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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2019	May 08, 2019
Entity Registrant Name	PetIQ, Inc.
Entity Central Index Key	0001668673
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Class A common stock
Entity Common Stock, Shares Outstanding		22,361,504
Class B common stock
Entity Common Stock, Shares Outstanding		5,840,196

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 54,367	$ 66,360
Accounts receivable, net	65,466	45,007
Inventories	112,539	92,142
Other current assets	4,313	4,212
Total current assets	236,685	207,721
Property, plant and equipment, net	26,811	27,335
Operating lease right-of-use assets	9,860
Deferred tax assets	46,585	43,946
Other non-current assets	2,667	2,857
Intangible assets, net	87,366	88,546
Goodwill	125,279	125,029
Total assets	535,253	495,434
Current liabilities
Accounts payable	71,023	54,768
Accrued wages payable	4,158	5,295
Accrued interest payable	607	728
Other accrued expenses	919	1,154
Current portion of operating leases	2,862
Current portion of long-term debt and finance leases	2,446	2,251
Total current liabilities	82,015	64,196
Operating leases, less current installments	7,170
Long-term debt	115,274	107,418
Finance Leases, less current installments	1,944	2,319
Other non-current liabilities	268	524
Total non-current liabilities	124,656	110,261
Commitments and contingencies
Equity
Additional paid-in capital	271,916	262,219
Accumulated deficit	(2,839)	(4,450)
Accumulated other comprehensive loss	(941)	(1,316)
Total stockholders' equity	268,164	256,481
Non-controlling interest	60,418	64,496
Total equity	328,582	320,977
Total liabilities and equity	535,253	495,434
Class A common stock
Equity
Common stock value	22	22
Class B common stock
Equity
Common stock value	$ 6	$ 7

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Common stock, shares outstanding	22,156,706	21,619,875
Class A common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	125,000,000	125,000,000
Common Stock, Shares, Issued	22,156,706	21,619,875
Common stock, shares outstanding	22,156,706	21,619,875
Class B common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	100,000,000	100,000,000
Common Stock, Shares, Issued	6,546,791	6,594,364
Common stock, shares outstanding	6,027,847	6,546,791

Condensed Consolidated Statements of Income (loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Total net sales	$ 148,436	$ 115,066
Total cost of sales	123,706	99,183
Gross profit	24,730	15,883
Operating expenses
General and administrative expenses	20,538	18,968
Contingent note revaluations	(680)	141
Operating income (loss)	4,872	(3,226)
Interest expense, net	(1,937)	(1,765)
Foreign currency loss, net	(122)	(78)
Other income, net	13	45
Total other expense, net	(2,046)	(1,798)
Pretax net income (loss)	2,826	(5,024)
Income tax (expense) benefit	(500)	1,067
Net income (loss)	2,326	(3,957)
Net income (loss) attributable to non-controlling interest	715	(1,929)
Net loss attributable to PetIQ, Inc.	$ 1,611	$ (2,028)
Net income (loss) per share attributable to PetIQ, Inc. Class A common stock
Basic	$ 0.07	$ (0.14)
Diluted	$ 0.07	$ (0.14)
Weighted average shares of Class A common stock outstanding
Basic	21,800,033	14,574,883
Diluted	21,977,898	14,574,883
Product
Total net sales	$ 126,084	$ 97,851
Total cost of sales	108,064	84,586
Services
Total net sales	22,352	17,215
Total cost of sales	$ 15,642	$ 14,597

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Comprehensive Income
Net income (loss)	$ 2,326	$ (3,957)
Foreign currency translation adjustment	539	436
Comprehensive income (loss)	2,865	(3,521)
Comprehensive income attributable to non-controlling interest	848	(1,767)
Comprehensive income (loss) attributable to PetIQ	$ 2,017	$ (1,754)

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities
Net Income (loss)	$ 2,326	$ (3,957)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization of intangible assets and loan fees	3,091	2,522
Foreign exchange (gain) loss on liabilities		53
(Gain) Loss on disposition of property, plant, and equipment	(34)	(20)
Stock based compensation expense	1,544	698
Deferred tax adjustment	500	(1,067)
Contingent note revaluations	(680)	141
Other non-cash activity	17	(334)
Changes in assets and liabilities
Accounts receivable	(20,444)	(28,997)
Inventories	(20,366)	(27,238)
Prepaid expenses and other assets	21	16
Accounts payable	17,335	22,508
Accrued wages payable	(1,150)	(482)
Other accrued expenses	(359)	(2,274)
Net cash used in operating activities	(18,199)	(38,431)
Cash flows from investing activities
Proceeds from disposition of property, plant, and equipment	47	57
Purchase of property, plant, and equipment	(897)	(2,224)
Business acquisitions (net of cash acquired)		(91,986)
Net cash used in investing activities	(850)	(94,153)
Cash flows from financing activities
Proceeds from issuance of long-term debt	134,134	162,278
Principal payments on long-term debt	(125,717)	(59,533)
Tax distributions to Continuing LLC Owners	(1,378)	(540)
Principal payments on capital lease obligations	(371)	(242)
Payment of deferred financing fees and debt discount	(50)	(2,613)
Exercise of options to purchase common stock	315
Net cash provided by financing activities	6,933	99,350
Net change in cash and cash equivalents	(12,116)	(33,234)
Effect of exchange rate changes on cash and cash equivalents	123	52
Cash and cash equivalents, beginning of period	66,360	37,896
Cash and cash equivalents, end of period	54,367	4,714
Supplemental cash flow information
Interest paid	2,146	831
Property, plant, and equipment acquired through accounts payable	(51)	(511)
Capital lease additions	210	34
Net change of deferred tax asset from step-up in basis	3,138	8,981
Income taxes paid	176	46
Accrued tax distribution	$ 257	434
Non cash consideration - Contingent notes		6,900
Non cash consideration - Guarantee note		10,000
Non cash consideration - Issuance of Class B common stock and LLC Interests		$ 90,031

Condensed Consolidated Statements of Equity - USD ($) $ in Thousands	Class A common stock Common Stock [Member]	Class B common stock Common Stock [Member]	(Accumulated Deficit)	Accumulated Other Comprehensive (Loss) Income	Additional Paid-In Capital	Non-controlling Interest	Total
Beginning Balance at Dec. 31, 2017	$ 13	$ 8	$ (3,493)	$ (687)	$ 70,873	$ 38,130	$ 104,844
Beginning Balance (in shares) at Dec. 31, 2017	13,222,583	8,268,188
Increase (Decrease) in Stockholders' Equity
Issuance of equity for business combination		$ 3		112	36,281	53,635	90,031
Issuance of equity for business combination (in shares)		3,042,794
Exchange of LLC Interests held by LLC Owners	$ 3	$ (3)		(126)	21,385	(21,259)
Exchange of LLC Interests held by LLC Owners (in shares)	2,909,460	(2,909,460)
Net increase in deferred tax asset from LLC Interest transactions					8,981		8,981
Accrued tax distributions						(434)	(434)
Other comprehensive income (loss)				274		162	436
Stock based compensation expense					396	302	698
Net income (loss)			(2,028)			(1,929)	(3,957)
Ending Balance at Mar. 31, 2018	$ 16	$ 8	(5,696)	(427)	137,916	68,497	200,314
Ending Balance (in shares) at Mar. 31, 2018	16,132,043	8,401,522
Increase (Decrease) in Stockholders' Equity
ASC 606 adoption, net of tax			(175)			(110)	(285)
Beginning Balance at Dec. 31, 2018	$ 22	$ 7	(4,450)	(1,316)	262,219	64,496	320,977
Beginning Balance (in shares) at Dec. 31, 2018	21,619,875	6,546,791
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 1	$ (1)		(31)	5,049	(5,018)
Exchange of LLC Interests held by LLC Owners (in shares)	518,944	(518,944)
Net increase in deferred tax asset from LLC Interest transactions					3,138		3,138
Accrued tax distributions						(257)	(257)
Other comprehensive income (loss)				406		133	539
Stock based compensation expense					1,195	349	1,544
Exercise of Options to purchase Common Stock	$ 0				315		$ 315
Exercise of Options to purchase Common Stock (in shares)	16,553						16,553
Issuance of stock for vesting of RSU's	$ 0						$ 0
Issuance of stock for vesting of RSU's (in shares)	1,334
Net income (loss)			1,611			715	2,326
Ending Balance at Mar. 31, 2019	$ 22	$ 6	$ (2,839)	$ (941)	$ 271,916	$ 60,418	$ 328,582
Ending Balance (in shares) at Mar. 31, 2019	22,156,706	6,027,847

Principal Business Activity and Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

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 Principles of Consolidation

PetIQ is a leading, rapidly growing pet health and wellness company. Through over 60,000 points of distribution across retail and e-commerce channels, PetIQ and VIP Petcare, a wholly-owned subsidiary, have a mission to make pet lives better by educating pet parents on the importance of offering regular, convenient access and affordable choices for pet preventative and wellness veterinary products and services. PetIQ believes that pets are an important part of the family and deserve the best products and care we can give them.

We are the managing member of PetIQ Holdings, LLC (“Holdco”), a Delaware limited liability company, which is the sole member of PetIQ, LLC (“Opco”) and, through Holdco, operate and control all the business and affairs of Opco.

The condensed consolidated financial statements as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 are unaudited. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2018 and related notes thereto included in most recent annual report and filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 12, 2019. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

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 and intangible assets; the valuation of property, plant, and equipment, intangible assets and goodwill, the valuation of assets and liabilities in connection with acquisitions, the valuation of deferred tax assets and liabilities, the valuation of inventories, 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 for each period.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, are at cost, which approximates fair value due to their relatively short maturities. The guarantee notes are carried at cost, which approximates fair value as the stated interest rate is consistent with current market rates. Our term loan and revolving credit facility bear interest at a variable interest rate plus an applicable margin and, therefore, carrying amounts approximate fair value.

The following table presents liabilities measured at fair value on a recurring basis:


$'s in 000's		March 31, 2019	December 31, 2018
Liabilities:
2019 Contingent note	$	2,000	$	2,680

In connection with the acquisition of Community Veterinary Clinics, LLC d/b/a VIP Petcare (“VIP” and such acquisition, the “VIP Acquisition”) a portion of the purchase price was structured in the form of Contingent Notes (the “Contingent Notes”) that vest based on the combined Company EBITDA targets for the years ending December 31, 2018 and 2019 (“Measurement Dates”). See Note 2 – “Business Combinations” for more information regarding the VIP Acquisition. The Company is required to reassess the fair value of the Contingent Notes at each reporting period. As of December 31, 2018, $7.5 million was payable pursuant to the 2018 Contingent Note, subject to the same payment terms described below. As such, the portion of the liability as it relates to the 2018 Contingent Note became fixed as of December 31, 2018.

