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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2019	Nov. 08, 2019
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Entity Registrant Name	PetIQ, Inc.
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Central Index Key	0001668673
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Class A common stock
Entity Common Stock, Shares Outstanding		23,420,012
Class B common stock
Entity Common Stock, Shares Outstanding		4,852,308

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 10,455	$ 66,360
Accounts receivable, net	98,788	45,007
Inventories	97,967	92,142
Other current assets	6,207	4,212
Total current assets	213,417	207,721
Property, plant and equipment, net	45,815	27,335
Operating lease right of use assets	21,987
Deferred tax assets	53,414	43,946
Other non-current assets	1,966	2,857
Intangible assets, net	121,721	88,546
Goodwill	231,764	125,029
Total assets	690,084	495,434
Current liabilities
Accounts payable	58,743	54,768
Accrued wages payable	8,674	5,295
Accrued interest payable	124	728
Other accrued expenses	3,998	1,154
Current portion of operating leases	4,745
Current portion of long-term debt and finance leases	3,504	2,251
Total current liabilities	79,788	64,196
Operating leases, less current installments	17,561
Long-term debt, less current installments	254,745	107,418
Finance leases, less current installments	1,879	2,319
Other non-current liabilities	238	524
Total non-current liabilities	274,423	110,261
Commitments and contingencies
Equity
Additional paid-in capital	292,810	262,219
Retained Earnings (Accumulated deficit)	(4,914)	(4,450)
Accumulated other comprehensive loss	(1,661)	(1,316)
Total stockholders' equity	286,263	256,481
Non-controlling interest	49,610	64,496
Total equity	335,873	320,977
Total liabilities and equity	690,084	495,434
Class A common stock
Equity
Common stock value	23	22
Class B common stock
Equity
Common stock value	$ 5	$ 7

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2019	Dec. 31, 2018
Common stock, shares outstanding	23,302	21,620
Class A common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	125,000	125,000
Common Stock, Shares, Issued	23,302	21,620
Common stock, shares outstanding	23,302	21,620
Class B common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	100,000	100,000
Common Stock, Shares, Issued	4,957	6,547
Common stock, shares outstanding	4,957	6,547

Condensed Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Total net sales	$ 186,025	$ 131,382	$ 555,095	$ 417,590
Total cost of sales	158,734	107,200	468,174	351,207
Gross profit	27,291	24,182	86,921	66,383
Operating expenses
General and administrative expenses	29,345	17,621	74,333	53,532
Contingent note revaluations loss (gain)	2,310	(350)	3,090	250
Operating (loss) income	(4,364)	6,911	9,498	12,601
Interest expense, net	(5,742)	(2,159)	(9,921)	(6,140)
Foreign currency (loss) gain, net		(50)	(73)	8
Other income (expense), net	6	1	21	(372)
Total other expense, net	(5,736)	(2,208)	(9,973)	(6,504)
Pretax net (loss) income	(10,100)	4,703	(475)	6,097
Income tax benefit (expense)	1,304	(801)	(77)	(754)
Net (loss) income	(8,796)	3,902	(552)	5,343
Net (loss) income attributable to non-controlling interest	(2,906)	1,681	(88)	2,651
Net (loss) income attributable to PetIQ, Inc.	$ (5,890)	$ 2,221	$ (464)	$ 2,692
Net (loss) income per share attributable to PetIQ, Inc. Class A common stock
Basic	$ (0.26)	$ 0.13	$ (0.02)	$ 0.17
Diluted	$ (0.26)	$ 0.13	$ (0.02)	$ 0.17
Weighted Average shares of Class A common stock outstanding
Basic	22,974	16,944	22,387	15,842
Diluted	22,974	17,239	22,387	15,966
Product
Total net sales	$ 161,534	$ 108,524	$ 482,224	$ 355,088
Total cost of sales	140,839	90,155	416,748	302,324
Services
Total net sales	24,491	22,858	72,871	62,502
Total cost of sales	$ 17,895	$ 17,045	$ 51,426	$ 48,883

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Comprehensive Income
Net (loss) income	$ (8,796)	$ 3,902	$ (552)	$ 5,343
Foreign currency translation adjustment	(273)	(11)	(302)	(300)
Comprehensive (loss) income	(9,069)	3,891	(854)	5,043
Comprehensive (loss) income attributable to non-controlling interest	(2,945)	1,670	(141)	2,571
Comprehensive (loss) income attributable to PetIQ	$ (6,124)	$ 2,221	$ (713)	$ 2,472

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

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+ Details

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities
Net (loss) income	$ (552)	$ 5,343
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation and amortization of intangible assets and loan fees	11,005	8,927
Foreign exchange loss on liabilities		16
Loss on disposition of property, plant, and equipment	(25)	(41)
Stock based compensation expense	4,747	2,678
Deferred tax adjustment	37	761
Contingent note revaluations	3,090	250
Other non-cash activity	146	(334)
Changes in assets and liabilities
Accounts receivable	(41,684)	(23,299)
Inventories	12,137	(24,745)
Other assets	1,368	3,681
Accounts payable	1,026	11,182
Accrued wages payable	2,401	942
Other accrued expenses	(2,299)	1,291
Net cash used in operating activities	(8,603)	(13,348)
Cash flows from investing activities
Proceeds from disposition of property, plant, and equipment	70	108
Purchase of property, plant, and equipment	(5,128)	(6,128)
Business acquisitions (net of cash acquired)	(185,090)	(92,083)
Net cash used in investing activities	(190,148)	(98,103)
Cash flows from financing activities
Proceeds from issuance of long-term debt	661,084	427,778
Principal payments on long-term debt	(511,681)	(346,137)
Tax Distributions to LLC Owners	(1,641)	(1,455)
Principal payments on finance lease obligations	(1,103)	(861)
Payment of deferred financing fees and debt discount	(5,362)	(2,675)
Exercise of options to purchase common stock	1,588	1,429
Net cash provided by financing activities	142,885	78,079
Net change in cash and cash equivalents	(55,866)	(33,372)
Effect of exchange rate changes on cash and cash equivalents	(39)	(42)
Cash and cash equivalents, beginning of period	66,360	37,896
Cash and cash equivalents, end of period	10,455	4,482
Supplemental cash flow information
Interest paid	9,472	5,129
Net change in property, plant, and equipment acquired through accounts payable	(380)	25
Finance lease additions	535	34
Net change of deferred tax asset from step-up in basis	9,517	35,621
Income taxes paid	216	491
Accrued tax distribution	$ 103	844
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 ($) shares in Thousands, $ 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	13,223	8,268
Increase (Decrease) in Stockholders' Equity
Issuance of equity for business combination		$ 4		112	36,280	53,635	90,031
Issuance of equity for business combination (in shares)		4,200
Exchange of LLC Interests held by LLC Owners	$ 6	$ (6)		(254)	43,920	(43,666)
Exchange of LLC Interests held by LLC Owners (in shares)	5,874	5,874
Net increase in deferred tax asset from LLC Interest transactions					35,621		35,621
Accrued tax distributions						(844)	(844)
Other comprehensive loss				(220)		(80)	(300)
Stock based compensation expense					1,757	921	2,678
Exercise of Options to purchase Common Stock					1,429		1,429
Exercise of Options to purchase Common Stock (in shares)	76
Net (loss) income			2,692			2,651	5,343
Ending Balance at Sep. 30, 2018	$ 19	$ 7	(976)	(1,049)	189,880	50,637	238,518
Ending Balance (in shares) at Sep. 30, 2018	19,172	6,594
Beginning Balance at Jun. 30, 2018	$ 16	$ 9	(3,197)	(913)	146,054	67,039	209,008
Beginning Balance (in shares) at Jun. 30, 2018	16,648	9,043
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 3	$ (3)		(136)	18,403	(18,267)
Exchange of LLC Interests held by LLC Owners (in shares)	2,448	(2,448)
Net increase in deferred tax asset from LLC Interest transactions					23,116		23,116
Accrued tax distributions						(151)	(151)
Other comprehensive loss						(11)	(11)
Stock based compensation expense					878	346	1,224
Exercise of Options to purchase Common Stock					1,429		1,429
Exercise of Options to purchase Common Stock (in shares)	76
Net (loss) income			2,221			1,681	3,902
Ending Balance at Sep. 30, 2018	$ 19	$ 7	(976)	(1,049)	189,880	50,637	238,518
Ending Balance (in shares) at Sep. 30, 2018	19,172	6,594
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	21,620	6,547
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 1	$ (2)		(96)	15,759	(15,663)
Exchange of LLC Interests held by LLC Owners (in shares)	1,590	(1,590)
Net increase in deferred tax asset from LLC Interest transactions					9,517		9,517
Accrued tax distributions						(103)	(103)
Other comprehensive loss				(249)		(53)	(302)
Stock based compensation expense					3,727	1,020	4,747
Exercise of Options to purchase Common Stock					1,588		$ 1,588
Exercise of Options to purchase Common Stock (in shares)	81						81
Issuance of stock for vesting of RSU's (in shares)	11
Net (loss) income			(464)			(88)	$ (552)
Ending Balance at Sep. 30, 2019	$ 23	$ 5	(4,914)	(1,661)	$ 292,810	49,610	335,873
Ending Balance (in shares) at Sep. 30, 2019	23,302	4,957			292,810
Beginning Balance at Jun. 30, 2019	$ 22	$ 7	976	(1,327)	$ 282,343	56,157	338,178
Beginning Balance (in shares) at Jun. 30, 2019	22,750	5,462
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 1	$ (1)		(100)	4,951	(4,851)
Exchange of LLC Interests held by LLC Owners (in shares)	505	(505)
Net increase in deferred tax asset from LLC Interest transactions					3,424		3,424
Accrued tax distributions						949	949
Other comprehensive loss				(234)		(39)	(273)
Stock based compensation expense					1,302	299	1,601
Exercise of Options to purchase Common Stock					790		790
Exercise of Options to purchase Common Stock (in shares)	43
Issuance of stock for vesting of RSU's (in shares)	3
Net (loss) income			(5,890)			(2,906)	(8,796)
Ending Balance at Sep. 30, 2019	$ 23	$ 5	$ (4,914)	$ (1,661)	$ 292,810	$ 49,610	$ 335,873
Ending Balance (in shares) at Sep. 30, 2019	23,302	4,957			292,810

Principal Business Activity and Significant Accounting Policies

9 Months Ended

Sep. 30, 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 pet medication and wellness company delivering a smarter way for pet parents to help their pets live their best lives through convenient access to affordable veterinary products and services. The company engages with customers through points of distribution across retail and e-commerce channels with its branded distributed medications, which is further supported by its own world-class medications manufacturing facility in Omaha, Nebraska. The company’s national service platform, VIP Petcare, operates retail partner locations providing cost effective and convenient veterinary wellness services. PetIQ 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 September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 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, the valuation of inventories, and reserves for legal contingencies.

