Segments (Tables)

12 Months Ended

Dec. 31, 2019

Segments

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

$'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
Property, plant, and equipment		23,114		13,520		15,891		52,525
Depreciation expense		3,552		3,170		2,417		9,139
Capital expenditures		1,297		6,409		2,570		10,276

$'s in 000's					Unallocated
December 31, 2018	Products		Services		Corporate		Consolidated
Net Sales	$	450,229	$	78,385	$	—	$	528,614
Adjusted EBITDA		52,185		15,246		(25,892)		41,539
Property, plant, and equipment		13,191		6,137		8,007		27,335
Depreciation expense		2,343		2,326		1,988		6,657
Capital expenditures		1,339		3,440		2,399		7,178

$'s in 000's					Unallocated
December 31, 2017	Products		Services		Corporate		Consolidated
Net Sales	$	266,687	$	—	$	—	$	266,687
Adjusted EBITDA		30,836		—		(8,529)		22,307
Property, plant, and equipment		11,843		—		3,157		15,000
Depreciation expense		2,165		—		183		2,348
Capital expenditures		1,519		—		2,612		4,131

Summary of reconciles segment adjusted ebitda to pretax net income

	For the years ended
$'s in 000's	December 31, 2019		December 31, 2018		December 31, 2017
Adjusted EBITDA:
Product	$	73,537	$	52,185	$	30,836
Services		20,045		15,246		—
Unallocated Corporate		(32,907)		(25,892)		(8,529)
Total Consolidated		60,675		41,539		22,307
Adjustments:
Depreciation		(9,139)		(6,657)		(2,348)
Amortization		(5,994)		(5,210)		(1,052)
Interest		(14,495)		(8,022)		(1,563)
Acquisition costs(1)		(6,147)		(3,787)		(1,965)
Stock based compensation expense		(7,355)		(3,812)		(447)
Purchase accounting adjustment to inventory(2)		(4,805)		(2,149)		—
Non same-store revenue(3)		8,088		3,967		—
Non same-store costs(3)		(19,553)		(10,345)		—
Fair value adjustment of contingent note		(7,320)		(3,280)		—
Integration costs and costs of discontinued clinics(4)		(3,788)		(998)		—
Clinic launch expenses(5)		(767)		(1,380)		—
Non-recurring royalty settlement(6)		—		(440)		—
SKU Rationalization(7)		(6,482)		—		(610)
Costs associated with becoming a public company		—		—		(2,710)
Supplier receivable write-off		—		—		175
Litigation expenses		(529)		—		—
Pretax net (loss) income	$	(17,611)	$	(574)	$	11,787
Income tax benefit (expense)		3,309		661		(3,970)
Net (loss) income	$	(14,302)	$	87	$	7,817

⁽¹⁾ Acquisition costs are costs directly related to various completed and pending acquisitions 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 which are part of the Services Segment and the HBH Acquisition, which is part of the Products 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.

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

	Year ended December 31, 2019
$'s in 000's	U.S.		Foreign		Total
Products sales	$	610,986	$	6,132	$	617,118
Services revenue		92,313		—		92,313
Total net sales	$	703,299	$	6,132	$	709,431
	Year ended December 31, 2018
$'s in 000's	U.S.		Foreign		Total
Products sales	$	444,364	$	5,865	$	450,229
Services revenue		78,385		—		78,385
Total net sales	$	522,749	$	5,865	$	528,614
	Year ended December 31, 2017
$'s in 000's	U.S.		Foreign		Total
Products sales	$	261,526	$	5,161	$	266,687
Services revenue		—		—		—
Total net sales	$	261,526	$	5,161	$	266,687

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

	December 31, 2019		December 31, 2018
United States	$	51,397	$	26,268
Europe		1,128		1,067
Total	$	52,525	$	27,335