For the 2019 Contingent Note, a Monte Carlo simulation method was utilized in estimating the fair value (Level 3) of the Contingent Notes. The simulation model is a numerical algorithm that generates thousands of scenarios for the future EBITDA in order to assess the probability of achieving the EBITDA hurdles. The valuation model simulates the last twelve months EBITDA from the Valuation Date to the end of each Measurement Date in one 'jump'. The Contingent Notes were valued within a risk-neutral option pricing framework with the real growth rate adjusted for the market price of EBITDA risk. The Company used the WACC less risk-free rate as a proxy for the EBITDA risk premium.

Although the Company believes its estimates and assumptions are reasonable, different assumptions, including those regarding the operating results of the Company, or changes in the future may result in different estimated amounts.

The contingent consideration is included in long-term debt in the accompanying condensed consolidated balance sheets. The Company will satisfy this obligation with a cash payment to the sellers due in July 2023 upon the achievement of the respective milestones discussed above. The Contingent Notes will bear interest at a fixed rate of 6.75%, beginning upon the achievement of the respective milestones discussed above.

The following table summarizes the Level 3 activity related to the Contingent Notes:


	Three months ended
$'s in 000's	March 31, 2019		March 31, 2018
Balance at beginning of the period	$	2,680	$	—
Fair value of contingent consideration at VIP Acquisition date		—		6,900
Change in fair value of contingent consideration		(680)		141
Transfer out of level 3		—		—
Balance at the end of the period	$	2,000	$	7,041

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the date of acquisition. All credit card, debit card and electronic transfer transactions that process in less than seven days are classified as cash and cash equivalents. The Company maintains its cash accounts in various deposit accounts, the balances of which at times exceeded federal deposit insurance limits during the periods presented.

Receivables and Credit Policy

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms generally requiring payment within 45 days from the invoice date. Accounts receivable are stated at the amount billed to the customer, net of discounts and estimated deductions. The Company does not have a policy for charging interest on overdue customer account balances. The Company provides an allowance for 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.

Other receivables consists of various receivables due from vendors, banking partners, and notes receivable from suppliers. Non-current portions of these other receivables are included in other non-current assets on the consolidated balance sheets.

Accounts receivable consists of the following as of:


$'s in 000's	March 31, 2019		December 31, 2018
Trade receivables	$	61,618	$	43,531
Other receivables		4,164		1,764
		65,782		45,295
Less: Allowance for doubtful accounts		(243)		(216)
Non-current portion of receivables		(73)		(72)
Total accounts receivable, net	$	65,466	$	45,007

Inventories

Inventories are stated at the lower of cost or net realizable value, which approximate the first-in first-out (“FIFO”) method and includes earned rebate amounts. The Company maintains reserves for estimated obsolete or unmarketable inventory based on the difference between the cost of inventory and its estimated net realizable value. In estimating the reserves, management considers factors such as excess or slow-moving inventories, product expiration dating, and market conditions. Changes in these conditions may result in additional reserves. Major components of inventories consist of the following as of:


$'s in 000's	March 31, 2019		December 31, 2018
Raw materials	$	6,445	$	6,106
Work in progress		54		94
Finished goods		106,040		85,942
Total inventories	$	112,539	$	92,142

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 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 and general and administrative expenses in the condensed consolidated statements of operations, depending on the use of the asset. The estimated useful lives of property, plant, and equipment are as follows:


Computer equipment and software			3 years
Vehicle and vehicle accessories			3-5 years
Buildings			33 years
Equipment			2-15 years
Leasehold improvements			3-15 years
Furniture and fixtures			5-10 years

Revenue Recognition

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are product sales and the delivery of veterinary services.

Revenue is generally recognized for product sales on a point in time basis when product control is transferred to the customer. In general, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time.

The Company determined that certain products manufactured to a customers specifications do not have an alternative future use at a reasonable profit margin due to costs associated with reworking, transporting and repackaging these products. These products are produced subject to purchase orders that include an enforceable right to payment. Therefore the Company determined that revenue on these products would be recognized over time, as the products are produced. This represents a minor subset of the products the Company manufactures.

Revenue is recognized for services over time when the service is delivered.

Customer contracts generally do not include more than one performance obligation. When a contract does contain more than one performance obligation, we allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.

The performance obligations in our contracts are satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of March 31, 2019.

Significant Payment Terms

Our customer contracts identify the product, quantity, price, payment and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more extended, no terms beyond one year are granted at contract inception. As a result, we do not adjust the promised amount of consideration for the effects of a significant financing component because the period between our transfer of a promised good or service to a customer and the customer’s payment for that good or service will be one year or less.

Shipping

All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in the cost of sales. This includes shipping and handling costs after control over a product has transferred to a customer.

Variable Consideration

In addition to fixed contract consideration, most contracts include some form of variable consideration. The most common forms of variable consideration include discounts, rebates, and sales returns and allowances. Variable consideration is treated as a reduction in revenue when product revenue is recognized. Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration each period based on the terms of the agreements, historical experience, and any recent changes in the market. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe therefore not requiring any additional constraint on the variable consideration.

Trade marketing expense, consisting primarily of customer pricing allowances and merchandising funds are offered through various programs to customers and are designed to promote our products. They include the cost of in-store product displays, feature pricing in retailers' advertisements and other temporary price reductions. These programs are offered to our customers both in fixed and variable (rate per case) amounts. The ultimate cost of these programs depends on retailer performance and is subject to management estimates.

Certain retailers require the payment of product introductory fees in order to obtain space for the Company's products on the retailer's store shelves. This cost is typically a lump sum and is determined using the expected value based on the contract between the two parties.

Both trade marketing expense and product introductory fees are recognized as reductions of revenue at the time the transfer of control of the associated products occurs. Accruals for expected payouts, or amounts paid in advance, under these programs are included as other current assets or accounts payable in the Condensed Consolidated Balance Sheet.

Warranties & Returns

PetIQ provides all customers with a standard or assurance type warranty. Either stated or implied, the Company provides assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No significant services beyond an assurance warranty are provided to customers.

The Company does not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a reduction in revenue. This return estimate is reviewed and updated each period and is based on historical sales and return experience.

Contract balances

Contract asset and liability balances as of March 31, 2019 and December 31, 2018 are immaterial. The Company does not have significant deferred revenue or unbilled receivable balances because of transactions with customers.

Cost of Services

Cost of Services are comprised of all service and product costs related to the delivery of veterinary services, including but not limited to, salaries of veterinarians, technicians and other clinic based personnel, transportation and delivery costs, rent, occupancy costs, supply costs, depreciation and amortization of clinic assets, certain marketing and promotional expenses and costs of goods sold.

Research and Development and Advertising Costs

Research and development and advertising costs are expensed as incurred and are included in general and administrative expenses. Research and development costs amounted to $97 thousand and $49 thousand for the three months ended March 31, 2019 and 2018, respectively. Advertising costs were $655 thousand and $594 thousand for the three months ended March 31, 2019 and 2018, respectively. Advertising costs do not include trade marketing programs which are part of net sales.

Income taxes

The Company records a tax provision for the anticipated tax consequences of the reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company may record a valuation allowance, if conditions are applicable, to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Non-controlling interest

The non-controlling interests on the condensed consolidated statements of income represents the portion of earnings or loss attributable to the economic interest in the Company’s subsidiary, Holdco, held by the non-controlling holders of Class B common stock and limited liability company interests in Holdco. Non-controlling interests on the condensed consolidated balance sheet represents the portion of net assets of the Company attributable to the non-controlling holders of Class B common stock and limited liability company interests in Holdco, based on the portion of the LLC Interests owned by holders of Class B common stock and limited liability company interests in Holdco. As of March 31, 2019 and December 31, 2018 the non-controlling interest was approximately 21.4% and 23.2%, 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. If the assessment indicates a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. The Company consults with both internal and external legal counsel related to litigation.

Adopted Accounting Standard Updates

In February 2016, the FASB issued ASU 2016-02, Leases. The Company adopted the provisions of this guidance effective January 1, 2019, using the modified retrospective optional transition method. Therefore, the standard was applied beginning January 1, 2019 and prior periods were not restated. The adoption of the standard did not result in a cumulative-effect adjustment to the opening balance of Retained earnings. The Company elected the package of practical expedients and implemented internal controls and system functionality to enable the preparation of financial information upon adoption. In addition, the Company has elected to apply the practical expedient to not separate the lease and non-lease components for all of the Company's leases.

The adoption of the new standard resulted in the recognition of a right of use asset and short-term and long-term liabilities recorded on the Company's consolidated balance sheet related to operating leases. Accounting for finance leases remained substantially unchanged. In addition, the adoption of the standard did not have a material impact on the Company's results of operations or cash flows.

Business Combination

3 Months Ended

Mar. 31, 2019

Business Combination

Business Combination

Note 2 – Business Combination

VIP Acquisition

On January 17, 2018 PetIQ, Inc. completed the acquisition of VIP from VIP Holdings, LLC (“VIPH” or the “Sellers”).

The fair value of the consideration is summarized as follows:


$'s in 000's		Fair value
Current assets	$	15,617
Property, plant, and equipment		8,885
Other assets, net		295
Intangible assets - Customer relationships (20 year useful life)		77,200
Intangible assets - Brand names (10 year useful life)		9,600
Goodwill		112,643
Total assets		224,240

Current liabilities		22,908
Capital lease obligations		3,032
Total liabilities		25,940

Estimated purchase price	$	198,300

Cash paid, net of cash acquired	$	92,082
LLC Interests and shares of Class B common stock		90,031
Guarantee note		10,000
Contingent notes		6,900
Post-closing working capital adjustment		(713)

Estimated fair value of total consideration transferred	$	198,300

The definite-lived intangibles primarily relate to customer relationships and brand names. The $86.8 million represents the fair value and will be amortized over the estimated useful lives of the assets through January 2038. Amortization expense for these definite-lived intangible assets for the three ended March 31, 2019 and 2018 was $1.3 million and $1.0 million, respectively.

Goodwill represents the future economic benefits that do not qualify for separate recognition and primarily includes the assembled workforce and other non-contractual relationships, as well as expected future synergies. Approximately $49.8 million of the $112.6 million of goodwill will not be tax deductible, and the remaining balance is expected to be deductible for tax purposes. Goodwill was allocated to the Products and Services segments.

HBH Enterprises

On October 17, 2018, the Company completed the acquisition of HBH Enterprises, LLC (“HBH”) (the “HBH Acquisition”). Total consideration, net of cash acquired, was approximately $14.7 million consisting of cash of $1.7 million and equity consideration of approximately $13.0 million. The equity consideration consisted 400,000 LLC interests of Holdco and 400,000 shares of Class B common stock, $0.001 par value per share, of the Company.

