Excess Of Net Income [Member]
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests	us-gaap_MinorityInterestDecreaseFromRedemptions	120,000
Other Comprehensive Income (Loss), Net of Tax	us-gaap_OtherComprehensiveIncomeLossNetOfTax	515,000
Other Comprehensive Income (Loss), Net of Tax	us-gaap_OtherComprehensiveIncomeLossNetOfTax	190,000
Exchange of LLC Interest Held	petq_ExchangeOfLlcInterestHeld	668,000
Common Class A [Member] \| Common Stock [Member]
Stock Issued During Period, Value, New Issues	us-gaap_StockIssuedDuringPeriodValueNewIssues	$ 7,000
Stock Issued During Period Shares New Issues Recapitalization for Merger	petq_StockIssuedDuringPeriodSharesNewIssuesRecapitalizationForMerger	6,035,083
Stock Issued During Period Value New Issues Recapitalization for Merger	petq_StockIssuedDuringPeriodValueNewIssuesRecapitalizationForMerger	$ 6,000
Stock Issued During Period, Shares, New Issues	us-gaap_StockIssuedDuringPeriodSharesNewIssues	7,187,500
Common Class B [Member] \| Common Stock [Member]
Stock Issued During Period, Shares, New Issues, Recapitalization	petq_StockIssuedDuringPeriodSharesNewIssuesRecapitalization	8,401,522
Common Unit Issued In Exchange of Shares, Value	petq_CommonUnitIssuedInExchangeOfSharesValue	$ 0
Common Unit Issued In Exchange Of Shares	petq_CommonUnitIssuedInExchangeOfShares	(133,334)
Stock Issued During Period, Value, New Issues, Recapitalization	petq_StockIssuedDuringPeriodValueNewIssuesRecapitalization	$ 8,000