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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2020	May 08, 2020
Document Information [Line Items]
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
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	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Class A common stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		24,341,237
Class B common stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		4,039,658

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 28,108	$ 27,272
Accounts receivable, net	131,541	71,377
Inventories	118,738	79,703
Other current assets	8,043	7,071
Total current assets	286,430	185,423
Property, plant and equipment, net	54,240	52,525
Operating lease right of use assets	20,582	20,785
Deferred tax assets	64,149	59,780
Other non-current assets	3,268	3,214
Intangible assets, net	117,621	119,956
Goodwill	230,702	231,045
Total assets	776,992	672,728
Current liabilities
Accounts payable	78,733	51,538
Accrued wages payable	6,536	9,082
Accrued interest payable	643	83
Other accrued expenses	5,968	3,871
Current portion of operating leases	4,770	4,619
Current portion of long-term debt and finance leases	3,841	3,821
Total current liabilities	100,491	73,014
Operating leases, less current installments	16,283	16,580
Long-term debt, less current installments	325,432	251,376
Finance leases, less current installments	3,225	3,331
Other non-current liabilities	58	117
Total non-current liabilities	344,998	271,404
Commitments and contingencies
Equity
Additional paid-in capital	312,874	300,120
Accumulated deficit	(18,006)	(15,903)
Accumulated other comprehensive loss	(1,655)	(1,131)
Total stockholders' equity	293,241	283,114
Non-controlling interest	38,262	45,196
Total equity	331,503	328,310
Total liabilities and equity	776,992	672,728
Class A common stock
Equity
Common stock value	24	23
Class B common stock
Equity
Common stock value	$ 4	$ 5

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Mar. 31, 2020	Dec. 31, 2019
Common stock, shares outstanding	24,318	23,554
Class A common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	125,000	125,000
Common Stock, Shares, Issued	24,318	23,554
Common stock, shares outstanding	24,318	23,554
Class B common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	100,000	100,000
Common Stock, Shares, Issued	4,049	4,752
Common stock, shares outstanding	4,049	4,752

Consolidated Statements of (Loss) Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Total net sales	$ 186,778	$ 148,436
Total cost of sales	154,624	123,706
Gross profit	32,154	24,730
Operating expenses
General and administrative expenses	31,690	20,538
Contingent note revaluations loss		(680)
Operating (loss) income	464	4,872
Interest expense, net	(4,704)	(1,937)
Foreign currency gain (loss), net	73	(122)
Other (expense) income, net	365	13
Total other expense, net	(4,266)	(2,046)
Pretax net (loss) income	(3,802)	2,826
Income tax benefit (expense)	1,169	(500)
Net (loss) income	(2,633)	2,326
Net (loss) income attributable to non-controlling interest	(530)	715
Net (loss) income attributable to PetIQ, Inc.	$ (2,103)	$ 1,611
Net (loss) income per share attributable to PetIQ, Inc. Class A common stock
Basic	$ (0.09)	$ 0.07
Diluted	$ (0.09)	$ 0.07
Weighted average shares of Class A common stock outstanding
Basic	23,728	21,800
Diluted	23,728	21,978
Product
Total net sales	$ 166,280	$ 126,084
Total cost of sales	134,779	108,064
Services
Total net sales	20,498	22,352
Total cost of sales	$ 19,845	$ 15,642

Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Comprehensive Income
Net (loss) income	$ (2,633)	$ 2,326
Foreign currency translation adjustment	(574)	539
Comprehensive (loss) income	(3,207)	2,865
Comprehensive (loss) income attributable to non-controlling interest	(623)	848
Comprehensive loss attributable to PetIQ	$ (2,584)	$ 2,017

- Definition

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

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+ Details

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities
Net (loss) income	$ (2,633)	$ 2,326
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation and amortization of intangible assets and loan fees	5,470	3,091
(Gain) Loss on disposition of property, plant, and equipment	(375)	(34)
Stock based compensation expense	2,558	1,544
Deferred tax adjustment	(1,169)	500
Contingent note revaluations		(680)
Other non-cash activity	33	17
Changes in assets and liabilities
Accounts receivable	(60,217)	(20,444)
Inventories	(39,069)	(20,366)
Other assets	(1,090)	21
Accounts payable	27,827	17,335
Accrued wages payable	(2,561)	(1,150)
Other accrued expenses	2,620	(359)
Net cash (used in) provided by operating activities	(68,606)	(18,199)
Cash flows from investing activities
Proceeds from disposition of property, plant, and equipment	429	47
Purchase of property, plant, and equipment	(5,075)	(897)
Net cash used in investing activities	(4,646)	(850)
Cash flows from financing activities
Proceeds from issuance of long-term debt	239,600	134,134
Principal payments on long-term debt	(165,816)	(125,717)
Tax Distributions to LLC Owners	(20)	(1,378)
Principal payments on finance lease obligations	(394)	(371)
Payment of deferred financing fees and debt discount		(50)
Tax withholding payments on Restricted Stock Units	(149)
Exercise of options and RSU withholdings to purchase common stock	1,002	315
Net cash provided by financing activities	74,223	6,933
Net change in cash and cash equivalents	971	(12,116)
Effect of exchange rate changes on cash and cash equivalents	(135)	123
Cash and cash equivalents, beginning of period	27,272	66,360
Cash and cash equivalents, end of period	28,108	54,367
Supplemental cash flow information
Interest paid	3,789	2,146
Net change in property, plant, and equipment acquired through accounts payable	681	(51)
Finance lease additions	381	210
Net change of deferred tax asset from step-up in basis	3,199	3,138
Income taxes paid	89	176
Accrued tax distribution	$ 106	$ 257

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, 2018	$ 22	$ 7	$ (4,450)	$ (1,316)	$ 262,219	$ 64,496	$ 320,977
Beginning Balance (in shares) at Dec. 31, 2018	21,620	6,547
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 1	$ (1)		(31)	5,049	(5,018)
Exchange of LLC Interests held by LLC Owners (in shares)	519	(519)
Net increase in deferred tax asset from LLC Interest transactions					3,138		3,138
Accrued tax distributions						(257)	(257)
Other comprehensive income				406		133	539
Stock based compensation expense					1,195	349	1,544
Exercise of Options to purchase Common Stock					315		315
Exercise of Options to purchase Common Stock (in shares)	17
Issuance of stock for vesting of RSU's (in shares)	1
Net (loss) income			1,611			715	2,326
Ending Balance at Mar. 31, 2019	$ 22	$ 6	(2,839)	(941)	271,916	60,418	328,582
Ending Balance (in shares) at Mar. 31, 2019	22,157	6,028
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
Exercise of Options to purchase Common Stock (in shares)							119
Ending Balance at Dec. 31, 2019	$ 23	$ 5	(15,903)	(1,131)	300,120	45,196	$ 328,310
Ending Balance (in shares) at Dec. 31, 2019	23,554	4,752
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 1	$ (1)		(43)	6,665	(6,622)
Exchange of LLC Interests held by LLC Owners (in shares)	703	(703)
Net increase in deferred tax asset from LLC Interest transactions					3,199		3,199
Accrued tax distributions						(106)	(106)
Other comprehensive income				(481)		(93)	(574)
Stock based compensation expense					2,142	416	2,558
Exercise of Options to purchase Common Stock					1,002		$ 1,002
Exercise of Options to purchase Common Stock (in shares)	46						46
Issuance of stock for vesting of RSU's					(255)		$ (255)
Issuance of stock for vesting of RSU's (in shares)	15
Net (loss) income			(2,103)			(530)	(2,633)
Ending Balance at Mar. 31, 2020	$ 24	$ 4	$ (18,006)	$ (1,655)	$ 312,874	$ 38,262	$ 331,503
Ending Balance (in shares) at Mar. 31, 2020	24,318	4,049

Principal Business Activity and Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

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. We engage with customers through more than 60,000 points of distribution across retail, including veterinary, and e-commerce channels with our branded distributed medications, which is further supported by our own world-class medication manufacturing facility in Omaha, Nebraska. Our national service platform, VIP Petcare (“VIP”), operates in over 3,400 retail partner locations in 41 states, providing cost effective and convenient veterinary wellness services. PetIQ believes that pets are an important part of the family and deserve the best products and care we can give them.

We have two reporting segments: (i) Products; and (ii) Services. The Products segment consists of our manufacturing and distribution business. The Services segments consists of veterinary services, and related product sales, provided by the Company directly to consumers.

We are the sole 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 of the business and affairs of Opco.

The condensed consolidated financial statements as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019 are unaudited. The condensed consolidated balance sheet as of December 31, 2019 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, 2019 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 11, 2020. 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 note is carried at cost, which approximates fair value. 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.

