0001558370-22-002584 | 10-K | XBRL Viewer

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Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands	Class A common stock Common Stock	Class B common stock Common Stock	Retained Earnings	Cumulative dividends and distributions	Additional Paid In Capital	Noncontrolling Interest in Consolidated Joint Venture	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)		(109)	17,299	(17,190)
Exchange of LLC Interests held by LLC Owners (in shares)	1,794	(1,794)
Deferred tax adjustment					12,381		12,381
Accrued tax distributions						(786)	(786)
Other comprehensive income				294		72	366
Stock based compensation expense					5,902	1,453	7,355
Exercise of Options to purchase Common Stock					2,318		2,318
Exercise of Options to purchase Common Stock (in shares)	119
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares)	21
Net loss			(11,453)			(2,849)	(14,302)
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	$ 2	$ (2)		105	15,725	(15,830)
Exchange of LLC Interests held by LLC Owners (in shares)	1,712	(1,712)
Accrued tax distributions						434	434
Other comprehensive income				340		23	363
Stock based compensation expense					7,921	1,249	9,170
Payment for capped call share options					(12,803)	(2,018)	(14,821)
Exercise of Options to purchase Common Stock					9,274		$ 9,274
Exercise of Options to purchase Common Stock (in shares)	395						395
Issuance of stock for vesting of RSU's, net of tax with holdings					(595)		$ (595)
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares)	50
Net loss			(82,655)			(3,072)	(85,727)
Ending Balance at Dec. 31, 2020	$ 26	$ 3	(98,558)	(686)	319,642	25,983	246,410
Ending Balance (in shares) at Dec. 31, 2020	25,711	3,040
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 3	$ (3)		66	23,531	(23,597)
Exchange of LLC Interests held by LLC Owners (in shares)	2,768	(2,768)
Deferred tax adjustment					3,235	113	3,348
Accrued tax distributions						(7)	(7)
Other comprehensive income				(64)		(1)	(65)
Stock based compensation expense					9,109	319	9,428
Exercise of Options to purchase Common Stock					13,426		$ 13,426
Exercise of Options to purchase Common Stock (in shares)	583						583
Issuance of stock for vesting of RSU's, net of tax with holdings					(937)		$ (937)
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares)	77
Net loss			(15,967)			(416)	(16,383)
Ending Balance at Dec. 31, 2021	$ 29		$ (114,525)	$ (684)	$ 368,006	$ 2,394	$ 255,220
Ending Balance (in shares) at Dec. 31, 2021	29,139	272

Income Taxes - Deferred Tax Assets Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Tax effects of temporary differences:
Investment in partnership	$ 77,306	$ 63,439
Fixed Assets	43	44
Net operating loss carryforwards and tax credits	25,888	15,382
Disallowed business interest carryforward	3,169	1,678
Other accruals and reversals	5	9
Subtotal	106,411	80,552
Less: valuation allowance	(106,258)	(80,355)
Total net deferred tax assets	153	197
Fixed Assets	(151)	(12)
Intangible assets	(454)	(456)
Other	(7)	(6)
Total deferred tax liabilities	$ (612)	$ (474)

Segments (Details) $ in Thousands	12 Months Ended
Segments (Details) $ in Thousands	Dec. 31, 2021 USD ($) segment	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Segments
Number of operating segments \| segment	2
Financial information relating to the Company's operating segments
Net Sales	$ 932,528	$ 780,051	$ 709,431
Adjusted EBITDA	92,892	67,792	60,675
Depreciation expense	14,366	12,082	9,139
Capital expenditures	31,270	22,392	10,276
Property, plant and equipment	76,613	63,146
United States
Financial information relating to the Company's operating segments
Net Sales	925,726	773,628	703,299
Property, plant and equipment	75,315	61,807
Foreign
Financial information relating to the Company's operating segments
Net Sales	6,802	6,423	6,132
Europe
Financial information relating to the Company's operating segments
Property, plant and equipment	1,298	1,339
Products
Financial information relating to the Company's operating segments
Net Sales	825,395	725,705	617,118
Products \| United States
Financial information relating to the Company's operating segments
Net Sales	818,593	719,282	610,986
Products \| Foreign
Financial information relating to the Company's operating segments
Net Sales	6,802	6,423	6,132
Services
Financial information relating to the Company's operating segments
Net Sales	107,133	54,346	92,313
Services \| United States
Financial information relating to the Company's operating segments
Net Sales	107,133	54,346	92,313
Operating Segments \| Products
Financial information relating to the Company's operating segments
Net Sales	825,395	725,705	617,118
Adjusted EBITDA	149,321	117,216	73,537
Depreciation expense	3,857	4,810	3,552
Capital expenditures	1,884	13,394	1,297
Operating Segments \| Services
Financial information relating to the Company's operating segments
Net Sales	107,133	54,346	92,313
Adjusted EBITDA	11,742	3,387	20,045
Depreciation expense	6,510	3,775	3,170
Capital expenditures	10,537	7,373	6,409
Corporate, Non-Segment \| Unallocated Corporate
Financial information relating to the Company's operating segments
Adjusted EBITDA	(68,171)	(52,811)	(32,907)
Depreciation expense	3,999	3,497	2,417
Capital expenditures	$ 18,849	$ 1,625	$ 2,570

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities
Net loss	$ (16,383)	$ (85,727)	$ (14,302)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation, amortization of intangible assets and loan fees	39,300	27,483	16,509
Loss on debt extinguishment	5,453
Gain on disposition of property, plant, and equipment	(1,183)	(238)	(189)
Stock based compensation expense	9,428	9,170	7,355
Deferred tax adjustment	3,487	59,708	(3,458)
Termination of supply agreement		7,801
Contingent note revaluation			7,320
Other non-cash activity	233	164	405
Changes in assets and liabilities
Accounts receivable	(11,197)	(31,652)	(14,123)
Inventories	1,283	(17,846)	30,448
Other assets	(1,380)	556	(1,619)
Accounts payable	(12,131)	17,435	(7,595)
Accrued wages payable	2,194	1,424	2,800
Other accrued expenses	4,663	7,121	(2,718)
Net cash provided by (used in) operating activities	23,767	(4,601)	20,833
Cash flows from investing activities
Proceeds from disposition of property, plant, and equipment	5,132	442	340
Purchase of property, plant, and equipment	(31,270)	(22,392)	(10,276)
Purchase of Capstar and related intangibles		(96,072)
Business acquisitions (net of cash acquired)			(185,090)
Net cash used in investing activities	(26,138)	(118,022)	(195,026)
Cash flows from financing activities
Proceeds from issuance of convertible notes		143,750
Payment for Capped Call options		(14,821)
Proceeds from issuance of long-term debt	642,568	837,675	818,387
Principal payments on long-term debt	(597,071)	(838,073)	(676,509)
Payment of financing fees on Convertible Notes		(5,884)
Tax distributions to LLC Owners	(70)	(47)	(1,686)
Principal payments on finance lease obligations	(1,926)	(1,965)	(1,547)
Payment of deferred financing fees and debt discount	(7,656)	(550)	(5,790)
Tax withholding payments on Restricted Stock Units	(937)	(595)	(114)
Exercise of options to purchase class A common stock	13,426	9,274	2,318
Net cash provided by financing activities	48,334	128,764	135,059
Net change in cash and cash equivalents	45,963	6,141	(39,134)
Effect of exchange rate changes on cash and cash equivalents	(13)	43	46
Cash and cash equivalents, beginning of period	33,456	27,272	66,360
Cash and cash equivalents, end of period	79,406	33,456	27,272
Supplemental cash flow information
Interest paid	19,189	19,402	13,632
Net change in property, plant, and equipment acquired through accounts payable	735	279	(1,814)
Finance lease additions	1,191	2,019	3,006
Net change of deferred tax asset from step-up in basis	3,348		12,381
Income taxes paid, net of refunds	418	130	249
Accrued tax distribution	$ 7	(434)	$ 786
Issuance of note for termination, settlement, and asset acquisition agreement		17,487
Purchase of intangible assets from note issuance		$ (9,686)

Related Parties (Details) - USD ($) $ in Millions	1 Months Ended			12 Months Ended
Related Parties (Details) - USD ($) $ in Millions	Dec. 31, 2021	Aug. 31, 2021	Apr. 30, 2020	Dec. 31, 2021
Insurance Policies With Chris Christensen
Related Parties
Premium expense				$ 6.9
Insurance Policies With Chris Christensen \| Colliers International
Related Parties
Payments to acquire land	$ 2.5
Payment of Broker's Commission	$ 0.1
Insurance Policies With Chris Christensen \| Colliers International \| Corporate Office in Eagle Idaho
Related Parties
Commission paid		$ 0.1
Real Estate Held-for-sale		$ 4.8
Acadia Investor Relations L LC
Related Parties
Related party transaction, expenses from transactions with Related Party				$ 0.2
Mike Christensen \| Insurance Policies With Chris Christensen \| Colliers International
Related Parties
Payments to acquire land			$ 2.5
Payment of Broker's Commission			$ 0.1

Business Combination and Asset Acquisition (Tables)

12 Months Ended

Dec. 31, 2021

Capstar Acquisition

Schedule of fair value of purchased assets


$'s in 000's	Fair Value
Amortizable intangibles
Customer relationships	$	70,901
Patents and processes		9,895
Total amortizable intangibles		80,796
Non-amortizable intangibles
Trademarks and other		15,276
Total purchased intangible assets	$	96,072

Property, Plant, and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Property, Plant, and Equipment
Property, plant and equipment, gross	$ 116,702	$ 94,254
Less accumulated depreciation	(40,089)	(31,108)
Total property, plant, and equipment	76,613	63,146
Depreciation and amortization expense	14,366	12,082	$ 9,139
Accelerated depreciation	2,000
Leasehold improvements
Property, Plant, and Equipment
Property, plant and equipment, gross	26,341	19,709
Equipment
Property, Plant, and Equipment
Property, plant and equipment, gross	26,414	25,664
Vehicles and accessories
Property, Plant, and Equipment
Property, plant and equipment, gross	7,339	7,110
Computer equipment and software
Property, Plant, and Equipment
Property, plant and equipment, gross	15,418	10,858
Buildings
Property, Plant, and Equipment
Property, plant and equipment, gross	23,302	10,168
Furniture and fixtures
Property, Plant, and Equipment
Property, plant and equipment, gross	3,877	2,347
Land
Property, Plant, and Equipment
Property, plant and equipment, gross	8,934	7,067
Construction in Progress
Property, Plant, and Equipment
Property, plant and equipment, gross	$ 5,077	$ 11,331

Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Numerator:
Net loss	$ (16,383)	$ (85,727)	$ (14,302)
Less: net loss attributable to non-controlling interests	(416)	(3,072)	(2,849)
Net loss attributable to PetIQ, Inc.	$ (15,967)	$ (82,655)	$ (11,453)
Denominator:
Weighted-average shares of Class A common stock outstanding -- basic (in shares)	28,242	24,629	22,652
Weighted-average shares of Class A common stock outstanding - diluted (in shares)	28,242	24,629	22,652
Loss per share of Class A common stock - basic	$ (0.57)	$ (3.36)	$ (0.51)
Loss per share of Class A common stock - diluted	$ (0.57)	$ (3.36)	$ (0.51)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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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

Employee Benefit Plans (Details) - USD ($) $ in Millions	12 Months Ended
Employee Benefit Plans (Details) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Employee Benefit Plans
Employee contribution	100.00%
Employer contribution	100.00%
Employer contribution, percent of match	3.00%
Employer matching contribution	$ 1.1	$ 0.9	$ 0.6

Debt (Tables)

12 Months Ended

Dec. 31, 2021

Debt

Schedule of components of long term debt


				As adjusted (Note1)
$'s in 000's	December 31, 2021		December 31, 2020
Convertible Notes	$	143,750	$	143,750
Term loans		298,500		217,250
Revolving credit facility		—		15,000
Notes Payable - VIP Acquisition		—		27,500
Other Debt		23,518		16,257
Net discount on debt and deferred financing fees		(10,418)		(9,947)
	$	455,350	$	409,810
Less current maturities of long-term debt		(6,880)		(6,219)
Total long-term debt	$	448,470	$	403,591

Schedule of future maturities of long-term debt, excluding net discount on debt and deferred financing fees


($'s in 000's)
2022			6,880
2023			7,099
2024			7,339
2025			4,600
2026			147,350
Thereafter			292,500

- 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.