The estimate of fair value and purchase price allocation were based on information available at the time of closing the HBH Acquisition and the Company continues to evaluate the underlying inputs and assumptions. The Company is in process of finalizing valuation studies. Accordingly, these preliminary estimates are subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed as of the date of closing the HBH Acquisition.The purchase price allocation has been preliminarily allocated as follows:



$'s in 000's		Preliminary Estimated Fair Value
Working Capital, net	$	1,676
Property, plant, and equipment		2,686
Intangible assets - Customer relationships		3,800
Goodwill		7,607
Total assets		15,769

Capital lease obligations		1,114
Total liabilities		1,114

Estimated purchase price	$	14,655

Cash paid, net of cash acquired	$	1,683
LLC Interests and shares of Class B common stock		12,972

Estimated fair value of total consideration transferred	$	14,655

Goodwill represents the future economic benefits that do not qualify for separate recognition and primarily includes the assembled workforce and other non-contractual relationships, as well as expected future synergies. Approximately $5.0 million of the $7.6 million of goodwill will not be tax deductible, and the remaining balance is expected to be deductible for tax purposes. Goodwill was allocated to the Products segment.

Property, Plant, and equipment

3 Months Ended

Mar. 31, 2019

Property, Plant, and Equipment

Property, Plant, and Equipment

Note 3 – Property, Plant, and Equipment

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


$'s in 000's		March 31, 2019		December 31, 2018
Leasehold improvements	$	10,906	$	10,776
Equipment		14,782		14,477
Vehicles and accessories		4,004		3,989
Computer equipment and software		6,131		5,839
Buildings		2,480		2,479
Furniture and fixtures		1,573		1,547
Land		660		660
Construction in progress		1,041		682
		41,577		40,449
Less accumulated depreciation		(14,766)		(13,114)
Total property, plant, and equipment	$	26,811	$	27,335

Depreciation expense related to these assets was $1.7 million and $1.3 million for the three months ended March 31, 2019 and 2018, respectively.

Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2019

Intangible Assets and Goodwill

Intangible Assets and Goodwill

Note 4 – Intangible Assets and Goodwilll

Intangible assets consist of the following at:


$'s in 000's	Useful Lives	March 31, 2019		December 31, 2018
Amortizable intangibles
Distribution agreement	2 years	$	3,021	$	3,021
Certification	7 years		350		350
Customer relationships	12-20 years		82,178		82,124
Patents and processes	10 years		1,994		1,900
Brand names	10-15 years		10,513		10,470
Total amortizable intangibles			98,056		97,865
Less accumulated amortization			(11,206)		(9,835)
Total net amortizable intangibles			86,850		88,030
Non-amortizable intangibles
Trademarks and other			516		516
Intangible assets, net of accumulated amortization		$	87,366	$	88,546

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 three months ended March 31, 2019 and 2018, was $1.3 million and $1.1 million, respectively

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


Years ending December 31, ($'s in 000's)
Remainder of 2019	$	3,818
2020		6,642
2021		6,749
2022		6,740
2023		6,265
Thereafter		56,636

The following is a summary of the changes in the carrying value of goodwill for the period from January 1, 2018 to March 31, 2019:


		Reporting Unit
($'s in 000's)		Products		Services		Total
Goodwill as of January 1, 2018		5,064		—		5,064
Foreign currency translation		(285)		—		(285)
Acquisitions		72,986		47,264		120,250
Goodwill as of December 31, 2018	$	77,765	$	47,264	$	125,029
Foreign currency translation		250		—		250
Goodwill as of March 31, 2019	$	78,015	$	47,264	$	125,279

- 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

3 Months Ended

Mar. 31, 2019

Debt

Debt

Note 5 – Debt

A&R Credit Agreement

In connection with the VIP Acquisition, the Company amended and restated its existing revolving credit agreement (the “A&R Credit Agreement”) on January 17, 2018, which was subsequently amended in August 2018. The A&R Credit Agreement provides for a secured revolving credit facility of $75 million in the aggregate, at either LIBOR or Base (prime) interest rates plus an applicable margin. The A&R Credit Agreement matures on January 17, 2023 and contains a lockbox mechanism.

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. The Term Loan Credit Agreement requires quarterly principal payments, with the full balance due on January 17, 2023.

As of March 31, 2019, the Company had $22.1 million outstanding under the A&R Credit Agreement and $74.4 million under the Term Loan Credit Agreement. The interest rate on the A&R Credit Agreement was 5.5% as a Base Rate loan, the interest rate on the Term Loan Credit Agreement was 7.8% as a LIBOR rate loan. Additionally the Company pays between 0.375% and 0.50% as an unused facility fee, depending on the amount borrowed.

The A&R Credit Agreement and Term Loan Credit Agreement contain 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 March 31, 2019, the Company was in compliance with these covenants.

Other Debt

The Company entered into a mortgage with a local bank to finance $1.9 million of the purchase price of a commercial building in Eagle, Idaho, in July 2017. The mortgage bears interest at a fixed rate of 4.35% and utilizes a 25 year amortization schedule with a 10 year balloon payment of the balance due at that time.

In connection with the VIP Acquisition, the Company entered into a guarantee note which requires the Company to pay $10.0 million to the sellers on July 17, 2023. The note bears interest at a fixed 6.75% and requires quarterly interest payments. As of December 31, 2018 $7.5 million was payable pursuant to the 2018 Contingent Note and up to $10 million may be payable pursuant to the 2019 Contingent Note. See “Note – 2 Business Combinations”. The $7.5 million note requires quarterly interest payments of 6.75% with the balance payable July 17, 2023. The following represents the Company’s long-term debt as of:


$'s in 000's	March 31, 2019		December 31, 2018
Term loans	$	74,438	$	74,625
Revolving credit facility		22,067		13,452
Mortgage		1,847		1,859
Contingent notes		2,000		2,680
Earned contingent note		7,500		7,500
Guaranteed note		10,000		10,000
Net discount on debt and deferred financing fees		(1,782)		(1,902)
	$	116,070	$	108,214
Less current maturities of long-term debt		(796)		(796)
Total long-term debt	$	115,274	$	107,418

Future maturities of long-term debt, excluding the net discount on debt and deferred financing fees, as of March 31, 2019, are as follows:


($'s in 000's)
Remainder of 2019	$	597
2020		798
2021		800
2022		802
2023		111,247
Thereafter		1,608

The Company incurred debt issuance costs of $0.1 million related to the A&R Credit Agreement and zero related to the Term Loan during the three months ended March 31, 2019 and $2.4 million and $0.3 million related to the Term Loan and A&R Credit Agreement, respectively, during the three months ended March 31, 2018.

Leases

3 Months Ended

Mar. 31, 2019

Leases

Leases

Note 6 – Leases

The Company leases certain real estate for commercial, production, and retail purposes, as well as equipment from third parties. Lease expiration dates are between 2019 and 2025. A portion of leases are denominated in foreign currencies.

On January 1, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842),” which requires most leases to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective method and used the effective date as our date of initial adoption. Prior year financial statements were not restated under the new standard and, therefore, those amounts are not presented below. For both operating and finance leases, the Company recognizes a right-of-use asset, which represents the right to use the underlying asset for the lease term, and a lease liability, which represents the present value of our obligation to make payments arising over the lease term.

We elected the short-term lease exemption for all leases that qualify. This means leases having an initial term of twelve months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the term of the lease.

The Company's leases may include options to extend or terminate the lease. These options to extend are included in the lease term when it is reasonably certain that we will exercise that option. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases primarily relate to common area maintenance, insurance, taxes and utilities. Variable payments for equipment, vehicles, and leases within supply agreements primarily relate to usage, repairs, and maintenance. As the implicit rate is not readily determinable for most of the Company's leases, the Company applies a portfolio approach using an estimated incremental borrowing rate to determine the initial present value of lease payments over the lease terms, which is based on market and company specific information.

The effect of the changes made to our consolidated balance sheet as of January 1, 2019 for the adoption of the new lease standard was as follows:


	Balance at		Adjustments due		Balance at
$'s in 000's	December 31, 2018		to ASC 842		January 1, 2019
ASSETS
Property and equipment, net (1)	$	27,335	$	—	$	27,335
Operating lease right-of-use assets		—		10,424		10,424
Other non-current assets	$	2,857	$	(116)	$	2,741

LIABILITIES						—
Current portion of long-term debt and finance leases	$	—	$	2,921	$	2,921
Operating Leases, less current installments		—		7,644		7,644
Current portion of long-term debt and finance leases(2)		2,251		—		2,251
Finance leases, less current installments		2,319		—	$	2,319
Other non-current liabilities	$	524	$	(257)	$	267

(1)

Finance lease right-of-use assets of $4.5 million are included in property and equipment, net, on the condensed consolidated balance sheets.

(2)

Current portion of long-term debt and finance leases includes $1.5 million of current portion of finance leases.

In accordance with the new lease standard requirements, the disclosure of the impact of adoption on our consolidated balance sheet was as follows:


		March 31, 2019
			Balance without
			adoption of		Effect of
$'s in 000's	As Reported		ASC 842		change
ASSETS
Property and equipment, net (1)	$	26,811	$	26,811	$	—
Operating lease right-of-use assets		9,860		—		(9,860)
Other non-current assets	$	2,667	$	2,769	$	102

LIABILITIES
Current portion of operating leases	$	2,862	$	—	$	(2,862)
Operating leases, less current installments		7,170		—		(7,170)
Current portion of long-term debt and finance leases(2)		2,446		2,446		—
Finance leases, less current installments		1,944		1,944		—
Other non-current liabilities	$	268	$	494	$	226

(1)

Finance lease right-of-use assets of $4.2 million are included in property and equipment, net, on the condensed consolidated balance sheets.

(2)

Current portion of long-term debt and finance leases includes $1.6 million of current portion of finance leases.

The components of lease expense were as follows:


	Three Months
	Ended
$'s in 000's	March 31, 2019
Finance lease cost
Amortization of right-of-use assets	$	290
Interest on lease liabilities		50
Operating lease cost		910
Variable lease cost(1)		72
Short-term lease cost		14
Total lease cost	$	1,336

(1)

Variable lease cost primarily relates to common area maintenance, property taxes and insurance on leased real estate.