Fair Value of Financial Instruments

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

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

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

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

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

The carrying amounts of the Company’s financial instruments, including cash, 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	September 30, 2019		December 31, 2018
Liabilities:
2019 Contingent note	$	5,770	$	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, and is carried at cost, which approximates fair value as the stated interest rate is consistent with current market rates.

For the 2019 Contingent Note, a Monte Carlo simulation method was utilized in estimating the fair value (Level 3) of the Contingent Note. 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 targets. The valuation model simulates the last twelve months EBITDA from the Valuation Date to the end of the Measurement Date in one 'jump'. The 2019 Contingent Note was 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:


	Nine months ended
$'s in 000's	September 30, 2019		September 30, 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		3,090		250
Balance at the end of the period	$	5,770	$	7,150

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	September 30, 2019		December 31, 2018
Trade receivables	$	95,444	$	43,531
Other receivables		3,674		1,764
		99,118		45,295
Less: Allowance for doubtful accounts		(330)		(216)
Non-current portion of receivables		—		(72)
Total accounts receivable, net	$	98,788	$	45,007

Inventories

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


$'s in 000's	September 30, 2019		December 31, 2018
Raw materials	$	9,895	$	6,106
Work in progress		1,595		94
Finished goods		86,477		85,942
Total inventories	$	97,967	$	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 calculated using the straight-line method, based on estimated useful lives of the assets, except for leasehold improvements and finance leased assets which are depreciated over the shorter of the expected useful life or the lease term. Depreciation and amortization expense is recorded in cost of sales and general and administrative expenses in the 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 customer’s specifications do not have an alternative future use at a reasonable profit margin due to costs associated with reworking, transporting and repackaging these products. These products are produced subject to purchase orders that include an enforceable right to payment. Therefore the Company determined that revenue on these products would be recognized over time, as the products are produced. This represents a minor subset of the products the Company manufactures.

Revenue is recognized for services at the time 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 September 30, 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 accounts payable or other current assets in the Condensed Consolidated Balance Sheets.

Warranties & Returns

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

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

Contract balances

Contract asset and liability balances as of September 30, 2019 and December 31, 2018 are immaterial. The Company does not have significant deferred revenue or unbilled receivable balances.

Cost of Services

Cost of Services are comprised of all service and product costs related to the delivery of veterinary services, including but not limited to, salaries 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 $185 thousand and $33 thousand for three months ended September 30, 2019 and 2018, respectively, and $352 thousand and $131 thousand for the nine months ended September 30, 2019 and 2018, respectively. Advertising costs were $1,821 thousand and $532 thousand for the three months ended September 30, 2019 and 2018, respectively, and $3,498 thousand and $2,545 thousand for the nine months ended September 30, 2019 and 2018, respectively. Advertising costs do not include trade marketing programs which are part of net sales.

Collaboration Agreements

Through the Perrigo Animal Health Acquisition, we entered into a product development and asset purchase agreement with a third party for certain product formulations in development by the third party. The Company may make up to $20.8 million of payments over the course of the next several years contingent on achievement of certain development and regulatory approval milestones. Product development costs are expensed as incurred or as milestone payments become probable. There can be no assurance that these products will be approved by the U.S. Food and Drug Administration (“FDA”) on the anticipated schedule or at all. Consideration paid after FDA approval will be capitalized and amortized to cost of goods sold over the economic life of each product. The expenses paid prior to FDA approval will be included in General and Administrative expenses on the Consolidated Statements of (Loss) Income.

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 (loss) 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 September 30, 2019 and December 31, 2018 the non-controlling interest was approximately 17.5% 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 accumulated deficit. The Company elected the package of practical expedients and implemented internal controls and system functionality to enable the preparation of financial information upon adoption. In addition, the Company has elected to apply the practical expedient to not separate the lease and non-lease components for all of the Company's leases.

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

Business Combination

9 Months Ended

Sep. 30, 2019

Business Combination

Business Combination

Note 2 – Business Combination

Perrigo Animal Health Acquisition

On July 8, 2019, PetIQ, Inc., through its subsidiary PetIQ, LLC, completed the acquisition of all the outstanding stock of Sergeant’s Pet Care Products, Inc. (“Sergeant’s”), d/b/a Perrigo Animal Health, including any assets related to Perrigo Company plc’s animal health business (the “Perrigo Animal Health Acquisition”). Sergeant’s is now an indirect wholly-owned subsidiary of the Company.

The fair value of the consideration is summarized as follows:


	Preliminary
	Estimated
$'s in 000's	Fair value
Inventories	$	17,998
Property, plant and equipment		18,207
Other current assets		13,048
Other assets		9,680
Indefinite-lived intangible assets		23,040
Definite-lived intangible assets - 13 year weighted average life		14,550
Goodwill		106,869
Total assets		203,392

Liabilities assumed		18,999

Purchase price	$	184,393

Cash paid, net of cash acquired	$	(185,090)
Post-closing working capital adjustment		697

Fair value of total consideration transferred	$	(184,393)

The definite-lived intangibles primarily relate to trademarks, customer relationships, developed technology and know-how and in-process research and development intangibles. The $14.6 million represents the fair value and will be amortized over the estimated useful lives of the assets through June 2039. Amortization expense for these definite-lived intangible assets for the three and nine months ended September 30, 2019 was $0.5 million, respectively.

The indefinite-lived intangibles primarily relate to trademarks and in-process research and development. We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis and more frequently if an event occurs or circumstances change that would indicate impairment may exist.

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 $106.9 million of goodwill is expected to be deductible for tax purposes. Goodwill was allocated to the Products segment.

The estimate of fair value and purchase price allocation were based on information available at the time of closing the Perrigo Animal Health Acquisition. The Company is in process of finalizing the net working capital adjustment and valuation reports. Accordingly, these preliminary estimates are subject to retrospective 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 Perrigo Animal Health Acquisition. Transaction costs of $5.4 million were incurred in the nine months ended September 30, 2019, and are included in General and Administrative expenses on the Condensed Consolidated Statements of (loss) Income.

Pro Forma Combined Statements of Operations (Unaudited)

The following unaudited pro forma combined statements of operations presents the Company's operations as if the Perrigo Animal Health Acquisition and related financing activities had occurred on January 1, 2018. The pro forma information includes the following adjustments for nonrecurring charges (i) removal of costs of goods sold based on the step-up in fair value of acquired inventory of $2.4 million for the three months ended September 30, 2019; and (ii) elimination of acquisition expenses of $2.0 million and $5.4 million for the three and nine months ended September 30, 2019, respectively. Additionally the share count utilized and Net (Loss) Income do not account for non-controlling interests. The pro forma combined statements of operations are not necessarily indicative of the results of operations as they would have been had the Perrigo Animal Health Acquisition been effected on the assumed date and are not intended to be a projection of future results:


	Three months ended September 30,				Nine months ended September 30,
($'s in 000's, except per share data)	2019		2018		2019		2018
Net sales	$	186,025	$	151,788	$	597,012	$	494,381
Net (loss) income	$	(3,713)	$	(152,253)	$	4,235	$	(182,267)

(Loss) Earnings per share:
Basic	$	(0.16)	$	(8.99)	$	0.19	$	(11.51)
Diluted	$	(0.16)	$	(8.99)	$	0.19	$	(11.51)

For the nine months ended September 30, 2019, the acquired business had Product sales of $16.6 million and pre-tax net income of $1.7 million are included in the Condensed Consolidated Statements of (loss) Income.

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 of 400 thousand LLC interests of Holdco and 400 thousand shares of Class B common stock, $0.001 par value per share, of the Company.

The fair value of the consideration is summarized as follows:



$'s in 000's	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.

VIP Acquisition

On January 17, 2018, PetIQ, Inc. completed the VIP Acquisition.

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

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)

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 months ended September 30, 2019 and 2018 was $1.1 million and $1.2 million, respectively, and $2.2 million for the nine months ended September 30, 2019 and 2018, 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.

Property, Plant, and equipment

9 Months Ended

Sep. 30, 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	September 30, 2019		December 31, 2018
Leasehold improvements	$	12,485	$	10,776
Equipment		21,013		14,477
Vehicles and accessories		4,240		3,989
Computer equipment and software		7,513		5,839
Buildings		10,033		2,479
Furniture and fixtures		1,658		1,547
Land		4,557		660
Construction in progress		2,886		682
		64,385		40,449
Less accumulated depreciation		(18,570)		(13,114)
Total property, plant, and equipment	$	45,815	$	27,335

Depreciation expense related to these assets was $2.4 million and $1.8 million for the three months ended 2019 and 2018, respectively, and $5.6 million and $4.8 million for the nine months ended September 30, 2019 and 2018, respectively.

Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2019

Intangible Assets and Goodwill

Intangible Assets and Goodwill

Note 4 – Intangible Assets and Goodwill

Intangible assets consist of the following at:


$'s in 000's	Useful Lives	September 30, 2019		December 31, 2018
Amortizable intangibles
Distribution agreement	2 years	$	3,021	$	3,021
Certification	7 years		350		350
Customer relationships	12-20 years		89,159		82,124
Patents and processes	10 years		4,804		1,900
Brand names	10-15 years		14,963		10,470
Total amortizable intangibles			112,297		97,865
Less accumulated amortization			(14,131)		(9,835)
Total net amortizable intangibles			98,166		88,030
Non-amortizable intangibles
Trademarks and other			18,016		516
In-process research and development			5,539		-
Intangible assets, net of accumulated amortization		$	121,721	$	88,546

Certain intangible assets are denominated in currencies other than the U.S. Dollar; therefore, their gross and net carrying values are subject to foreign currency movements. Amortization expense for the three months ended 2019 and 2018 was $1.8 million and $1.3 million, respectively, and $4.4 million and $3.7 million for the nine months ended September 30, 2019 and 2018, respectively.

The in-process research and development (“IPRD”), intangible assets represent the value assigned to acquired R&D projects that principally represent rights to develop and sell a product that the Company has acquired which have not yet been completed or approved. The IPRD acquired as part of the Perrigo Animal Health Acquisition is accounted for as an indefinite-lived asset until the product is available for sale and regulatory approval is obtained, or abandonment of the associated research and development efforts. If the research and development efforts are successfully completed, the IPRD would be amortized over its then estimated useful life. The fair value of the IPRD was estimated using the multi-period excess earnings income method. The projected cash flows estimates for the future products were based on certain key assumptions including estimates of future revenues and expenses, taking into account the stage of development at the acquisition date and the resources needed to complete development.

