Segments (Tables)

9 Months Ended

Sep. 30, 2019

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


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


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


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


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

Summary of reconciles segment adjusted ebitda to pretax net income


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

(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

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

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


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

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


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

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

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


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