Other information related to leases was as follows as of:


			March 31, 2019
Weighted-average remaining lease term (years)
Operating leases			3.95
Finance leases			2.65
Weighted-average discount rate
Operating leases			5.0%
Finance leases			5.5%

Annual future commitments under non-cancelable leases as of March 31, 2019, consist of the following:


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
Remainder of 2019	$	2,655	$	1,231
2020		2,869		1,344
2021		2,032		660
2022		1,886		495
2023		1,579		119
Thereafter		28		19
Total minimum future obligations	$	11,049	$	3,868
Less interest		(1,017)		(275)
Present value of net future minimum obligations		10,032		3,593
Less current lease obligations		(2,862)		(1,649)
Long-term lease obligations	$	7,170	$	1,944

Supplemental cash flow information:


		Three Months
		Ended
$'s in 000's		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	50
Operating cash flows from operating leases		880
Financing cash flows from finance leases		371
Right-of-use assets obtained in exchange for lease obligations
Operating leases		—
Finance leases		210

Annual future commitments under non-cancelable leases as of December 31, 2018 under ASC 840 were:


	Lease Obligations
$'s in 000's	Operating Leases		Capital Leases
2019	$	3,318	$	1,615
2020		2,685		1,296
2021		1,894		605
2022		1,765		433
2023		1,478		123
Thereafter		134		—
Total minimum future obligations	$	11,274	$	4,072
Less imputed interest				(298)
Total lease obligations				3,774
Less current obligations				(1,455)
Long-term lease obligations			$	2,319

Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2019
Income Taxes
Income Taxes	Note 7 – Income Tax As a result of the IPO and related reorganization transactions completed in July 2017, the Company held a majority of the economic interest in Holdco and consolidates the financial position and results of Holdco. The remaining ownership of Holdco not held by the Company is considered a 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. Our effective tax rate (ETR) from continuing operations was 17.7% and 21.2% for the three months ended March 31, 2019 and 2018, respectively. Income tax expense for the three months of 2019 and 2018 was different than the U.S federal statutory income tax rate of 21% primarily due to the impact of the non-controlling interest income that is not taxable. HoldCo makes cash distributions to members to pay taxes attributable to their allocable share of income earned. In the three months ended March 31, 2019 and 2018, the Company made cash distributions of $1.4 million and $0.5 million, respectively. Additionally, HoldCo accrues for distributions required to be made related to estimated income taxes. During the three months ended March 31, 2019 and 2018, the Company accrued $0.3 million and $0.4 million, respectively.

Earnings (loss) per Share

3 Months Ended

Mar. 31, 2019

Earnings (loss) per Share

Earnings (loss) per Share

Note 8 – 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 available to PetIQ, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted 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 adjusted to give effect to potentially dilutive securities.

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



(in 000's, except for per share amounts)	March 31, 2019		March 31, 2018
Numerator:
Net income (loss)	$	2,326	$	(3,957)
Less: net income (loss) attributable to non-controlling interests		715		(1,929)
Net income (loss) attributable to PetIQ, Inc. — basic and diluted		1,611		(2,028)
Denominator:
Weighted-average shares of Class A common stock outstanding -- basic		21,800		14,575
Dilutive effects of stock options that are convertible into Class A common stock		171		—
Dilutive effect of RSUs		7		—
Weighted-average shares of Class A common stock outstanding -- diluted		21,978		14,575

Earnings (loss) per share of Class A common stock — basic	$	0.07	$	(0.14)
Earnings (loss) per share of Class A common stock — diluted	$	0.07	$	(0.14)

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.

For the three months ended March 31, 2019 and 2018, all shares of the Company’s Class B common stock have not been included in the diluted earnings per share calculation as they have been determined to be anti-dilutive under the if-converted method.

Additionally, 1,455,562 stock options and restricted stock units have not been included in the diluted earnings per share calculation for the three months ended March 31, 2019, respectively, as they have been determined to be anti-dilutive under the treasury stock method. All options and restricted stock units outstanding for the three months ended March 31, 2018 have not been included in the diluted earnings per share calculation as they have been determined to be anti-dilutive under the treasury stock method.

Stock Based Compensation

3 Months Ended

Mar. 31, 2019

Stock Based Compensation

Stock Based Compensation

Note 9 – Stock Based Compensation

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 March 31, 2019, 5,853 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.

PetIQ, Inc. 2018 Inducement and Retention Stock Plan for CVC Employees

The PetIQ, Inc. 2018 Inducement and Retention Stock Plan for CVC Employees (the “Inducement Plan”) provides for the grant of stock options to employees hired in connection with the VIP Acquisition as employment inducement awards pursuant to NASDAQ Listing Rule 5635(c)(4). The Inducement Plan reserved 800,000 shares of Class A Common Stock of the Company. As of March 31, 2019, no shares were available for issuance under the Inducement 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 and the Inducement Plan, which are subject to time-based vesting conditions, typically 25% on each anniversary of the grant date until fully vested. Upon a termination of service relationship by the Company, all unvested options will be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The maximum contractual term for stock options is 10 years.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $1.4 million and $0.7 million for the three months ended March 31, 2019 and 2018, respectively. All stock based compensation expense is included in general and administrative expenses based on the role of recipients. The fair value of the stock option awards were determined on the grant dates using the Black-Scholes valuation model based on the following weighted-average assumptions for the periods ended March 31, 2019 and 2018:


	March 31, 2019			March 31, 2018
Expected term (years) (1)		6.25			6.25
Expected volatility (2)		35.00	%		35.00	%
Risk-free interest rate (3)		2.74	%		2.53	%
Dividend yield (4)		0.00	%		0.00	%

⁽¹⁾

The Company utilized the simplified method to determine the expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

⁽²⁾

The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period consistent with the expected option term.

⁽³⁾

The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds to the expected term of the stock options.

⁽⁴⁾

The Company has not paid and does not anticipate paying a cash dividend on our common stock.

The following table summarizes the activity of the Company’s unvested stock options for the period ended March 31,

2019.


							Weighted
							Average
			Weighted				Remaining
			Average		Aggregate		Contractual
	Stock		Exercise		Intrinsic		Life
	Options		Price		Value		(years)
Outstanding at December 31, 2018		1,944,589	$	23.45		5,527		9.1
Granted		319,387		27.73
Exercised		(16,553)		19.04
Forfeited		(43,000)		21.48
Cancelled		—
Outstanding at March 31, 2019		2,204,423	$	24.14	$	17,636		9.0
Options exercisable at March 31, 2019		356,356

The weighted average grant date fair value of stock options granted during the period ended March 31, 2019 was $10.82 per option. At March 31, 2019, total unrecognized compensation cost related to unvested stock options was $17.1 million and is expected to be recognized over a weighted-average period of 3.2 years.

Restricted Stock Units

The Company awards RSUs to certain employees and directors under the Plan, which are subject to time-based vesting conditions. Upon a termination of service relationship by the Company, all unvested RSUs will be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The fair value of RSUs are measured based on the closing fair market value of the Company’s common stock on the date of grant. At March 31, 2019, total unrecognized compensation cost related to unvested RSUs was $3.9 million and is expected to vest over a weighted average 3.7 years.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $0.2 million for the three months ended March 31, 2019. All stock based compensation expense is included in general and administrative expenses based on the role of recipients.

The following table summarizes the activity of the Company’s RSUs for the period ended March 31, 2019.


			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Outstanding at December 31, 2018		50,758	$	33.16
Granted		96,833		27.73
Settled		(1,334)		24.97
Forfeited		(1,893)		27.73
Nonvested RSUs at March 31, 2019		144,364	$	29.67

There were grants of 4,004 RSUs for the three months ended March 31, 2018 .

Stockholder's Equity	3 Months Ended
Stockholder's Equity	Mar. 31, 2019
Stockholder's Equity
Stockholder's Equity	Note 10 – Stockholders’ Equity Acquisition During the three months ended March 31, 2018, Holdco issued 4,200,000 LLC Interests and Class B common shares as consideration for the VIP Acquisition. Exchanges During the three months ended March 31, 2019, holders of Class B common stock and LLC Interests exercised exchange rights and exchanged 518,944 Class B common shares and corresponding LLC Interests for newly issued Class A Common Stock. The LLC Agreement generally allows for conversions on the last day of each calendar month.

Non-Controlling Interests

3 Months Ended

Mar. 31, 2019

Non-Controlling Interests

Non-Controlling Interests

Note 11 – Non-Controlling Interests

The following table presents the outstanding LLC Interests and changes in LLC Interests for the periods presented.


	LLC Interests held					% of Total
		LLC				LLC
	Owners		PetIQ, Inc.		Total	Owners	PetIQ, Inc.
As of December 31, 2018		6,546,791		21,619,875	28,166,666	23.2%	76.8%
Stock based compensation adjustments		—		17,887	17,887
Exchange transactions		(518,944)		518,944	—
As of March 31, 2019		6,027,847		22,156,706	28,184,553	21.4%	78.6%

For the three months ended March 31, 2019 and 2018, the Company owned a weighted average of 77.4% and 56.7% of Holdco, respectively.

Customer Concentration	3 Months Ended
Customer Concentration	Mar. 31, 2019
Customer Concentration
Customer Concentration	Note 12 – Customer Concentration The Company has significant exposure to customer concentration. During the three months ended March 31, 2019 and 2018, two customers individually accounted for more than 10% of sales, together comprising 33% and 33% of net sales, respectively, for such periods. At March 31, 2019, two Product Segment customers individually accounted for more than 10% of outstanding trade receivables, and in aggregate accounted for 61% of outstanding trade receivaables, net. At December 31, 2018 one Product Segment customer, individually accounted for more than 10% of outstanding trade receivables, and in aggregate accounted for 43%, of outstanding trade receivables, net.

Commitments and Contingencies	3 Months Ended
Commitments and Contingencies	Mar. 31, 2019
Commitments and Contingencies
Commitments and Contingencies	Note 13 – Commitments and Contingencies Litigation Contingencies On April 4, 2018, Med Vets, Inc. and Bay Medical Solutions Inc. (collectively “Plaintiffs”) filed suit in the United States District Court for the Northern District of California against PetIQ and VIP Petcare Holdings, Inc. for alleged unlawful merger and other antitrust violations. On April 22, 2019, the Court granted the Company’s Motion to Dismiss without further leave to amend, concluding that Plaintiffs were not able to identify any factual allegations to support their alleged claims. 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 March 31, 2019, 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 condensed statements of operations.

Segments

3 Months Ended

Mar. 31, 2019

Segments

Segments

Note 14 – Segments

Effective January 17, 2018, the Company has two operating segments: Products and Services. The Products segment consists of the Company’s manufacturing and distribution business. Services represents all veterinary services, and related product sales, provided by the Company directly to consumers. The segments are based on the discrete financial information reviewed by the Chief Operating Decision Maker to make resource allocation decisions and to evaluate performance. Certain corporate costs are not included in this analysis, such as accounting, legal, human resources, information technology and corporate headquarters expenses. Additionally certain expense types are allocated to the corporate portion of the Company, such as stock based compensation, amortization expense on intangible assets, interest expense, foreign currency exchange adjustments, and income taxes. The period from January 1, 2018 to January 16, 2018 has been recast to reflect these reportable operating segments.