A portion of the purchase price for the acquisition of Community Veterinary Clinics, LLC d/b/a VIP Petcare (“VIP” and such acquisition, the “VIP Acquisition”) was structured in the form of Contingent Notes (the “Contingent Notes”) that vested based on the combined Company EBITDA targets for the years ending December 31, 2018 and 2019 (“Measurement Dates”). The combined Company EBITDA targets were met for each year end, and as such the Contingent Notes were earned. As such, the portion of the liability as it relates to each Contingent Note became fixed as of December 31, 2019, and 2018, and are carried at cost, which approximates fair value as the stated interest rate is consistent with current market rates. See Note 2 – “Business Combinations” for more information regarding the VIP Acquisition.

The Contingent Notes are included in long-term debt in the accompanying consolidated balance sheets. The Contingent Notes began bearing interest at a fixed rate of 6.75% once they were earned, with the balance payable July 17, 2023.

The Company was required to reassess the fair value of the Contingent Notes at each reporting period prior to the Measurement Dates.

The following table summarizes the Level 3 activity related to the Contingent Notes for the three months ended March 31, 2019:


$'s in 000's
Balance at beginning of the period	$	2,680
Change in fair value of contingent consideration		(680)
Balance at the end of the period	$	2,000

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 expected losses. The Company’s estimate is based on historical collection experience, a review of the current status of trade accounts receivable, and known current economic conditions including the current and expected impact of COVID-19. Payments of trade receivables are allocated to the specific invoices identified on the customer's remittance advice.

Other receivables consists of various receivables due from vendors, banking partners, and notes receivable from suppliers.

Accounts receivable consists of the following as of:


$'s in 000's	March 31, 2020		December 31, 2019
Trade receivables	$	124,845	$	67,551
Other receivables		7,040		4,257
		131,885		71,808
Less: Allowance for doubtful accounts		(344)		(431)
Total accounts receivable, net	$	131,541	$	71,377

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	March 31, 2020		December 31, 2019
Raw materials	$	10,755	$	10,675
Work in progress		2,178		1,717
Finished goods		105,805		67,311
Total inventories	$	118,738	$	79,703

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.

Incentives in the form of cash paid to the customer (or a reduction of a customer cash payment to us) typically are recognized as a reduction of sales unless the incentive is for a distinct benefit that we receive from the customer (e.g., advertising or marketing).

The performance obligations in our contracts are satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of March 31, 2020.

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 March 31, 2020 and December 31, 2019 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 $1.0 million and $0.1 million for three months ended March 31, 2020 and 2019, respectively. Advertising costs were $2.5 million and $0.7 million for the three months ended March 31, 2020 and 2019, respectively.

Collaboration Agreements

Through the Company’s 2019 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”), 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. No costs were incurred during the three months ended March 31, 2020 or 2019.

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 March 31, 2020 and December 31, 2019 the non-controlling interest was approximately 14.3% and 16.8%, 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

Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, "Financial Instruments - Credit Losses." This ASU requires an organization to measure all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable information. Organizations will now use forward-looking information to better estimate their credit losses. The Company adopted this ASU using a modified retrospective approach. Under this method of adoption, the Company determined that there was no cumulative-effect adjustment to beginning Retained earnings on the condensed consolidated balance sheet. Adoption of this standard did not impact the Company’s income before income taxes and had no impact on the condensed consolidated statement of cash flows.

Business Combinations

3 Months Ended

Mar. 31, 2020

Business Combinations

Business Combinations

Note 2 – Business Combination

Perrigo Animal Health Acquisition

On July 8, 2019, PetIQ, through Opco, completed 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:



$'s in 000's	Fair Value
Inventories	$	17,998
Property, plant and equipment		19,568
Other current assets		13,048
Other assets		9,680
Indefinite-lived intangible assets		23,040
Definite-lived intangible assets - 13 year weighted average life		14,480
Goodwill		105,838
Total assets		203,652

Liabilities assumed		19,259

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 $14.5 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 months ended March 31, 2020 was $0.6 million.

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 $105.8 million of goodwill is expected to be deductible for tax purposes. Goodwill was allocated to the Products segment.

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, 2019. 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: Pro forma results for the three months ended March 31, 2019:


($'s in 000's, except per share data)
Net sales	$	168,005
Net (loss) income	$	1,636

(Loss) Earnings per share:
Basic	$	0.08
Diluted	$	0.07

For the three months ended March 31, 2020, the acquired business had Product sales of $23.8 million and pre-tax net income of $6.9 million and are included in the Condensed Consolidated Statements of (Loss) Income.

Property, Plant, and Equipment

3 Months Ended

Mar. 31, 2020

Property, Plant, and Equipment

Property, Plant, and Equipment

Note 3 – Property, Plant, and Equipment

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


$'s in 000's	March 31, 2020		December 31, 2019
Leasehold improvements	$	17,252	$	15,517
Equipment		23,666		23,138
Vehicles and accessories		5,985		6,007
Computer equipment and software		9,642		8,070
Buildings		10,069		10,050
Furniture and fixtures		1,951		1,836
Land		4,557		4,557
Construction in progress		3,824		3,392
		76,946		72,567
Less accumulated depreciation		(22,706)		(20,042)
Total property, plant, and equipment	$	54,240	$	52,525

Depreciation expense related to these assets was $2.9 million and $1.7 million for the three months ended March 31, 2020 and March 31, 2019, respectively.

Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2020

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	March 31, 2020		December 31, 2019
Amortizable intangibles
Certification	7 years	$	350	$	350
Customer relationships	12-20 years		89,170		89,232
Patents and processes	5-10 years		4,828		4,928
Brand names	5-15 years		14,971		15,019
Total amortizable intangibles			109,319		109,529
Less accumulated amortization			(15,184)		(13,058)
Total net amortizable intangibles			94,135		96,471
Non-amortizable intangibles
Trademarks and other			18,016		18,016
In-process research and development			5,470		5,469
Intangible assets, net of accumulated amortization		$	117,621	$	119,956

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 March 31, 2020 and 2019 was $2.2 million and $1.3 million, respectively.

The in-process research and development (“IPRD”), intangible assets represent the value assigned to acquired R&D projects that principally represent rights to develop and sell 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 2020	$	6,708
2021		8,941
2022		9,154
2023		8,796
2024		6,788
Thereafter		53,748

The following is a summary of the changes in the carrying value of goodwill for the period from January 1, 2019 to March 31, 2020:


	Reporting Unit
($'s in 000's)	Products		Services		Total
Goodwill as of January 1, 2019		77,765		47,264		125,029
Foreign currency translation		178		—		178
Acquisitions		105,838		—		105,838
Goodwill as of December 31, 2019		183,781		47,264		231,045
Foreign currency translation		(343)		—		(343)
Goodwill as of March 31, 2020	$	183,438	$	47,264	$	230,702

Debt

3 Months Ended

Mar. 31, 2020

Debt

Debt

Note 5 – Debt

A&R Credit Agreement

In connection with the Perrigo Animal Health Acquisition, the Company amended the existing revolving credit agreement of Opco and each of its domestic wholly-owned subsidiaries (the “Amended Revolving Credit Agreement”) on July 8, 2019. The Amended Revolving Credit Agreement provides for a secured revolving credit facility of $125 million that matures on July 8, 2024. The borrowers under the Amended Revolving Credit Facility incur fees between 0.375% and 0.50% as unused facility fees, dependent on the aggregate amount borrowed.

All obligations under the Amended Revolving Credit Agreement are unconditionally guaranteed by HoldCo and, subject to certain exceptions, each of its material current and future domestic wholly-owned subsidiaries. All obligations under the Amended Revolving Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of each borrower and guarantor under the Amended Revolving Credit Agreement, subject to certain exceptions.

The Amended Revolving Credit Agreement contains a number of covenants that, among other things, restrict the ability of the borrowers and guarantors thereunder 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 March 31, 2020, the borrowers and guarantors thereunder were in compliance with these covenants. Although the Company currently expects continued compliance with debt covenants, the impact COVID-19 may negatively affect the Company’s ability to comply with these covenants. The Amended Revolving Credit Agreement also contains certain customary affirmative covenants and events of default (including change of control). In addition, the Amended Revolving Credit Agreement contains a minimum fixed charge coverage ratio covenant which is tested if availability under the Amended Revolving Credit Agreement falls below a certain level. As of March 31, 2020, the borrower and guarantors thereunder were in compliance with these covenants.

As of March 31, 2020, $84.3 million was outstanding under the Amended Revolving Credit Agreement. The weighted average interest rate on the Amended Revolving Credit Agreement was 3.1% at March 31, 2020.