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


Years ending December 31, ($'s in 000's)
Remainder of 2019	$	1,807
2020		8,974
2021		8,962
2022		9,151
2023		8,793
Thereafter		60,479

The following is a summary of the changes in the carrying value of goodwill for the period from January 1, 2018 to September 30, 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		(134)		—		(134)
Acquisitions		106,869		—		106,869
Goodwill as of September 30, 2019	$	184,500	$	47,264	$	231,764

Debt

9 Months Ended

Sep. 30, 2019

Debt

Debt

Note 5 – Debt

A&R Credit Agreement

In connection with the Perrigo Animal Health Acquisition described in Note 2 – Business Combination, above, the Company amended and restated its existing revolving credit agreement (the “A&R Credit Agreement”) on July 8, 2019. The A&R Credit Agreement provides for a secured revolving credit facility of $110 million, with an accordion feature allowing an additional increase up to $125 million and extends the maturity date of the revolving facility to July 8, 2024. In addition, the A&R Credit Agreement reduces the interest rate on Eurodollar rate loans and modifies certain financial covenants, including eliminating the maximum first lien net coverage ratio. The Company incurs fees between 0.375% and 0.50% as unused facility fees, dependent on the amount borrowed.

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.

As of September 30, 2019, $17.5 million was outstanding under the A&R Credit Agreement. The weighted average interest rate on the A&R Credit Agreement was 4.3% at September 30, 2019.

A&R Term Loan Credit Agreement

Also in connection with the closing of the Perrigo Animal Health Acquisition, the Company amended and restated its existing term loan credit agreement (the “A&R Term Loan Credit Agreement”) on July 8, 2019. The A&R Term Loan Credit Agreement was increased from $74.1 million to $220.0 million at an interest rate of 6.5% as a LIBOR rate loan, the proceeds of which were used to refinance the existing term loan facility and consummate the acquisition.

All obligations under the A&R Term Loan Credit Agreement are unconditionally guaranteed by PetIQ Holdings, LLC and each of its domestic wholly-owned subsidiaries and, subject to certain exceptions, each of its material current and future domestic wholly-owned subsidiaries. All obligations under the A&R Term Loan Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and each guarantor under the A&R Term Loan Credit Agreement, subject to certain exceptions.

The A&R Term Loan Credit Agreement contains a number of covenants that, among other things, restrict the Company’s ability to (subject to certain exceptions): (i) make investments, loans or advances; (ii) incur additional indebtedness; (iii) create liens on assets; (iv) engage in mergers or consolidations and/or sell assets; (v) pay dividends and distributions or repurchase our equity interests; (vi) repay subordinated indebtedness; (vii) make certain acquisitions; and (viii) other restrictions typical for a credit agreement of this type. As of September 30, 2019, the Company was in compliance with these covenants.

The A&R Term Loan Credit Agreement also contains certain customary affirmative covenants and events of default (including change of control). In addition, the A&R Term Loan Credit Agreement includes a maintenance covenants that requires compliance a maximum first lien net leverage ratio. The availability of certain baskets and the ability to enter into certain transactions (including our ability to pay dividends) may also be subject to compliance with secured leverage ratios. As of September 30, 2019, the Company was in compliance with these covenants.

As of September 30, 2019, $220.0 million was outstanding under the A&R Term Loan Credit Agreement. The A&R Credit Agreement and A&R 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 September 30, 2019, the Company was in compliance with these covenants.

General Other Debt

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

In connection with the VIP Acquisition, the Company entered into a guarantee note of $10.0 million. 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. The guarantee note and the 2018 Contingent Note, collectively, “Notes Payable – VIP Acquisition” of $17.5 million require quarterly interest payments of 6.75% with the balance payable July 17, 2023. The following represents the Company’s long-term debt as of:


$'s in 000's	September 30, 2019		December 31, 2018
Term loans	$	220,000	$	74,625
Revolving credit facility		17,514		13,452
Mortgage		1,824		1,859
2019 Contingent note		5,770		2,680
Notes Payable - VIP Acquisition		17,500		17,500
Net discount on debt and deferred financing fees		(5,616)		(1,902)
	$	256,992	$	108,214
Less current maturities of long-term debt		(2,247)		(796)
Total long-term debt	$	254,745	$	107,418

Future maturities of long-term debt, excluding the 2019 Contingent note and net discount on debt and deferred financing fees, as of September 30, 2019, are as follows:


($'s in 000's)
Remainder of 2019	$	561
2020		2,248
2021		2,250
2022		2,252
2023		19,755
Thereafter		229,772

The Company incurred debt issuance costs of $0.7 million during the three and nine months ended September 30, 2019, respectively, related to the A&R Credit Agreement and $4.7 million during the three and nine months ended September 30, 2019, respectively, related to the A&R Term Loan Credit Agreement.

Leases

9 Months Ended

Sep. 30, 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 2026. 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. Renewal options generally range from one to ten years and the 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, giving consideration to company specific information and publicly available interest rates for instruments with similar characteristics, to determine the initial present value of lease payments over the lease terms.

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 operating 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:


		September 30, 2019
			Balance excluding
			the adoption of		Effect of
$'s in 000's	As Reported		ASC 842		change
ASSETS
Property and equipment, net (1)	$	45,815	$	26,303	$	(19,512)
Operating lease right-of-use assets		21,987		—		(21,987)
Other non-current assets		1,966		2,040		74

LIABILITIES
Current portion of operating leases	$	4,745	$	—	$	(4,745)
Operating leases, less current installments		17,561		—		(17,561)
Current portion of long-term debt and finance leases(2)		3,504		3,504		—
Finance leases, less current installments		1,879		1,879		—
Other non-current liabilities		238		494		256

⁽¹⁾

Finance lease right-of-use assets of $3.8 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 $1.2 million of current portion of finance leases.



	Three Months Ended		Nine Months Ended
$'s in 000's	September 30, 2019		September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	337	$	1,038
Interest on lease liabilities		126		235
Operating lease cost		3,293		5,164
Variable lease cost(1)		208		395
Short-term lease cost		29		48
Total lease cost	$	3,993	$	6,880

⁽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:


			September 30, 2019
Weighted-average remaining lease term (years)
Operating leases			5.17
Finance leases			2.54
Weighted-average discount rate
Operating leases			5.2%
Finance leases			5.5%

Annual future commitments under non-cancelable leases as of September 30, 2019, consist of the following:


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
Remainder of 2019	$	1,482	$	440
2020		5,911		1,428
2021		4,551		735
2022		4,380		566
2023		4,075		164
Thereafter		5,309		25
Total minimum future obligations	$	25,708	$	3,358
Less interest		(3,402)		(241)
Present value of net future minimum obligations		22,306		3,117
Less current lease obligations		(4,745)		(1,238)
Long-term lease obligations	$	17,561	$	1,879

Supplemental cash flow information:



	Nine Months Ended
$'s in 000's	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	235
Operating cash flows from operating leases		3,110
Financing cash flows from finance leases		1,103
(Noncash) right-of-use assets obtained in exchange for lease obligations
Operating leases		4,648
Finance leases		535

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	9 Months Ended
Income Taxes	Sep. 30, 2019
Income Taxes
Income Taxes	Note 7 – Income Tax As a result of the Company’s initial public offering 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 12.9% and (16.3)% for the three and nine months ended September 30, 2019, respectively including discrete items, and 17.0% and 12.4% for the three and nine months ended September 30, 2018, respectively. Income tax expense for the three and nine months ended September 30, 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. Additionally, the Company incurred period specific discrete tax expense items which have also affected the effective tax rates for the three and nine months ended September 30, 2019 and 2018. HoldCo makes cash distributions to members to pay taxes attributable to their allocable share of income earned. In the three and nine months ended September 30, 2019, the Company made cash distributions of $0.3 million and $1.6 million, respectively. In the three and nine months ended September 30, 2018, the Company made cash distributions of $0.1 million and $1.5 million, respectively. Additionally, HoldCo accrues for distributions required to be made related to estimated income taxes. During the three and nine months ended September 30, 2019, the Company relieved previously accrued distributions by $(1.0) million and accrued $0.1 million, respectively, and during the three and nine months ended September 30, 2018, the Company accrued $0.2 and $0.8 million, respectively.

Earnings per Share

9 Months Ended

Sep. 30, 2019

Earnings per Share

Earnings per Share

Note 8 – Earnings per Share

Basic and Diluted (Loss) Earnings per Share

Basic earnings per share of Class A common stock is computed by dividing net income available to PetIQ, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to PetIQ, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

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


	Three months ended September 30,				Nine months ended September 30,
(in 000's, except for per share amounts)		2019	2018			2019	2018
Numerator:
Net (loss) income	$	(8,796)	$	3,902	$	(552)	$	5,343
Less: net (loss) income attributable to non-controlling interests		(2,906)		1,681		(88)		2,651
Net (loss) income attributable to PetIQ, Inc. — basic and diluted		(5,890)		2,221		(464)		2,692
Denominator:
Weighted-average shares of Class A common stock outstanding -- basic		22,974		16,944		22,387		15,842
Dilutive effects of stock options that are convertible into Class A common stock		—		291		—		122
Dilutive effect of RSUs		—		4		—		1
Weighted-average shares of Class A common stock outstanding -- diluted		22,974		17,239		22,387		15,966

(Loss) earnings per share of Class A common stock — basic	$	(0.26)	$	0.13	$	(0.02)	$	0.17
(Loss) earnings per share of Class A common stock — diluted	$	(0.26)	$	0.13	$	(0.02)	$	0.17

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 and nine months ended September 30, 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, respectively.

Additionally, all stock options and restricted stock units have not been included in the diluted earnings per share calculation for the three and nine months ended September 30, 2019, respectively, as they have been determined to be anti-dilutive under the treasury stock method. For the three and nine months ended September 30, 2018, 974 thousand and 346 thousand, respectively, stock options and restricted stock units 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

9 Months Ended

Sep. 30, 2019

Stock Based Compensation

Stock Based Compensation

Note 9 – Stock Based Compensation

PetIQ, Inc. Omnibus Incentive Plan

The PetIQ, Inc. Omnibus Incentive Plan, as amended (the “Plan”) provides for the grant of various equity-based incentive awards to directors of the Company, employees, and consultant’s. The types of equity-based awards that may be granted under the Plan include: stock options, stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), and other stock-based awards. The Company has 3,914 thousand authorized shares under the Plan. As of September 30, 2019, 1,987 thousand 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”) provided 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 thousand shares of Class A Common Stock of the Company. As of September 30, 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 previously issued stock options under the Inducement Plan, which are subject to time-based vesting conditions, typically 25% on each anniversary of the grant date until fully vested. Upon a termination of service relationship by the Company, all unvested options will be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The maximum contractual term for stock options is 10 years.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $1.4 million and $4.0 million for the three and nine months ended September 30, 2019, respectively and $1.2 million and $2.7 million for the three and nine months ended September 30, 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 was determined on the grant dates using the Black-Scholes valuation model based on the following weighted-average assumptions for the periods ended September 30, 2019 and 2018:


	September 30, 2019			September 30, 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 September 30, 2019.