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Reference 11: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 12: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=123467817&loc=d3e21475-112644

+ Details

Principal Business Activity and Significant Accounting Policies - Property, Plant, and Equipment (Details)	12 Months Ended
	Dec. 31, 2021
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	2 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

Income Taxes - Effective Income Tax Rate Reconciliation (Details)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Reconciliation:
Income tax expense (benefit) at federal statutory rate	21.00%	21.00%	21.00%
State and local income taxes net of federal tax benefit	(0.20%)	0.60%	1.30%
Non-controlling interest and nontaxable income	(0.10%)	(2.40%)	(4.00%)
Deferred tax rate changes	1.00%	(0.60%)	(0.40%)
Share-based compensation	6.80%	0.60%	0.10%
Return-to-Provision	(15.70%)	(2.30%)	0.80%
Valuation Allowance	(42.90%)	(255.20%)	0.40%
Other	(0.80%)	(0.40%)	(0.40%)
Effective income tax rate	(30.90%)	(238.70%)	18.80%

Customer Concentration (Details) - customer	12 Months Ended
Customer Concentration (Details) - customer	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Customer concentrations \| Sales
Customer Concentration
Number of customers accounted for more than 10% of sales individually	1	2	2
Customer concentrations \| Sales \| One Customer
Customer Concentration
Concentration risk	26.00%
Customer concentrations \| Sales \| Two Customers
Customer Concentration
Concentration risk		42.00%	35.00%
Customer concentrations \| Accounts receivable
Customer Concentration
Number of customers accounted for more than 10% of sales individually	1	1
Credit concentrations \| Accounts receivable \| One Customer
Customer Concentration
Concentration risk	47.00%	52.00%

Principal Business Activity and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2021

Principal Business Activity and Significant Accounting Policies

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“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 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 and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are at cost, which approximates fair value due to their relatively short maturities.

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 began bearing interest at a fixed rate of 6.75%, with the balance payable July 17, 2023. The Company fully repaid the Contingent Notes as part of the refinance activity described in Note 5 – Debt.

Cash and Cash Equivalents

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

Receivables and Credit Policy

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms 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 credit losses 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 government agencies.

Accounts receivable consists of the following as of:


$'s in 000's	December 31, 2021		December 31, 2020
Trade receivables	$	108,049	$	96,381
Other receivables		6,405		7,094
		114,454		103,475
Less: Allowance for doubtful accounts		(507)		(720)
Total accounts receivable, net	$	113,947	$	102,755

Inventories

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	December 31, 2021		December 31, 2020
Raw materials	$	16,564	$	15,761
Work in progress		1,650		2,273
Finished goods		78,226		79,739
Total inventories	$	96,440	$	97,773

Property, Plant, and Equipment

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. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Depreciation and amortization is provided 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 selling, general and administrative expenses in the 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			2-15 years
Furniture and fixtures			5-10 years

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill is the excess of the consideration paid over the fair value of specifically identifiable assets, liabilities and contingent liabilities in a business combination. Intangible assets acquired are recorded at estimated fair value. Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are tested for impairment annually during the fourth quarter, and at any time when events suggest an impairment more likely than not occurred.

To assess goodwill for impairment, the Company, depending on relevant facts and circumstances, performs either a qualitative assessment or a quantitative analysis utilizing a discounted cash flow valuation model. In performing the qualitative assessment, the Company evaluates relevant factors such as macroeconomic conditions, industry and market considerations, cost factors and overall financial performance, as well as company and reporting unit specific items. If, after assessing these qualitative factors, the Company determines that it is more likely than not that the carrying value of the reporting unit is less than its fair value, then no further testing is required. In performing a quantitative analysis, the Company determines the fair value of a reporting unit using management’s assumptions about future cash flows based on long-range strategic plans. This approach incorporates many assumptions including discount rates and future growth rates. In the event the carrying amount of a reporting unit exceeded its fair value, an impairment loss would be recognized.

Indefinite-lived intangible assets are tested for impairment utilizing either a qualitative assessment or a quantitative analysis. For a qualitative assessment, the Company identifies and considers relevant key factors, events, and circumstances to determine whether it is necessary to perform a quantitative impairment test. The key factors considered include macroeconomic, industry, and market conditions, as well as the asset's actual and forecasted results. For the quantitative impairment tests, the Company compares the carrying amounts to the current fair market values. Intangible assets with definite lives are amortized over their estimated useful lives to reflect the pattern over which the economic benefits of the intangible assets are consumed. Definite-lived intangible assets are also evaluated for impairment when impairment indicators are present.

No impairment charge was recorded for the years ended December 31, 2021, 2020, and 2019.

Convertible Debt

Convertible Debt

On May 19, 2020, we issued $143.8 million aggregate principal amount of Convertible Notes due 2026 (the “Notes”). See Note 5 – “Debt.” Simultaneously, with the issuance of the Notes, we bought capped call options from certain financial institutions to minimize the impact of potential dilution of our Class A common stock upon conversion of the Notes. The premium for the capped call options was recorded as additional paid-in capital in our consolidated balance sheets as the options are settleable in our Class A common stock.

Effective January 1, 2021, we adopted ASU 2020-06 using the full retrospective approach. As a result of this adoption, we have de-recognized the equity component of the Notes and therefore no longer recognize any amortization of that component as interest expense (see below, Adopted Accounting Standard Update).

Revenue Recognition

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 for services is recognized over time as the service is delivered, typically over a single day. Payment is typically rendered at the time of service. Customer contracts generally do not include more than one performance obligation. When a contract does contain more than one performance obligation, we allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data. The Company began offering subscription based veterinary service plans called Smart Care Plans to customers of the Services segment in 2021, however total activity during the year ended December 31, 2021 was immaterial.

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 December 31, 2021 and 2020.

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 consolidated balance sheets.

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 and other costs

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.

Sales tax collected from customers and remitted to governmental authorities is not included in revenue and is reflected as a liability on the Company’s 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 December 31, 2021 and 2020 are immaterial. The Company does not have significant deferred revenue or unbilled receivable balances.

Cost of Services

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 and contract costs 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

Research and development and advertising costs are expensed as incurred and are included in selling, general and administrative expenses. Research and development costs amounted to $8.0 million, $2.3 million, and $1.3 million and advertising costs were $16.2 million, $10.1 million, and $4.5 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Collaboration Agreements

Collaboration Agreements

Through the Perrigo Animal Health Acquisition, we entered into a product development and asset purchase agreement with a third party for certain product formulations in development by the third party. During the year ended December 31, 2021, the Company opted out of the arrangement for two of the product formulations, which reduced the amount potentially payable under the agreement. The Company may make payments of up to $5.3 million over the course of the next several years contingent on achievement of certain development and regulatory approval milestones on the remaining product formulation in development. Product development costs are expensed as incurred or as milestone payments become probable. There can be no assurance that this product 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 selling, general and administrative expenses on the consolidated statements of operations. The Company accrued $2.0 million in research and development expense within accounts payable in the consolidated balance sheets related to the agreement as a milestone was determined to be probable during the year ended December 31, 2021. There were no expenses incurred under the agreement for the periods ended December 31, 2020 and 2019.

Litigation

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. See Note 13 for more information.

Stock based compensation

Stock based compensation

The Company expenses employee share-based awards under ASC Topic 718, Compensation—Stock Compensation, which requires compensation cost for the grant-date fair value of share-based awards to be recognized over the requisite service period. Stock options granted to executives and other employees are valued using the Black-Scholes option pricing model. See Note 9 for more information.

Accounting for Income Taxes

Accounting for Income Taxes

The Company uses the asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred taxes are measured using rates expected to apply to taxable income in years in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company uses a two-step process for the measurement of uncertain tax positions that have been taken or are expected to be taken in a tax return. The first step is a determination of whether the tax position should be recognized in the consolidated financial statements. The second step determines the measurement of the tax position. The Company records potential interest and penalties on uncertain tax positions as a component of income tax expense.

Interest expense, net

Interest expense, net

Interest expense, net, is comprised primarily of interest expense related to (i) our debt agreements, (ii) unused line fees, (iii) amortization of deferred loan fees and discounts, (iv) finance lease obligations and the mortgage note outstanding, offset by interest income earned on our demand deposits and other assets. Interest expense was $24.7 million, $22.8 million, and $14.9 million for the years ended December 31, 2021, 2020, and 2019, respectively, offset by $0.0 million, $0.0 million, and $0.4 million of interest income, respectively.

Non-controlling interest

Non-controlling interest

The non-controlling interests on the consolidated statements of operations 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 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.

Loss Per Share

Loss Per Share

Basic loss per share is computed by dividing net loss attributable to PetIQ, Inc. by the weighted average shares outstanding during the period. Diluted loss per share is computed by dividing net loss attributable to PetIQ, Inc., adjusted as necessary for the impact of potentially dilutive securities, by the weighted-average shares outstanding during the period and the impact of securities that would have a dilutive effect on loss per share. See Note 8 for further discussion.

Recently Issued Accounting Pronouncements / Adopted Accounting Standard Updates

Recently Issued Accounting Pronouncements / Adopted Accounting Standard Updates

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach.

On January 1, 2021, we adopted the ASU using the full retrospective method. Under the full retrospective method, the prior period consolidated financial statements have been retrospectively adjusted to reflect the adoption of the accounting standard in those periods. The adoption did not impact the year ended December 31, 2019 as the Company did not have any applicable instruments outstanding. The following tables show the impact of the adoption on our consolidated balance sheet and consolidated statement of operations.


			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted
Liabilities
	Long-term debt, less current installments	$	355,979	$	47,612	$	403,591
Stockholders' Equity
	Additional Paid-in Capital		356,442		(36,800)		319,642
	Non-controlling Interest		31,614		(5,631)		25,983
	Accumulated Deficit		(93,377)		(5,181)		(98,558)


			For the Year Ended
			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	26,299	$	(3,492)	$	22,807
	Tax expense		(52,216)		(8,197)		(60,413)

Net loss			(81,022)		(4,705)		(85,727)

Principal Business Activity and Significant Accounting Policies - Receivables and Credit Policy (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Receivables and Credit Policy
Accounts receivable, gross	$ 114,454	$ 103,475
Less: Allowance for doubtful accounts	(507)	(720)
Total accounts receivable, net	113,947	102,755
Trade receivables
Receivables and Credit Policy
Accounts receivable, gross	108,049	96,381
Other receivables
Receivables and Credit Policy
Accounts receivable, gross	$ 6,405	$ 7,094

Segments (Tables)

12 Months Ended

Dec. 31, 2021

Segments

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


$'s in 000's					Unallocated
December 31, 2021	Products		Services		Corporate		Consolidated
Net Sales	$	825,395	$	107,133	$	—	$	932,528
Adjusted EBITDA		149,321		11,742		(68,171)		92,892
Depreciation expense		3,857		6,510		3,999		14,366
Capital expenditures		1,884		10,537		18,849		31,270


$'s in 000's					Unallocated
December 31, 2020	Products		Services		Corporate		Consolidated
Net Sales	$	725,705	$	54,346	$	—	$	780,051
Adjusted EBITDA		117,216		3,387		(52,811)		67,792
Depreciation expense		4,810		3,775		3,497		12,082
Capital expenditures		13,394		7,373		1,625		22,392


$'s in 000's					Unallocated
December 31, 2019	Products		Services		Corporate		Consolidated
Net Sales		617,118		92,313		—		709,431
Adjusted EBITDA		73,537		20,045		(32,907)		60,675
Depreciation expense		3,552		3,170		2,417		9,139
Capital expenditures		1,297		6,409		2,570		10,276

Summary of reconciles segment adjusted ebitda to pretax net income


	For the years ended
$'s in 000's	December 31, 2021		December 31, 2020		December 31, 2019
Adjusted EBITDA:
Product	$	149,321	$	117,216	$	73,537
Services		11,742		3,387		20,045
Unallocated Corporate		(68,171)		(52,811)		(32,907)
Total Consolidated		92,892		67,792		60,675
Adjustments:
Depreciation		(14,366)		(12,082)		(9,139)
Amortization		(22,336)		(12,815)		(5,994)
Interest		(24,696)		(22,807)		(14,495)
Loss on debt extinguishment and related costs		(6,438)		—		—
Acquisition costs⁽¹⁾		(92)		(2,620)		(6,147)
Stock based compensation expense		(9,428)		(9,170)		(7,355)
Purchase accounting adjustment to inventory⁽²⁾		—		—		(4,805)
SKU rationalization⁽³⁾		—		—		(6,482)
Non same-store adjustment⁽⁴⁾		(23,159)		(16,354)		(12,232)
Fair value adjustment of contingent note		—		—		(7,320)
Integration costs		142		(9,776)		(3,788)
Litigation expenses		(4,105)		(1,006)		(529)
COVID-19 related costs⁽⁵⁾		—		(6,476)		—
CFO Transition		(928)		—		—
Pretax net loss	$	(12,514)	$	(25,314)	$	(17,611)
Income tax benefit (expense)		(3,869)		(60,413)		3,309
Net loss	$	(16,383)	$	(85,727)	$	(14,302)

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

(2)	Purchase accounting adjustment to inventory represents the portion of costs of sales related to the fair value of inventory adjusted as part of the purchase price allocation. The amounts relate to the Perrigo Animal Health Acquisition and are part of the Products segment.

(3)

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

(4)	Non same-store revenue and costs relate to our Services segment and are from wellness centers, host partners, and regions with less than six full quarters of operating results. This includes clinic launch expenses.

(5)

Costs related to maintaining service segment infrastructure, staffing, and overhead related to clinics and wellness centers closed due to COVID-19 related health and safety initiatives. Product segment and unallocated corporate costs related to incremental wages paid to essential workers and sanitation costs due to COVID.

