Business Overview and Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Overview and Significant Accounting Policies

1. BUSINESS OVERVIEW AND SIGNIFICANT ACCOUNTING POLICIES

Business

We are a global animal-health technology and services company dedicated to supporting the companion, equine, and large-animal veterinary markets.

Proposed Merger

On May 24, 2022, we entered into the Merger Agreement providing for the acquisition of the Company by Corgi Bidco, Inc. The Merger Agreement provides that, among other things, upon the terms and subject to the conditions set forth in the Merger Agreement, Corgi Merger Sub, Inc. will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Corgi Bidco, Inc.

Pursuant to the Merger Agreement, each share of common stock, par value $0.01 per share, of the Company (collectively, “Shares”) issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) (other than Shares owned by (i) Corgi Bidco, Inc., Corgi Merger Sub, Inc. or any of their respective subsidiaries (including the Shares to be transferred by CD&R VFC Holdings, L.P., a Cayman Islands exempted limited partnership and an affiliate of CD&R, directly or indirectly, to Corgi Bidco Inc. immediately prior to the Effective Time), (ii) the Company as treasury stock, and (iii) the shareholders of the Company who have perfected and not withdrawn a demand for appraisal rights in accordance with Section 262 of the Delaware General Corporation Law) will be converted into the right to receive $21.00 per Share in cash, without interest thereon.

The parties’ obligations to consummate the Merger are subject to the satisfaction or waiver of customary conditions set forth in the Merger Agreement, including, among others: (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding Shares, (ii) the receipt of certain consents and approvals from governmental entities, (iii) the absence of any law or governmental order prohibiting the Merger, (iv) no Company Material Adverse Effect (as defined in the Merger Agreement) having occurred since the signing of the Merger Agreement and (v) certain other customary conditions relating to the parties’ representations and warranties in the Merger Agreement and the performance of their respective obligations. The Merger is currently expected to close in the second half of 2022, subject to the satisfaction or waiver of the closing conditions.

The Company has incurred and will incur certain significant costs relating to the Merger, such as legal, accounting, financial advisory, and other professional services fees. In the event that the Merger Agreement is terminated under certain circumstances, the Company may also be required to pay a cash termination fee to Corgi Bidco, Inc. of $88 million. If the Merger Agreement is terminated under certain other circumstances, including because of a failure of Corgi Bidco, Inc. to consummate the Merger when required to or its uncured breach of the Merger Agreement, Corgi Bidco, Inc. may be required to pay or cause to be paid to the Company a cash termination fee of $198 million.

Additional information about the Merger is set forth in our Current Report on Form 8-K filed with the SEC on May 25, 2022, and our preliminary proxy statement filed with the SEC on June 30, 2022.

Basis of Presentation and Principles of Consolidation

The unaudited condensed consolidated financial statements as of and for the six months ended June 30, 2022, have been prepared in accordance with applicable rules and regulations of the SEC for interim financial reporting. Pursuant to those rules and regulations, we omitted certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP.

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all recurring adjustments and transactions necessary for a fair statement of our financial position, results of operations, and cash flows for the interim periods presented. Such operating results are not necessarily indicative of annual or future results. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the Form 10-K filed with the SEC on February 28, 2022.

The accompanying unaudited condensed consolidated financial statements include the operations of the Company, as well as those of our wholly-owned and majority-owned subsidiaries from their respective dates of inception or acquisition. Intercompany transactions and balances are eliminated in consolidation. Investments in unconsolidated affiliates, which are 20% to 50% owned, or investments of less than 20% in which we could influence the operating or financial decisions, are accounted for under the equity method.

Certain prior period amounts were reclassified or rounded to conform to the presentation of the current period.

Accounting Pronouncements

•ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference LIBOR. The standard is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. Our debt agreements that utilize LIBOR have not yet discontinued the use of LIBOR and, therefore, this ASU is not yet effective for us. The banking syndicate associated with our Credit Facilities ceased using the 1-week and 2-month USD LIBOR at the end of 2021, and the other USD Tenors will cease June 30, 2023. We will continue to monitor, and, to the extent our Credit Facilities require amendment to reflect a replacement rate prior to December 31, 2022, we will evaluate the benefits of adopting this ASU.