							Weighted
							Average
			Weighted				Remaining
	Stock		Average		Aggregate		Contractual
	Options		Exercise		Intrinsic		Life
	(in 000's)		Price		Value		(years)
Outstanding at December 31, 2018		1,945	$	23.45		5,527		9.1
Granted		423		27.54
Exercised		(81)		19.66
Forfeited		(147)		21.20
Cancelled/Expired		(1)		21.37
Outstanding at September 30, 2019		2,139	$	24.56	$	9,323		8.5
Options exercisable at September 30, 2019		438

The weighted average grant date fair value of stock options granted during the period ended September 30, 2019 was $10.63 per option. At September 30, 2019, total unrecognized compensation cost related to unvested stock options was $14.8 million and is expected to be recognized over a weighted-average period of 2.8 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 September 30, 2019, total unrecognized compensation cost related to unvested RSUs was $3.6 million and is expected to vest over a weighted average 3.3 years.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $0.3 million and $0.8 million for the three and nine months ended September 30, 2019 and $0.1 million and $0.1 million for the three and nine months ended September 30, 2018. 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 September 30, 2019.


			Weighted
	Number of		Average
	Shares		Grant Date
	(in 000's)		Fair Value
Outstanding at December 31, 2018		51	$	33.16
Granted		119		27.69
Settled		(11)		25.12
Forfeited		(10)		30.91
Nonvested RSUs at September 30, 2019		149	$	29.54

There were grants of 30 thousand RSUs for the nine months ended September 30, 2018.

Stockholder's Equity	9 Months Ended
Stockholder's Equity	Sep. 30, 2019
Stockholder's Equity
Stockholder's Equity	Note 10 – Stockholders’ Equity Acquisition During the nine months ended September 30, 2018 Holdco issued 4,200 thousand LLC Interests and Class B common shares as consideration for the VIP Acquisition. Exchanges During the nine months ended September 30, 2019 holders of Class B common stock and LLC Interests exercised exchange rights and exchanged 1,590 thousand Class B common shares and corresponding LLC Interests for newly issued Class A Common Stock. The LLC Agreement generally allows for exchanges on the last day of each calendar month. During the nine months ended September 30, 2018, holders of Class B common stock and LLC Interests exercised exchange rights and exchanged 5,874 thousand Class B common shares and corresponding LLC Interest 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

9 Months Ended

Sep. 30, 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
$'s in 000's	Owners		PetIQ, Inc.		Total	Owners	PetIQ, Inc.
As of December 31, 2018		6,547		21,620	28,167	23.2%	76.8%
Stock based compensation adjustments		—		92	92
Exchange transactions		(1,590)		1,590	—
As of September 30, 2019		4,957		23,302	28,259	17.5%	82.5%

Note that certain figures shown in the table above may not recalculate due to rounding.

For the three and nine months ended September 30, 2019, the Company owned a weighted average of 81.4% and 79.4% of Holdco, respectively.

Customer Concentration	9 Months Ended
Customer Concentration	Sep. 30, 2019
Customer Concentration
Customer Concentration	Note 12 – Customer Concentration The Company has significant exposure to customer concentration. During the three and nine months ended September 30, 2019 one and two customers individually accounted for more than 10% of sales, together comprising 23% and 35% of net sales, respectively, for such periods. During the three months ended September 30, 2018 one customer individually accounted for more than 10% of sales, comprising 22% of net sales. During the nine months ended September 30, 2018, two customers accounted for more than 10% of sales, together comprising 30% of net sales. At September 30, 2019 one Products segment customer individually accounted for more than 10% of outstanding trade receivables, and accounted for 52% of outstanding trade receivables, net. At December 31, 2018 one Products segment customer individually accounted for more than 10% of outstanding trade receivables, and accounted for 43% of outstanding trade receivables, net.

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 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. Plaintiffs filed a notice of appeal with 9th Circuit Court of Appeals on May 21, 2019. Appeal briefing is expected to conclude in late 2019 and oral arguments are expected to occur in mid-2020. A final decision from the 9th Circuit Court of Appeals is estimated in late 2020. During the quarter ended September 30, 2019, the Company recorded a liability of $1 million for contract termination costs, related to a settlement for alleged breach of contract. The expense is included within General and Administrative expenses for the three and nine months ended September 30, 2019. The liability is included in accrued expenses. The Company records a liability when a particular contingency is probable and estimable and provides disclosure for contingencies that are at least reasonably possible of resulting in a loss including an estimate which we currently cannot make. The Company has not accrued for any contingency, other than those previously noted, at September 30, 2019 and December 31, 2018 as the Company does not consider any other 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

9 Months Ended

Sep. 30, 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. The Services segment consists of the Company’s veterinary services, and related product sales, provided by the Company directly to consumers.

The segments are based on the discrete financial information reviewed by the Chief Operating Decision Maker (“CODM”) to make resource allocation decisions and to evaluate performance. We measure and evaluate our reportable segments based on net sales and segment Adjusted EBITDA. We exclude from our segments certain corporate costs and expenses, such as accounting, legal, human resources, information technology and corporate headquarters expenses as our corporate functions do not meet the definition of a segment as defined in the accounting guidance related to segment reporting.

Effective during the three months ended September 30, 2019, the Company changed its segment measure of profitability for its reportable segments from segment operating income (loss) to Adjusted EBITDA to better align the way the CODM views reportable segment operations in light of changes in the Company’s operations, including the increase of manufacturing operations as a result of the Perrigo Animal Health Acquisition in the Products segment and the growth of the Company’s wellness centers, host partners, and regions within the Services segment. For comparability purposes, previous periods have been recast to reflect the measure of segment profitability.

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


$'s in 000's					Unallocated
September 30, 2019	Products		Services		Corporate		Consolidated
Net Sales	$	161,534	$	24,491	$	—	$	186,025
Adjusted EBITDA		20,506		7,048		(8,296)		19,258


$'s in 000's					Unallocated
September 30, 2018	Products		Services		Corporate		Consolidated
Net Sales	$	108,524	$	22,858	$	—	$	131,382
Adjusted EBITDA		14,642		5,217		(6,450)		13,409

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


$'s in 000's					Unallocated
September 30, 2019	Products		Services		Corporate		Consolidated
Net Sales	$	482,224	$	72,871	$	—	$	555,095
Adjusted EBITDA		56,030		18,147		(23,217)		50,960


$'s in 000's					Unallocated
September 30, 2018	Products		Services		Corporate		Consolidated
Net Sales	$	355,088	$	62,502	$	—	$	417,590
Adjusted EBITDA		41,337		13,049		(19,327)		35,059

The following table reconciles Segment Adjusted EBITDA to Net (loss) income for the periods presented.


	For the three months ended				For the nine months ended
$'s in 000's	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Adjusted EBITDA:
Product	$	20,506	$	14,642	$	56,030	$	41,337
Services		7,048		5,217		18,147		13,049
Unallocated Corporate		(8,296)		(6,450)		(23,217)		(19,327)
Total Consolidated		19,258		13,409		50,960		35,059
Adjustments:
Depreciation		(2,404)		(1,786)		(5,587)		(4,816)
Amortization		(1,807)		(1,294)		(4,364)		(3,691)
Interest		(5,742)		(2,159)		(9,921)		(6,140)
Acquisition costs(1)		(1,960)		(113)		(5,425)		(3,479)
Stock based compensation expense		(1,601)		(1,224)		(4,747)		(2,678)
Purchase accounting adjustment to inventory(2)		(2,403)		—		(2,403)		(1,502)
Non same-store revenue(3)		2,583		1,472		6,254		2,775
Non same-store costs(3)		(5,394)		(3,845)		(12,690)		(6,667)
Fair value adjustment of contingent note		(2,310)		350		(3,090)		(250)
Integration costs and costs of discontinued clinics(4)		(1,166)		(57)		(2,308)		(813)
Clinic launch expenses(5)		(672)		(50)		(672)		(1,261)
Non-recurring royalty settlement(6)		—		—		—		(440)
SKU Rationalization(7)		(6,482)		—		(6,482)		—
Pretax net (loss) income	$	(10,100)	$	4,703	$	(475)	$	6,097
Income tax benefit (expense)		1,304		(801)		(77)		(754)
Net (loss) income	$	(8,796)	$	3,902	$	(552)	$	5,343

(1)

Acquisition costs are costs directly related to the acquisitions of Perrigo Animal Health, HBH, and VIP, and include diligence, accounting, banking, and other out of pocket costs.

(2)

Purchase accounting adjustment to inventory represents the portion of costs of sales related to the fair value of inventory adjusted as part of the purchase price allocation. During 2019 the amounts relate to the Perrigo Animal Health Acquisition and are part of the Products segment. During 2018 the costs relate to the VIP Acquisition and are part of the Services Segment.

(3)

Non same-store revenue and costs relate to Services segment regional offices, mobile community clinics provided with host partners and wellness centers that have been operating for less than six full trailing quarters.

(4)

Integration costs and costs of discontinued clinics represent costs related to integrating the acquired businesses, such as personnel costs like severance and signing bonuses, consulting work, contract termination, and IT conversion costs. These costs are primarily in the Products segment and the corporate segment for personnel costs, legal and consulting expenses, and IT costs. In addition, related to the Service Segment, there were costs associated with vet services clinics that were discontinued subsequent to the acquisition of VIP.

(5)

Clinic launch expenses relate to our Services segment and represent the nonrecurring costs to open new veterinary wellness centers, primarily employee costs, training, marketing, and rent prior to opening for business.

(6)

Non-recurring royalty settlement represents a settlement paid to a supplier related to a royalty agreement in place since 2013.

(7)

SKU Rationalization relates to the disposal of, or reserve to, estimated net realizable value for inventory that will either no longer be sold, or will be de-emphasized, as the Company aligns brands between Legacy PetIQ brands and brands acquired as part of the Perrigo Animal Health Acquisition. All costs are included in the Products segment gross margin.