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


		Year ended December 31, 2021
$'s in 000's		U.S.		Foreign		Total
Product sales	$	818,593	$	6,802	$	825,395
Service revenue		107,133		—		107,133
Total net sales	$	925,726	$	6,802	$	932,528


		Year ended December 31, 2020
$'s in 000's		U.S.		Foreign		Total
Product sales	$	719,282	$	6,423	$	725,705
Service revenue		54,346		—		54,346
Total net sales	$	773,628	$	6,423	$	780,051


		Year ended December 31, 2019
$'s in 000's		U.S.		Foreign		Total
Product sales	$	610,986	$	6,132	$	617,118
Service revenue		92,313		—		92,313
Total net sales	$	703,299	$	6,132	$	709,431

The net book value of property plant and equipment, by geographic location was as follows as of:


	December 31, 2021		December 31, 2020
United States	$	75,315	$	61,807
Europe		1,298		1,339
Total	$	76,613	$	63,146

Segments - Reconciliation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	$ 92,892	$ 67,792	$ 60,675
Depreciation	(14,366)	(12,082)	(9,139)
Amortization	(22,336)	(12,815)	(5,994)
Interest	(24,696)	(22,807)	(14,495)
Loss on debt extinguishment and related costs	(6,438)
Acquisition costs	(92)	(2,620)	(6,147)
Stock based compensation expense	(9,428)	(9,170)	(7,355)
Purchase accounting adjustment to inventory			(4,805)
SKU Rationalization			(6,482)
Non same-store adjustment	(23,159)	(16,354)	(12,232)
Fair value adjustment of contingent note			(7,320)
Integration costs	142	(9,776)	(3,788)
Litigation expenses	(4,105)	(1,006)	(529)
COVID-19 related costs		(6,476)
CFO Transition	(928)
Pretax net loss	(12,514)	(25,314)	(17,611)
Income tax benefit (expense)	(3,869)	(60,413)	3,309
Net loss	(16,383)	(85,727)	(14,302)
Products \| Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	149,321	117,216	73,537
Services \| Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	11,742	3,387	20,045
Unallocated Corporate \| Corporate, Non-Segment
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	$ (68,171)	$ (52,811)	$ (32,907)

Property, Plant, and Equipment

12 Months Ended

Dec. 31, 2021

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	December 31, 2021		December 31, 2020
Leasehold improvements	$	26,341	$	19,709
Equipment		26,414		25,664
Vehicles and accessories		7,339		7,110
Computer equipment and software		15,418		10,858
Buildings		23,302		10,168
Furniture and fixtures		3,877		2,347
Land		8,934		7,067
Construction in progress		5,077		11,331
		116,702		94,254
Less accumulated depreciation		(40,089)		(31,108)
Total property, plant, and equipment	$	76,613	$	63,146

Depreciation and amortization expense related to these assets total $14.4 million, $12.1 million, and $9.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. Depreciation for the year ended December 31, 2021 includes approximately $2.0 million of accelerated depreciation related to assets with shortened useful lives.

Principal Business Activity and Significant Accounting Policies - Adopted Accounting Standard Updates (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Liabilities
Long-term debt, less current installments	$ 448,470	$ 403,591
Stockholder's Equity
Additional Paid in Capital	368,006	319,642
Non-controlling Interest	2,394	25,983
Accumulated deficit	(114,525)	(98,558)
Consolidated Statements of Operations
Interest expense, net	24,696	22,807	$ 14,495
Income tax benefit (expense)	(3,869)	(60,413)	3,309
Net loss	$ (16,383)	(85,727)	$ (14,302)
As reported \| ASU 2020-06
Liabilities
Long-term debt, less current installments		355,979
Stockholder's Equity
Additional Paid in Capital		356,442
Non-controlling Interest		31,614
Accumulated deficit		(93,377)
Consolidated Statements of Operations
Interest expense, net		26,299
Income tax benefit (expense)		(52,216)
Net loss		(81,022)
Adjustment \| ASU 2020-06
Liabilities
Long-term debt, less current installments		47,612
Stockholder's Equity
Additional Paid in Capital		(36,800)
Non-controlling Interest		(5,631)
Accumulated deficit		(5,181)
Consolidated Statements of Operations
Interest expense, net		(3,492)
Income tax benefit (expense)		(8,197)
Net loss		$ (4,705)

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Comprehensive Income
Net loss income	$ (16,383)	$ (85,727)	$ (14,302)
Foreign currency translation adjustment	(65)	363	366
Comprehensive loss	(16,448)	(85,364)	(13,936)
Comprehensive loss attributable to non-controlling interest	(417)	(3,049)	(2,777)
Comprehensive loss attributable to PetIQ	$ (16,031)	$ (82,315)	$ (11,159)

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income (loss) and other comprehensive income (loss), attributable to noncontrolling interests. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

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

+ References

+ Details

Non-Controlling Interests (Tables)

12 Months Ended

Dec. 31, 2021

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, 2020		4,752		23,554	28,306	16.8%	83.2%
Stock based compensation transactions		—		445	445
Exchange transactions		(1,712)		1,712	—
As of December 31, 2020		3,040		25,711	28,751	10.6%	89.4%
Stock based compensation transactions		—		660	660
Exchange transactions		(2,768)		2,768	—
As of December 31, 2021		272		29,139	29,411	0.9%	99.1%

Debt - Convertible Notes (Details) $ in Thousands	May 19, 2020 USD ($) D	Dec. 31, 2021 USD ($)	May 31, 2020	Jul. 31, 2017
Debt Instrument [Line Items]
Interest rate		2.00%		4.35%
Convertible Notes
Debt Instrument [Line Items]
Aggregate principal amount	$ 143,800
Interest rate	4.00%		4.00%
Class A common stock \| Convertible Notes \| Maximum
Debt Instrument [Line Items]
Aggregate principal amount	$ 143,800
Interest rate	4.00%
Net proceeds from the debt	$ 137,900
Conversion ratio	33.7268
Denomination for conversion of debt	$ 1,000
Premium percentage on conversion price	130.00%
Threshold trading days \| D	20
Threshold consecutive trading days \| D	30
Fair value of our convertible notes		$ 169,000

Property, Plant, and Equipment (Tables)

12 Months Ended

Dec. 31, 2021

Property, Plant, and Equipment

Summary of Property, Plant, and Equipment



$'s in 000's	December 31, 2021		December 31, 2020
Leasehold improvements	$	26,341	$	19,709
Equipment		26,414		25,664
Vehicles and accessories		7,339		7,110
Computer equipment and software		15,418		10,858
Buildings		23,302		10,168
Furniture and fixtures		3,877		2,347
Land		8,934		7,067
Construction in progress		5,077		11,331
		116,702		94,254
Less accumulated depreciation		(40,089)		(31,108)
Total property, plant, and equipment	$	76,613	$	63,146

Employee Benefit Plans

12 Months Ended

Dec. 31, 2021

Employee Benefit Plans

Employee Benefit Plans

Note 16 – Employee Benefit Plans

The Company sponsors 401(k) defined contribution plans at certain subsidiaries. Participants may elect to defer up to 100% of compensation. The Company makes matching contributions of 100% of the employee deferrals up to 3% of compensation. The Company may also make discretionary profit sharing contributions each year, which are allocated to each eligible participant based on compensation. The Company made matching contributions of $1.1 million, $0.9 million, and $0.6 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

Principal Business Activity and Significant Accounting Policies - Research and Development and Advertising Costs (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Research and Development and Advertising Costs
Research and development costs	$ 8.0	$ 2.3	$ 1.3
Advertising costs	$ 16.2	$ 10.1	$ 4.5

Principal Business Activity and Significant Accounting Policies - Fair value on a recurring basis (Details)	Dec. 31, 2021	Jul. 31, 2017
Fair Value of Financial Instruments
Fixed interest rate	2.00%	4.35%
Contingent notes
Fair Value of Financial Instruments
Fixed interest rate	6.75%

Customer Concentration

12 Months Ended

Dec. 31, 2021

Customer Concentration

Customer Concentration

Note 12 - Customer Concentration

The Company has significant exposure to customer concentration. During each of the years ended December 31, 2021, 2020, and 2019, one, two, and two customers, respectively, accounted for more than 10% of sales individually and in aggregate, which accounted for 26%, 42%, and 35% of net sales, respectively.

At December 31, 2021, one Products segment customer individually accounted for more than 10% of outstanding trade receivables, and accounted for 47% of outstanding trade receivables, net. At December 31, 2020 one Products segment customers individually accounted for more than 10% of outstanding trade receivables, and accounted for 52% of outstanding trade receivables, net. All of our customer concentration exists in our Products segment.

Leases - Components of lease expense and other information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Lease cost
Amortization of right-of-use assets	$ 2,215	$ 1,681	$ 1,441
Interest on lease liabilities	338	315	308
Operating lease cost	5,556	5,831	4,833
Variable lease cost	1,283	1,130	629
Short-term lease cost	13	34	41
Sublease income	(238)	(528)	(452)
Total lease cost	$ 9,167	$ 8,463	$ 6,800
Weighted-average remaining lease term (years), Operating leases	3 years 10 months 9 days	4 years 4 months 28 days
Weighted-average remaining lease term (years), Finance leases	2 years 7 months 2 days	2 years 4 months 17 days
Weighted-average discount rate, Operating leases	4.90%	5.30%
Weighted-average discount rate, Finance leases	4.60%	5.70%

Business Combination and Asset Acquisition

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition

Business Combination and Asset Acquisition

Note 2 – Business Combination and Asset Acquisition

Capstar ® (nitenpyram) Acquisition

On July 31, 2020 the Company completed the acquisition of Capstar® and CapAction® and related assets (the “Capstar Acquisition”) from Elanco US Inc. for $95 million, plus the cost of certain outstanding finished goods inventory in saleable condition, using cash on hand as a result of the issuance of the 4.00% Convertible Senior Notes due 2026 (the “Notes”) in May 2020, See Note 5 – “Debt”

The Capstar Acquisition was accounted for as an asset acquisition and certain transaction related costs of approximately $1.0 million were included in the cost of the acquired assets. The fair value assigned to trade names was based on the income approach using a relief from royalty methodology that assumes that the fair value of a trade name can be measured by estimating the cost of licensing and paying a royalty fee for the trade name that the owner of the trade name avoids. The estimated fair value of customer relationship was determined using an income approach, specifically a discounted cash flow analysis. The rate utilized to discount net cash flows to their present values was approximately 15% and was determined after consideration of the overall enterprise rate of return and the relative risk and importance of the assets to

the generation of future cash flows. The fair value assigned to patents and processes was determined based on the income approach. The purchased assets are identified below:


$'s in 000's	Fair Value
Amortizable intangibles
Customer relationships	$	70,901
Patents and processes		9,895
Total amortizable intangibles		80,796
Non-amortizable intangibles
Trademarks and other		15,276
Total purchased intangible assets	$	96,072

The weighted average amortization period of the amortizable intangible assets is approximately 11.8 years.

Supplier Termination, Settlement and Asset Purchase Agreement:

During July 2020, the Company entered into a Termination, Settlement and Asset Purchase Agreement (“Agreement”) with a supplier who alleged PetIQ had breached its supply agreement due to the acquisition of Perrigo Animal Health. The Agreement called for PetIQ to pay $20.6 million, $2.6 million at signing and $1.0 million per quarter thereafter. The Agreement terminated the supply agreement that was previously in place, settled all outstanding claims and operations, and allowed PetIQ to purchase certain intellectual property related assets. The Company has estimated the fair value of the payment obligation as $17.5 million, and determined the fair value of the acquired assets to be $9.7 million. The assets acquired are included within the patents and processes intangible assets category and will be amortized over 10 years. The assets were valued using the relief from royalty method. The remainder of the obligation is considered to be a payment to settle the alleged breach of the supply agreement, the termination expense is included in selling, general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2020. The obligation is considered debt and is included in debt on the consolidated balance sheet. See Note 5 – “Debt” for additional information.

Principal Business Activity and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2021

Schedule of accounts receivable


$'s in 000's	December 31, 2021		December 31, 2020
Trade receivables	$	108,049	$	96,381
Other receivables		6,405		7,094
		114,454		103,475
Less: Allowance for doubtful accounts		(507)		(720)
Total accounts receivable, net	$	113,947	$	102,755

Schedule of components of inventories


$'s in 000's	December 31, 2021		December 31, 2020
Raw materials	$	16,564	$	15,761
Work in progress		1,650		2,273
Finished goods		78,226		79,739
Total inventories	$	96,440	$	97,773

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			2-15 years
Furniture and fixtures			5-10 years

ASU 2020-06

Schedule of impact of the adoption


			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted
Liabilities
	Long-term debt, less current installments	$	355,979	$	47,612	$	403,591
Stockholders' Equity
	Additional Paid-in Capital		356,442		(36,800)		319,642
	Non-controlling Interest		31,614		(5,631)		25,983
	Accumulated Deficit		(93,377)		(5,181)		(98,558)


			For the Year Ended
			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	26,299	$	(3,492)	$	22,807
	Tax expense		(52,216)		(8,197)		(60,413)

Net loss			(81,022)		(4,705)		(85,727)

- Definition

The entire disclosure for change in accounting principle. Includes, but is not limited to, nature, reason, and method of adopting amendment to accounting standards or other change in accounting principle.