A&R Term Loan Credit Agreement

Also in connection with the closing of the Perrigo Animal Health Acquisition, the Company amended and restated the existing term loan credit agreement of Opco (the “A&R Term Loan Credit Agreement”) on July 8, 2019. The $220.0 million A&R Term Loan Credit Agreement has an interest rate equal to the Eurodollar rate plus 4.50%. The proceeds of the A&R Term Loan Agreement were used to refinance the existing term loan facility and consummate the Perrigo Animal Health 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 PetIQ, LLC 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 ability of the borrower and guarantors thereunder 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. 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 covenant that requires compliance with 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 March 31, 2020, the borrower and guarantors thereunder were 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 and the Contingent Notes. As of March 31, 2020, $7.5 million was payable pursuant to the 2018 Contingent Note and $10.0 million was payable pursuant to the 2019 Contingent Note. The guarantee note and the Contingent Notes, have a collective balance of $27.5 million and 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	March 31, 2020		December 31, 2019
Term loans	$	219,450	$	220,000
Revolving credit facility		84,346		10,000
Mortgage		1,801		1,812
Notes Payable - VIP Acquisition		27,500		27,500
Net discount on debt and deferred financing fees		(5,416)		(5,688)
	$	327,681	$	253,624
Less current maturities of long-term debt		(2,249)		(2,248)
Total long-term debt	$	325,432	$	251,376

Future maturities of long-term debt, excluding the discount on debt and deferred financing fees, as of March 31, 2020, are as follows:


($'s in 000's)
Remainder of 2020	$	1,686
2021		2,250
2022		2,253
2023		29,755
2024		2,257
Thereafter		294,896

The Company did not incur any debt issuance costs during the three months ended March 31, 2020. The Company incurred debt issuance costs of $0.1 million related to the A&R Credit Agreement and zero related to the Term Loan during the three months ended March 31, 2019.

Leases

3 Months Ended

Mar. 31, 2020

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.

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.



	Three Months Ended		Three Months Ended
$'s in 000's	March 31, 2020		March 31, 2019
Finance lease cost
Amortization of right-of-use assets	$	391	$	290
Interest on lease liabilities		82		50
Operating lease cost		1,831		910
Variable lease cost(1)		175		72
Short-term lease cost		5		14
Sublease income		(75)		—
Total lease cost	$	2,409	$	1,336

⁽¹⁾

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

Other information related to leases was as follows as of:


	March 31, 2020	March 31, 2019
Weighted-average remaining lease term (years)
Operating leases	4.82	3.95
Finance leases	2.80	2.65
Weighted-average discount rate
Operating leases	5.3%	5.0%
Finance leases	5.8%	5.5%

Annual future commitments under non-cancelable leases as of March 31, 2020, consist of the following:


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
Remainder of 2020	$	4,452	$	1,237
2021		5,137		1,411
2022		4,829		1,225
2023		4,036		1,196
2024		2,516		150
Thereafter		2,957		23
Total minimum future obligations	$	23,927	$	5,242
Less interest		(2,874)		(426)
Present value of net future minimum obligations		21,053		4,816
Less current lease obligations		(4,770)		(1,591)
Long-term lease obligations	$	16,283	$	3,225

Supplemental cash flow information:



	Three Months Ended		Three Months Ended
$'s in 000's	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	82	$	50
Operating cash flows from operating leases		1,798		880
Financing cash flows from finance leases		394		371
(Noncash) right-of-use assets obtained in exchange for lease obligations
Operating leases		1,696		—
Finance leases		381		210

Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2020
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 30.8% and 17.7% for the three months ended March 31, 2020 and 2019, respectively including discrete items. Income tax expense for three months ended March 31, 2020 and 2019 was different than the U.S federal statutory income tax rate of 21% primarily due to the effect of state taxes, foreign GILTI income inclusion and various permanent tax differences which are offset partially by the impact of the non-controlling interest income that is not taxable. The Company has assessed the realizability of the net deferred tax assets as of March 31, 2020 and in that analysis has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of certain carryforwards. The Company believes that there will be sufficient taxable income in the future that the Company’s deferred tax assets will be realized except for the following. The Company has a valuation allowance for certain deferred tax assets of $0.1 million and $0.1 million as of March 31, 2020 and December 31, 2019, respectively. It is possible that some or all of the remaining deferred tax assets could ultimately not be realized in the future if our operations are not able to generate sufficient taxable income. Therefore, a substantial valuation allowance to reduce our deferred tax assets may be required, which would materially increase our tax expense in the period in which the allowance is recognized and would adversely affect our results of operations. HoldCo makes cash distributions to members to pay taxes attributable to their allocable share of income earned. In the three months ended March 31, 2020 and 2019, the Company made cash distributions of $0.02 million and $1.40 million, respectively. Additionally, HoldCo accrues for distributions required to be made related to estimated income taxes. During the three months ended March 31, 2020 and 2019, the Company accrued distributions of $0.1 million and $0.3 million, respectively On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. This legislation was enacted before the date of filing this Form 10-Q. The Company will benefit from the Employee Retention Credits and the payroll tax deferral.

Earnings (Loss) per Share

3 Months Ended

Mar. 31, 2020

Earnings (Loss) per Share

Earnings (Loss) 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 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 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 March 31,
(in 000's, except for per share amounts)		2020	2019
Numerator:
Net (loss) income	$	(2,633)	$	2,326
Less: net (loss) income attributable to non-controlling interests		(530)		715
Net (loss) income attributable to PetIQ, Inc. — basic and diluted		(2,103)		1,611
Denominator:
Weighted-average shares of Class A common stock outstanding -- basic		23,728		21,800
Dilutive effects of stock options that are convertible into Class A common stock		—		171
Dilutive effect of RSUs		—		7
Weighted-average shares of Class A common stock outstanding -- diluted		23,728		21,978

(Loss) earnings per share of Class A common stock — basic	$	(0.09)	$	0.07
(Loss) earnings per share of Class A common stock — diluted	$	(0.09)	$	0.07

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

For the three months ended March 31, 2020 and 2019, 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 months ended March 31, 2020, as they have been determined to be anti-dilutive under the treasury stock method. For the three months ended March 31, 2019, 748 thousand and 30 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

3 Months Ended

Mar. 31, 2020

Stock Based Compensation

Stock Based Compensation

Note 9 – Stock Based Compensation

PetIQ, Inc. Omnibus Incentive Plan

The PetIQ, Inc. Omnibus Incentive Plan, as amended (the “Plan”) provides for the grant of various equity-based incentive awards to directors of the Company, employees, and consultants. The types of equity-based awards that may be granted under the Plan include: stock options, stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), and other stock-based awards. The Company has 3,914 thousand authorized shares under the Plan. As of March 31, 2020, 1,299 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 March 31, 2020, 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 $2.2 million for the three months ended March 31, 2020, and $1.4 million for the three months ended March 31, 2019. All stock based compensation expense is included in general and administrative expenses based on the role of recipients. The 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 March 31, 2020 and 2019:


	March 31, 2020			March 31, 2019
Expected term (years) (1)		6.25			6.25
Expected volatility (2)		33.91	%		35.00	%
Risk-free interest rate (3)		0.72	%		2.74	%
Dividend yield (4)		0.00	%		0.00	%

⁽¹⁾

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

⁽²⁾

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

⁽³⁾

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

⁽⁴⁾

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

The weighted average grant date fair value of stock options granted during the period ended March 31, 2020 was $6.70 per option. At March 31, 2020, total unrecognized compensation cost related to unvested stock options was $13.2 million and is expected to be recognized over a weighted-average period of 2.7 years.


							Weighted
							Average
			Weighted		Aggregate		Remaining
	Stock		Average		Intrinsic		Contractual
	Options		Exercise		Value		Life
	(in 000's)		Price		(in 000's)		(years)
Outstanding at January 1, 2019		1,945	$	23.45	$	5,527		9.1
Granted		423		27.54
Exercised		(119)		19.51
Forfeited		(168)		21.92
Cancelled/Expired		(9)		25.70
Outstanding at December 31, 2019		2,072	$	24.63	$	6,266		8.0
Granted		478		19.49
Exercised		(46)		21.65
Forfeited		(13)		22.98
Outstanding at March 31, 2020		2,491	$	23.70	$	5,974		7.9
Options exercisable at March 31, 2020		870

Restricted Stock Units

The Company awards RSUs to certain employees and directors under the Plan, which are subject to time-based vesting conditions. Upon a termination of service relationship by the Company, all unvested RSUs will be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The fair value of RSUs are measured based on the closing fair market value of the Company’s common stock on the date of grant. At March 31, 2020, total unrecognized compensation cost related to unvested RSUs was $7.5 million and is expected to vest over a weighted average 3.5 years.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $0.4 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively. All stock based compensation expense is included in general and administrative expenses based on the role of recipients.

The following table summarizes the activity of the Company’s RSUs for the period ended March 31, 2020.