Supplemental geographic disclosures are below.


	Three months ended September 30, 2019
$'s in 000's	U.S.		Foreign		Total
Products segment sales	$	159,922	$	1,612	$	161,534
Services segment revenue		24,491		—		24,491
Total net sales	$	184,413	$	1,612	$	186,025

	Three months ended September 30, 2018
$'s in 000's	U.S.		Foreign		Total
Products segment sales	$	107,089	$	1,435	$	108,524
Services segment revenue		22,858		—		22,858
Total net sales	$	129,947	$	1,435	$	131,382


	Nine months ended September 30, 2019
$'s in 000's	U.S.		Foreign		Total
Products sales	$	478,979	$	3,245	$	482,224
Services revenue		72,871		—		72,871
Total net sales	$	551,850	$	3,245	$	555,095

	Nine months ended September 30, 2018
$'s in 000's	U.S.		Foreign		Total
Products sales	$	352,058	$	3,030	$	355,088
Services revenue		62,502		—		62,502
Total net sales	$	414,560	$	3,030	$	417,590

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


	September 30, 2019		December 31, 2018
United States	$	44,796	$	26,268
Europe		1,019		1,067
Total	$	45,815	$	27,335

Related Parties	9 Months Ended
Related Parties	Sep. 30, 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 September 30, 2019, the Company had paid $0.3 million in advance on required tax distributions which has been included in other current assets on the condensed balance sheets. At December 31, 2018, the Company had recorded an accrual of $1.2 million, for estimated tax distributions, which is 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 September 30, 2019 and December 31, 2018 and accrued interest of $290 thousand and $169 thousand as of September 30, 2019 and December 31, 2018, respectively. The Company paid no interest in the three months ended September 30, 2019 and 2018 respectively. The Company paid $692 thousand and $257 thousand of interest in the nine months ended September 30, 2019 and 2018, respectively. 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 $91 thousand and $274 thousand in the three and nine months ended September 30, 2019, respectively. The Company incurred rent expenses of $89 thousand and $268 thousand in the three and nine months ended September 30, 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 $555 thousand and $693 thousand for the three and nine months ended September 30, 2019, respectively, and $522 thousand for the three and nine months ended September 30, 2018. Mr. Chris Christensen was paid a commission of approximately $28 thousand and $35 thousand for the three and nine months ended September 30, 2019, respectively, and $20 thousand and $25 thousand for the three and nine months ended September 30, 2018, respectively, by Moreton for the sale of such insurance policies to the Company.

Subsequent Events	9 Months Ended
Subsequent Events	Sep. 30, 2019
Subsequent Events
Subsequent Events	Note 16 – Subsequent events As a result of the Perrigo Animal Health Acquisition and related integration activities, the Company made the strategic decision to consolidate certain functions, including to transfer a significant portion of operations from its facility in Daytona, Florida to Omaha, Nebraska by the fourth quarter 2020. This is an opportunity to optimize OTC production and distribution functions out of a single facility in a centralized location that will create greater efficiencies across its combined supply chain. As of September 30, 2019, an estimate of the financial impact of the related integration activities cannot be made, however, the Company will continue to evaluate the financial impacts.

Principal Business Activity and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Principal Business Activity and Significant Accounting Policies

Use of Estimates

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	September 30, 2019		December 31, 2018
Liabilities:
2019 Contingent note	$	5,770	$	2,680

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


	Nine months ended
$'s in 000's	September 30, 2019		September 30, 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		3,090		250
Balance at the end of the period	$	5,770	$	7,150

Cash and Cash Equivalents

Receivables and Credit Policy

Accounts receivable consists of the following as of:


$'s in 000's	September 30, 2019		December 31, 2018
Trade receivables	$	95,444	$	43,531
Other receivables		3,674		1,764
		99,118		45,295
Less: Allowance for doubtful accounts		(330)		(216)
Non-current portion of receivables		—		(72)
Total accounts receivable, net	$	98,788	$	45,007

Inventories


$'s in 000's	September 30, 2019		December 31, 2018
Raw materials	$	9,895	$	6,106
Work in progress		1,595		94
Finished goods		86,477		85,942
Total inventories	$	97,967	$	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

Cost of Services

Research and Development and Advertising Costs

Collaboration Agreements

Accounting for Income Taxes

Income taxes

Non-controlling interest

Litigation

Adopted Accounting Standard Updates

Principal Business Activity and Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Principal Business Activity and Significant Accounting Policies

Summary of liabilities measured at fair value on a recurring basis


$'s in 000's	September 30, 2019		December 31, 2018
Liabilities:
2019 Contingent note	$	5,770	$	2,680

Summary of Level 3 activity related to the contingent consideration


	Nine months ended
$'s in 000's	September 30, 2019		September 30, 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		3,090		250
Balance at the end of the period	$	5,770	$	7,150

Schedule of accounts receivable


$'s in 000's	September 30, 2019		December 31, 2018
Trade receivables	$	95,444	$	43,531
Other receivables		3,674		1,764
		99,118		45,295
Less: Allowance for doubtful accounts		(330)		(216)
Non-current portion of receivables		—		(72)
Total accounts receivable, net	$	98,788	$	45,007

Schedule of components of inventories


$'s in 000's	September 30, 2019		December 31, 2018
Raw materials	$	9,895	$	6,106
Work in progress		1,595		94
Finished goods		86,477		85,942
Total inventories	$	97,967	$	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)

9 Months Ended

Sep. 30, 2019

Summary of pro forma combined statements of operations


	Three months ended September 30,				Nine months ended September 30,
($'s in 000's, except per share data)	2019		2018		2019		2018
Net sales	$	186,025	$	151,788	$	597,012	$	494,381
Net (loss) income	$	(3,713)	$	(152,253)	$	4,235	$	(182,267)

(Loss) Earnings per share:
Basic	$	(0.16)	$	(8.99)	$	0.19	$	(11.51)
Diluted	$	(0.16)	$	(8.99)	$	0.19	$	(11.51)

VIP

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

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)

Fair value of total consideration transferred	$	198,300

HBH

Summary of preliminary estimated fair value of the consideration



$'s in 000's	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

Perrigo Animal Health Acquisition

Summary of preliminary estimated fair value of the consideration


	Preliminary
	Estimated
$'s in 000's	Fair value
Inventories	$	17,998
Property, plant and equipment		18,207
Other current assets		13,048
Other assets		9,680
Indefinite-lived intangible assets		23,040
Definite-lived intangible assets - 13 year weighted average life		14,550
Goodwill		106,869
Total assets		203,392

Liabilities assumed		18,999

Purchase price	$	184,393

Cash paid, net of cash acquired	$	(185,090)
Post-closing working capital adjustment		697

Fair value of total consideration transferred	$	(184,393)

Property, Plant, and equipment (Tables)

9 Months Ended

Sep. 30, 2019

Property, Plant, and Equipment

Property, Plant, and Equipment


$'s in 000's	September 30, 2019		December 31, 2018
Leasehold improvements	$	12,485	$	10,776
Equipment		21,013		14,477
Vehicles and accessories		4,240		3,989
Computer equipment and software		7,513		5,839
Buildings		10,033		2,479
Furniture and fixtures		1,658		1,547
Land		4,557		660
Construction in progress		2,886		682
		64,385		40,449
Less accumulated depreciation		(18,570)		(13,114)
Total property, plant, and equipment	$	45,815	$	27,335

Intangible Assets and Goodwill (Tables)

9 Months Ended

Sep. 30, 2019

Intangible Assets and Goodwill

Schedule of intangible assets


$'s in 000's	Useful Lives	September 30, 2019		December 31, 2018
Amortizable intangibles
Distribution agreement	2 years	$	3,021	$	3,021
Certification	7 years		350		350
Customer relationships	12-20 years		89,159		82,124
Patents and processes	10 years		4,804		1,900
Brand names	10-15 years		14,963		10,470
Total amortizable intangibles			112,297		97,865
Less accumulated amortization			(14,131)		(9,835)
Total net amortizable intangibles			98,166		88,030
Non-amortizable intangibles
Trademarks and other			18,016		516
In-process research and development			5,539		-
Intangible assets, net of accumulated amortization		$	121,721	$	88,546

Estimated future amortization expense


Years ending December 31, ($'s in 000's)
Remainder of 2019	$	1,807
2020		8,974
2021		8,962
2022		9,151
2023		8,793
Thereafter		60,479

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		(134)		—		(134)
Acquisitions		106,869		—		106,869
Goodwill as of September 30, 2019	$	184,500	$	47,264	$	231,764

Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt

Schedule of components of long term debt


$'s in 000's	September 30, 2019		December 31, 2018
Term loans	$	220,000	$	74,625
Revolving credit facility		17,514		13,452
Mortgage		1,824		1,859
2019 Contingent note		5,770		2,680
Notes Payable - VIP Acquisition		17,500		17,500
Net discount on debt and deferred financing fees		(5,616)		(1,902)
	$	256,992	$	108,214
Less current maturities of long-term debt		(2,247)		(796)
Total long-term debt	$	254,745	$	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	$	561
2020		2,248
2021		2,250
2022		2,252
2023		19,755
Thereafter		229,772

- 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://fasb.org/us-gaap/role/ref/legacyRef
-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://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28541-108399

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21506-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-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://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28551-108399

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21521-112644

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21538-112644

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-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 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

Leases (Tables)

9 Months Ended

Sep. 30, 2019

Schedule of components of lease expense



	Three Months Ended		Nine Months Ended
$'s in 000's	September 30, 2019		September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	337	$	1,038
Interest on lease liabilities		126		235
Operating lease cost		3,293		5,164
Variable lease cost(1)		208		395
Short-term lease cost		29		48
Total lease cost	$	3,993	$	6,880

Schedule of other information related to leases


			September 30, 2019
Weighted-average remaining lease term (years)
Operating leases			5.17
Finance leases			2.54
Weighted-average discount rate
Operating leases			5.2%
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	$	1,482	$	440
2020		5,911		1,428
2021		4,551		735
2022		4,380		566
2023		4,075		164
Thereafter		5,309		25
Total minimum future obligations	$	25,708	$	3,358
Less interest		(3,402)		(241)
Present value of net future minimum obligations		22,306		3,117
Less current lease obligations		(4,745)		(1,238)
Long-term lease obligations	$	17,561	$	1,879

Supplemental cash flow information



	Nine Months Ended
$'s in 000's	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	235
Operating cash flows from operating leases		3,110
Financing cash flows from finance leases		1,103
(Noncash) right-of-use assets obtained in exchange for lease obligations
Operating leases		4,648
Finance leases		535

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 operating 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:


		September 30, 2019
			Balance excluding
			the adoption of		Effect of
$'s in 000's	As Reported		ASC 842		change
ASSETS
Property and equipment, net (1)	$	45,815	$	26,303	$	(19,512)
Operating lease right-of-use assets		21,987		—		(21,987)
Other non-current assets		1,966		2,040		74

LIABILITIES
Current portion of operating leases	$	4,745	$	—	$	(4,745)
Operating leases, less current installments		17,561		—		(17,561)
Current portion of long-term debt and finance leases(2)		3,504		3,504		—
Finance leases, less current installments		1,879		1,879		—
Other non-current liabilities		238		494		256

⁽¹⁾

Finance lease right-of-use assets of $3.8 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 $1.2 million of current portion of finance leases.

Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings per Share

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


	Three months ended September 30,				Nine months ended September 30,
(in 000's, except for per share amounts)		2019	2018			2019	2018
Numerator:
Net (loss) income	$	(8,796)	$	3,902	$	(552)	$	5,343
Less: net (loss) income attributable to non-controlling interests		(2,906)		1,681		(88)		2,651
Net (loss) income attributable to PetIQ, Inc. — basic and diluted		(5,890)		2,221		(464)		2,692
Denominator:
Weighted-average shares of Class A common stock outstanding -- basic		22,974		16,944		22,387		15,842
Dilutive effects of stock options that are convertible into Class A common stock		—		291		—		122
Dilutive effect of RSUs		—		4		—		1
Weighted-average shares of Class A common stock outstanding -- diluted		22,974		17,239		22,387		15,966

(Loss) earnings per share of Class A common stock — basic	$	(0.26)	$	0.13	$	(0.02)	$	0.17
(Loss) earnings per share of Class A common stock — diluted	$	(0.26)	$	0.13	$	(0.02)	$	0.17

Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 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


	September 30, 2019			September 30, 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
	Stock		Average		Aggregate		Contractual
	Options		Exercise		Intrinsic		Life
	(in 000's)		Price		Value		(years)
Outstanding at December 31, 2018		1,945	$	23.45		5,527		9.1
Granted		423		27.54
Exercised		(81)		19.66
Forfeited		(147)		21.20
Cancelled/Expired		(1)		21.37
Outstanding at September 30, 2019		2,139	$	24.56	$	9,323		8.5
Options exercisable at September 30, 2019		438

Summary of RSU activity


			Weighted
	Number of		Average
	Shares		Grant Date
	(in 000's)		Fair Value
Outstanding at December 31, 2018		51	$	33.16
Granted		119		27.69
Settled		(11)		25.12
Forfeited		(10)		30.91
Nonvested RSUs at September 30, 2019		149	$	29.54

Non-Controlling Interests (Tables)

9 Months Ended

Sep. 30, 2019

Non-Controlling Interests

Summary of noncontrolling interest


	LLC Interests held					% of Total
		LLC				LLC
$'s in 000's	Owners		PetIQ, Inc.		Total	Owners	PetIQ, Inc.
As of December 31, 2018		6,547		21,620	28,167	23.2%	76.8%
Stock based compensation adjustments		—		92	92
Exchange transactions		(1,590)		1,590	—
As of September 30, 2019		4,957		23,302	28,259	17.5%	82.5%

Segments (Tables)

9 Months Ended

Sep. 30, 2019

Segments

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


$'s in 000's					Unallocated
September 30, 2019	Products		Services		Corporate		Consolidated
Net Sales	$	161,534	$	24,491	$	—	$	186,025
Adjusted EBITDA		20,506		7,048		(8,296)		19,258


$'s in 000's					Unallocated
September 30, 2018	Products		Services		Corporate		Consolidated
Net Sales	$	108,524	$	22,858	$	—	$	131,382
Adjusted EBITDA		14,642		5,217		(6,450)		13,409


$'s in 000's					Unallocated
September 30, 2019	Products		Services		Corporate		Consolidated
Net Sales	$	482,224	$	72,871	$	—	$	555,095
Adjusted EBITDA		56,030		18,147		(23,217)		50,960


$'s in 000's					Unallocated
September 30, 2018	Products		Services		Corporate		Consolidated
Net Sales	$	355,088	$	62,502	$	—	$	417,590
Adjusted EBITDA		41,337		13,049		(19,327)		35,059

Summary of reconciles segment adjusted ebitda to pretax net income


	For the three months ended				For the nine months ended
$'s in 000's	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Adjusted EBITDA:
Product	$	20,506	$	14,642	$	56,030	$	41,337
Services		7,048		5,217		18,147		13,049
Unallocated Corporate		(8,296)		(6,450)		(23,217)		(19,327)
Total Consolidated		19,258		13,409		50,960		35,059
Adjustments:
Depreciation		(2,404)		(1,786)		(5,587)		(4,816)
Amortization		(1,807)		(1,294)		(4,364)		(3,691)
Interest		(5,742)		(2,159)		(9,921)		(6,140)
Acquisition costs(1)		(1,960)		(113)		(5,425)		(3,479)
Stock based compensation expense		(1,601)		(1,224)		(4,747)		(2,678)
Purchase accounting adjustment to inventory(2)		(2,403)		—		(2,403)		(1,502)
Non same-store revenue(3)		2,583		1,472		6,254		2,775
Non same-store costs(3)		(5,394)		(3,845)		(12,690)		(6,667)
Fair value adjustment of contingent note		(2,310)		350		(3,090)		(250)
Integration costs and costs of discontinued clinics(4)		(1,166)		(57)		(2,308)		(813)
Clinic launch expenses(5)		(672)		(50)		(672)		(1,261)
Non-recurring royalty settlement(6)		—		—		—		(440)
SKU Rationalization(7)		(6,482)		—		(6,482)		—
Pretax net (loss) income	$	(10,100)	$	4,703	$	(475)	$	6,097
Income tax benefit (expense)		1,304		(801)		(77)		(754)
Net (loss) income	$	(8,796)	$	3,902	$	(552)	$	5,343

(1)

Acquisition costs are costs directly related to the acquisitions of Perrigo Animal Health, HBH, and VIP, and include diligence, accounting, banking, and other out of pocket costs.

(2)

(3)

(4)

(5)

(6)

Non-recurring royalty settlement represents a settlement paid to a supplier related to a royalty agreement in place since 2013.

(7)

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


	Three months ended September 30, 2019
$'s in 000's	U.S.		Foreign		Total
Products segment sales	$	159,922	$	1,612	$	161,534
Services segment revenue		24,491		—		24,491
Total net sales	$	184,413	$	1,612	$	186,025

	Three months ended September 30, 2018
$'s in 000's	U.S.		Foreign		Total
Products segment sales	$	107,089	$	1,435	$	108,524
Services segment revenue		22,858		—		22,858
Total net sales	$	129,947	$	1,435	$	131,382


	Nine months ended September 30, 2019
$'s in 000's	U.S.		Foreign		Total
Products sales	$	478,979	$	3,245	$	482,224
Services revenue		72,871		—		72,871
Total net sales	$	551,850	$	3,245	$	555,095

	Nine months ended September 30, 2018
$'s in 000's	U.S.		Foreign		Total
Products sales	$	352,058	$	3,030	$	355,088
Services revenue		62,502		—		62,502
Total net sales	$	414,560	$	3,030	$	417,590

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


	September 30, 2019		December 31, 2018
United States	$	44,796	$	26,268
Europe		1,019		1,067
Total	$	45,815	$	27,335

Principal Business Activity and Significant Accounting Policies - Fair value on a recurring basis (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value of Financial Instruments
Fixed interest rate	4.35%
Contingent notes
Fair Value of Financial Instruments
Fixed interest rate	6.75%
VIP \| Contingent notes
Fair Value of Financial Instruments
Contingent notes		$ 7,500
Recurring \| Contingent notes
Fair Value of Financial Instruments
Contingent notes	$ 5,770	$ 2,680

Principal Business Activity and Significant Accounting Policies - Fair value on a contingent consideration (Details) - VIP - Level 3 - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 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	3,090	250
Balance at the end of the period	$ 5,770	$ 7,150

Principal Business Activity and Significant Accounting Policies - Receivables and Credit Policy (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Receivables and Credit Policy
Accounts receivable, gross	$ 99,118	$ 45,295
Less: Allowance for doubtful accounts	(330)	(216)
Non-current portion of receivables		72
Total accounts receivable, net	98,788	45,007
Trade receivables
Receivables and Credit Policy
Accounts receivable, gross	95,444	43,531
Other receivables
Receivables and Credit Policy
Accounts receivable, gross	$ 3,674	$ 1,764

Principal Business Activity and Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Inventories
Raw materials	$ 9,895	$ 6,106
Work in progress	1,595	94
Finished goods	86,477	85,942
Total inventories	$ 97,967	$ 92,142

Principal Business Activity and Significant Accounting Policies - PPNE (Details)	9 Months Ended
	Sep. 30, 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)	Sep. 30, 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		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Research and Development and Advertising Costs
Research and development costs	$ 185	$ 33	$ 352	$ 131
Advertising costs	1,821	$ 532	3,498	$ 2,545
Collaboration Agreements
Collaboration agreements, contingent payments to be made	$ 20,800		$ 20,800
Continuing LLC Owners
Non-Controlling Interests
Interest held by non-controlling owners	17.50%		17.50%		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		1 year

Business Combination - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended		9 Months Ended
	Oct. 17, 2018	Jan. 17, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Business Combination
Number of shares Issued						4,200,000
Intangible assets, net of accumulated amortization			$ 98,166		$ 98,166		$ 88,030
Remainder of 2019			1,807		1,807
Acquisition costs			$ 1,960	$ 113	$ 5,425	$ 3,479
Class B common stock
Business Combination
Number of shares Issued						4,200,000
Common stock, par value			$ 0.001		$ 0.001		$ 0.001
VIP
Business Combination
Total purchase price, net of cash acquired		$ 198,300
Goodwill not deductible for tax purposes					$ 49,800
HBH
Business Combination
Total purchase price, net of cash acquired					14,655
Goodwill not deductible for tax purposes					5,000
HBH \| Class B common stock
Business Combination
Number of shares Issued	400,000
Common stock, par value	$ 0.001
HBH \| Holdco
Business Combination
Number of shares Issued	400,000
Common stock, par value	$ 0.001
Perrigo Animal Health Acquisition
Business Combination
Intangible assets, net of accumulated amortization			$ 14,600		14,600
Current amortization expense					500
Acquisition costs					5,400
Customer relationships and brand names
Business Combination
Intangible assets, net of accumulated amortization			86,800		86,800
Current amortization expense			$ 1,100	$ 1,200	$ 2,200	$ 2,200