+ References

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Reference 34: http://www.xbrl.org/2003/role/disclosureRef
-Topic 848
-SubTopic 10
-Name Accounting Standards Codification
-Section 65
-Paragraph 2
-Publisher FASB
-Subparagraph (c)

+ Details

Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Goodwill, Beginning Balance	$ 231,158	$ 231,045
Foreign currency translation	(48)	113
Goodwill, Ending Balance	231,110	231,158
Product
Goodwill, Beginning Balance	183,894	183,781
Foreign currency translation	(48)	113
Goodwill, Ending Balance	183,846	183,894
Services [Member]
Goodwill, Beginning Balance	47,264	47,264
Goodwill, Ending Balance	$ 47,264	$ 47,264

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Income Taxes

Schedule of components of earnings before net loss taxes, by tax jurisdiction


	Years Ended December 31
				As adjusted (Note1)
$'s in 000's	2021		2020		2019
United States	$	(12,816)	$	(25,747)	$	(17,953)
Foreign		302		433		342
Total	$	(12,514)	$	(25,314)	$	(17,611)

Schedule of provision for income taxes


	Years Ended December 31
				As adjusted (Note1)
$'s in 000's	2021		2020		2019
Current:
Federal	$	—	$	—	$	—
State		323		327		317
Foreign		26		137		17
	$	349	$	464	$	334
Deferred and other:
Federal		2,661		47,048		(2,146)
State		717		12,922		(1,336)
Foreign		142		(21)		(161)
		3,520		59,949		(3,643)
Total income tax expense (benefit)	$	3,869	$	60,413	$	(3,309)

Schedule of reconciliation between effective tax rate and statutory tax rate


	Years Ended December 31
				As adjusted (Note1)
		2021		2020		2019
Income tax expense (benefit) at federal statutory rate		21.0	%	21.0	%	21.0	%
State and local income taxes net of federal tax benefit		(0.2)		0.6		1.3
Non-controlling interest and nontaxable income		(0.1)		(2.4)		(4.0)
Deferred tax rate changes		1.0		(0.6)		(0.4)
Share-based compensation		6.8		0.6		0.1
Return-to-Provision		(15.7)		(2.3)		0.8
Valuation Allowance		(42.9)		(255.2)		0.4
Other		(0.8)		(0.4)		(0.4)
Effective income tax rate		(30.9)	%	(238.7)	%	18.8	%

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


				As adjusted (Note1)
$'s in 000's	2021		2020
Deferred tax assets
Investment in partnership	$	77,306	$	63,439
Fixed assets		43		44
Net operating loss carryforwards and tax credits		25,888		15,382
Disallowed business interest carryforward		3,169		1,678
Other accruals and reversals		5		9
Subtotal		106,411		80,552
Less: valuation allowance		(106,258)		(80,355)
Net deferred tax assets		153		197

Deferred tax liabilities
Fixed Assets	$	(151)	$	(12)
Intangible assets		(454)		(456)
Other		(7)		(6)
Net deferred tax liabilities	$	(612)	$	(474)

Business Combination and Asset Acquisition - Supplier Termination, Settlement and Asset Purchase Agreement (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Jul. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Business Acquisition [Line Items]
Amount required to pay pursuant to settlement agreement	$ 20,600
Payment on signing	2,600
Payment per quarter	1,000
Estimated fair value of the payment obligation	17,500
Fair value of assets acquired	$ 9,700		$ 9,686
Patents and processes
Business Acquisition [Line Items]
Amortizable Intangibles, useful lives		10 years

Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

Note 7 - Income Taxes

The Company is the sole managing member of Holdco. Holdco is treated as a partnership for U.S. federal income tax purposes with the remaining partners of Holdco (the “LLC Owners”) owning a non-controlling interest. The LLC Owners have an exchange right which grants them the right to exchange a Holdco partnership interest and a PetIQ Class B Common Stock share for a PetIQ Class A Common Stock share. Upon such an exchange, the Company is treated as purchasing an additional interest in Holdco from the LLC Owners in a taxable exchange which generates deferred tax assets as a result of an increase in tax basis for the Company. As of December 31, 2021, the Company had $82.8M of deferred tax assets associated with these exchanges, which currently have a full valuation allowance against the deferred tax asset. The non-controlling interests totaled approximately 0.9% of the ownership of Holdco as of December 31, 2021. See Note 11 – Non-controlling interests for more information.

HoldCo’s members, including the Company, are liable for federal, state, and local income taxes based on their share of HoldCo’s taxable income.

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


	Years Ended December 31
				As adjusted (Note1)
$'s in 000's	2021		2020		2019
United States	$	(12,816)	$	(25,747)	$	(17,953)
Foreign		302		433		342
Total	$	(12,514)	$	(25,314)	$	(17,611)

The provision for income taxes for 2021, 2020, and 2019 consisted of the following:


	Years Ended December 31
				As adjusted (Note1)
$'s in 000's	2021		2020		2019
Current:
Federal	$	—	$	—	$	—
State		323		327		317
Foreign		26		137		17
	$	349	$	464	$	334
Deferred and other:
Federal		2,661		47,048		(2,146)
State		717		12,922		(1,336)
Foreign		142		(21)		(161)
		3,520		59,949		(3,643)
Total income tax expense (benefit)	$	3,869	$	60,413	$	(3,309)

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


	Years Ended December 31
				As adjusted (Note1)
		2021		2020		2019
Income tax expense (benefit) at federal statutory rate		21.0	%	21.0	%	21.0	%
State and local income taxes net of federal tax benefit		(0.2)		0.6		1.3
Non-controlling interest and nontaxable income		(0.1)		(2.4)		(4.0)
Deferred tax rate changes		1.0		(0.6)		(0.4)
Share-based compensation		6.8		0.6		0.1
Return-to-Provision		(15.7)		(2.3)		0.8
Valuation Allowance		(42.9)		(255.2)		0.4
Other		(0.8)		(0.4)		(0.4)
Effective income tax rate		(30.9)	%	(238.7)	%	18.8	%

Our tax rate is affected primarily by the changes in valuation allowance during the year ended December 31, 2021 and the portion of income and expense allocated to the non-controlling interest. It is also affected by discrete items that may occur in any given year such as stock based compensation, but are not consistent from year to year.

As a result of the IPO and reorganization transactions, the Company has recorded deferred tax assets and liabilities based on the differences between the book value of assets and liabilities for financial reporting purposes and those amounts applicable for income tax purposes. Deferred tax assets have been recorded for the basis differences resulting from the purchase of LLC Interests from existing members and newly issued LLC Interests acquired directly from Holdco. The tax

effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows:


				As adjusted (Note1)
$'s in 000's	2021		2020
Deferred tax assets
Investment in partnership	$	77,306	$	63,439
Fixed assets		43		44
Net operating loss carryforwards and tax credits		25,888		15,382
Disallowed business interest carryforward		3,169		1,678
Other accruals and reversals		5		9
Subtotal		106,411		80,552
Less: valuation allowance		(106,258)		(80,355)
Net deferred tax assets		153		197

Deferred tax liabilities
Fixed Assets	$	(151)	$	(12)
Intangible assets		(454)		(456)
Other		(7)		(6)
Net deferred tax liabilities	$	(612)	$	(474)

At December 31, 2021, the Company has federal net operating loss (“NOL”) carryforwards of $103.6 million, of which $1.9 million, generated in 2017 and prior, will expire in 2037. The remaining NOLs do not expire. The NOL generated in 2018 and after of $101.7 million will have an indefinite carryforward period but can generally only be used to offset 80% of taxable income in any particular year. The Company has a federal business interest expense carryover totaling $15.1 million as of December 31, 2021, which has an indefinite carryforward period but is limited in any particular year based on certain provisions. As of December 31, 2021, the Company has charitable contribution carryforwards of $0.6 million, which if unused will expire between 2022 and 2026. The Company has state NOL carryforwards of $499.5 million (tax effected $4.6 million) as of December 31, 2021 which expire between 2022 and 2039 and others that have an indefinite carryforward period. At December 31, 2021 the Company had foreign NOL carryforwards of $0.6 million which do not expire.

The Company has assessed the realizability of the net deferred tax assets as of December 31, 2021 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 to realize its deferred tax assets. The Company believes it is more likely than not that the benefit from the recorded deferred tax assets in the United States and Ireland will not be realized. The Company has recorded a valuation allowance for these deferred tax assets of $106.3 million and $80.4 million as of December 31, 2021 and 2020, respectively. Additionally, the Company has recorded a net deferred tax liability related to its indefinite lived intangible assets in the United States. In future periods, if we conclude we have future taxable income sufficient to recognize the deferred tax assets, we may reduce or eliminate the valuation allowance.

The Company has not recognized any uncertain tax positions, penalties or interest as we have concluded that no such positions exist. Accordingly, no unrecognized tax benefit would impact the effective tax rate. If interest and penalties were accrued, we would recognize interest and penalties as income tax expense. We are subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2021, tax years from 2018 to present are subject to examination by the tax authorities.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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+ Details

Stockholders' Equity

12 Months Ended

Dec. 31, 2021

Stockholders' Equity

Stockholders' Equity

Note 10 - Stockholders’ Equity

Certificate of Incorporation

The Company’s amended and restated certificate of incorporation, among other things, provides for the (i) authorization of 125,000,000 shares of Class A common stock with a par value of $0.001 per share; (ii) authorization of 100,000,000 shares of Class B common stock with a par value of $0.001 per share; (iii) authorization of 12,500,000 shares of blank check preferred stock; and (iv) establishment of a classified board of directors, divided into three classes, each of whose members will serve for staggered three-year terms.

Each share of the Company’s Class A common stock and Class B common stock entitles its holders to one vote per share on all matters presented to the Company’s stockholders generally.

Holders of the Company’s Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company. Shares of Class B common stock may only be issued to the extent necessary to maintain the one-to-one ratio between the number of LLC interests of HoldCo held by Continuing LLC Owners. Shares of Class B common stock are transferable only together with an equal number of LLC Interests. Shares of Class B common stock will be canceled on a one-for-one basis upon the redemption or exchange any of the outstanding LLC Interests held by the Continuing LLC Owners.

The Company must, at all times, maintain a one-to-one ratio between the number of outstanding shares of Class A common stock and the number of LLC Interests owned by PetIQ (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities).

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Intangible Assets and Goodwill (Tables)

12 Months Ended

Dec. 31, 2021

Intangible Assets and Goodwill

Schedule of intangible assets


$'s in 000's	Useful Lives	December 31, 2021		December 31, 2020
Amortizable intangibles
Certification	7 years	$	350	$	350
Customer relationships	12-20 years		160,167		160,178
Patents and processes	5-10 years		14,843		14,905
Brand names	5-15 years		24,731		24,740
Total amortizable intangibles			200,091		200,173
Less accumulated amortization			(44,438)		(25,984)
Total net amortizable intangibles			155,653		174,189
Non-amortizable intangibles
Trademarks and other			33,341		33,341
In-process research and development			1,668		5,470
Intangible assets, net of accumulated amortization		$	190,662	$	213,000

Estimated future amortization expense


Years ending December 31, ($'s in 000's)
2022						17,966
2023						16,921
2024						14,554
2025						13,893
2026						13,303
Thereafter						79,016

Schedule of Goodwill


	Reporting Unit
($'s in 000's)	Products		Services		Total
Goodwill as of January 1, 2020		183,781		47,264		231,045
Foreign currency translation		113		—		113
Goodwill as of December 31, 2020		183,894		47,264		231,158
Foreign currency translation		(48)		—		(48)
Goodwill as of December 31, 2021	$	183,846	$	47,264	$	231,110

Debt

12 Months Ended

Dec. 31, 2021

Debt

Debt

Note 5 – Debt

On April 13, 2021, the Company entered into the ABL Facility and the Term Loan B (each as defined below), which replaced both the Amended Revolving Credit Agreement and A&R Term Loan Agreement as well as fully repaid $27.5 million of the Notes Payable – VIP Acquisition (as defined below).

As part of the termination of the Amended Revolving Credit Agreement and the A&R Term Loan Credit agreement, and the repayment in full of the Notes Payable – VIP Acquisition, the Company wrote off $5.5 million in deferred financing fees to loss on debt extinguishment and incurred an additional $0.9 million in costs related to the transaction which are included in selling, general and administrative expenses.

Senior Secured Asset-Based Revolving Credit Facility – ABL

On April 13, 2021, Opco entered into an asset-based revolving credit agreement with KeyBank National Association, as administrative agent and collateral agent, and the lenders’ party thereto, that provides revolving credit commitments of $125.0 million, subject to a borrowing base limitation (the “ABL Facility”). The borrowing base for the ABL Facility at any time equals the sum of: (i) 90% of eligible investment-grade accounts; plus (ii) 85% of eligible other accounts; plus, (iii) 85% of the net orderly liquidation value of the cost of certain eligible on-hand and in-transit inventory; plus, (iv) at the option of Opco, 100% of qualified cash; minus (v) reserves. The ABL Facility bears interest at a variable rate plus a margin, with the variable rate being based on a base rate or LIBOR at the option of the Company. The rate at December 31, 2021 was 2.37%. The Company also pays a commitment fee on unused borrowings at a rate of 0.35%.

The ABL Facility is secured by substantially all the assets of PetIQ Holdings, LLC and its wholly-owned domestic subsidiaries including a first-priority security interest in personal property consisting of accounts receivable, inventory, cash, and deposit accounts (such collateral subject to such first-priority security interest, “ABL Priority Collateral”), and a second-priority security interest in all other personal and real property of PetIQ Holdings, LLC and its wholly-owned domestic subsidiaries (such collateral subject to such second-priority security interest, “Term Priority Collateral”), in each case, subject to customary exceptions. The ABL contains customary representations and warranties, affirmative and negative covenants and events of default, including negative covenants that restrict the ability of PetIQ Holdings, LLC and its restricted subsidiaries to incur additional indebtedness, pay dividends, make investments, loans, and acquisitions, among other restrictions.