			Weighted
	Number of		Average
	Shares		Grant Date
	(in 000's)		Fair Value
Outstanding at January 1, 2019		51	$	33.16
Granted		123		27.61
Settled		(25)		30.43
Forfeited		(15)		30.58
Outstanding at December 31, 2019		133	$	28.85
Granted		243		19.49
Settled		(22)		27.56
Forfeited		(1)		32.53
Nonvested RSUs at March 31, 2020		353	$	22.48

Stockholder's Equity	3 Months Ended
Stockholder's Equity	Mar. 31, 2020
Stockholder's Equity
Stockholder's Equity	Note 10 – Stockholders’ Equity Exchanges During the three months ended March 31, 2020 and 2019, respectively, holders of Class B common stock and LLC Interests exercised exchange rights and exchanged 703 thousand and 519 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.

Non-Controlling Interests

3 Months Ended

Mar. 31, 2020

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 January 1, 2019		6,547		21,620	28,167	23.2%	76.8%
Stock based compensation adjustments		—		140	140
Exchange transactions		(1,794)		1,794	—
As of December 31, 2019		4,752		23,554	28,306	16.8%	83.2%
Stock based compensation adjustments				61	61
Exchange transactions		(703)		703	—
As of March 31, 2020		4,049		24,318	28,367	14.3%	85.7%

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

For the three months ended March 31, 2020 and 2019, respectively, the Company owned a weighted average of 83.7% and 77.4% of Holdco, respectively.

Customer Concentration	3 Months Ended
Customer Concentration	Mar. 31, 2020
Customer Concentration
Customer Concentration	Note 12 – Customer Concentration The Company has significant exposure to customer concentration. During the three months ended March 31, 2020 two customers individually accounted for more than 10% of sales, comprising 42% of net sales, for such periods. During the three months ended March 31, 2019 two customers individually accounted for more than 10% of sales, comprising 33% of net sales. At March 31, 2020 one Products segment customer individually accounted for more than 10% of outstanding trade receivables, and accounted for 45% of outstanding trade receivables, net. At December 31, 2019 two Products segment customers individually accounted for more than 10% of outstanding trade receivables, and accounted for 61% of outstanding trade receivables, net.

Commitments and Contingencies	3 Months Ended
Commitments and Contingencies	Mar. 31, 2020
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. The Plaintiffs’ sought unspecified monetary damages, and various injunctive relief, including an order to require PetIQ to divest its interests in VIP. In June 2018, the Company filed a Motion to Dismiss the Complaint for failure to state a claim upon which relief could be granted. On August 3, 2018 the Court granted the Company’s Motion to Dismiss the Complaint, but permitted the plaintiffs to attempt to plead a viable Complaint. The Plaintiffs’ filed an Amended Complaint on December 13, 2018 and we subsequently filed a second Motion to Dismiss the Amended Complaint. 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 the 9th Circuit Court of Appeals on May 21, 2019 and briefing on appeal was completed in December 2019. Oral arguments have been scheduled for June 9, 2020. A final decision from the 9th Circuit Court of Appeals is estimated in late 2020 or early 2021. As no impact to the Company is considered probable or estimable, no litigation reserve has been accrued. The Company has a supplier who has alleged PetIQ has breached its supply agreement. PetIQ believes the Company is not in breach, however even if the Company has breached the supply agreement, the Company has the ability to cure the breach prior to Q3 2020. The supplier has stated it believes the breach would warrant a $20 million payment. As PetIQ believes the Company has not breached the agreement, the potential outcome is between no payment and the $20 million alleged by the supplier. Any amount within the range is as likely as any other, the Company has not recorded a liability as of March 31, 2020. Negotiations with the supplier are ongoing. The Company cannot provide assurance that any ultimate resolution will be favorable to the Company. The Company records a liability when a particular contingency is probable and estimable and provides disclosure for contingencies that are at least reasonably possible of resulting in a loss including an estimate which we currently cannot make. The Company has not accrued for any contingency at March 31, 2020 and December 31, 2019 as the Company does not consider any contingency to be probable or estimable. The Company expenses legal costs as incurred within general and administrative expenses on the consolidated condensed statements of operations. Commitments During the three months ended March 31, 2020, the Company executed an Asset Purchase Agreement (the “Purchase Agreement”) to acquire the U.S. rights to Capstar® and CapAction® and related assets (the “Acquisition”) from Elanco US Inc. (“Elanco”) for $95 million, plus the cost of certain outstanding finished goods inventory in saleable condition. The closing of the transaction is contingent upon customary closing conditions, including, among others, the approval of the acquisition under a consent order issued by the U.S. Federal Trade Commission. The parties have agreed that the Acquisition will not close earlier than July 1, 2020. The Company is in the process of arranging financing to complete the Acquisition.

Segments

3 Months Ended

Mar. 31, 2020

Segments

Segments

Note 14 – Segments

The Company has two operating segments: Products and Services. The Products segment consists of the Company’s manufacturing and distribution business. The Services segment consists of the Company’s veterinary services, and related product sales, provided by the Company directly to consumers.

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

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


$'s in 000's					Unallocated
March 31, 2020	Products		Services		Corporate		Consolidated
Net Sales	$	166,280	$	20,498	$	—	$	186,778
Adjusted EBITDA		24,279		1,989		(11,810)		14,458
Depreciation expense		1,316		848		709		2,873
Capital expenditures		1,673		2,833		569		5,075


$'s in 000's					Unallocated
March 31, 2019	Products		Services		Corporate		Consolidated
Net Sales	$	126,084	$	22,352	$	—	$	148,436
Adjusted EBITDA		13,556		5,277		(7,961)		10,872
Depreciation expense		553		524		576		1,653
Capital expenditures	$	462	$	281	$	154	$	897

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


	For the three months ended
$'s in 000's	March 31, 2020		March 31, 2019
Adjusted EBITDA:
Product	$	24,279	$	13,556
Services		1,989		5,277
Unallocated Corporate		(11,810)		(7,961)
Total Consolidated		14,458		10,872
Adjustments:
Depreciation		(2,873)		(1,654)
Amortization		(2,242)		(1,279)
Interest		(4,704)		(1,937)
Acquisition costs(1)		(586)		(576)
Stock based compensation expense		(2,558)		(1,544)
Non same-store revenue(2)		2,282		1,516
Non same-store costs(2)		(6,400)		(3,252)
Fair value adjustment of contingent note(3)		—		680
Integration costs and costs of discontinued clinics(4)		(454)		—
Clinic launch expenses(5)		(676)		—
Litigation expenses		(49)		—
Pretax net (loss) income	$	(3,802)	$	2,826
Income tax benefit (expense)		1,169		(500)
Net (loss) income	$	(2,633)	$	2,326

(1)

Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket costs related to completed and contemplated acquisitions.

(2)

Non same-store revenue and costs relate to Services segment and are from wellness centers, host partners, and regions with less than six full trailing quarters of operating results.

(3)

Fair value adjustment on the contingent note represents the non cash adjustment to mark the 2019 Contingent Note to Fair value.

(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.

(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.

Supplemental geographic disclosures are below.


	Three months ended March 31, 2020
$'s in 000's	U.S.		Foreign		Total
Products segment sales	$	165,072	$	1,208	$	166,280
Services segment revenue		20,498		—		20,498
Total net sales	$	185,570	$	1,208	$	186,778

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

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


	March 31, 2020		December 31, 2019
United States	$	53,129	$	51,397
Europe		1,111		1,128
Total	$	54,240	$	52,525

Related Parties	3 Months Ended
Related Parties	Mar. 31, 2020
Related Parties
Related Parties	Note 15 – Related Parties As discussed in Note 7– “Income Taxes,” the Company has accrued tax distributions that are payable to holders of Class B common stock and LLC Interests to facilitate the payment of periodic estimated tax obligations by such holders. At March 31, 2020 and December 31, 2019, the Company had an accrual of $0.5 million and $0.4 million, respectively, 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 $27.5 million in aggregate as of March 31, 2020 and December 31, 2019. The Company had $0.4 million in accrued interest on these notes as of March 31, 2020 and no accrued interest on these notes as of December 31, 2019. The Company paid no interest in the three months ended March 31, 2020, but paid $0.4 million of interest in the three months ended March 31, 2019. 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 $73 thousand in the three months ended March 31, 2020 and March 31, 2019, 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 $283 thousand and $137 thousand for the three months ended March 31, 2020 and March 31, 2019. Mr. Chris Christensen was paid a commission of approximately $18 thousand and $7 thousand for the three months ended March 31, 2020 and March 31, 2019, respectively, for the sale of such insurance policies to the Company.

Subsequent Events	3 Months Ended
Subsequent Events	Mar. 31, 2020
Subsequent Events
Subsequent Events	Note 16 – Subsequent events In April 2020, the Company purchased a parcel of land for $2.5 million. The broker for the Company was Colliers International, and the agent was Mike Christensen, the brother of CEO McCord Christensen. Total commission paid to Colliers was approximately $75 thousand. The Company is closely monitoring the impact of the coronavirus (“COVID-19”) pandemic on all aspects of its business. The COVID-19 pandemic adversely affected the Company’s financial results and business operations in the Company’s first fiscal quarter ended March 31, 2020, and uncertainties regarding the pandemic continue to result in serious economic disruptions including restrictions on our business activities or health impacts to our employees. The full impact of the COVID-19 outbreak is unknown, resulting in a high degree of uncertainty for potentially extended periods of time. At this time, neither the duration nor scope of the disruption can be predicted, therefore, the negative impact on our financial position and operating results cannot be reasonably estimated.