Business Combination - Total consideration (Details) - USD ($) $ in Thousands			9 Months Ended
	Jul. 08, 2019	Jan. 17, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Preliminary estimated fair value of the consideration
Goodwill			$ 231,764		$ 125,029	$ 5,064
Cash paid, net of cash acquired			185,090	$ 92,083
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
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
Perrigo Animal Health Acquisition
Preliminary estimated fair value of the consideration
Finite-Lived Intangible Asset, Useful Life			13 years
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
Customer relationships \| HBH
Preliminary estimated fair value of the consideration
Intangible assets			$ 3,800
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
Estimated \| Perrigo Animal Health Acquisition
Preliminary estimated fair value of the consideration
Inventories	$ 17,998
Property, plant, and equipment	18,207
Other current assets	13,048
Other assets	9,680
Intangible assets	23,040
Intangible assets - Brand names (10 year useful life)	14,550
Goodwill	106,869
Total assets	203,392
Total liabilities	18,999
Estimated purchase price	184,393
Cash paid, net of cash acquired	(185,090)
Post-closing working capital adjustment	697
Estimated fair value of total consideration transferred	$ (184,393)

Business Combination - Pro Forma (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Business Acquisition, Pro Forma Information [Abstract]
Net sales	$ 186,025	$ 151,788	$ 597,012	$ 494,381
Net (loss) income	$ (3,713)	$ (152,253)	$ 4,235	$ (182,267)
(Loss) Earnings per share: Basic	$ (0.16)	$ (8.99)	$ 0.19	$ (11.51)
(Loss) Earnings per share: Diluted	$ (0.16)	$ (8.99)	$ 0.19	$ (11.51)
Revenues	$ 186,025	$ 131,382	$ 555,095	$ 417,590
Perrigo Animal Health Acquisition
Business Acquisition, Pro Forma Information [Abstract]
Pre-tax net income			1,700
Perrigo Animal Health Acquisition \| Acquisition-related Costs [Member]
Business Acquisition, Pro Forma Information [Abstract]
Revenues			2,400
Perrigo Animal Health Acquisition \| Fair Value Adjustment to Inventory [Member]
Business Acquisition, Pro Forma Information [Abstract]
Revenues	$ 2,000		5,400
Product \| Perrigo Animal Health Acquisition
Business Acquisition, Pro Forma Information [Abstract]
Net sales			$ 16,600

Property, Plant, and equipment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jan. 01, 2019	Dec. 31, 2018
Property, Plant, and Equipment
Property, plant and equipment, gross	$ 64,385		$ 64,385			$ 40,449
Less accumulated depreciation	(18,570)		(18,570)			(13,114)
Property, Plant and Equipment, Net, Total	45,815		45,815		$ 27,335	27,335
Depreciation and amortization expense	2,400	$ 1,800	5,600	$ 4,800
Leasehold improvements
Property, Plant, and Equipment
Property, plant and equipment, gross	12,485		12,485			10,776
Equipment
Property, Plant, and Equipment
Property, plant and equipment, gross	21,013		21,013			14,477
Vehicles and accessories
Property, Plant, and Equipment
Property, plant and equipment, gross	4,240		4,240			3,989
Computer equipment and software
Property, Plant, and Equipment
Property, plant and equipment, gross	7,513		7,513			5,839
Buildings
Property, Plant, and Equipment
Property, plant and equipment, gross	10,033		10,033			2,479
Furniture and fixtures
Property, Plant, and Equipment
Property, plant and equipment, gross	1,658		1,658			1,547
Land
Property, Plant, and Equipment
Property, plant and equipment, gross	4,557		4,557			660
Construction in Progress
Property, Plant, and Equipment
Property, plant and equipment, gross	$ 2,886		$ 2,886			$ 682

Intangible Assets and Goodwill - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Intangible Assets and Goodwill
Amortizable Intangibles, gross	$ 112,297		$ 112,297		$ 97,865
Less accumulated amortization	(14,131)		(14,131)		(9,835)
Total net amortizable intangibles	98,166		98,166		88,030
Intangible assets, net of accumulated amortization	121,721		121,721		88,546
Amortization expense	1,800	$ 1,300	4,400	$ 3,700
Trademarks and other
Intangible Assets and Goodwill
Non-amortizable intangibles	18,016		18,016		516
IPRD
Intangible Assets and Goodwill
Non-amortizable intangibles	5,539		$ 5,539
Distribution agreement
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			2 years
Amortizable Intangibles, gross	3,021		$ 3,021		3,021
Certification
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			7 years
Amortizable Intangibles, gross	350		$ 350		350
Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			20 years
Amortizable Intangibles, gross	89,159		$ 89,159		82,124
Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			10 years
Amortizable Intangibles, gross	4,804		$ 4,804		1,900
Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			10 years
Amortizable Intangibles, gross	$ 14,963		$ 14,963		$ 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	Sep. 30, 2019 USD ($)
Intangible Assets and Goodwill
Remainder of 2019	$ 1,807
2020	8,974
2021	8,962
2022	9,151
2023	8,793
Thereafter	$ 60,479

Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Goodwill, Beginning Balance	$ 125,029	$ 5,064
Foreign currency translation	(134)	(285)
Acquisition	106,869	120,250
Goodwill, Ending Balance	231,764	125,029
Product
Goodwill, Beginning Balance	77,765	5,064
Foreign currency translation	(134)	(285)
Acquisition	106,869	72,986
Goodwill, Ending Balance	184,500	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	9 Months Ended		12 Months Ended
Debt (Details) - USD ($) $ in Thousands	Jul. 08, 2019	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Jul. 07, 2019
Debt
Purchase price of a commercial building		$ 1,900	$ 1,900
Fixed interest rate		4.35%	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		$ 5,616	$ 5,616		1,902
Long-term Debt, Total		256,992	256,992		108,214
Less current maturities of long-term debt		(2,247)	(2,247)		(796)
Long-term debt, less current installments		254,745	254,745		107,418
Future maturities of long-term debt
Remainder of 2019		561	561
2020		2,248	2,248
2021		2,250	2,250
2022		2,252	2,252
2023		19,755	19,755
Thereafter		229,772	229,772
Debt issuance costs			5,362	$ 2,675
Revolving credit facility
Debt
Maximum borrowing capacity		110,000	110,000
Accordion feature allowing an additional increase	$ 125,000
Outstanding balance		17,514	$ 17,514		13,452
Variable interest rate, basis points spread over variable reference rate (as a percent)			4.30%
Future maturities of long-term debt
Debt issuance costs		700	$ 700
Term loans
Debt
Outstanding balance		220,000	220,000		74,625
Future maturities of long-term debt
Debt issuance costs		4,700	4,700
Mortgage
Debt
Mortgage		1,824	1,824		1,859
Term Loan Credit Agreement
Debt
Outstanding balance		220,000	220,000
A&R Term Loan Credit Agreement
Debt
Maximum borrowing capacity	$ 220,000					$ 74,100
A&R Term Loan Credit Agreement \| Minimum
Debt
Unused facility fee (as a percent)	0.375%
A&R Term Loan Credit Agreement \| Maximum
Debt
Unused facility fee (as a percent)	0.50%
A&R Term Loan Credit Agreement \| LIBOR
Debt
Fixed interest rate	6.50%
Contingent notes
Debt
Contingent notes		5,770	5,770		2,680
Earned Contingent Note
Debt
Long-term Debt, Total		17,500	17,500		$ 17,500
Long-term debt, less current installments		$ 17,500	$ 17,500
Guaranteed note
Debt
Fixed interest rate		6.75%	6.75%
Long-term Debt, Total		$ 10,000	$ 10,000

Leases – Narrative (Details)	Sep. 30, 2019
Maximum
Lessee, Lease, Description [Line Items]
Renewal options term	10 years
Minimum
Lessee, Lease, Description [Line Items]
Renewal options term	1 year

Leases – Adoption of new lease standard (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
ASSETS
Property, plant and equipment, net	$ 45,815	$ 27,335	$ 27,335
Operating lease right of use assets	21,987	10,424
Finance lease right-of-use assets	3,800	4,500
Other non-current assets	1,966	2,741	2,857
LIABILITIES
Current portion of operating leases	4,745	2,921
Operating leases, less current installments	17,561	7,644
Current portion of long-term debt and finance lease	3,504	2,251	2,251
Finance leases, less current installments	1,879	2,319	2,319
Other non-current liabilities	238	267	$ 524
Finance lease right-of-use assets	3,800	4,500
Current portion of finance lease	1,238	1,500
ASU 2016-02 \| Balance without adoption of ASC 842
ASSETS
Property, plant and equipment, net	26,303
Other non-current assets	2,040
LIABILITIES
Current portion of long-term debt and finance lease	3,504
Finance leases, less current installments	1,879
Other non-current liabilities	494
ASU 2016-02 \| Adjustment
ASSETS
Property, plant and equipment, net	(19,512)
Operating lease right of use assets	(21,987)	10,424
Other non-current assets	74	(116)
LIABILITIES
Current portion of operating leases	(4,745)	2,921
Operating leases, less current installments	(17,561)	7,644
Other non-current liabilities	$ 256	$ (257)

Leases – Components of lease expense and other information (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)
Lease cost
Amortization of right-of-use assets	$ 337	$ 1,038
Interest on lease liabilities	126	235
Operating lease cost	3,293	5,164
Variable lease cost	208	395
Short-term lease cost	29	48
Total lease cost	$ 3,993	$ 6,880
Weighted-average remaining lease term (years), Operating leases	5 years 2 months 1 day	5 years 2 months 1 day
Weighted-average remaining lease term (years), Finance leases	2 years 6 months 15 days	2 years 6 months 15 days
Weighted-average discount rate, Operating leases	5.20%	5.20%
Weighted-average discount rate, Finance leases	5.50%	5.50%

Leases – Annual future commitments under non-cancelable leases (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Lease Obligations, Operating Leases
Remainder of 2019	$ 1,482
2020	5,911
2021	4,551
2022	4,380
2023	4,075
Thereafter	5,309
Total minimum future obligations	25,708
Less interest	(3,402)
Present value of net future minimum obligations	22,306
Less current lease obligations	(4,745)	$ (2,921)
Long-term lease obligations	17,561	7,644
Lease Obligations, Finance Leases
Remainder of 2019	440
2020	1,428
2021	735
2022	566
2023	164
Thereafter	25
Total minimum future obligations	3,358
Less interest	(241)
Present value of net future minimum obligations	3,117
Less current lease obligations	(1,238)	(1,500)
Long-term lease obligations	$ 1,879	$ 2,319	$ 2,319