Senior Secured Term Loan Facility – Term Loan B

On April 13, 2021, Opco entered into a term credit agreement with Jefferies Finance LLC, as administrative agent and collateral agent, and the lenders’ party thereto, that provides senior secured term loans of $300.0 million (the “Term Loan B”). The Term Loan B bears interest at a variable rate (with the variable rate being based on a base rate or LIBOR at the option of the Company) plus a margin of 3.25% in the case of base rate loans, or 4.25% in the case of LIBOR loans. LIBOR rates are subject to a 0.50% floor. The interest rate at December 31, 2021 was 4.25%. The Term Loan B requires quarterly amortization payments of 0.25% of the original principal amount, with the balance due on the seventh anniversary of the closing date.

The Term Loan B is secured by substantially all the assets of PetIQ Holdings, LLC and its wholly-owned domestic subsidiaries, including a first-priority security interest in Term Priority Collateral and a second-priority security interest in ABL Priority Collateral, in each case, subject to customary exceptions. The Term Loan B contains customary representations and warranties, affirmative and negative covenants and events of default, including negative covenants that restrict the ability of PetIQ Holdings, LLC and its restricted subsidiaries to incur additional indebtedness, pay dividends, make investments, loans, and acquisitions, among other restrictions.

Convertible Notes

On May 19, 2020, the Company issued $143.8 million in aggregate principal amount of 4.00% Convertible Senior Notes due 2026 (the “Notes”) pursuant to the indenture (the “Indenture”), dated as of May 19, 2020. The total net proceeds from the Notes offering, after deducting debt issuance costs paid or payable by us, was $137.9 million. The Notes accrue interest at a rate of 4.00% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Notes will mature on June 1, 2026, unless earlier repurchased, redeemed or converted. Before January 15, 2026, holders will have the right to convert their Notes only upon the occurrence of certain events. From and after January 15, 2026, holders may convert their Notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its Class A common stock, or a combination of cash and shares of its Class A common stock, at its election. The initial conversion rate is 33.7268 shares of Class A common stock per $1,000 principal amount of Notes. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after June 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s Class A common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Notes will constitute a Make-Whole Fundamental Change with respect to such Notes, which will result in an increase to the conversion rate if such Notes are converted after they are called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s Class A common stock.

The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. The Notes contain customary events of default.

The fair value of the Notes was $169.0 million as of December 31, 2021. The estimated fair value of the Notes is based on market rates at the closing trading price of the Convertible Notes as of December 31, 2021 and is classified as Level 2 in the fair value hierarchy.

Capped Call Transactions

On May 14, 2020 and May 19, 2020, the Company entered into capped call transactions (the “Capped Call Transactions”) with two counterparties (the “Option Counterparties”). The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to the Notes, the underlying shares of Class A common stock and are intended to reduce, subject to a limit, the potential dilution with respect to the Class A common stock upon conversion of the Notes. The cap price of the Capped Call Transactions is $41.51 per share of Class A common stock, and is subject to certain adjustments under the terms of the Capped Call Transactions.

The Company paid approximately $14.8 million for the Capped Call Transactions, which was recorded as additional paid-in capital, using a portion of the gross proceeds from the sale of the Notes. The capped call is expected to be tax deductible as the Company elected to integrate the capped call into the Notes for tax purposes.

Amended & Restated Credit Agreement

OpCo entered into an Amended Revolving Credit Agreement on July 8, 2019 (the “Amended Revolving Credit Agreement”). The Amended Revolving Credit Agreement provided for a secured revolving credit facility of $125 million that matured on July 8, 2024. The borrowers under the Amended Revolving Credit Facility incurred fees between 0.375% and 0.50% as unused facility fees, dependent on the aggregate amount borrowed. On May 14, 2020, the Company amended the Amended Revolving Credit Agreement to allow for the Notes described above. Additionally, the amendment instituted a Eurodollar floor of 1% to the agreement.

All obligations under the Amended Revolving Credit Agreement were 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, were 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 was fully repaid and terminated in April 2021.

Amended & Restated Term Loan Credit Agreement

OpCo entered into an Amended and Restated Term Loan Credit Agreement on July 8, 2019 (the “A&R Term Loan Credit Agreement”). The $220.0 million A&R Term Loan Credit Agreement had an interest rate equal to the Eurodollar rate plus 5.00%. The A&R Term Loan Credit Agreement called for 1% of the original loan balance to be paid annually via equal quarterly payments, with the balance of the loan due on the sixth anniversary of the agreement.

All obligations under the A&R Term Loan Credit Agreement were 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, were secured by substantially all of the assets of OpCo and each guarantor under the A&R Term Loan Credit Agreement, subject to certain exceptions.

The A&R Term Loan Credit Agreement was fully repaid and terminated in April 2021.

General Other Debt

The Company entered into a mortgage with Huntington Bank to finance a commercial building in Eagle, Idaho, in December 2021. The mortgage bears interest at a fixed rate of 2.0% plus LIBOR and utilizes a 10 year amortization schedule with a balloon payment of the balance due at that time. The rate at December 31, 2021 was 2.10%.

The Company entered into a mortgage with a local bank to finance 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. The Company entered into an agreement to sell the commercial building in Eagle,

Idaho, which closed in the third quarter of 2021. The Company used the proceeds from the sale to repay the mortgage on August 2, 2021.

In July 2020, the Company entered into the Agreement. See Note 2 – “Asset Acquisitions”. The Agreement called for PetIQ to pay $20.6 million, $2.6 million at signing and $1.0 million per quarter thereafter with no interest. The Company discounted the payment stream using a market interest rate of 8.3%, resulting in an obligation of $17.5 million at the time it was entered into.

In connection with the acquisition of Community Veterinary Clinics, LLC d/b/a, VIP Petcare (the “VIP Acquisition”), the Company entered into a guarantee note of $10.0 million and contingent Notes that were subsequently earned. As of December 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 (collectively, “Notes Payable – VIP Acquisition”) of $27.5 million required quarterly interest payments of 6.75% with the balance payable July 17, 2023. These Notes Payable – VIP Acquisition were fully repaid in April 2021.

The following represents the Company’s long-term debt as of:


				As adjusted (Note1)
$'s in 000's	December 31, 2021		December 31, 2020
Convertible Notes	$	143,750	$	143,750
Term loans		298,500		217,250
Revolving credit facility		—		15,000
Notes Payable - VIP Acquisition		—		27,500
Other Debt		23,518		16,257
Net discount on debt and deferred financing fees		(10,418)		(9,947)
	$	455,350	$	409,810
Less current maturities of long-term debt		(6,880)		(6,219)
Total long-term debt	$	448,470	$	403,591

Future maturities of long-term debt, excluding net discount on debt and deferred financing fees, as of December 31, 2021, are as follows:


($'s in 000's)
2022			6,880
2023			7,099
2024			7,339
2025			4,600
2026			147,350
Thereafter			292,500

The Company incurred $6.4 million in debt issuance costs related to the Term Loan B, $1.0 million related to the ABL, and $0.2 million related to the new mortgage during the year ended December 31, 2021. The Company incurred debt issuance costs of $0.6 million related to the A&R Credit Agreement and $5.9 million in connection with the Notes during the year ended December 31, 2020. The Company incurred debt issuance costs of $0.7 million during the year ended December 31, 2019 related to the A&R Credit Agreement and $5.1 million related to the A&R Term Loan Credit Agreement.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (h)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (g)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1E
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (i)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

Leases

12 Months Ended

Dec. 31, 2021

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 2022 and 2027.

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 and vehicles primarily relate to usage, repairs, and maintenance. As the implicit rate is not readily determinable for most of the Company’s leases, the Company applies a portfolio approach using an estimated incremental borrowing rate, giving consideration to company specific information and publicly available interest rates for instruments with similar characteristics, to determine the initial present value of lease payments over the lease terms.

The components of lease expense consists of the following:


	For the Year Ended
$'s in 000's	December 31, 2021		December 31, 2020		December 31, 2019
Finance lease cost
Amortization of right-of-use assets	$	2,215	$	1,681	$	1,441
Interest on lease liabilities		338		315		308
Operating lease cost		5,556		5,831		4,833
Variable lease cost⁽¹⁾		1,283		1,130		629
Short-term lease cost		13		34		41
Sublease income		(238)		(528)		(452)
Total lease cost	$	9,167	$	8,463	$	6,800

(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:


	December 31, 2021	December 31, 2020
Weighted-average remaining lease term (years)
Operating leases	3.86	4.41
Finance leases	2.59	2.38
Weighted-average discount rate
Operating leases	4.9%	5.3%
Finance leases	4.6%	5.7%

Annual future commitments under non-cancelable leases as of December 31, 2021, consist of the following:


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
2022	$	6,951	$	1,622
2023		6,139		1,696
2024		4,581		609
2025		3,629		225
2026		2,029		78
Thereafter		56		—
Total minimum future obligations	$	23,385	$	4,230
Less interest		(2,042)		(267)
Present value of net future minimum obligations		21,343		3,963
Less current lease obligations		(6,500)		(1,470)
Long-term lease obligations	$	14,843	$	2,493

Supplemental cash flow information:



	For the Year Ended
$'s in 000's	December 31, 2021		December 31, 2020		December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	338	$	315	$	308
Operating cash flows from operating leases		3,928		5,668		4,568
Financing cash flows from finance leases		1,926		1,965		1,547
(Noncash) right-of-use assets obtained in exchange for lease obligations
Operating leases		5,212		5,105		5,368
Finance leases		1,191		2,019		(3,006)

Stockholders' Equity (Details)	12 Months Ended
Stockholders' Equity (Details)	Dec. 31, 2021 Vote $ / shares shares	Dec. 31, 2020 $ / shares shares
Class of Stock [Line Items]
Blank check preferred stock, authorized	12,500,000
Staggered term (in years)	3 years
Number of votes per share \| Vote	1
Class A common stock
Class of Stock [Line Items]
Common stock authorized	125,000,000	125,000,000
Common stock, par value \| $ / shares	$ 0.001	$ 0.001
Class B common stock
Class of Stock [Line Items]
Common stock authorized	100,000,000	100,000,000
Common stock, par value \| $ / shares	$ 0.001	$ 0.001
Share ratio	1

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current assets
Cash and cash equivalents	$ 79,406	$ 33,456
Accounts receivable, net	113,947	102,755
Inventories	96,440	97,773
Other current assets	8,896	8,312
Total current assets	298,689	242,296
Property, plant and equipment, net	76,613	63,146
Operating lease right of use assets	20,489	20,122
Other non-current assets	2,024	1,870
Intangible assets, net	190,662	213,000
Goodwill	231,110	231,158
Total assets	819,587	771,592
Current liabilities
Accounts payable	55,057	68,131
Accrued wages payable	12,704	10,540
Accrued interest payable	3,811	903
Other accrued expenses	11,680	8,815
Current portion of operating leases	6,500	4,915
Current portion of long-term debt and finance leases	8,350	7,763
Total current liabilities	98,102	101,067
Operating leases, less current installments	14,843	15,789
Long-term debt, less current installments	448,470	403,591
Finance leases, less current installments	2,493	3,338
Other non-current liabilities	459	1,397
Total non-current liabilities	466,265	424,115
Equity
Additional paid-in capital	368,006	319,642
Accumulated deficit	(114,525)	(98,558)
Accumulated other comprehensive loss	(684)	(686)
Total stockholders' equity	252,826	220,427
Non-controlling interest	2,394	25,983
Total equity	255,220	246,410
Total liabilities and equity	819,587	771,592
Class A common stock
Equity
Common stock value	$ 29	26
Class B common stock
Equity
Common stock value		$ 3

Non-Controlling Interests (Details) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Common Stock, Shares, Outstanding, Beginning Balance	25,711	23,554
Stock based compensation transactions	660	445
Exchange transactions	2,768	1,712
Common Stock, Shares, Outstanding, Ending Balance	29,139	25,711
Continuing LLC Owners
Common Stock, Shares, Outstanding, Beginning Balance	3,040	4,752
Exchange transactions	(2,768)	(1,712)
Common Stock, Shares, Outstanding, Ending Balance	272	3,040
Amended Holdco LLC Agreement
Common Stock, Shares, Outstanding, Beginning Balance	28,751	28,306
Stock based compensation transactions	660	445
Common Stock, Shares, Outstanding, Ending Balance	29,411	28,751
Holdco
Weighted average ownership percentage in Holdco	96.60%	86.40%
Continuing LLC Owners
Ownership interest by continuing LLC owners	0.90%	10.60%	16.80%
Ownership interest in Holdco	0.90%
PetIQ
Ownership interest in Holdco	99.10%	89.40%	83.20%

Intangible Assets and Goodwill - Estimated future amortization expense (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Intangible Assets and Goodwill
2022	$ 17,966
2023	16,921
2024	14,554
2025	13,893
2026	13,303
Thereafter	$ 79,016