Principal Business Activity and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

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 Company was required to reassess the fair value of the Contingent Notes at each reporting period prior to the Measurement Dates.

The following table summarizes the Level 3 activity related to the Contingent Notes for the three months ended March 31, 2019:


$'s in 000's
Balance at beginning of the period	$	2,680
Change in fair value of contingent consideration		(680)
Balance at the end of the period	$	2,000

Cash and Cash Equivalents

Receivables and Credit Policy

Other receivables consists of various receivables due from vendors, banking partners, and notes receivable from suppliers.

Accounts receivable consists of the following as of:


$'s in 000's	March 31, 2020		December 31, 2019
Trade receivables	$	124,845	$	67,551
Other receivables		7,040		4,257
		131,885		71,808
Less: Allowance for doubtful accounts		(344)		(431)
Total accounts receivable, net	$	131,541	$	71,377

Inventories


$'s in 000's	March 31, 2020		December 31, 2019
Raw materials	$	10,755	$	10,675
Work in progress		2,178		1,717
Finished goods		105,805		67,311
Total inventories	$	118,738	$	79,703

Property, Plant, and Equipment


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

Revenue Recognition

When Performance Obligations Are Satisfied

The performance obligations in our contracts are satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of March 31, 2020.

Significant Payment Terms

Shipping

Variable Consideration

Warranties & Returns

Contract balances

Contract asset and liability balances as of March 31, 2020 and December 31, 2019 are immaterial. The Company does not have significant deferred revenue or unbilled receivable balances.

Cost of Services

Research and Development and Advertising Costs

Collaboration Agreements

Income taxes

Non-controlling interest

Litigation

Adopted Accounting Standard Updates

Principal Business Activity and Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2020

Principal Business Activity and Significant Accounting Policies

Summary of Level 3 activity related to the contingent consideration


$'s in 000's
Balance at beginning of the period	$	2,680
Change in fair value of contingent consideration		(680)
Balance at the end of the period	$	2,000

Schedule of accounts receivable


$'s in 000's	March 31, 2020		December 31, 2019
Trade receivables	$	124,845	$	67,551
Other receivables		7,040		4,257
		131,885		71,808
Less: Allowance for doubtful accounts		(344)		(431)
Total accounts receivable, net	$	131,541	$	71,377

Schedule of components of inventories


$'s in 000's	March 31, 2020		December 31, 2019
Raw materials	$	10,755	$	10,675
Work in progress		2,178		1,717
Finished goods		105,805		67,311
Total inventories	$	118,738	$	79,703

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 Combinations (Tables) - Perrigo Animal Health Acquisition

3 Months Ended

Mar. 31, 2020

Summary of preliminary estimated fair value of the consideration



$'s in 000's	Fair Value
Inventories	$	17,998
Property, plant and equipment		19,568
Other current assets		13,048
Other assets		9,680
Indefinite-lived intangible assets		23,040
Definite-lived intangible assets - 13 year weighted average life		14,480
Goodwill		105,838
Total assets		203,652

Liabilities assumed		19,259

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)

Summary of pro forma combined statements of operations


($'s in 000's, except per share data)
Net sales	$	168,005
Net (loss) income	$	1,636

(Loss) Earnings per share:
Basic	$	0.08
Diluted	$	0.07

Property, Plant, and Equipment (Tables)

3 Months Ended

Mar. 31, 2020

Property, Plant, and Equipment

Property, Plant, and Equipment


$'s in 000's	March 31, 2020		December 31, 2019
Leasehold improvements	$	17,252	$	15,517
Equipment		23,666		23,138
Vehicles and accessories		5,985		6,007
Computer equipment and software		9,642		8,070
Buildings		10,069		10,050
Furniture and fixtures		1,951		1,836
Land		4,557		4,557
Construction in progress		3,824		3,392
		76,946		72,567
Less accumulated depreciation		(22,706)		(20,042)
Total property, plant, and equipment	$	54,240	$	52,525

Intangible Assets and Goodwill (Tables)

3 Months Ended

Mar. 31, 2020

Intangible Assets and Goodwill

Schedule of intangible assets


$'s in 000's	Useful Lives	March 31, 2020		December 31, 2019
Amortizable intangibles
Certification	7 years	$	350	$	350
Customer relationships	12-20 years		89,170		89,232
Patents and processes	5-10 years		4,828		4,928
Brand names	5-15 years		14,971		15,019
Total amortizable intangibles			109,319		109,529
Less accumulated amortization			(15,184)		(13,058)
Total net amortizable intangibles			94,135		96,471
Non-amortizable intangibles
Trademarks and other			18,016		18,016
In-process research and development			5,470		5,469
Intangible assets, net of accumulated amortization		$	117,621	$	119,956

Estimated future amortization expense


Years ending December 31, ($'s in 000's)
Remainder of 2020	$	6,708
2021		8,941
2022		9,154
2023		8,796
2024		6,788
Thereafter		53,748

Schedule of Goodwill


	Reporting Unit
($'s in 000's)	Products		Services		Total
Goodwill as of January 1, 2019		77,765		47,264		125,029
Foreign currency translation		178		—		178
Acquisitions		105,838		—		105,838
Goodwill as of December 31, 2019		183,781		47,264		231,045
Foreign currency translation		(343)		—		(343)
Goodwill as of March 31, 2020	$	183,438	$	47,264	$	230,702

Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt

Schedule of components of long term debt


$'s in 000's	March 31, 2020		December 31, 2019
Term loans	$	219,450	$	220,000
Revolving credit facility		84,346		10,000
Mortgage		1,801		1,812
Notes Payable - VIP Acquisition		27,500		27,500
Net discount on debt and deferred financing fees		(5,416)		(5,688)
	$	327,681	$	253,624
Less current maturities of long-term debt		(2,249)		(2,248)
Total long-term debt	$	325,432	$	251,376

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


($'s in 000's)
Remainder of 2020	$	1,686
2021		2,250
2022		2,253
2023		29,755
2024		2,257
Thereafter		294,896

- 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

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Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
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-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

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

+ Details

Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases

Schedule of components of lease expense



	Three Months Ended		Three Months Ended
$'s in 000's	March 31, 2020		March 31, 2019
Finance lease cost
Amortization of right-of-use assets	$	391	$	290
Interest on lease liabilities		82		50
Operating lease cost		1,831		910
Variable lease cost(1)		175		72
Short-term lease cost		5		14
Sublease income		(75)		—
Total lease cost	$	2,409	$	1,336

Schedule of other information related to leases


	March 31, 2020	March 31, 2019
Weighted-average remaining lease term (years)
Operating leases	4.82	3.95
Finance leases	2.80	2.65
Weighted-average discount rate
Operating leases	5.3%	5.0%
Finance leases	5.8%	5.5%

Summary of annual future commitments under non-cancelable leases


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
Remainder of 2020	$	4,452	$	1,237
2021		5,137		1,411
2022		4,829		1,225
2023		4,036		1,196
2024		2,516		150
Thereafter		2,957		23
Total minimum future obligations	$	23,927	$	5,242
Less interest		(2,874)		(426)
Present value of net future minimum obligations		21,053		4,816
Less current lease obligations		(4,770)		(1,591)
Long-term lease obligations	$	16,283	$	3,225

Supplemental cash flow information



	Three Months Ended		Three Months Ended
$'s in 000's	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	82	$	50
Operating cash flows from operating leases		1,798		880
Financing cash flows from finance leases		394		371
(Noncash) right-of-use assets obtained in exchange for lease obligations
Operating leases		1,696		—
Finance leases		381		210

Earnings (Loss) per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings (Loss) per Share

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


	Three months ended March 31,
(in 000's, except for per share amounts)		2020	2019
Numerator:
Net (loss) income	$	(2,633)	$	2,326
Less: net (loss) income attributable to non-controlling interests		(530)		715
Net (loss) income attributable to PetIQ, Inc. — basic and diluted		(2,103)		1,611
Denominator:
Weighted-average shares of Class A common stock outstanding -- basic		23,728		21,800
Dilutive effects of stock options that are convertible into Class A common stock		—		171
Dilutive effect of RSUs		—		7
Weighted-average shares of Class A common stock outstanding -- diluted		23,728		21,978

(Loss) earnings per share of Class A common stock — basic	$	(0.09)	$	0.07
(Loss) earnings per share of Class A common stock — diluted	$	(0.09)	$	0.07

Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Stock Based Compensation

Fair value of the stock option awards was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions


	March 31, 2020			March 31, 2019
Expected term (years) (1)		6.25			6.25
Expected volatility (2)		33.91	%		35.00	%
Risk-free interest rate (3)		0.72	%		2.74	%
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		Aggregate		Remaining
	Stock		Average		Intrinsic		Contractual
	Options		Exercise		Value		Life
	(in 000's)		Price		(in 000's)		(years)
Outstanding at January 1, 2019		1,945	$	23.45	$	5,527		9.1
Granted		423		27.54
Exercised		(119)		19.51
Forfeited		(168)		21.92
Cancelled/Expired		(9)		25.70
Outstanding at December 31, 2019		2,072	$	24.63	$	6,266		8.0
Granted		478		19.49
Exercised		(46)		21.65
Forfeited		(13)		22.98
Outstanding at March 31, 2020		2,491	$	23.70	$	5,974		7.9
Options exercisable at March 31, 2020		870

Summary of RSU activity


			Weighted
	Number of		Average
	Shares		Grant Date
	(in 000's)		Fair Value
Outstanding at January 1, 2019		51	$	33.16
Granted		123		27.61
Settled		(25)		30.43
Forfeited		(15)		30.58
Outstanding at December 31, 2019		133	$	28.85
Granted		243		19.49
Settled		(22)		27.56
Forfeited		(1)		32.53
Nonvested RSUs at March 31, 2020		353	$	22.48

Non-Controlling Interests (Tables)

3 Months Ended

Mar. 31, 2020

Non-Controlling Interests

Summary of noncontrolling interest


	LLC Interests held					% of Total
		LLC				LLC
$'s in 000's	Owners		PetIQ, Inc.		Total	Owners	PetIQ, Inc.
As of January 1, 2019		6,547		21,620	28,167	23.2%	76.8%
Stock based compensation adjustments		—		140	140
Exchange transactions		(1,794)		1,794	—
As of December 31, 2019		4,752		23,554	28,306	16.8%	83.2%
Stock based compensation adjustments				61	61
Exchange transactions		(703)		703	—
As of March 31, 2020		4,049		24,318	28,367	14.3%	85.7%

Segments (Tables)

3 Months Ended

Mar. 31, 2020

Segments

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


$'s in 000's					Unallocated
March 31, 2020	Products		Services		Corporate		Consolidated
Net Sales	$	166,280	$	20,498	$	—	$	186,778
Adjusted EBITDA		24,279		1,989		(11,810)		14,458
Depreciation expense		1,316		848		709		2,873
Capital expenditures		1,673		2,833		569		5,075


$'s in 000's					Unallocated
March 31, 2019	Products		Services		Corporate		Consolidated
Net Sales	$	126,084	$	22,352	$	—	$	148,436
Adjusted EBITDA		13,556		5,277		(7,961)		10,872
Depreciation expense		553		524		576		1,653
Capital expenditures	$	462	$	281	$	154	$	897

Summary of reconciles segment adjusted ebitda to pretax net income


	For the three months ended
$'s in 000's	March 31, 2020		March 31, 2019
Adjusted EBITDA:
Product	$	24,279	$	13,556
Services		1,989		5,277
Unallocated Corporate		(11,810)		(7,961)
Total Consolidated		14,458		10,872
Adjustments:
Depreciation		(2,873)		(1,654)
Amortization		(2,242)		(1,279)
Interest		(4,704)		(1,937)
Acquisition costs(1)		(586)		(576)
Stock based compensation expense		(2,558)		(1,544)
Non same-store revenue(2)		2,282		1,516
Non same-store costs(2)		(6,400)		(3,252)
Fair value adjustment of contingent note(3)		—		680
Integration costs and costs of discontinued clinics(4)		(454)		—
Clinic launch expenses(5)		(676)		—
Litigation expenses		(49)		—
Pretax net (loss) income	$	(3,802)	$	2,826
Income tax benefit (expense)		1,169		(500)
Net (loss) income	$	(2,633)	$	2,326

(1)

Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket costs related to completed and contemplated acquisitions.

(2)

Non same-store revenue and costs relate to Services segment and are from wellness centers, host partners, and regions with less than six full trailing quarters of operating results.

(3)

Fair value adjustment on the contingent note represents the non cash adjustment to mark the 2019 Contingent Note to Fair value.

(4)

(5)

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


	Three months ended March 31, 2020
$'s in 000's	U.S.		Foreign		Total
Products segment sales	$	165,072	$	1,208	$	166,280
Services segment revenue		20,498		—		20,498
Total net sales	$	185,570	$	1,208	$	186,778

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

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


	March 31, 2020		December 31, 2019
United States	$	53,129	$	51,397
Europe		1,111		1,128
Total	$	54,240	$	52,525

Principal Business Activity and Significant Accounting Policies - (Details)	3 Months Ended
	Mar. 31, 2020 segment state location item
Principal Business Activity and Significant Accounting Policies
Number of points of distribution \| item	60,000
Number of retail pharmacy locations \| location	3,400
Number of states in which the entity provides veterinary services to pet owners \| state	41
Number of reportable segments \| segment	2

Principal Business Activity and Significant Accounting Policies - Fair value on a recurring basis (Details)	Mar. 31, 2020	Jul. 31, 2017
Fair Value of Financial Instruments
Fixed interest rate		4.35%
Contingent notes
Fair Value of Financial Instruments
Fixed interest rate	6.75%

Principal Business Activity and Significant Accounting Policies - Fair value on a contingent consideration (Details) - VIP - Level 3 $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Business Acquisition, Contingent Consideration [Line Items]
Balance at beginning of the period	$ 2,680
Change in fair value of contingent consideration	(680)
Balance at the end of the period	$ 2,000

Principal Business Activity and Significant Accounting Policies - Receivables and Credit Policy (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Receivables and Credit Policy
Accounts receivable, gross	$ 131,885	$ 71,808
Less: Allowance for doubtful accounts	(344)	(431)
Total accounts receivable, net	131,541	71,377
Trade receivables
Receivables and Credit Policy
Accounts receivable, gross	124,845	67,551
Other receivables
Receivables and Credit Policy
Accounts receivable, gross	$ 7,040	$ 4,257

Principal Business Activity and Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Inventories
Raw materials	$ 10,755	$ 10,675
Work in progress	2,178	1,717
Finished goods	105,805	67,311
Total inventories	$ 118,738	$ 79,703

Principal Business Activity and Significant Accounting Policies - PPNE (Details)	3 Months Ended
	Mar. 31, 2020
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)	Mar. 31, 2020
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 Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018
Research and Development and Advertising Costs
Research and development costs	$ 1.0	$ 0.1
Advertising costs	2.5	$ 0.7
Collaboration Agreements
Collaboration agreements, contingent payments to be made	$ 20.8
Continuing LLC Owners
Non-Controlling Interests
Interest held by non-controlling owners	14.30%		16.80%	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

Principal Business Activity and Significant Accounting Policies - Research and Development and Advertising Costs (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Research and Development and Advertising Costs
Research and development costs	$ 1.0	$ 0.1
Advertising costs	$ 2.5	$ 0.7

Principal Business Activity and Significant Accounting Policies - Collaboration Agreements (Details) $ in Millions	Mar. 31, 2020 USD ($)
Principal Business Activity and Significant Accounting Policies
Collaboration agreements, contingent payments to be made	$ 20.8

Principal Business Activity and Significant Accounting Policies - Non-controlling interest (Details)	Mar. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Continuing LLC Owners
Noncontrolling Interest [Line Items]
Interest held by non-controlling owners	14.30%	16.80%	23.20%

Business Combinations - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Business Combination
Intangible assets, net of accumulated amortization	$ 94,135		$ 96,471
Remainder of 2020	6,708
Goodwill not deductible for tax purposes	105,800
Acquisition costs	$ 586	$ 576
Class B common stock
Business Combination
Common stock, par value	$ 0.001		$ 0.001
Perrigo Animal Health Acquisition
Business Combination
Intangible assets, net of accumulated amortization	$ 14,500
Current amortization expense	$ 600

Business Combinations - Total consideration (Details) - USD ($) $ in Thousands		3 Months Ended
	Jul. 08, 2019	Mar. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Preliminary estimated fair value of the consideration
Goodwill		$ 230,702	$ 231,045	$ 125,029
Perrigo Animal Health Acquisition
Preliminary estimated fair value of the consideration
Finite-Lived Intangible Asset, Useful Life		13 years
Perrigo Animal Health Acquisition \| Estimated
Preliminary estimated fair value of the consideration
Inventories	$ 17,998
Property, plant, and equipment	19,568
Other current assets	13,048
Other assets	9,680
Indefinite-lived intangible assets	14,480
Definite-lived intangible assets	23,040
Goodwill	105,838
Total assets	203,652
Liabilities assumed	19,259
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)
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
Minimum \| Customer relationships
Preliminary estimated fair value of the consideration
Finite-Lived Intangible Asset, Useful Life		12 years
Minimum \| Brand names
Preliminary estimated fair value of the consideration
Finite-Lived Intangible Asset, Useful Life		5 years