Financial information relating to the Company’s operating segments for the three months ended:


$'s in 000's
March 31, 2019	Products		Services		Corporate		Consolidated
Net Sales	$	126,084	$	22,352	$	—	$	148,436
Operating income (loss)		13,003		3,017		(11,148)		4,872
Interest expense		—		—		(1,937)		(1,937)
Foreign currency loss, net		—		—		(122)		(122)
Other income, net		—		—		13		13
Depreciation expense		553		524		576		1,653
Amortization expense	$	—	$	—	$	1,279	$	1,279


$'s in 000's
March 31, 2018	Products		Services		Corporate		Consolidated
Net Sales	$	97,851	$	17,215	$	—	$	115,066
Operating income (loss)		8,949		(356)		(11,819)		(3,226)
Interest expense		—		—		(1,765)		(1,765)
Other income, net		—		—		45		45
Foreign currency loss, net		—		—		(78)		(78)
Depreciation expense		462		547		241		1,250
Amortization expense	$	—	$	—	$	1,140	$	1,140

Supplemental geographic disclosures are below.


		three months ended March 31, 2019
$'s in 000's		U.S.		Foreign		Total
Product segment sales	$	124,451	$	1,633	$	126,084
Service segment revenue		22,352		—		22,352
Total net sales	$	146,803	$	1,633	$	148,436

		three months ended March 31, 2018
$'s in 000's		U.S.		Foreign		Total
Product segment sales	$	96,256	$	1,595	$	97,851
Service segment revenue		17,215		—		17,215
Total net sales	$	113,471	$	1,595	$	115,066

Property, plant, and equipment by geographic location is below.


	March 31, 2019		December 31, 2018
United States	$	25,762	$	26,268
Europe		1,049		1,067
Total	$	26,811	$	27,335

Related Parties	3 Months Ended
Related Parties	Mar. 31, 2019
Related Parties
Related Parties	Note 15 – Related Parties As discussed in Note 7– “Income Taxes”, the Company has accrued tax distributions that are payable to holders of Class B common stock and LLC Interests to facilitate the payment of periodic estimated tax obligations by such holders. At March 31, 2019, and December 31, 2018, the Company had an accrual of $71 thousand and $1.2 million, respectively, for estimated tax distributions, which are included in accounts payable on the condensed consolidated balance sheets. As discussed in Note 5– “Debt”, the Company has notes payable to the sellers of VIP, who are significant shareholders of the Company, of $17.5 million in aggregate as of December 31, 2018 and March 31, 2019 and accrued interest of $169 thousand as of December 31, 2018. The Company paid $440 thousand of interest in the three months ended March 31, 2019, of which $271 thousand related to the three months ended March 31, 2019. Additionally, up to $10 million may be due under the 2019 Contingent note, in the event the note is earned. The Company leases office and warehouse space from a company under common control of the sellers of VIP, commencing on January 17, 2018. The Company incurred rent expenses of $73 thousand and $73 thousand in the three months ended March 31, 2019 and 2018, respectively. 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 premium expense, paid to Moreton and subsequently transferred to insurance providers, was $137 thousand for the three months ended March 31, 2019 and $109 thousand for the three months ended March 31, 2018. Mr. Chris Christensen was paid a commission of approximately $7 thousand and $5 thousand for the three months ended March 31, 2019 and 2018, respectively, by Moreton for the sale of such insurance policies to the Company.

Subsequent Events	3 Months Ended
Subsequent Events	Mar. 31, 2019
Subsequent Events
Subsequent Events	Note 16 – Subsequent events On May 8, 2019, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement”) by and among PetIQ, LLC (“Buyer”), L. Perrigo Company (“Seller”), Perrigo Company plc and the Company. Upon the terms and subject to the conditions set forth in the Purchase Agreement, Buyer will acquire all of the outstanding capital stock of Sergeant’s Pet Care Products, Inc., including any assets related to Perrigo’s animal health business (the “Business”), from Seller, resulting in the Business becoming an indirect wholly-owned subsidiary of the Company (the “Acquisition”). The purchase price for the Acquisition is $185 million in cash, subject to customary adjustments for net working capital, closing indebtedness and transaction expenses. The Purchase Agreement contains customary representations and warranties, covenants and agreements, including, among others, in the case of Seller to conduct the Business in the ordinary course of business during the period between the execution of the Purchase Agreement and the consummation of the Acquisition. In addition, the parties to the Purchase Agreement have agreed to indemnify each other for certain liabilities arising out of the Purchase Agreement, subject to various limitations including, among other things caps and time limitations. Buyer will also obtain representation and warranty insurance that provides coverage for certain breaches of, and inaccuracies in, representations and warranties made by Seller in the Purchase Agreement, subject to exclusions, deductibles and other terms and conditions. The obligation of the parties to close the Acquisition is subject to customary closing conditions, including the receipt of antitrust clearance in the United States. The Purchase Agreement may be terminated in certain circumstances including, among other things, if the parties fail to receive antitrust clearance in the United States by May 7, 2020 or if Buyer and Seller mutually agree there is no reasonable likelihood that the Transaction will receive antitrust clearance in the United States by May 7, 2020, in which case Buyer shall pay Seller a termination fee of $5 million.

Principal Business Activity and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Principal Business Activity and Significant Accounting Policies

Use of Estimates

Foreign Currencies

Fair Value of Financial Instruments

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table presents liabilities measured at fair value on a recurring basis:


$'s in 000's		March 31, 2019	December 31, 2018
Liabilities:
2019 Contingent note	$	2,000	$	2,680

The following table summarizes the Level 3 activity related to the Contingent Notes:


	Three months ended
$'s in 000's	March 31, 2019		March 31, 2018
Balance at beginning of the period	$	2,680	$	—
Fair value of contingent consideration at VIP Acquisition date		—		6,900
Change in fair value of contingent consideration		(680)		141
Transfer out of level 3		—		—
Balance at the end of the period	$	2,000	$	7,041

Cash and Cash Equivalents

Receivables and Credit Policy

Accounts receivable consists of the following as of:


$'s in 000's	March 31, 2019		December 31, 2018
Trade receivables	$	61,618	$	43,531
Other receivables		4,164		1,764
		65,782		45,295
Less: Allowance for doubtful accounts		(243)		(216)
Non-current portion of receivables		(73)		(72)
Total accounts receivable, net	$	65,466	$	45,007

Inventories


$'s in 000's	March 31, 2019		December 31, 2018
Raw materials	$	6,445	$	6,106
Work in progress		54		94
Finished goods		106,040		85,942
Total inventories	$	112,539	$	92,142

Property, Plant, and Equipment


Computer equipment and software			3 years
Vehicle and vehicle accessories			3-5 years
Buildings			33 years
Equipment			2-15 years
Leasehold improvements			3-15 years
Furniture and fixtures			5-10 years

Revenue Recognition

When Performance Obligations Are Satisfied

Revenue is recognized for services over time when the service is delivered.

The performance obligations in our contracts are satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of March 31, 2019.

Significant Payment Terms

Shipping

Variable Consideration

Warranties & Returns

Contract balances

Cost of Services

Research and Development and Advertising Costs

Litigation

Accounting for Income Taxes

Income taxes

Non-controlling interest

Adopted Accounting Standard Updates

Principal Business Activity and Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2019

Principal Business Activity and Significant Accounting Policies

Summary of liabilities measured at fair value on a recurring basis


$'s in 000's		March 31, 2019	December 31, 2018
Liabilities:
2019 Contingent note	$	2,000	$	2,680

Summary of Level 3 activity related to the contingent consideration

The following table summarizes the Level 3 activity related to the Contingent Notes:


	Three months ended
$'s in 000's	March 31, 2019		March 31, 2018
Balance at beginning of the period	$	2,680	$	—
Fair value of contingent consideration at VIP Acquisition date		—		6,900
Change in fair value of contingent consideration		(680)		141
Transfer out of level 3		—		—
Balance at the end of the period	$	2,000	$	7,041

Schedule of accounts receivable


$'s in 000's	March 31, 2019		December 31, 2018
Trade receivables	$	61,618	$	43,531
Other receivables		4,164		1,764
		65,782		45,295
Less: Allowance for doubtful accounts		(243)		(216)
Non-current portion of receivables		(73)		(72)
Total accounts receivable, net	$	65,466	$	45,007

Schedule of components of inventories


$'s in 000's	March 31, 2019		December 31, 2018
Raw materials	$	6,445	$	6,106
Work in progress		54		94
Finished goods		106,040		85,942
Total inventories	$	112,539	$	92,142

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


Computer equipment and software			3 years
Vehicle and vehicle accessories			3-5 years
Buildings			33 years
Equipment			2-15 years
Leasehold improvements			3-15 years
Furniture and fixtures			5-10 years

Business Combination (Tables)

3 Months Ended

Mar. 31, 2019

Summary of preliminary estimated fair value of the consideration


$'s in 000's		Fair value
Current assets	$	15,617
Property, plant, and equipment		8,885
Other assets, net		295
Intangible assets - Customer relationships (20 year useful life)		77,200
Intangible assets - Brand names (10 year useful life)		9,600
Goodwill		112,643
Total assets		224,240

Current liabilities		22,908
Capital lease obligations		3,032
Total liabilities		25,940

Estimated purchase price	$	198,300

Cash paid, net of cash acquired	$	92,082
LLC Interests and shares of Class B common stock		90,031
Guarantee note		10,000
Contingent notes		6,900
Post-closing working capital adjustment		(713)

Estimated fair value of total consideration transferred	$	198,300

HBH

Summary of pro forma combined statements of operations



$'s in 000's		Preliminary Estimated Fair Value
Working Capital, net	$	1,676
Property, plant, and equipment		2,686
Intangible assets - Customer relationships		3,800
Goodwill		7,607
Total assets		15,769

Capital lease obligations		1,114
Total liabilities		1,114

Estimated purchase price	$	14,655

Cash paid, net of cash acquired	$	1,683
LLC Interests and shares of Class B common stock		12,972

Estimated fair value of total consideration transferred	$	14,655

Property, Plant, and equipment (Tables)

3 Months Ended

Mar. 31, 2019

Property, Plant, and Equipment

Property, Plant, and Equipment


$'s in 000's		March 31, 2019		December 31, 2018
Leasehold improvements	$	10,906	$	10,776
Equipment		14,782		14,477
Vehicles and accessories		4,004		3,989
Computer equipment and software		6,131		5,839
Buildings		2,480		2,479
Furniture and fixtures		1,573		1,547
Land		660		660
Construction in progress		1,041		682
		41,577		40,449
Less accumulated depreciation		(14,766)		(13,114)
Total property, plant, and equipment	$	26,811	$	27,335

Intangible Assets and Goodwill (Tables)

3 Months Ended

Mar. 31, 2019

Intangible Assets and Goodwill

Schedule of intangible assets


$'s in 000's	Useful Lives	March 31, 2019		December 31, 2018
Amortizable intangibles
Distribution agreement	2 years	$	3,021	$	3,021
Certification	7 years		350		350
Customer relationships	12-20 years		82,178		82,124
Patents and processes	10 years		1,994		1,900
Brand names	10-15 years		10,513		10,470
Total amortizable intangibles			98,056		97,865
Less accumulated amortization			(11,206)		(9,835)
Total net amortizable intangibles			86,850		88,030
Non-amortizable intangibles
Trademarks and other			516		516
Intangible assets, net of accumulated amortization		$	87,366	$	88,546

Estimated future amortization expense


Years ending December 31, ($'s in 000's)
Remainder of 2019	$	3,818
2020		6,642
2021		6,749
2022		6,740
2023		6,265
Thereafter		56,636