Debt - Narrative (Details) - USD ($) $ in Millions		12 Months Ended
Debt - Narrative (Details) - USD ($) $ in Millions	Apr. 13, 2021	Dec. 31, 2021
Notes Payable VIP Acquisition
Debt Instrument [Line Items]
Repayment of debt	$ 27.5
Wrote off deferred financing fees to loss on debt extinguishment	5.5
Transaction cost on termination of debt instrument	0.9
Senior Secured Asset-Based Revolving Credit Facility - ABL
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 125.0
Eligible investment - grade accounts	90.00%
Percentage of eligible investment other accounts	85.00%
Percentage of net orderly liquidation value of cost of certain eligible on hand and in transit inventory	85.00%
Percentage of qualified cash	100.00%
Line of credit facility, interest rate at period end		2.37%
Unused facility fee (as a percent)		0.35%
Senior Secured Term Loan Facility - Term Loan B
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 300.0
Line of credit facility, interest rate at period end		4.25%
Floor rate	0.50%
Debt instrument, frequency of periodic payment	quarterly
Percentage of periodic payment, principal	0.25%
Senior Secured Term Loan Facility - Term Loan B \| Base Rate
Debt Instrument [Line Items]
Variable interest rate, basis points spread over variable reference rate (as a percent)	3.25%
Senior Secured Term Loan Facility - Term Loan B \| LIBOR
Debt Instrument [Line Items]
Variable interest rate, basis points spread over variable reference rate (as a percent)	4.25%

Leases - Annual future commitments under non-cancelable leases (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Lease Obligations, Operating Leases
2022	$ 6,951
2023	6,139
2024	4,581
2025	3,629
2026	2,029
Thereafter	56
Total minimum future obligations	23,385
Less interest	(2,042)
Present value of net future minimum obligations	21,343
Less current lease obligations	(6,500)	$ (4,915)
Long-term lease obligations	14,843	15,789
Lease Obligations, Finance Leases
2022	1,622
2023	1,696
2024	609
2025	225
2026	78
Total minimum future obligations	4,230
Less interest	(267)
Present value of net future minimum obligations	3,963
Less current lease obligations	$ (1,470)
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	Long Term Debt And Finance Leases Current
Long-term lease obligations	$ 2,493	$ 3,338

Income Taxes - Provision for income taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Current:
State	$ 323	$ 327	$ 317
Foreign	26	137	17
Total current	349	464	334
Deferred and other:
Federal	2,661	47,048	(2,146)
State	717	12,922	(1,336)
Foreign	142	(21)	(161)
Total deferred and other	3,520	59,949	(3,643)
Total income tax expense (benefit)	$ 3,869	$ 60,413	$ (3,309)

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2021	Dec. 31, 2020
Common stock, shares outstanding	29,139,000	25,711,000
Class A common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	125,000,000	125,000,000
Common Stock, Shares, Issued	29,139,000	25,711,000
Common stock, shares outstanding	29,139,000	25,711,000
Class B common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	100,000,000	100,000,000
Common Stock, Shares, Issued	272,000	3,040,000
Common stock, shares outstanding	272,000	3,040,000

Stock Based Compensation - Summary of Unvested Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Stock Based Compensation
Stock Options Outstanding - Beginning Balance	2,086	2,072
Stock Options Granted (in shares)	354	505
Stock option Exercised (in shares)	(583)	(395)
Stock Options Forfeited (in shares)	(64)	(96)
Stock Options Cancelled (in shares)	(25)
Stock Options Outstanding - Ending Balance	1,768	2,086	2,072
Options exercisable - Ending Balance	755
Weighted Average Exercise Price Outstanding - Beginning Balance	$ 23.93	$ 24.63
Weighted Average Exercise Price - Granted	35.66	20.22
Weighted Average Exercise Price - Exercised	23.05	23.48
Weighted Average Exercise Price - Forfeited	24.84	21.42
Weighted Average Exercise Price - Cancelled	25.70
Weighted Average Exercise Price Outstanding - Ending Balance	$ 26.51	$ 23.93	$ 24.63
Aggregate Intrinsic Value	$ 2,897	$ 30,302	$ 6,266
Aggregate Intrinsic Value - Exercised	$ 8,499	$ 4,468
Weighted Average Remaining Contractual Life (years)	7 years 3 months 18 days	7 years 2 months 12 days	8 years

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Total net sales	$ 932,528	$ 780,051	$ 709,431
Total cost of sales	746,135	644,863	602,048
Gross profit	186,393	135,188	107,383
Operating expenses
Selling, General and administrative expenses	170,521	138,375	103,200
Contingent note revaluation loss			7,320
Operating (loss) income	15,872	(3,187)	(3,137)
Interest expense, net	24,696	22,807	14,495
Foreign currency (gain) loss, net	159	(109)	151
Loss on debt extinguishment	5,453
Other (expense), net	(1,922)	(571)	(172)
Total other expense, net	28,386	22,127	14,474
Pretax net loss	(12,514)	(25,314)	(17,611)
Income tax benefit (expense)	(3,869)	(60,413)	3,309
Net loss	(16,383)	(85,727)	(14,302)
Net loss attributable to non-controlling interest	(416)	(3,072)	(2,849)
Net loss attributable to PetIQ, Inc.	$ (15,967)	$ (82,655)	$ (11,453)
Net loss per share attributable to PetIQ, Inc. Class A common stock
Basic	$ (0.57)	$ (3.36)	$ (0.51)
Diluted	$ (0.57)	$ (3.36)	$ (0.51)
Weighted average shares of Class A common stock outstanding
Basic	28,242	24,629	22,652
Diluted	28,242	24,629	22,652
Product
Total net sales	$ 825,395	$ 725,705	$ 617,118
Total cost of sales	646,402	584,401	530,031
Services [Member]
Total net sales	107,133	54,346	92,313
Total cost of sales	$ 99,733	$ 60,462	$ 72,017

Non-Controlling Interests

12 Months Ended

Dec. 31, 2021

Non-Controlling Interests

Non-Controlling Interests

Note 11 - Non-Controlling Interests

The Company reports a non-controlling interest representing the LLC interests of HoldCo held by Continuing LLC Owners. Changes in PetIQ’s ownership interest in HoldCo while PetIQ retains its controlling interest in HoldCo will be accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC interests of HoldCo by the Continuing LLC Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when HoldCo has positive or negative net assets, respectively. The Company is also required to make tax distributions based on the LLC Agreement to Continuing LLC Members on a regular basis, these distributions will reduce the non-controlling interest.

As of December 31, 2021, there were 29,411 thousand LLC Interests outstanding, of which PetIQ owned 29,139 thousand, representing a 99.1% ownership interest in HoldCo. Exchange and other equity activity during the years ended December 31, 2021 and 2020 resulted in weighted average ownership of HoldCo by PetIQ of 96.6% and 86.4%, respectively.


	LLC Interests held					% of Total
		LLC				LLC
$'s in 000's	Owners		PetIQ, Inc.		Total	Owners	PetIQ, Inc.
As of January 1, 2020		4,752		23,554	28,306	16.8%	83.2%
Stock based compensation transactions		—		445	445
Exchange transactions		(1,712)		1,712	—
As of December 31, 2020		3,040		25,711	28,751	10.6%	89.4%
Stock based compensation transactions		—		660	660
Exchange transactions		(2,768)		2,768	—
As of December 31, 2021		272		29,139	29,411	0.9%	99.1%

Principal Business Activity and Significant Accounting Policies - Convertible Debt (Details) $ in Millions	May 19, 2020 USD ($)
Convertible Notes
Debt Instrument [Line Items]
Aggregate principal amount	$ 143.8

Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies

Commitments and Contingencies

Note 13 - Commitments and Contingencies

Litigation Contingencies

During the years ended December 31, 2021, 2020, and 2019, the Company recorded liabilities of $3.5 million, $7.8 million, and $1.0 million respectively, for contract termination costs and other litigation related matters. The expense is included within selling, general and administrative expenses for the years ended December 31, 2021, 2020, and 2019.

During the year ended December 31, 2021, the Company entered into mediation with a third party who had filed a class action lawsuit against the Company. As a result of that mediation, the Company accrued the expected settlement of $1.4 million. Final settlement and payment is expected to occur in 2022.

Additionally, during the year ended December 31, 2021, the Company continued to evaluate a lawsuit brought by a former supplier to the Company related to the redemption of ownership interests. The plaintiff has alleged actual damages of approximately $3.0 million and has claimed additional punitive damages that could result in treble damages. The Company believes the range of outcomes is between $2.0 million and the amount alleged by the plaintiff, and as no amount within the range is more likely than any other, the Company has accrued an obligation of $2.0 million as of December 31, 2021. There is no assurance that the Company’s defense will be successful, and as such the Company will continue to monitor the expected outcome of the matter.

The Company records a liability when a particular contingency is probable and estimable and provides disclosure for contingencies that are at least reasonably possible of resulting in a loss including an estimate which we currently cannot make. The Company has not accrued for any contingency other than those noted above, at December 31, 2021 as the Company does not consider any other contingency to be probable or estimable. The Company expenses legal costs as incurred within selling, general, and administrative expenses on the consolidated statements of operations.

Commitments

We have commitments for leases and long-term debt that are discussed further in Note 5, Debt, and Note 6, Leases. In addition, we have purchase obligations for goods and services, capital expenditures, and raw materials entered into in the normal course of business.

Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2021

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


	December 31, 2021			December 31, 2020
Expected term (years) ⁽¹⁾		6.17			6.25
Expected volatility ⁽²⁾		33.45	%		33.91	%
Risk-free interest rate ⁽³⁾		0.89	%		0.37	%
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.

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, 2020		2,072	$	24.63	$	6,266		8.0
Granted		505		20.22
Exercised		(395)		23.48	$	4,468
Forfeited		(96)		21.42
Outstanding at December 31, 2020		2,086	$	23.93	$	30,302		7.2
Granted		354		35.66
Exercised		(583)		23.05	$	8,499
Forfeited		(64)		24.84
Cancelled		(25)		25.70
Outstanding at December 31, 2021		1,768	$	26.51	$	2,897		7.3
Options exercisable at December 31, 2021		755

Summary of RSU activity


			Weighted
	Number of		Average
	Shares		Grant Date
	(in 000's)		Fair Value
Outstanding at January 1, 2020		133	$	28.85
Granted		271		20.73
Settled		(70)		25.65
Forfeited		(17)		23.34
Outstanding at December 31, 2020		317	$	22.91
Granted		268		37.91
Settled		(103)		24.81
Forfeited		(23)		26.02
Nonvested RSUs at December 31, 2021		459	$	31.08

Principal Business Activity and Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Inventories
Raw materials	$ 16,564	$ 15,761
Work in progress	1,650	2,273
Finished goods	78,226	79,739
Total inventories	$ 96,440	$ 97,773

Stock Based Compensation - Weighted Average Assumptions (Details)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Stock Based Compensation
Expected term (years)	6 years 2 months 1 day	6 years 3 months
Expected volatility	33.45%	33.91%
Risk-free interest rate	0.89%	0.37%
Dividend yield	0.00%	0.00%

Commitments and Contingencies (Details) - USD ($) $ in Millions	1 Months Ended	12 Months Ended
	Jul. 31, 2020	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Litigation Contingencies
Loss Contingency, Damages Sought, Value	$ 20.6
Med Vets, Inc. and Bay Medical Solutions Inc
Litigation Contingencies
Liability recorded		$ 3.5	$ 7.8	$ 1.0
Mediation With Third Party
Litigation Contingencies
Liability recorded		1.4
Lawsuit By Former Supplier For Redemption Of Ownership Interest
Litigation Contingencies
Liability recorded		2.0
Loss Contingency, Damages Sought, Value		3.0
Lawsuit By Former Supplier For Redemption Of Ownership Interest \| Minimum
Litigation Contingencies
Loss Contingency, Estimate of Possible Loss		$ 2.0

Principal Business Activity and Significant Accounting Policies - Disaggregation of revenue (Details)	Dec. 31, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Disaggregation of revenue
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year

Stock Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Unrecognized compensation cost related to unvested stock options	$ 7,000
Share-based Compensation	9,428	$ 9,170	$ 7,355
Income Tax Expense	3,869	60,413	(3,309)
RSU
Unrecognized compensation cost related to unvested stock options	$ 11,200
Vesting period	2 years 8 months 12 days
Share-based Compensation	$ 4,300	2,600	1,100
Income Tax Expense	$ 0	$ 0	$ 1,400
Number of Shares
Beginning Balance	317	133
Granted (in shares)	268	271
Settled (in shares)	(103)	(70)
Forfeited (in shares)	(23)	(17)
Ending balance	459	317	133
Weighted Average Grant Date Fair Value
Beginning Balance	$ 22.91	$ 28.85
Granted (per share)	37.91	20.73
Settled (per share)	24.81	25.65
Forfeited (per share)	26.02	23.34
Ending balance	$ 31.08	$ 22.91	$ 28.85

Business Combination and Asset Acquisition - Capstar Acquisition (Details) $ in Thousands		12 Months Ended
	Jul. 31, 2020 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	May 31, 2020	May 19, 2020	Jul. 31, 2017
Business Acquisition [Line Items]
Acquisition Price		$ 31,270	$ 22,392	$ 10,276
Interest rate		2.00%					4.35%
Capitalized asset acquisition cost		$ 1,000
Fair value measurement input		15
Amortizable Intangibles		$ 80,796
Total purchased intangible assets		$ 96,072
Weighted average amortization period		11 years 9 months 18 days
Trademarks and other
Business Acquisition [Line Items]
Non-Amortizable Intangibles		$ 15,276
Convertible Notes
Business Acquisition [Line Items]
Interest rate					4.00%	4.00%
Customer relationships
Business Acquisition [Line Items]
Amortizable Intangibles		70,901
Patents and processes
Business Acquisition [Line Items]
Amortizable Intangibles		$ 9,895
Capstar Acquisition
Business Acquisition [Line Items]
Acquisition Price	$ 95,000

Segments

12 Months Ended

Dec. 31, 2021

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 years ended:


$'s in 000's					Unallocated
December 31, 2021	Products		Services		Corporate		Consolidated
Net Sales	$	825,395	$	107,133	$	—	$	932,528
Adjusted EBITDA		149,321		11,742		(68,171)		92,892
Depreciation expense		3,857		6,510		3,999		14,366
Capital expenditures		1,884		10,537		18,849		31,270


$'s in 000's					Unallocated
December 31, 2020	Products		Services		Corporate		Consolidated
Net Sales	$	725,705	$	54,346	$	—	$	780,051
Adjusted EBITDA		117,216		3,387		(52,811)		67,792
Depreciation expense		4,810		3,775		3,497		12,082
Capital expenditures		13,394		7,373		1,625		22,392


$'s in 000's					Unallocated
December 31, 2019	Products		Services		Corporate		Consolidated
Net Sales		617,118		92,313		—		709,431
Adjusted EBITDA		73,537		20,045		(32,907)		60,675
Depreciation expense		3,552		3,170		2,417		9,139
Capital expenditures		1,297		6,409		2,570		10,276

The following table reconciles Segment Adjusted EBITDA to Net Loss for the periods presented.