Business Combinations - Pro Forma (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Business Acquisition, Pro Forma Information [Abstract]
Revenues	$ 186,778	$ 148,436
Perrigo Animal Health Acquisition
Business Acquisition, Pro Forma Information [Abstract]
Net sales		168,005
Net (loss) income		$ 1,636
(Loss) Earnings per share: Basic		$ 0.08
(Loss) Earnings per share: Diluted		$ 0.07
Pre-tax net income	6,900
Product \| Perrigo Animal Health Acquisition
Business Acquisition, Pro Forma Information [Abstract]
Net sales	$ 23,800

Property, Plant, and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Property, Plant, and Equipment
Property, plant and equipment, gross	$ 76,946		$ 72,567
Less accumulated depreciation	(22,706)		(20,042)
Property, Plant and Equipment, Net, Total	54,240		52,525
Depreciation and amortization expense	2,873	$ 1,653
Leasehold improvements
Property, Plant, and Equipment
Property, plant and equipment, gross	17,252		15,517
Equipment
Property, Plant, and Equipment
Property, plant and equipment, gross	23,666		23,138
Vehicles and accessories
Property, Plant, and Equipment
Property, plant and equipment, gross	5,985		6,007
Computer equipment and software
Property, Plant, and Equipment
Property, plant and equipment, gross	9,642		8,070
Buildings
Property, Plant, and Equipment
Property, plant and equipment, gross	10,069		10,050
Furniture and fixtures
Property, Plant, and Equipment
Property, plant and equipment, gross	1,951		1,836
Land
Property, Plant, and Equipment
Property, plant and equipment, gross	4,557		4,557
Construction in Progress
Property, Plant, and Equipment
Property, plant and equipment, gross	$ 3,824		$ 3,392

Intangible Assets and Goodwill - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Intangible Assets and Goodwill
Amortizable Intangibles, gross	$ 109,319		$ 109,529
Less accumulated amortization	(15,184)		(13,058)
Total net amortizable intangibles	94,135		96,471
Intangible assets, net of accumulated amortization	117,621		119,956
Amortization expense	2,200	$ 1,300
Trademarks and other
Intangible Assets and Goodwill
Non-amortizable intangibles	18,016		18,016
IPRD
Intangible Assets and Goodwill
Non-amortizable intangibles	$ 5,470		5,469
Certification
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	7 years
Amortizable Intangibles, gross	$ 350		350
Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, gross	89,170		89,232
Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, gross	4,828		4,928
Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, gross	$ 14,971		$ 15,019
Minimum \| Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	12 years
Minimum \| Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	5 years
Minimum \| Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	5 years
Maximum \| Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	20 years
Maximum \| Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	10 years
Maximum \| Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	15 years

Intangible Assets and Goodwill - Estimated future amortization expense (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Intangible Assets and Goodwill
Remainder of 2020	$ 6,708
2021	8,941
2022	9,154
2023	8,796
2024	6,788
Thereafter	$ 53,748

Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Goodwill, Beginning Balance	$ 231,045	$ 125,029
Foreign currency translation	(343)	178
Acquisition		105,838
Goodwill, Ending Balance	230,702	231,045
Product
Goodwill, Beginning Balance	183,781	77,765
Foreign currency translation	(343)	178
Acquisition		105,838
Goodwill, Ending Balance	183,438	183,781
Services
Goodwill, Beginning Balance	47,264	47,264
Foreign currency translation
Acquisition
Goodwill, Ending Balance	$ 47,264	$ 47,264

Debt (Details) - USD ($)		1 Months Ended	3 Months Ended
Debt (Details) - USD ($)	Jul. 08, 2019	Jul. 31, 2017	Mar. 31, 2019	Mar. 31, 2020	Dec. 31, 2019
Debt
Purchase price of a commercial building		$ 1,900,000
Fixed interest rate		4.35%
Amortization schedule		25 years
Balloon payment		10 years
Net discount on debt and deferred financing fees				$ 5,416,000	$ 5,688,000
Long-term Debt, Total				327,681,000	253,624,000
Less current maturities of long-term debt				(2,249,000)	(2,248,000)
Long-term debt, less current installments				325,432,000	251,376,000
Future maturities of long-term debt
Remainder of 2020				1,686,000
2021				2,250,000
2022				2,253,000
2023				29,755,000
2024				2,257,000
Thereafter				294,896,000
Debt issuance costs			$ 50,000
Debt issuance costs				0
Revolving credit facility
Debt
Maximum borrowing capacity	$ 125,000,000
Outstanding balance				84,346,000	10,000,000
Revolving credit facility \| Minimum
Debt
Unused facility fee (as a percent)	0.375%
Revolving credit facility \| Maximum
Debt
Unused facility fee (as a percent)	0.50%
Term loans
Debt
Outstanding balance				219,450,000	220,000,000
Future maturities of long-term debt
Debt issuance costs			0
Mortgage
Debt
Mortgage				1,801,000	1,812,000
A&R Term Loan Credit Agreement
Debt
Maximum borrowing capacity	$ 220,000,000
Variable interest rate, basis points spread over variable reference rate (as a percent)	4.50%
Future maturities of long-term debt
Debt issuance costs			$ 100,000
Contingent notes
Debt
Outstanding balance				10,000,000
Earned Contingent Note
Debt
Contingent notes				$ 27,500,000
Fixed interest rate				6.75%
Long-term Debt, Total				$ 27,500,000	$ 27,500,000
Guaranteed note
Debt
Outstanding balance				7,500,000
Long-term Debt, Total				10,000,000
Amended Credit Agreement
Debt
Outstanding balance				$ 84,300,000
Weighted average interest rate				3.10%

Leases - Narrative (Details)	Mar. 31, 2020
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	Mar. 31, 2020	Dec. 31, 2019
ASSETS
Property, plant and equipment, net	$ 54,240	$ 52,525
Operating lease right of use assets	20,582	20,785
Other non-current assets	3,268	3,214
LIABILITIES
Current portion of operating leases	4,770	4,619
Operating leases, less current installments	16,283	16,580
Finance leases, less current installments	3,225	3,331
Other non-current liabilities	58	$ 117
Current portion of finance lease	$ 1,591

Leases - Components of lease expense and other information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Lease cost
Amortization of right-of-use assets	$ 391	$ 290
Interest on lease liabilities	82	50
Operating lease cost	1,831	910
Variable lease cost	175	72
Short-term lease cost	5	14
Sublease income	(75)
Total lease cost	$ 2,409	$ 1,336
Weighted-average remaining lease term (years), Operating leases	4 years 9 months 26 days	3 years 11 months 12 days
Weighted-average remaining lease term (years), Finance leases	2 years 9 months 18 days	2 years 7 months 24 days
Weighted-average discount rate, Operating leases	5.30%	5.00%
Weighted-average discount rate, Finance leases	5.80%	5.50%

Leases - Annual future commitments under non-cancelable leases (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Lease Obligations, Operating Leases
Remainder of 2020	$ 4,452
2021	5,137
2022	4,829
2023	4,036
2024	2,516
Thereafter	2,957
Total minimum future obligations	23,927
Less interest	(2,874)
Present value of net future minimum obligations	21,053
Less current lease obligations	(4,770)	$ (4,619)
Long-term lease obligations	16,283	16,580
Lease Obligations, Finance Leases
Remainder of 2020	1,237
2021	1,411
2022	1,225
2023	1,196
2024	150
Thereafter	23
Total minimum future obligations	5,242
Less interest	(426)
Present value of net future minimum obligations	4,816
Less current lease obligations	(1,591)
Long-term lease obligations	$ 3,225	$ 3,331

Leases - Supplemental Cash Flow (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases
Operating cash flows from finance leases	$ 82	$ 50
Operating cash flows from operating leases	1,798	880
Financing cash flows from finance leases	394	371
Operating leases	1,696
Finance leases	$ (381)	$ (210)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Income tax expense (benefit)	30.80%	17.70%
Income tax expense (benefit) at federal statutory rate	21.00%	21.00%
Deferred Tax Assets, Valuation Allowance	$ 100		$ 100
HoldCo
Cash distributions	20	$ 1,400
Accrued estimated income tax	$ 100	$ 300

Earnings (Loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerator:
Net (loss) income	$ (2,633)	$ 2,326
Net (loss) income attributable to non-controlling interest	(530)	715
Net (loss) income attributable to PetIQ, Inc.	$ (2,103)	$ 1,611
Denominator:
Basic weighted average shares (in shares)	23,728	21,800
Weighted-average shares of Class A common stock outstanding - diluted (in shares)	23,728	21,978
Basic net income (loss) per common share	$ (0.09)	$ 0.07
Diluted net (loss) income per common share	$ (0.09)	$ 0.07
Stock options
Denominator:
Dilutive effects of stocks		171
Anti dilutive shares excluded from computation of diluted earnings per share	748	30
RSU
Denominator:
Dilutive effects of stocks		7