Schedule of Goodwill


		Reporting Unit
($'s in 000's)		Products		Services		Total
Goodwill as of January 1, 2018		5,064		—		5,064
Foreign currency translation		(285)		—		(285)
Acquisitions		72,986		47,264		120,250
Goodwill as of December 31, 2018	$	77,765	$	47,264	$	125,029
Foreign currency translation		250		—		250
Goodwill as of March 31, 2019	$	78,015	$	47,264	$	125,279

Debt (Tables)

3 Months Ended

Mar. 31, 2019

Debt

Schedule of components of long term debt


$'s in 000's	March 31, 2019		December 31, 2018
Term loans	$	74,438	$	74,625
Revolving credit facility		22,067		13,452
Mortgage		1,847		1,859
Contingent notes		2,000		2,680
Earned contingent note		7,500		7,500
Guaranteed note		10,000		10,000
Net discount on debt and deferred financing fees		(1,782)		(1,902)
	$	116,070	$	108,214
Less current maturities of long-term debt		(796)		(796)
Total long-term debt	$	115,274	$	107,418

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


($'s in 000's)
Remainder of 2019	$	597
2020		798
2021		800
2022		802
2023		111,247
Thereafter		1,608

- 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)

3 Months Ended

Mar. 31, 2019

Schedule of components of lease expense


	Three Months
	Ended
$'s in 000's	March 31, 2019
Finance lease cost
Amortization of right-of-use assets	$	290
Interest on lease liabilities		50
Operating lease cost		910
Variable lease cost(1)		72
Short-term lease cost		14
Total lease cost	$	1,336

Schedule of other information related to leases


			March 31, 2019
Weighted-average remaining lease term (years)
Operating leases			3.95
Finance leases			2.65
Weighted-average discount rate
Operating leases			5.0%
Finance leases			5.5%

Summary of annual future commitments under non-cancelable leases


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
Remainder of 2019	$	2,655	$	1,231
2020		2,869		1,344
2021		2,032		660
2022		1,886		495
2023		1,579		119
Thereafter		28		19
Total minimum future obligations	$	11,049	$	3,868
Less interest		(1,017)		(275)
Present value of net future minimum obligations		10,032		3,593
Less current lease obligations		(2,862)		(1,649)
Long-term lease obligations	$	7,170	$	1,944

Supplemental cash flow information


		Three Months
		Ended
$'s in 000's		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	50
Operating cash flows from operating leases		880
Financing cash flows from finance leases		371
Right-of-use assets obtained in exchange for lease obligations
Operating leases		—
Finance leases		210

Summary of operating and capital annual future commitments under non-cancelable leases


	Lease Obligations
$'s in 000's	Operating Leases		Capital Leases
2019	$	3,318	$	1,615
2020		2,685		1,296
2021		1,894		605
2022		1,765		433
2023		1,478		123
Thereafter		134		—
Total minimum future obligations	$	11,274	$	4,072
Less imputed interest				(298)
Total lease obligations				3,774
Less current obligations				(1,455)
Long-term lease obligations			$	2,319

ASU 2016-02

Schedule of effect of the changes to consolidated balance sheet for the adoption of the new lease standard

The effect of the changes made to our consolidated balance sheet as of January 1, 2019 for the adoption of the new lease standard was as follows:


	Balance at		Adjustments due		Balance at
$'s in 000's	December 31, 2018		to ASC 842		January 1, 2019
ASSETS
Property and equipment, net (1)	$	27,335	$	—	$	27,335
Operating lease right-of-use assets		—		10,424		10,424
Other non-current assets	$	2,857	$	(116)	$	2,741

LIABILITIES						—
Current portion of long-term debt and finance leases	$	—	$	2,921	$	2,921
Operating Leases, less current installments		—		7,644		7,644
Current portion of long-term debt and finance leases(2)		2,251		—		2,251
Finance leases, less current installments		2,319		—	$	2,319
Other non-current liabilities	$	524	$	(257)	$	267

(1)

Finance lease right-of-use assets of $4.5 million are included in property and equipment, net, on the condensed consolidated balance sheets.

(2)

Current portion of long-term debt and finance leases includes $1.5 million of current portion of finance leases.

In accordance with the new lease standard requirements, the disclosure of the impact of adoption on our consolidated balance sheet was as follows:


		March 31, 2019
			Balance without
			adoption of		Effect of
$'s in 000's	As Reported		ASC 842		change
ASSETS
Property and equipment, net (1)	$	26,811	$	26,811	$	—
Operating lease right-of-use assets		9,860		—		(9,860)
Other non-current assets	$	2,667	$	2,769	$	102

LIABILITIES
Current portion of operating leases	$	2,862	$	—	$	(2,862)
Operating leases, less current installments		7,170		—		(7,170)
Current portion of long-term debt and finance leases(2)		2,446		2,446		—
Finance leases, less current installments		1,944		1,944		—
Other non-current liabilities	$	268	$	494	$	226

(1)

Finance lease right-of-use assets of $4.2 million are included in property and equipment, net, on the condensed consolidated balance sheets.

(2)

Current portion of long-term debt and finance leases includes $1.6 million of current portion of finance leases.

Earnings (loss) per Share (Tables)

3 Months Ended

Mar. 31, 2019

Earnings (loss) per Share

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



(in 000's, except for per share amounts)	March 31, 2019		March 31, 2018
Numerator:
Net income (loss)	$	2,326	$	(3,957)
Less: net income (loss) attributable to non-controlling interests		715		(1,929)
Net income (loss) attributable to PetIQ, Inc. — basic and diluted		1,611		(2,028)
Denominator:
Weighted-average shares of Class A common stock outstanding -- basic		21,800		14,575
Dilutive effects of stock options that are convertible into Class A common stock		171		—
Dilutive effect of RSUs		7		—
Weighted-average shares of Class A common stock outstanding -- diluted		21,978		14,575

Earnings (loss) per share of Class A common stock — basic	$	0.07	$	(0.14)
Earnings (loss) per share of Class A common stock — diluted	$	0.07	$	(0.14)

Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2019

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


	March 31, 2019			March 31, 2018
Expected term (years) (1)		6.25			6.25
Expected volatility (2)		35.00	%		35.00	%
Risk-free interest rate (3)		2.74	%		2.53	%
Dividend yield (4)		0.00	%		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, 2018		1,944,589	$	23.45		5,527		9.1
Granted		319,387		27.73
Exercised		(16,553)		19.04
Forfeited		(43,000)		21.48
Cancelled		—
Outstanding at March 31, 2019		2,204,423	$	24.14	$	17,636		9.0
Options exercisable at March 31, 2019		356,356

Summary of RSU activity


			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Outstanding at December 31, 2018		50,758	$	33.16
Granted		96,833		27.73
Settled		(1,334)		24.97
Forfeited		(1,893)		27.73
Nonvested RSUs at March 31, 2019		144,364	$	29.67

Non-Controlling Interests (Tables)

3 Months Ended

Mar. 31, 2019

Non-Controlling Interests

Summary of noncontrolling interest


	LLC Interests held					% of Total
		LLC				LLC
	Owners		PetIQ, Inc.		Total	Owners	PetIQ, Inc.
As of December 31, 2018		6,546,791		21,619,875	28,166,666	23.2%	76.8%
Stock based compensation adjustments		—		17,887	17,887
Exchange transactions		(518,944)		518,944	—
As of March 31, 2019		6,027,847		22,156,706	28,184,553	21.4%	78.6%

Segments (Tables)

3 Months Ended

Mar. 31, 2019

Segments

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

$'s in 000's
March 31, 2019	Products		Services		Corporate		Consolidated
Net Sales	$	126,084	$	22,352	$	—	$	148,436
Operating income (loss)		13,003		3,017		(11,148)		4,872
Interest expense		—		—		(1,937)		(1,937)
Foreign currency loss, net		—		—		(122)		(122)
Other income, net		—		—		13		13
Depreciation expense		553		524		576		1,653
Amortization expense	$	—	$	—	$	1,279	$	1,279


$'s in 000's
March 31, 2018	Products		Services		Corporate		Consolidated
Net Sales	$	97,851	$	17,215	$	—	$	115,066
Operating income (loss)		8,949		(356)		(11,819)		(3,226)
Interest expense		—		—		(1,765)		(1,765)
Other income, net		—		—		45		45
Foreign currency loss, net		—		—		(78)		(78)
Depreciation expense		462		547		241		1,250
Amortization expense	$	—	$	—	$	1,140	$	1,140

Summary of net book value of property plant and equipment, net by location


		three months ended March 31, 2019
$'s in 000's		U.S.		Foreign		Total
Product segment sales	$	124,451	$	1,633	$	126,084
Service segment revenue		22,352		—		22,352
Total net sales	$	146,803	$	1,633	$	148,436

		three months ended March 31, 2018
$'s in 000's		U.S.		Foreign		Total
Product segment sales	$	96,256	$	1,595	$	97,851
Service segment revenue		17,215		—		17,215
Total net sales	$	113,471	$	1,595	$	115,066

Property, plant, and equipment by geographic location is below.


	March 31, 2019		December 31, 2018
United States	$	25,762	$	26,268
Europe		1,049		1,067
Total	$	26,811	$	27,335

Principal Business Activity and Significant Accounting Policies - (Details)	3 Months Ended
	Mar. 31, 2019 item
Principal Business Activity and Significant Accounting Policies
Number of points of distribution	60,000

Principal Business Activity and Significant Accounting Policies - Fair value on a recurring basis (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Liabilities:
Fixed interest rate	4.35%
Contingent note revaluations	$ (680)	$ 141
Contingent notes
Liabilities:
Fixed interest rate	6.75%
Recurring \| Contingent notes
Liabilities:
Contingent notes	$ 2,000		$ 2,680

Principal Business Activity and Significant Accounting Policies - Fair value on a contingent consideration (Details) - VIP - Level 3 - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Business Acquisition, Contingent Consideration [Line Items]
Balance at beginning of the period	$ 2,680
Fair value of contingent consideration at VIP Acquisition date		$ 6,900
Change in fair value of contingent consideration	(680)	141
Transfer out of level 3			$ 7,500
Balance at the end of the period	$ 2,000	$ 7,041	$ 2,680

Principal Business Activity and Significant Accounting Policies - Receivables and Credit Policy (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Receivables and Credit Policy
Accounts receivable, gross	$ 65,782	$ 45,295
Less: Allowance for doubtful accounts	(243)	(216)
Non-current portion of receivables	73	72
Total accounts receivable, net	65,466	45,007
Trade receivables
Receivables and Credit Policy
Accounts receivable, gross	61,618	43,531
Other receivables
Receivables and Credit Policy
Accounts receivable, gross	$ 4,164	$ 1,764

Principal Business Activity and Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Inventories
Raw materials	$ 6,445	$ 6,106
Work in progress	54	94
Finished goods	106,040	85,942
Total inventories	$ 112,539	$ 92,142