	For the years ended
$'s in 000's	December 31, 2021		December 31, 2020		December 31, 2019
Adjusted EBITDA:
Product	$	149,321	$	117,216	$	73,537
Services		11,742		3,387		20,045
Unallocated Corporate		(68,171)		(52,811)		(32,907)
Total Consolidated		92,892		67,792		60,675
Adjustments:
Depreciation		(14,366)		(12,082)		(9,139)
Amortization		(22,336)		(12,815)		(5,994)
Interest		(24,696)		(22,807)		(14,495)
Loss on debt extinguishment and related costs		(6,438)		—		—
Acquisition costs⁽¹⁾		(92)		(2,620)		(6,147)
Stock based compensation expense		(9,428)		(9,170)		(7,355)
Purchase accounting adjustment to inventory⁽²⁾		—		—		(4,805)
SKU rationalization⁽³⁾		—		—		(6,482)
Non same-store adjustment⁽⁴⁾		(23,159)		(16,354)		(12,232)
Fair value adjustment of contingent note		—		—		(7,320)
Integration costs		142		(9,776)		(3,788)
Litigation expenses		(4,105)		(1,006)		(529)
COVID-19 related costs⁽⁵⁾		—		(6,476)		—
CFO Transition		(928)		—		—
Pretax net loss	$	(12,514)	$	(25,314)	$	(17,611)
Income tax benefit (expense)		(3,869)		(60,413)		3,309
Net loss	$	(16,383)	$	(85,727)	$	(14,302)

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

(2)	Purchase accounting adjustment to inventory represents the portion of costs of sales related to the fair value of inventory adjusted as part of the purchase price allocation. The amounts relate to the Perrigo Animal Health Acquisition and are part of the Products segment.

(3)

(4)	Non same-store revenue and costs relate to our Services segment and are from wellness centers, host partners, and regions with less than six full quarters of operating results. This includes clinic launch expenses.

(5)

Supplemental geographic disclosures are below.


		Year ended December 31, 2021
$'s in 000's		U.S.		Foreign		Total
Product sales	$	818,593	$	6,802	$	825,395
Service revenue		107,133		—		107,133
Total net sales	$	925,726	$	6,802	$	932,528


		Year ended December 31, 2020
$'s in 000's		U.S.		Foreign		Total
Product sales	$	719,282	$	6,423	$	725,705
Service revenue		54,346		—		54,346
Total net sales	$	773,628	$	6,423	$	780,051


		Year ended December 31, 2019
$'s in 000's		U.S.		Foreign		Total
Product sales	$	610,986	$	6,132	$	617,118
Service revenue		92,313		—		92,313
Total net sales	$	703,299	$	6,132	$	709,431

The net book value of property plant and equipment, by geographic location was as follows as of:


	December 31, 2021		December 31, 2020
United States	$	75,315	$	61,807
Europe		1,298		1,339
Total	$	76,613	$	63,146

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Section 50
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Debt - Capped Call Transactions (Details) $ / shares in Units, $ in Thousands		12 Months Ended
	May 14, 2020 USD ($) item	Dec. 31, 2021 $ / shares	Dec. 31, 2020 USD ($)
Debt Instrument [Line Items]
Number of option counterparties \| item	2
Payment for Capped Call Options			$ 14,821
Class A common stock
Debt Instrument [Line Items]
Derivative cap price per share \| $ / shares		$ 41.51
Class A common stock \| Capped Call Transactions
Debt Instrument [Line Items]
Payment for Capped Call Options	$ 14,800

Related Parties

12 Months Ended

Dec. 31, 2021

Related Parties

Related Parties

Note 15 - Related Parties

Chris Christensen, the brother of CEO, McCord Christensen, acts as the Company’s agent at Moreton Insurance (“Moreton”), which acts as a broker for a number of the Company’s insurance policies. The Company’s annual premium expense, which is paid at a variety of times throughout the year, and is generally paid directly to the relevant insurance company, amounted to $6.9 million in 2021. Amounts paid to Moreton and subsequently transferred to insurance providers, was $2.8 million and $2.3 million in 2020 and 2019.Mr. Chris Christensen earns various forms of compensation based on the specifics of each policy.

In August 2021, the Company sold its prior corporate office in Eagle, Idaho for $4.8 million. The Company utilized Colliers International (“Colliers”) as a broker with Mike Christensen, the brother of CEO, McCord Christensen, as agent.

The Company paid approximately $0.1 million in commissions to Colliers as a result of the sale. In December 2021, the Company purchased a parcel of land for $2.5 million. Total commission paid to Colliers was approximately $0.1 million as a result of this purchase. In April 2020, the Company purchased a parcel of land for $2.5 million. Total commission paid to Colliers was approximately $0.1 million as a result of this purchase.

Katie Turner, the spouse of CEO, McCord Christensen, is the owner of Acadia Investor Relations LLC, (“Acadia”) which acts as the Company’s investor relations consultant. Acadia has been paid $0.2 million for the year ending December 31, 2021.

Principal Business Activity and Significant Accounting Policies - Collaboration Agreements (Details) $ in Millions	12 Months Ended
	Dec. 31, 2021 USD ($) product
Collaboration Agreements
Number of product opted out \| product	2
Collaboration agreements, contingent payments to be made	$ 5.3
Collaboration Agreement, Probable Milestone Payments	$ 2.0

Loss per Share

12 Months Ended

Dec. 31, 2021

Loss per Share

Loss per Share

Note 8 – Loss per Share

Basic and Diluted Loss per share

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

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


	Year ended December 31,
				As Adjusted (Note 1)
(in 000's, except for per share amounts)		2021	2020		2019
Numerator:
Net loss	$	(16,383)	$	(85,727)	$	(14,302)
Less: net loss attributable to non-controlling interests		(416)		(3,072)		(2,849)
Net loss attributable to PetIQ, Inc. — basic and diluted		(15,967)		(82,655)		(11,453)
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		28,242		24,629		22,652
Dilutive effects of stock options that are convertible into Class A common stock		—		—		—
Dilutive effect of RSUs		—		—		—
Dilutive effect for conversion of Notes		—		—		—
Weighted-average shares of Class A common stock outstanding — diluted		28,242		24,629		22,652

Loss per share of Class A common stock — basic	$	(0.57)	$	(3.36)	$	(0.51)
Loss per share of Class A common stock — diluted	$	(0.57)	$	(3.36)	$	(0.51)

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

Shares of the Company’s Class B common stock have not been included in the diluted loss per share calculation as they have been determined to be anti-dilutive under the if-converted method.

Additionally, all stock options and restricted stock units and convertible Notes have not been included in the diluted earnings per share calculation for the years ended December 31, 2021, 2020 and 2019, as they have been determined to be anti-dilutive under the treasury stock method and if-converted method, as applicable.

Principal Business Activity and Significant Accounting Policies - Goodwill and Intangible Assets (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Principal Business Activity and Significant Accounting Policies
Impairment charge	$ 0	$ 0	$ 0

Leases (Tables)

12 Months Ended

Dec. 31, 2021

Leases

Schedule of components of lease expense


	For the Year Ended
$'s in 000's	December 31, 2021		December 31, 2020		December 31, 2019
Finance lease cost
Amortization of right-of-use assets	$	2,215	$	1,681	$	1,441
Interest on lease liabilities		338		315		308
Operating lease cost		5,556		5,831		4,833
Variable lease cost⁽¹⁾		1,283		1,130		629
Short-term lease cost		13		34		41
Sublease income		(238)		(528)		(452)
Total lease cost	$	9,167	$	8,463	$	6,800

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

Schedule of other information related to leases


	December 31, 2021	December 31, 2020
Weighted-average remaining lease term (years)
Operating leases	3.86	4.41
Finance leases	2.59	2.38
Weighted-average discount rate
Operating leases	4.9%	5.3%
Finance leases	4.6%	5.7%

Summary of annual future commitments under non-cancelable leases


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
2022	$	6,951	$	1,622
2023		6,139		1,696
2024		4,581		609
2025		3,629		225
2026		2,029		78
Thereafter		56		—
Total minimum future obligations	$	23,385	$	4,230
Less interest		(2,042)		(267)
Present value of net future minimum obligations		21,343		3,963
Less current lease obligations		(6,500)		(1,470)
Long-term lease obligations	$	14,843	$	2,493

Supplemental cash flow information



	For the Year Ended
$'s in 000's	December 31, 2021		December 31, 2020		December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	338	$	315	$	308
Operating cash flows from operating leases		3,928		5,668		4,568
Financing cash flows from finance leases		1,926		1,965		1,547
(Noncash) right-of-use assets obtained in exchange for lease obligations
Operating leases		5,212		5,105		5,368
Finance leases		1,191		2,019		(3,006)

Leases - Supplemental cash flow information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Leases
Operating cash flows from finance leases	$ 338	$ 315	$ 308
Operating cash flows from operating leases	3,928	5,668	4,568
Financing cash flows from finance leases	1,926	1,965	1,547
Operating leases	5,212	5,105	5,368
Finance leases	$ 1,191	$ 2,019	$ (3,006)

Principal Business Activity and Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2021 location state segment item
Principal Business Activity and Significant Accounting Policies
Number of points of distribution \| item	60,000
Number of retail pharmacy locations \| location	2,900
Number of states in which the entity provides veterinary services to pet owners \| state	42
Number of reportable segments \| segment	2

Income Taxes - Components of earnings before income taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Components of earnings before income taxes
United States	$ (12,816)	$ (25,747)	$ (17,953)
Foreign	302	433	342
Pretax net loss	$ (12,514)	$ (25,314)	$ (17,611)

- Definition

Amount of income (loss) from continuing operations, including income (loss) from equity method investments, before deduction of income tax expense (benefit), and income (loss) attributable to noncontrolling interest.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8906-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (f)
-URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 940
-SubTopic 20
-Section 25
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=123384075&loc=d3e41242-110953

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8736-108599

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(10))
-URI http://asc.fasb.org/extlink&oid=123367319&loc=SL114868664-224227

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(8))
-URI http://asc.fasb.org/extlink&oid=120400993&loc=SL114874131-224263

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 235
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-05(b)(2))
-URI http://asc.fasb.org/extlink&oid=120399901&loc=d3e537907-122884

Reference 9: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
-URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8924-108599

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-04(15))
-URI http://asc.fasb.org/extlink&oid=120399700&loc=SL114874048-224260

+ Details

Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2021

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	December 31, 2021		December 31, 2020
Amortizable intangibles
Certification	7 years	$	350	$	350
Customer relationships	12-20 years		160,167		160,178
Patents and processes	5-10 years		14,843		14,905
Brand names	5-15 years		24,731		24,740
Total amortizable intangibles			200,091		200,173
Less accumulated amortization			(44,438)		(25,984)
Total net amortizable intangibles			155,653		174,189
Non-amortizable intangibles
Trademarks and other			33,341		33,341
In-process research and development			1,668		5,470
Intangible assets, net of accumulated amortization		$	190,662	$	213,000

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 years ended December 31, 2021, 2020, and 2019 was $22.3 million, $12.8 million, and $6.0 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 products that the Company has acquired which has 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. In the event that the efforts are not successful, the Company will write off the relevant IPRD in the period in which it is no longer considered feasible. During the year ended December 31, 2021, the Company opted out of two of the acquired projects, effectively abandoning the associated research and development efforts. Accordingly, the Company wrote off the associated IPRD assets of $3.8 million, with the expense recorded as amortization expense included in selling, general, and administrative expenses on the consolidated statement of operations.

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


Years ending December 31, ($'s in 000's)
2022						17,966
2023						16,921
2024						14,554
2025						13,893
2026						13,303
Thereafter						79,016

The following is a summary of the changes in the carrying value of goodwill for the years ended December 31, 2021 and 2020.