Stock Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Stock Based Compensation
Shares reserved for future issuance	0
Stock Options Granted (in shares)	478		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	$ 2.2	$ 1.4
Grant date fair value of stock options granted	$ 6.70
Unrecognized compensation cost related to unvested stock options	$ 13.2
Unrecognized compensation cost related to unvested options, recognized weighted-average period	2 years 8 months 12 days
Class A common stock
Stock Based Compensation
Number of shares reserved	800
Class A common stock \| Omnibus Plan
Stock Based Compensation
Shares reserved for future issuance	3,914
Share available for issuance	1,299
Maximum
Stock Based Compensation
Maximum term for stock options	10 years

Stock Based Compensation - Weighted Average Assumptions (Details)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stock Based Compensation
Expected term (years)	6 years 3 months	6 years 3 months
Expected volatility	33.91%	35.00%
Risk-free interest rate	0.72%	2.74%
Dividend yield	0.00%	0.00%

Stock Based Compensation - Summary of Unvested Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Stock Based Compensation
Stock Options Outstanding - Beginning Balance	2,072	1,945
Stock Options Granted (in shares)	478	423
Stock option Exercised (in shares)	(46)	(119)
Stock Options Forfeited (in shares)	(13)	(168)
Stock Options Cancelled (in shares)		(9)
Stock Options Outstanding - Ending Balance	2,491	2,072	1,945
Options exercisable - Ending Balance	870
Weighted Average Exercise Price Outstanding - Beginning Balance	$ 24.63	$ 23.45
Weighted Average Exercise Price - Granted	19.49	27.54
Weighted Average Exercise Price - Exercised	21.65	19.51
Weighted Average Exercise Price - Forfeited	22.98	21.92
Weighted Average Exercise Price - Expired		25.70
Weighted Average Exercise Price Outstanding - Ending Balance	$ 23.70	$ 24.63	$ 23.45
Aggregate Intrinsic Value	$ 5,974	$ 6,266	$ 5,527
Weighted Average Remaining Contractual Life (years)	7 years 10 months 24 days	8 years	9 years 1 month 6 days

Stock Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Unrecognized compensation cost related to unvested stock options	$ 13.2
Stock based compensation expense	2.2	$ 1.4
RSU
Unrecognized compensation cost related to unvested stock options	$ 7.5
Vesting period	3 years 6 months
Stock based compensation expense	$ 0.4	$ 0.2
Number of Shares
Beginning Balance	133	51	51
Granted (in shares)	243		123
Settled (in shares)	(22)		(25)
Forfeited (in shares)	(1)		(15)
Ending balance	353		133
Weighted Average Grant Date Fair Value
Beginning Balance	$ 28.85	$ 33.16	$ 33.16
Granted (per share)	19.49		27.61
Settled (per share)	27.56		30.43
Forfeited (per share)	32.53		30.58
Ending balance	$ 22.48		$ 28.85

Stockholder's Equity (Details) - shares shares in Thousands	3 Months Ended		12 Months Ended
Stockholder's Equity (Details) - shares shares in Thousands	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Stockholder's Equity
Exchange of common shares	703		1,794
Class B common stock
Stockholder's Equity
Exchange of common shares	703	519

Non-Controlling Interests (Details) - shares shares in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018
Common Stock, Shares, Outstanding, Beginning Balance	23,554	21,620	21,620
Stock based compensation adjustments	61		140
Exchange transactions	703		1,794
Common Stock, Shares, Outstanding, Ending Balance	24,318		23,554
Continuing LLC Owners
Common Stock, Shares, Outstanding, Beginning Balance	4,752	6,547	6,547
Exchange transactions	(703)		(1,794)
Common Stock, Shares, Outstanding, Ending Balance	4,049		4,752
Amended Holdco LLC Agreement
Common Stock, Shares, Outstanding, Beginning Balance	28,306	28,167	28,167
Stock based compensation adjustments	61		140
Common Stock, Shares, Outstanding, Ending Balance	28,367		28,306
Holdco
Weighted average ownership percentage in Holdco	83.70%	77.40%
Continuing LLC Owners
Ownership interest by continuing LLC owners	14.30%		16.80%	23.20%
PetIQ
Ownership interest in Holdco	85.70%		83.20%	76.80%

Customer Concentration (Details) - customer	3 Months Ended		12 Months Ended
Customer Concentration (Details) - customer	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Customer concentrations \| Sales
Customer Concentration
Number of customers accounted for more than 10% of sales individually	2	2
Concentration risk	42.00%	33.00%
Customer concentrations \| Accounts receivable
Customer Concentration
Number of customers accounted for more than 10% of sales individually	1		2
Credit concentrations \| Accounts receivable
Customer Concentration
Concentration risk	45.00%		61.00%

Commitments and Contingencies (Details) $ in Millions	3 Months Ended
Commitments and Contingencies (Details) $ in Millions	Mar. 31, 2020 USD ($)
Litigation Contingencies
Asset purchase agreement with Elanco US Inc.	$ 95
Med Vets, Inc. and Bay Medical Solutions Inc
Litigation Contingencies
Amount required to pay pursuant to settlement agreement	$ 20

Segments (Details) $ in Thousands		3 Months Ended
Segments (Details) $ in Thousands	Jan. 17, 2018 segment	Mar. 31, 2020 USD ($) segment	Mar. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Segments
Number of operating segments \| segment	2
Number of reportable segments \| segment		2
Financial information relating to the Company’s operating segments
Net Sales		$ 186,778	$ 148,436
Adjusted EBITDA		14,458	10,872
Property, plant and equipment, net		54,240		$ 52,525
Depreciation expense		2,873	1,653
Capital Expenditures		5,075	897
Domestic
Financial information relating to the Company’s operating segments
Net Sales		185,570	146,803
Property, plant and equipment, net		53,129		51,397
Foreign
Financial information relating to the Company’s operating segments
Net Sales		1,208	1,633
Europe
Financial information relating to the Company’s operating segments
Property, plant and equipment, net		1,111		$ 1,128
Products
Financial information relating to the Company’s operating segments
Net Sales		166,280	126,084
Products \| Domestic
Financial information relating to the Company’s operating segments
Net Sales		165,072	124,451
Products \| Foreign
Financial information relating to the Company’s operating segments
Net Sales		1,208	1,633
Services
Financial information relating to the Company’s operating segments
Net Sales		20,498	22,352
Services \| Domestic
Financial information relating to the Company’s operating segments
Net Sales		20,498	22,352
Operating Segments \| Products
Financial information relating to the Company’s operating segments
Net Sales		166,280	126,084
Adjusted EBITDA		24,279	13,556
Depreciation expense		1,316	553
Capital Expenditures		1,673	462
Operating Segments \| Services
Financial information relating to the Company’s operating segments
Net Sales		20,498	22,352
Adjusted EBITDA		1,989	5,277
Depreciation expense		848	524
Capital Expenditures		2,833	281
Corporate, Non-Segment \| Unallocated Corporate
Financial information relating to the Company’s operating segments
Adjusted EBITDA		(11,810)	(7,961)
Depreciation expense		709	576
Capital Expenditures		$ 569	$ 154

Segments - Reconciles Segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	$ 14,458	$ 10,872
Depreciation	(2,873)	(1,654)
Amortization	(2,242)	(1,279)
Interest	(4,704)	(1,937)
Acquisition costs	(586)	(576)
Stock based compensation expense	(2,558)	(1,544)
Non same-store revenue	2,282	1,516
Non same-store costs	(6,400)	(3,252)
Fair value adjustment of contingent note		680
Integration costs and costs of discontinued clinics	(454)
Clinic launch expenses	(676)
Litigation expenses	(49)
Pretax net (loss) income	(3,802)	2,826
Income tax benefit (expense)	1,169	(500)
Net (loss) income	(2,633)	2,326
Products \| Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	24,279	13,556
Services \| Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	1,989	5,277
Unallocated Corporate \| Corporate, Non-Segment
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	$ (11,810)	$ (7,961)

Related Parties (Details) - USD ($) $ in Thousands	3 Months Ended
Related Parties (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Related Parties
Accrued estimated tax distributions	$ 500		$ 400
Notes payable to Seller's of VIP	27,500		$ 27,500
Accrued interest	400
Payment of interest	0	$ 400
Rent expense	91	73
Chris Christensen
Related Parties
Payment of premium expenses	283	137
Commission paid	$ 18	$ 7

Subsequent Events (Details) - Subsequent event $ in Millions	1 Months Ended
	Apr. 30, 2020 USD ($)
Subsequent Event [Line Items]
Payments to acquire land	$ 2.5
Payment of Agent's Commission	$ 75.0