Principal Business Activity and Significant Accounting Policies - PPNE (Details)	3 Months Ended
	Mar. 31, 2019
Computer equipment and software
Property, Plant, and Equipment
Estimated useful life	3 years
Vehicle and vehicle accessories \| Minimum
Property, Plant, and Equipment
Estimated useful life	3 years
Vehicle and vehicle accessories \| Maximum
Property, Plant, and Equipment
Estimated useful life	5 years
Buildings
Property, Plant, and Equipment
Estimated useful life	33 years
Equipment \| Minimum
Property, Plant, and Equipment
Estimated useful life	2 years
Equipment \| Maximum
Property, Plant, and Equipment
Estimated useful life	15 years
Leasehold improvements \| Minimum
Property, Plant, and Equipment
Estimated useful life	3 years
Leasehold improvements \| Maximum
Property, Plant, and Equipment
Estimated useful life	15 years
Furniture and fixtures \| Minimum
Property, Plant, and Equipment
Estimated useful life	5 years
Furniture and fixtures \| Maximum
Property, Plant, and Equipment
Estimated useful life	10 years

Principal Business Activity and Significant Accounting Policies - Disaggregation of revenue (Details)	3 Months Ended
	Mar. 31, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-09-30
Disaggregation of revenue
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year

Principal Business Activity and Significant Accounting Policies - Others (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Research and Development and Advertising Costs
Research and development costs	$ 49	$ 97
Advertising costs	$ 655	$ 594
Continuing LLC Owners
Non-Controlling Interests
Interest held by non-controlling owners	21.40%		23.20%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-09-30
Revenue Recognition
Period of satisfaction of performance obligation	1 year

Business Combination - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	Oct. 17, 2018	Jan. 17, 2018	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Business Combination
Number of shares Issued			4,200,000
Intangible assets, net of accumulated amortization			$ 86,850		$ 88,030
Remainder of 2019			3,818
Goodwill not deductible for tax purposes			$ 49,800
Class B common stock
Business Combination
Number of shares Issued			4,200,000
Common stock, par value			$ 0.001		$ 0.001
VIP
Business Combination
Total purchase price, net of cash acquired		$ 198,300
HBH \| Class B common stock
Business Combination
Number of shares Issued	400,000
HBH \| Holdco
Business Combination
Number of shares Issued	400,000
Contingent notes \| Holdco
Business Combination
Common stock, par value			$ 0.001
Customer relationships and brand names
Business Combination
Intangible assets, net of accumulated amortization			$ 86,800
Current amortization expense			$ 1,300	$ 1,000

Business Combination - Total consideration (Details) - USD ($) $ in Thousands			3 Months Ended
	Oct. 17, 2018	Jan. 17, 2018	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	Dec. 31, 2017
Preliminary estimated fair value of the consideration
Goodwill			$ 125,279		$ 125,029	$ 5,064
Cash paid, net of cash acquired				$ 91,986
VIP
Preliminary estimated fair value of the consideration
Current assets		$ 15,617
Property, plant, and equipment		8,885
Other assets, net		295
Total assets		224,240
Current liabilities		22,908
Capital lease obligations		3,032
Total liabilities		25,940
Estimated purchase price		198,300
Cash paid, net of cash acquired		92,082
LLC Interests and shares of Class B common stock		90,031
Guarantee note		10,000
Contingent notes		6,900
Post-closing working capital adjustment		(713)
Estimated fair value of total consideration transferred		198,300
Customer relationships
Preliminary estimated fair value of the consideration
Finite-Lived Intangible Asset, Useful Life			20 years
Customer relationships \| VIP
Preliminary estimated fair value of the consideration
Intangible assets		77,200
Brand names
Preliminary estimated fair value of the consideration
Finite-Lived Intangible Asset, Useful Life			10 years
Brand names \| VIP
Preliminary estimated fair value of the consideration
Intangible assets		9,600
Goodwill		$ 112,643
Maximum \| Customer relationships
Preliminary estimated fair value of the consideration
Finite-Lived Intangible Asset, Useful Life			20 years
Maximum \| Brand names
Preliminary estimated fair value of the consideration
Finite-Lived Intangible Asset, Useful Life			15 years
Balance without adoption of ASC 842 \| HBH
Preliminary estimated fair value of the consideration
Working Capital, net	$ 1,676
Property, plant, and equipment	2,686
Goodwill	7,607
Total assets	15,769
Capital lease obligations	1,114
Total liabilities	1,114
Estimated purchase price	14,655
Cash paid, net of cash acquired	1,683
LLC Interests and shares of Class B common stock	12,972
Estimated fair value of total consideration transferred	14,655
Balance without adoption of ASC 842 \| Customer relationships \| HBH
Preliminary estimated fair value of the consideration
Intangible assets	$ 3,800

Property, Plant, and equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Jan. 01, 2019	Dec. 31, 2018
Property, Plant, and Equipment
Property, plant and equipment, gross	$ 41,577			$ 40,449
Less accumulated depreciation	(14,766)			(13,114)
Property, Plant and Equipment, Net, Total	26,811		$ 27,335	27,335
Depreciation and amortization expense	1,653	$ 1,250
Leasehold improvements
Property, Plant, and Equipment
Property, plant and equipment, gross	10,906			10,776
Equipment
Property, Plant, and Equipment
Property, plant and equipment, gross	14,782			14,477
Vehicles and accessories
Property, Plant, and Equipment
Property, plant and equipment, gross	4,004			3,989
Computer equipment and software
Property, Plant, and Equipment
Property, plant and equipment, gross	6,131			5,839
Buildings
Property, Plant, and Equipment
Property, plant and equipment, gross	2,480			2,479
Furniture and fixtures
Property, Plant, and Equipment
Property, plant and equipment, gross	1,573			1,547
Land
Property, Plant, and Equipment
Property, plant and equipment, gross	660			660
Construction in Progress
Property, Plant, and Equipment
Property, plant and equipment, gross	$ 1,041			$ 682

Intangible Assets and Goodwill - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Intangible Assets and Goodwill
Amortizable Intangibles, gross	$ 98,056		$ 97,865
Less accumulated amortization	(11,206)		(9,835)
Total net amortizable intangibles	86,850		88,030
Intangible assets, net of accumulated amortization	87,366		88,546
Amortization expense	1,279	$ 1,140
Trademarks and other
Intangible Assets and Goodwill
Non-amortizable intangibles	$ 516		516
Distribution agreement
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	2 years
Amortizable Intangibles, gross	$ 3,021		3,021
Certification
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	7 years
Amortizable Intangibles, gross	$ 350		350
Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	20 years
Amortizable Intangibles, gross	$ 82,178		82,124
Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	10 years
Amortizable Intangibles, gross	$ 1,994		1,900
Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	10 years
Amortizable Intangibles, gross	$ 10,513		$ 10,470
Minimum \| Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	12 years
Minimum \| Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	10 years
Maximum \| Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	20 years
Maximum \| Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	15 years

Intangible Assets and Goodwill - Estimated future amortization expense (Details) $ in Thousands	Mar. 31, 2019 USD ($)
Intangible Assets and Goodwill
Remainder of 2019	$ 3,818
2020	6,642
2021	6,749
2022	6,740
2023	6,265
Thereafter	$ 56,636

Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Goodwill, Beginning Balance	$ 125,029	$ 5,064
Foreign currency translation	250	(285)
Acquisition		120,250
Goodwill, Ending Balance	125,279	125,029
Product
Goodwill, Beginning Balance	77,765	5,064
Foreign currency translation	250	(285)
Acquisition		72,986
Goodwill, Ending Balance	78,015	77,765
Services
Goodwill, Beginning Balance	47,264
Acquisition		47,264
Goodwill, Ending Balance	$ 47,264	$ 47,264

Debt (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Debt
Purchase price of a commercial building	$ 1,900
Fixed interest rate	4.35%
Earn-outs payments based on achievement of company Adjusted EBITDA targets			$ 7,500
Earn-outs payments based on achievement of company Adjusted EBITDA targets for 2019			10,000
Amortization schedule	25 years
Balloon payment	10 years
Net discount on debt and deferred financing fees	$ 1,782		1,902
Long-term Debt, Total	116,070		108,214
Less current maturities of long-term debt	(796)		(796)
Long-term debt	115,274		107,418
Future maturities of long-term debt
Remainder of 2019	597
2020	798
2021	800
2022	802
2023	111,247
Thereafter	1,608
Debt issuance costs	$ 50	$ 2,613
Minimum
Debt
Unused facility fee (as a percent)	0.375%
Maximum
Debt
Unused facility fee (as a percent)	0.50%
Revolving credit facility
Debt
Maximum borrowing capacity	$ 75,000
Outstanding balance	$ 22,067		13,452
Variable interest rate, basis points spread over variable reference rate (as a percent)	5.50%
Future maturities of long-term debt
Debt issuance costs	$ 100	300
Term loans
Debt
Outstanding balance	74,438		74,625
Future maturities of long-term debt
Debt issuance costs	0	$ 2,400
Mortgage
Debt
Mortgage	1,847		1,859
Term Loan Credit Agreement
Debt
Maximum borrowing capacity	$ 75,000
Variable interest rate, basis points spread over variable reference rate (as a percent)	7.80%
Contingent notes
Debt
Contingent notes	$ 2,000		2,680
Earned Contingent Note
Debt
Long-term Debt, Total	7,500		7,500
Long-term debt	$ 7,500
Guaranteed note
Debt
Fixed interest rate	6.75%
Long-term Debt, Total	$ 10,000		$ 10,000

Leases – Adoption of new lease standard (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
ASSETS
Property, plant and equipment, net	$ 26,811	$ 27,335	$ 27,335
Operating lease right-of-use assets	9,860	10,424
Finance lease right-of-use assets	4,200	4,500
Other non-current assets	2,667	2,741	2,857
LIABILITIES
Current portion of operating leases	2,862	2,921
Operating leases, less current installments	7,170	7,644
Current portion of long-term debt and finance lease	2,446	2,251	2,251
Finance Leases, less current installments	1,944	2,319	2,319
Other non-current liabilities	268	267	$ 524
Finance lease right-of-use assets	4,200	4,500
Current portion of finance lease	1,649	1,500
ASU 2016-02 \| Balance without adoption of ASC 842
ASSETS
Property, plant and equipment, net	26,811
Other non-current assets	2,769
LIABILITIES
Current portion of long-term debt and finance lease	2,446
Finance Leases, less current installments	1,944
Other non-current liabilities	494
ASU 2016-02 \| Adjustment
ASSETS
Operating lease right-of-use assets	(9,860)	10,424
Other non-current assets	102	(116)
LIABILITIES
Current portion of operating leases	(2,862)	2,921
Operating leases, less current installments	(7,170)	7,644
Other non-current liabilities	$ 226	$ (257)