	Reporting Unit
($'s in 000's)	Products		Services		Total
Goodwill as of January 1, 2020		183,781		47,264		231,045
Foreign currency translation		113		—		113
Goodwill as of December 31, 2020		183,894		47,264		231,158
Foreign currency translation		(48)		—		(48)
Goodwill as of December 31, 2021	$	183,846	$	47,264	$	231,110

Stock Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Stock Based Compensation
Stock based compensation expense	$ 9,428	$ 9,170	$ 7,355
Stock Options Granted (in shares)	354	505
Vesting percentage on each anniversary of the grant date	25.00%
Maximum term for stock options	6 years 2 months 1 day	6 years 3 months
Weighted average grant date fair value of stock options granted	$ 12.39	$ 11.88
Unrecognized compensation cost related to unvested stock options	$ 7,000
Unrecognized compensation cost related to unvested options, recognized weighted-average period	2 years 3 months 18 days
Omnibus Plan
Stock Based Compensation
Share available for issuance	0
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	771	1,293
Maximum
Stock Based Compensation
Maximum term for stock options	10 years
Stock options
Stock Based Compensation
Stock based compensation expense	$ 5,200	$ 6,500	$ 6,200

Loss per Share (Tables)

12 Months Ended

Dec. 31, 2021

Loss per Share

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


	Year ended December 31,
				As Adjusted (Note 1)
(in 000's, except for per share amounts)		2021	2020		2019
Numerator:
Net loss	$	(16,383)	$	(85,727)	$	(14,302)
Less: net loss attributable to non-controlling interests		(416)		(3,072)		(2,849)
Net loss attributable to PetIQ, Inc. — basic and diluted		(15,967)		(82,655)		(11,453)
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		28,242		24,629		22,652
Dilutive effects of stock options that are convertible into Class A common stock		—		—		—
Dilutive effect of RSUs		—		—		—
Dilutive effect for conversion of Notes		—		—		—
Weighted-average shares of Class A common stock outstanding — diluted		28,242		24,629		22,652

Loss per share of Class A common stock — basic	$	(0.57)	$	(3.36)	$	(0.51)
Loss per share of Class A common stock — diluted	$	(0.57)	$	(3.36)	$	(0.51)

Principal Business Activity and Significant Accounting Policies - Interest expense, net (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Interest expense, net
Interest expense	$ 24.7	$ 22.8	$ 14.9
Interest and other income	$ 0.0	$ 0.0	$ 0.4

Intangible Assets and Goodwill - Intangible Assets (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($) project	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Intangible Assets and Goodwill
Amortizable Intangibles, gross	$ 200,091	$ 200,173
Less accumulated amortization	(44,438)	(25,984)
Total net amortizable intangibles	155,653	174,189
Intangible assets, net of accumulated amortization	190,662	213,000
Amortization expense	$ 22,300	12,800	$ 6,000
Number of acquired R&D projects opted out \| project	2
General and administrative expenses	$ 170,521	138,375	$ 103,200
Trademarks and other
Intangible Assets and Goodwill
Non-amortizable intangibles	33,341	33,341
IPRD
Intangible Assets and Goodwill
Non-amortizable intangibles	1,668	5,470
General and administrative expenses	$ 3,800
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	$ 160,167	160,178
Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives	10 years
Amortizable Intangibles, gross	$ 14,843	14,905
Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, gross	$ 24,731	$ 24,740
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

Debt - A&R and General Other Debt (Details) - USD ($) $ in Thousands				1 Months Ended		12 Months Ended
	Apr. 13, 2021	May 14, 2020	Jul. 08, 2019	Jul. 31, 2020	Jul. 31, 2017	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Debt
Fixed interest rate					4.35%	2.00%
Amortization schedule					25 years	10 years
Market interest rate				8.30%		2.10%
Balloon payment					10 years
Amount required to pay pursuant to settlement agreement				$ 20,600
Payment on signing				2,600
Payment per quarter				1,000
Estimated fair value of the payment obligation				$ 17,500
Earn-outs payments based on achievement of company Adjusted EBITDA targets							$ 7,500
Earn-outs payments based on achievement of company Adjusted EBITDA targets for 2019							10,000
Other Debt						$ 23,518	16,257
Net discount on debt and deferred financing fees						(10,418)	(9,947)
Long term debt						455,350	409,810
Less current maturities of long-term debt						(6,880)	(6,219)
Long-term debt, less current installments						448,470	403,591
Future maturities of long-term debt
2022						6,880
2023						7,099
2024						7,339
2025						4,600
2026						147,350
Thereafter						292,500
Debt issuance costs						7,656	550	$ 5,790
Convertible Notes [Member]
Debt
Outstanding balance						143,750	143,750
Revolving credit facility
Debt
Maximum borrowing capacity			$ 125,000
Outstanding balance							15,000
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						298,500	217,250
New Mortgage
Future maturities of long-term debt
Debt issuance costs						$ 200
A&R Credit Agreement
Future maturities of long-term debt
Debt issuance costs							600	700
A&R Credit Agreement \| Euro dollar
Debt
Unused facility fee (as a percent)		1.00%
A&R Term Loan Credit Agreement
Debt
Maximum borrowing capacity			$ 220,000
Future maturities of long-term debt
Debt issuance costs								$ 5,100
A&R Term Loan Credit Agreement \| Euro dollar
Debt
Variable interest rate, basis points spread over variable reference rate (as a percent)			5.00%
Earned Contingent Note
Debt
Fixed interest rate						6.75%
Contingent notes						$ 27,500
Long term debt							27,500
Guaranteed note
Debt
Long term debt						$ 10,000
Senior Secured Asset-Based Revolving Credit Facility - ABL
Debt
Maximum borrowing capacity	$ 125,000
Unused facility fee (as a percent)						0.35%
Future maturities of long-term debt
Debt issuance costs						$ 1,000
Senior Secured Term Loan Facility - Term Loan B
Debt
Maximum borrowing capacity	$ 300,000
Future maturities of long-term debt
Debt issuance costs						$ 6,400
Senior Secured Term Loan Facility - Term Loan B \| LIBOR
Debt
Variable interest rate, basis points spread over variable reference rate (as a percent)	4.25%
Notes Payable
Future maturities of long-term debt
Debt issuance costs							$ 5,900

Income Taxes (Details) $ in Millions	Dec. 31, 2021 USD ($)
Deferred tax assets	$ 82.8
Continuing LLC Owners
Interest held by parent	0.90%

Leases - Narrative (Details)	Dec. 31, 2021
Minimum
Lessee, Lease, Description [Line Items]
Renewal options term	1 year
Maximum
Lessee, Lease, Description [Line Items]
Renewal options term	10 years

Principal Business Activity and Significant Accounting Policies

12 Months Ended

Dec. 31, 2021

Principal Business Activity and Significant Accounting Policies

Principal Business Activity and Significant Accounting Policies

Note 1 – Principal Business Activity and Significant Accounting Policies

Principal Business Activity and Principals of Consolidation

PetIQ 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 and e-commerce channels with our branded and distributed medications as well as health and wellness items, which are further supported by our world-class medications manufacturing facility in Omaha, Nebraska and health and wellness manufacturing facility in Springville, Utah. Our national veterinarian service platform operates in over 2,900 retail partner locations in 42 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 provide.

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

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

The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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.

Cash and Cash Equivalents

Receivables and Credit Policy

Other receivables consists of various receivables due from vendors, banking partners, and government agencies.

Accounts receivable consists of the following as of:


$'s in 000's	December 31, 2021		December 31, 2020
Trade receivables	$	108,049	$	96,381
Other receivables		6,405		7,094
		114,454		103,475
Less: Allowance for doubtful accounts		(507)		(720)
Total accounts receivable, net	$	113,947	$	102,755

Inventories


$'s in 000's	December 31, 2021		December 31, 2020
Raw materials	$	16,564	$	15,761
Work in progress		1,650		2,273
Finished goods		78,226		79,739
Total inventories	$	96,440	$	97,773

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			2-15 years
Furniture and fixtures			5-10 years

Goodwill and Intangible Assets

No impairment charge was recorded for the years ended December 31, 2021, 2020, and 2019.

Convertible Debt

Revenue Recognition

When Performance Obligations Are Satisfied

Variable Consideration

Significant Payment Terms

Shipping and other costs

Sales tax collected from customers and remitted to governmental authorities is not included in revenue and is reflected as a liability on the Company’s consolidated balance sheets.

Warranties & Returns

Contract balances

Contract asset and liability balances as of December 31, 2021 and 2020 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

Litigation

Stock based compensation

Accounting for Income Taxes

Interest expense, net

Non-controlling interest

Loss Per Share

Recently Issued Accounting Pronouncements / Adopted Accounting Standard Updates


			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted
Liabilities
	Long-term debt, less current installments	$	355,979	$	47,612	$	403,591
Stockholders' Equity
	Additional Paid-in Capital		356,442		(36,800)		319,642
	Non-controlling Interest		31,614		(5,631)		25,983
	Accumulated Deficit		(93,377)		(5,181)		(98,558)


			For the Year Ended
			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	26,299	$	(3,492)	$	22,807
	Tax expense		(52,216)		(8,197)		(60,413)

Net loss			(81,022)		(4,705)		(85,727)

Income Taxes - Valuation allowance and NOL (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Income Taxes
Federal net operating loss carryforwards	$ 103,600
Federal net operating loss carryforwards that will expire in 2037	1,900
Federal net operating loss carryforwards indefinite carryforward period	$ 101,700
Percentage of taxable income offset against net operating carryforward	80.00%
Federal interest expense carryover	$ 15,100
Charitable contribution carryforwards	600
State net operating loss carryforwards	499,500
State NOL, tax effected	4,600
Foreign net operating loss carryforwards indefinite carryforward period	600
Deferred tax assets	106,258	$ 80,355
Unrecognized tax benefit would impact the effective tax rate	$ 0

Stock Based Compensation

12 Months Ended

Dec. 31, 2021

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 December 31, 2021 and 2020, 771 thousand and 1,293 thousand shares were available for issuance under the Plan, respectively. All awards issued under the Plan may only be settled in shares of Class A common stock. Shares issued pursuant to awards under the incentive plans are from our authorized but unissued shares.

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

The PetIQ, Inc. 2018 Inducement and Retention Stock Plan for CVC Employees (the “Inducement Plan”) provides for the grant of stock options to employees hired in connection with the VIP Acquisition as employment inducement awards pursuant to NASDAQ Listing Rule 5635(c)(4). The Inducement Plan reserved 800 thousand shares of Class A Common Stock of the Company. As of December 31, 2021, 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 Company estimates future forfeitures and updates those estimates for actual experience as the awards vest, forfeiture estimates were not material for any period presented.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period. Expense recognized totaled $5.2 million, $6.5 million, and $6.2 million for the years ended December 31, 2021, 2020, and 2019, respectively. All stock based compensation expense is included in selling, 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:


	December 31, 2021			December 31, 2020
Expected term (years) ⁽¹⁾		6.17			6.25
Expected volatility ⁽²⁾		33.45	%		33.91	%
Risk-free interest rate ⁽³⁾		0.89	%		0.37	%
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 December 31, 2021 and 2020 was $12.39 and $11.88, respectively, per option. The following table summarizes the activity of the Company’s unvested stock options for the period ended December 31, 2021:


							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, 2020		2,072	$	24.63	$	6,266		8.0
Granted		505		20.22
Exercised		(395)		23.48	$	4,468
Forfeited		(96)		21.42
Outstanding at December 31, 2020		2,086	$	23.93	$	30,302		7.2
Granted		354		35.66
Exercised		(583)		23.05	$	8,499
Forfeited		(64)		24.84
Cancelled		(25)		25.70
Outstanding at December 31, 2021		1,768	$	26.51	$	2,897		7.3
Options exercisable at December 31, 2021		755

At December 31, 2021, total unrecognized compensation cost related to unvested stock options was $7.0 million and is expected to be recognized over a weighted-average period of approximately 2.3 years.

Restricted Stock Units

The Company awards RSUs to certain employees and directors under the Plan, which are subject to time-based vesting conditions. Upon a termination of service relationship by the Company, all unvested RSUs will generally 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 December 31, 2021, total unrecognized compensation cost related to unvested RSUs was $11.2 million and is expected to vest over a weighted average of 2.7 years.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $4.3 million, $2.6 million, and $1.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. All stock based compensation expense is included in selling, general and administrative expenses based on the role of recipients. The Company estimates future forfeitures and updates those estimates for actual experience as the awards vest.

The following table summarizes the activity of the Company’s RSUs for the period ended December 31, 2021:


			Weighted
	Number of		Average
	Shares		Grant Date
	(in 000's)		Fair Value
Outstanding at January 1, 2020		133	$	28.85
Granted		271		20.73
Settled		(70)		25.65
Forfeited		(17)		23.34
Outstanding at December 31, 2020		317	$	22.91
Granted		268		37.91
Settled		(103)		24.81
Forfeited		(23)		26.02
Nonvested RSUs at December 31, 2021		459	$	31.08

The total income tax benefit recognized in the income statement for share-based compensation arrangements was $0.0 million, $0.0 million and $1.4 million for the years ended December 31, 2021, 2020, and 2019, respectively.