Leases - Supplemental Cash Flow (Details) $ in Thousands	9 Months Ended
Leases - Supplemental Cash Flow (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Leases
Operating cash flows from finance leases	$ 235
Operating cash flows from operating leases	3,110
Financing cash flows from finance leases	1,103
Operating leases	4,648
Finance leases	$ 535

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		9 Months Ended
Income Taxes (Details) - USD ($) $ in Millions	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income tax expense (benefit)	12.90%	17.00%	(16.30%)	12.40%
Income tax expense (benefit) at federal statutory rate			21.00%
Holdco
Cash distributions	$ 0.3	$ 0.1	$ 1.6	$ 1.5
Accrued estimated income tax	$ (1.0)	$ 0.2	$ 0.1	$ 0.8

Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Numerator:
Net (loss) income	$ (8,796)	$ 3,902	$ (552)	$ 5,343
Net (loss) income attributable to non-controlling interest	(2,906)	1,681	(88)	2,651
Net (loss) income attributable to PetIQ, Inc.	$ (5,890)	$ 2,221	$ (464)	$ 2,692
Denominator:
Basic weighted average shares (in shares)	22,974	16,944	22,387	15,842
Weighted-average shares of Class A common stock outstanding - diluted (in shares)	22,974	17,239	22,387	15,966
Basic net income per common share	$ (0.26)	$ 0.13	$ (0.02)	$ 0.17
Diluted net income per common share	$ (0.26)	$ 0.13	$ (0.02)	$ 0.17
Stock options
Denominator:
Dilutive effects of stocks		291,000		122,000
Anti dilutive shares excluded from computation of diluted earnings per share		974,000		974,000
RSU
Denominator:
Dilutive effects of stocks		4,000		1,000

Stock Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Stock Based Compensation
Shares reserved for future issuance	0		0
Stock Options Granted (in shares)			423
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	$ (1,601)	$ (1,224)	$ (4,747)	$ (2,678)
Grant date fair value of stock options granted			$ 10.63
Unrecognized compensation cost related to unvested stock options	$ 14,800		$ 14,800
Unrecognized compensation cost related to unvested options, recognized weighted-average period			2 years 9 months 18 days
Class A common stock
Stock Based Compensation
Number of shares reserved	800		800
Class A common stock \| Omnibus Plan
Stock Based Compensation
Shares reserved for future issuance	3,914		3,914
Share available for issuance	1,987		1,987
Maximum
Stock Based Compensation
Maximum term for stock options			10 years

Stock Based Compensation - Weighted Average Assumptions (Details)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 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) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) $ / shares shares
Stock Based Compensation
Stock Options Outstanding - Beginning Balance	1,945
Stock Options Granted (in shares)	423
Stock option Exercised (in shares)	(81)
Stock Options Forfeited (in shares)	(147)
Stock Options Cancelled (in shares)	(1)
Stock Options Outstanding - Ending Balance	2,139	1,945
Options exercisable - Ending Balance	438
Weighted Average Exercise Price Outstanding - Beginning Balance \| $ / shares	$ 23.45
Weighted Average Exercise Price - Granted \| $ / shares	27.54
Weighted Average Exercise Price - Exercised \| $ / shares	19.66
Weighted Average Exercise Price - Forfeited \| $ / shares	21.20
Weighted Average Exercise Price - Expired \| $ / shares	21.37
Weighted Average Exercise Price Outstanding - Ending Balance \| $ / shares	$ 24.56	$ 23.45
Aggregate Intrinsic Value \| $	$ 9,323	$ 5,527
Weighted Average Remaining Contractual Life (years)	8 years 6 months	9 years 1 month 6 days

Stock Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Unrecognized compensation cost related to unvested stock options	$ 14,800		$ 14,800
Stock based compensation expense	(1,601)	$ (1,224)	(4,747)	$ (2,678)
RSU
Unrecognized compensation cost related to unvested stock options	3,600		$ 3,600
Vesting period			3 years 3 months 18 days
Stock based compensation expense	$ 300	$ 100	$ 800	$ 100
Number of Shares
Beginning Balance			51,000
Granted (in shares)			119,000	30
Settled (in shares)			(11,000)
Forfeited (in shares)			(10,000)
Ending balance	149,000		149,000
Weighted Average Grant Date Fair Value
Beginning Balance			$ 33.16
Granted (per share)			27.69
Settled (per share)			25.12
Forfeited (per share)			30.91
Ending balance	$ 29.54		$ 29.54

Stockholder's Equity (Details) - shares	9 Months Ended
Stockholder's Equity (Details) - shares	Sep. 30, 2019	Sep. 30, 2018
Stockholder's Equity
Number of shares Issued		4,200,000
Exchange of common shares	1,590,000	5,874,000
Class B common stock
Stockholder's Equity
Number of shares Issued		4,200,000
Exchange of common shares	1,590,000	5,874,000

Non-Controlling Interests (Details) - shares shares in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Common Stock, Shares, Outstanding, Beginning Balance		21,620
Stock based compensation adjustments		92
Exchange transactions		1,590	5,874
Common Stock, Shares, Outstanding, Ending Balance	23,302	23,302
Continuing LLC Owners
Common Stock, Shares, Outstanding, Beginning Balance		6,547
Exchange transactions		(1,590)
Common Stock, Shares, Outstanding, Ending Balance	4,957	4,957
Amended Holdco LLC Agreement
Common Stock, Shares, Outstanding, Beginning Balance		28,167
Stock based compensation adjustments		92
Common Stock, Shares, Outstanding, Ending Balance	28,259	28,259
Holdco
Weighted average ownership percentage in Holdco	81.40%	79.40%
Continuing LLC Owners
Ownership interest by continuing LLC owners	17.50%	17.50%		23.20%
PetIQ
Ownership interest in Holdco	82.50%	82.50%		76.80%

Customer Concentration (Details) - customer	3 Months Ended		9 Months Ended		12 Months Ended
Customer Concentration (Details) - customer	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Customer concentrations \| Sales
Customer Concentration
Number of customers accounted for more than 10% of sales individually	1	1	2	2
Concentration risk	23.00%	22.00%	35.00%	30.00%
Credit concentrations \| Accounts receivable
Customer Concentration
Number of customers accounted for more than 10% of sales individually			1		1
Concentration risk			52.00%		43.00%

Commitments and Contingencies (Details) $ in Millions	Sep. 30, 2019 USD ($)
Med Vets, Inc. and Bay Medical Solutions Inc
Litigation Contingencies
Liability recorded	$ 1

Segments (Details) $ in Thousands		3 Months Ended		9 Months Ended
Segments (Details) $ in Thousands	Jan. 17, 2018 segment	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	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		$ 186,025	$ 131,382	$ 555,095	$ 417,590
Adjusted EBITDA		19,258	13,409	50,960	35,059
Property, plant and equipment, net		45,815		45,815		$ 27,335	$ 27,335
Domestic
Financial information relating to the Company’s operating segments
Net Sales		184,413	129,947	551,850	414,560
Property, plant and equipment, net		44,796		44,796			26,268
Foreign
Financial information relating to the Company’s operating segments
Net Sales		1,612	1,435	3,245	3,030
Europe
Financial information relating to the Company’s operating segments
Property, plant and equipment, net		1,019		1,019			$ 1,067
Products
Financial information relating to the Company’s operating segments
Net Sales		161,534	108,524	482,224	355,088
Products \| Domestic
Financial information relating to the Company’s operating segments
Net Sales		159,922	107,089	478,979	352,058
Products \| Foreign
Financial information relating to the Company’s operating segments
Net Sales		1,612	1,435	3,245	3,030
Services
Financial information relating to the Company’s operating segments
Net Sales		24,491	22,858	72,871	62,502
Services \| Domestic
Financial information relating to the Company’s operating segments
Net Sales		24,491	22,858	72,871	62,502
Operating Segments \| Products
Financial information relating to the Company’s operating segments
Net Sales		161,534	108,524	482,224	355,088
Adjusted EBITDA		20,506	14,642	56,030	41,337
Operating Segments \| Services
Financial information relating to the Company’s operating segments
Net Sales		24,491	22,858	72,871	62,502
Adjusted EBITDA		7,048	5,217	18,147	13,049
Corporate, Non-Segment \| Unallocated Corporate
Financial information relating to the Company’s operating segments
Adjusted EBITDA		$ (8,296)	$ (6,450)	$ (23,217)	$ (19,327)

Segments- Reconciles Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	$ 19,258	$ 13,409	$ 50,960	$ 35,059
Depreciation	(2,404)	(1,786)	(5,587)	(4,816)
Amortization	(1,807)	(1,294)	(4,364)	(3,691)
Interest	(5,742)	(2,159)	(9,921)	(6,140)
Acquisition costs	(1,960)	(113)	(5,425)	(3,479)
Stock based compensation expense	(1,601)	(1,224)	(4,747)	(2,678)
Purchase accounting adjustment to inventory	(2,403)		(2,403)	(1,502)
Non same-store revenue	2,583	1,472	6,254	2,775
Non same-store costs	(5,394)	(3,845)	(12,690)	(6,667)
Fair value adjustment of contingent note	(2,310)	350	(3,090)	(250)
Integration costs and costs of discontinued clinics	(1,166)	(57)	(2,308)	(813)
Clinic launch expenses	(672)	(50)	(672)	(1,261)
Non-recurring royalty settlement				(440)
SKU Rationalization	(6,482)		(6,482)
Pretax net (loss) income	(10,100)	4,703	(475)	6,097
Income tax benefit (expense)	1,304	(801)	(77)	(754)
Net (loss) income	(8,796)	3,902	(552)	5,343
Products \| Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	20,506	14,642	56,030	41,337
Services \| Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	7,048	5,217	18,147	13,049
Unallocated Corporate \| Corporate, Non-Segment
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	$ (8,296)	$ (6,450)	$ (23,217)	$ (19,327)

Related Parties (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Related Parties (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Related Parties
Advance on tax distributions paid	$ 300		$ 300
Accrued estimated tax distributions					$ 1,200
Notes payable to Seller's of VIP	17,500		17,500		17,500
Accrued interest	290		290		$ 169
Payment of interest	0	$ 0	692	$ 257
Contingent note due	10,000		10,000
Rent expense	91	89	274	268
Chris Christensen
Related Parties
Payment of premium expenses	555	522	693	522
Commission paid	$ 28	$ 20	$ 35	$ 25