Leases – Components of lease expense and other information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Finance lease cost
Amortization of right-of-use assets	$ 290
Interest on lease liabilities	50
Operating lease cost	910
Variable lease cost	72
Short-term lease cost	14
Total lease cost	$ 1,336
Weighted-average remaining lease term (years), Operating leases	3 years 11 months 12 days
Weighted-average remaining lease term (years), Finance leases	2 years 7 months 24 days
Weighted-average discount rate, Operating leases	5.00%
Weighted-average discount rate, Finance leases	5.50%

Leases – Annual future commitments under non-cancelable leases (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Lease Obligations, Operating Leases
Remainder of 2019	$ 2,655
2020	2,869
2021	2,032
2022	1,886
2023	1,579
Thereafter	28
Total minimum future obligations	11,049
Less interest	(1,017)
Present value of net future minimum obligations	10,032
Less current lease obligations	(2,862)	$ (2,921)
Long-term lease obligations	7,170	7,644
Lease Obligations, Finance Leases
Remainder of 2019	1,231
2020	1,344
2021	660
2022	495
2023	119
Thereafter	19
Total minimum future obligations	3,868
Less interest	(275)
Present value of net future minimum obligations	3,593
Less current lease obligations	(1,649)	(1,500)
Long-term lease obligations	$ 1,944	$ 2,319	$ 2,319

Leases - Supplemental Cash Flow (Details) $ in Thousands	3 Months Ended
Leases - Supplemental Cash Flow (Details) $ in Thousands	Mar. 31, 2019 USD ($)
Leases
Operating cash flows from finance leases	$ 50
Operating cash flows from operating leases	880
Financing cash flows from finance leases	371
Finance leases	$ 210

Leases – Annual future commitments under non-cancelable leases - ASC 840 (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Operating Leases
2019	$ 3,318
2020	2,685
2021	1,894
2022	1,765
2023	1,478
Thereafter	134
Operating Leases, Total minimum future obligations	11,274
Capital Leases
2019	1,615
2020	1,296
2021	605
2022	433
2023	123
Capital Leases, Total minimum future obligations	4,072
Less imputed interest	(298)
Total lease obligations	3,774
Less current obligations	(1,455)
Long-term capital lease obligations	$ 2,319

Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
Income Taxes (Details) - USD ($) $ in Millions	Mar. 31, 2019	Mar. 31, 2018
Income tax expense (benefit) at federal statutory rate	21.00%
Income tax expense (benefit)	17.70%	21.20%
Holdco
Accrued estimated income tax	$ 0.3	$ 0.4
PetIQ
Cash distributions	$ 1.4	$ 0.5

Earnings (loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Numerator:
Net Income (loss)	$ 2,326	$ (3,957)
Net income (loss) attributable to non-controlling interest	715	(1,929)
Net loss attributable to PetIQ, Inc.	$ 1,611	$ (2,028)
Denominator:
Basic weighted average shares (in shares)	21,800,033	14,574,883
Weighted-average shares of Class A common stock outstanding - diluted (in shares)	21,977,898	14,574,883
Basic net income per common share	$ 0.07	$ (0.14)
Diluted net income per common share	$ 0.07	$ (0.14)
Stock options
Denominator:
Dilutive effects of stocks	171,000
Anti dilutive shares excluded from computation of diluted earnings per share	1,455,562
RSU
Denominator:
Dilutive effects of stocks	7,000

Stock Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Stock Based Compensation
Shares reserved for future issuance	0
Stock Options Granted (in shares)	319,387
Vesting percentage on each anniversary of the grant date	25.00%
Maximum term for stock options	6 years 3 months	6 years 3 months
Stock based compensation expense	$ (1,544)	$ (698)
Grant date fair value of stock options granted	$ 10.82
Unrecognized compensation cost related to unvested stock options	$ 17,100
Unrecognized compensation cost related to unvested options, recognized weighted-average period	3 years 2 months 12 days
Class A common stock
Stock Based Compensation
Number of shares reserved	800,000
Class A common stock \| Omnibus Plan
Stock Based Compensation
Shares reserved for future issuance	1,914,047
Share available for issuance	5,853
Maximum
Stock Based Compensation
Maximum term for stock options	10 years

Stock Based Compensation - Weighted Average Assumptions (Details)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Stock Based Compensation
Expected term (years)	6 years 3 months	6 years 3 months
Expected volatility	35.00%	35.00%
Risk-free interest rate	2.74%	2.53%
Dividend yield	0.00%	0.00%

Stock Based Compensation - Summary of Unvested Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Stock Based Compensation
Stock Options Outstanding - Beginning Balance	1,944,589
Stock Options Granted (in shares)	319,387
Stock option Exercised (in shares)	(16,553)
Stock Options Forfeited (in shares)	(43,000)
Stock Options Outstanding - Ending Balance	2,204,423	1,944,589
Options exercisable - Ending Balance	356,356
Weighted Average Exercise Price Outstanding - Beginning Balance	$ 23.45
Weighted Average Exercise Price - Granted	27.73
Weighted Average Exercise Price - Exercised	19.04
Weighted Average Exercise Price - Forfeited	21.48
Weighted Average Exercise Price Outstanding - Ending Balance	$ 24.14	$ 23.45
Aggregate Intrinsic Value	$ 17,636	$ 5,527
Weighted Average Remaining Contractual Life (years)	9 years	9 years 1 month 6 days

Stock Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Unrecognized compensation cost related to unvested stock options	$ 17,100
Stock based compensation expense	$ (1,544)	$ (698)
Weighted Average Grant Date Fair Value
Beginning Balance	$ 33.16
Granted (per share)	27.73
Settled (per share)	24.97
Forfeited (per share)	27.73
Ending balance	$ 29.67
RSU
Unrecognized compensation cost related to unvested stock options	$ 3,900
Vesting period	3 years 8 months 12 days
Stock based compensation expense	$ 200
Number of Shares
Beginning Balance	50,758
Granted (in shares)	96,833	4,004
Settled (in shares)	(1,334)
Forfeited (in shares)	(1,893)
Ending balance	144,364

Stockholder's Equity (Details)	3 Months Ended
Stockholder's Equity (Details)	Mar. 31, 2019 shares
Stockholder's Equity
Number of shares Issued	4,200,000
Exchange of common shares	518,944
Class B common stock
Stockholder's Equity
Number of shares Issued	4,200,000
Exchange of common shares	518,944

Non-Controlling Interests (Details) - shares	3 Months Ended
Non-Controlling Interests (Details) - shares	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Common Stock, Shares, Outstanding, Beginning Balance	21,619,875
Stock based compensation adjustments	17,887
Exchange transactions	518,944
Common Stock, Shares, Outstanding, Ending Balance	22,156,706
Continuing LLC Owners
Common Stock, Shares, Outstanding, Beginning Balance	6,546,791
Exchange transactions	(518,944)
Common Stock, Shares, Outstanding, Ending Balance	6,027,847
Amended Holdco LLC Agreement
Common Stock, Shares, Outstanding, Beginning Balance	28,166,666
Stock based compensation adjustments	17,887
Common Stock, Shares, Outstanding, Ending Balance	28,184,553
Holdco
Weighted average ownership percentage in Holdco	77.40%	56.70%
Continuing LLC Owners
Ownership interest by continuing LLC owners	21.40%		23.20%
PetIQ
Ownership interest in Holdco	78.60%		76.80%

Customer Concentration (Details) - customer	3 Months Ended		12 Months Ended
Customer Concentration (Details) - customer	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Customer concentrations \| Sales
Customer Concentration
Number of customers accounted for more than 10% of sales individually	2	2
Concentration risk	33.00%	33.00%
Credit concentrations \| Accounts receivable
Customer Concentration
Number of customers accounted for more than 10% of sales individually	2		1
Concentration risk	61.00%		43.00%

Segments (Details) $ in Thousands		3 Months Ended
Segments (Details) $ in Thousands	Jan. 17, 2018 segment	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)	Jan. 01, 2019 USD ($)	Dec. 31, 2018 USD ($)
Segments
Number of operating segments \| segment	2
Financial information relating to the Company’s operating segments
Net Sales		$ 148,436	$ 115,066
Gross profit		24,730	15,883
General and administrative expenses		20,538	18,968
Operating income (loss)		4,872	(3,226)
Interest expense		(1,937)	(1,765)
Foreign currency loss, net		(122)	(78)
Other income, net		13	45
Depreciation expense		1,653	1,250
Amortization expense		1,279	1,140
Revenues		148,436	115,066
Property, plant and equipment, net		26,811		$ 27,335	$ 27,335
Domestic
Financial information relating to the Company’s operating segments
Net Sales		146,803	113,471
Revenues		146,803	113,471
Property, plant and equipment, net		25,762			26,268
Foreign
Financial information relating to the Company’s operating segments
Net Sales		1,633	1,595
Revenues		1,633	1,595
Europe
Financial information relating to the Company’s operating segments
Property, plant and equipment, net		1,049			$ 1,067
Products
Financial information relating to the Company’s operating segments
Net Sales		126,084	97,851
Revenues		126,084	97,851
Products \| Domestic
Financial information relating to the Company’s operating segments
Net Sales		124,451	96,256
Revenues		124,451	96,256
Products \| Foreign
Financial information relating to the Company’s operating segments
Net Sales		1,633	1,595
Revenues		1,633	1,595
Services
Financial information relating to the Company’s operating segments
Net Sales		22,352	17,215
Revenues		22,352	17,215
Services \| Domestic
Financial information relating to the Company’s operating segments
Net Sales		22,352	17,215
Revenues		22,352	17,215
Operating Segments \| Products
Financial information relating to the Company’s operating segments
Net Sales		126,084	97,851
Operating income (loss)		13,003	8,949
Depreciation expense		553	462
Revenues		126,084	97,851
Operating Segments \| Services
Financial information relating to the Company’s operating segments
Net Sales		22,352	17,215
Operating income (loss)		3,017	(356)
Depreciation expense		524	547
Revenues		22,352	17,215
Corporate, Non-Segment
Financial information relating to the Company’s operating segments
Operating income (loss)		(11,148)	(11,819)
Interest expense		(1,937)	(1,765)
Foreign currency loss, net		(122)	(78)
Other income, net		13	45
Depreciation expense		576	241
Amortization expense		$ 1,279	$ 1,140

Related Parties (Details) - USD ($) $ in Thousands	3 Months Ended
Related Parties (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Related Parties
Accrued estimated tax distributions	$ 71		$ 1,200
Notes payable to Seller's of VIP	17,500		17,500
Accrued interest			$ 169
Payment of interest	440
Interest expense	271
Contingent note due	10,000
Rent expense	73	$ 73
Chris Christensen
Related Parties
Payment of premium expenses	137	109
Commission paid	$ 7	$ 5

Subsequent Events (Details) - Subsequent event $ in Millions	May 07, 2019 USD ($)
Subsequent events
Total consideration	$ 185.0
Seller
Subsequent events
Termination fee	$ 5.0