petiq, inc. (petq) - pet manufacturing process
Securities and Exchange Commission of the United States (Washington, DC)C. 20549FORM10‑K(Mark One)
☒Annual reports submitted under sections 13 or 15 (d)
Securities Trading Act of December 31, 2018 for fiscal year ended 1934☐Transition reports submitted under sections 13 or 15 (d)
Document No. of the transitional Securities Trading Act of 1934: PetIQ, Inc. (
The exact name of the registrant specified in the articles of association)
State or other jurisdiction registered or organized)(I. R. S.
Employer identity number)923 S.
Place83616Eagle starts on the first day, Idaho (Zip Code)(
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☐Yes. ☒NoAs, June 29, 2018, the last working day of the second fiscal quarter recently completed by the registrant, the total market value of ordinary shares held by non-registrants
The registrant's affiliates are $299. 7 million.
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As of March 11, 2019, we have issued 21,975,725 shares of Class A common stock and 6,207,792 shares of Class B common stock.
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Table ContentsPetIQ, Inc.
Part 1 of the content table. Item 1. Business 1A.
Risk factor 1B.
Unresolved employee reviews 2.
Property item month.
Legal action 4.
The second part is mine safety.
Item 5 the market in which the registrant's common stock, related shareholder matters and the issuer purchase equity securities.
Selected Financial Data Items 7.
Management Discussion and Analysis of operational financial status and results
Quantitative and qualitative disclosure of market risks
Financial statements and supplementary data items 9.
Changes and disagreements with accountants on accounting and financial disclosure project 9A.
Part III controls and procedures. Item 10.
Project 11. Director, executive officer and corporate governance.
Item 12 of administrative compensation.
Secured ownership of certain beneficial owners and management and related shareholders.
Relationship with directors and related transactions.
The fourth part is the main accounting expenses and services. Item 15.
Annex and financial statements table 16 Table 10-
The following discussion shall be read in conjunction with the audited consolidated financial statements contained elsewhere in this annual report and their accompanying notes.
The following discussion includes the following:
Look at the report.
Discuss important factors, including the continued development of our business and other factors that may lead to significant differences in actual results with historical information and the results mentioned in future information
For forward-looking statements submitted here, see "project 1a, risk factors" and "warning notes on forward-looking"
The "outlook statement" contained in this annual report ".
References to "petiq, Inc, unless otherwise required by the context.
"Company", "we" or "we" are collectively referred to as PetIQ, Inc.
And its combined subsidiaries, which include PetIQ Holdings, LLC, a Delaware limited liability company, which we call "Holding Co ". Item 1 -
Overqis is a fast growing provider of veterinary services and veterinary services
High-end pet supplies including prescriptions (“Rx”)
Drug treatment, excessivethe-counter (“OTC”)
Flea and tick prevention and health products for dogs and cats.
We are a pioneer in retail channels for pet products and also a major seller, which were previously purchased primarily from veterinary clinics.
We enable our customers to provide pet owners with choices, affordability and convenience related to products from leading national brands, as well as our proprietary value --
Consumer behavior supports our continued growth: Pet owners are increasingly buying pets from the channels we serve.
In addition, pet owners are taking their retail purchases from non-veterinarian-
High-end products, formerly the only product in the retail channel, to senior veterinarians
High-end products we sell.
We believe that due to our strong category position, broad portfolio, value proposition and solid customer relationships, we are fully equipped to take advantage of these changes in consumer behavior.
The terminal market we serve is huge and growing.
We acquired community veterinary clinics, LLC d/B/a VIP Petcare (January 17, 2018 (
"VIP" and such acquisitions ("VIP Acquisition ").
VIP offers a full range of services at community clinics and health centers hosted by pet retailers in 39 states, including diagnostic tests, vaccinations, prescription drugs, microchips and health checks.
VIP's veterinary services and products align with PetIQ's corporate strategy and mission to deliver a wide range of pet health and health solutions by providing consumers with easy access and affordable options
In 2018, we saw more than 1 million pets through the network of community clinics and health centers.
Since the VIP acquisition, we have opened 25 new health centers among our retail partners.
After the VIP acquisition, we have two segments :(i)Products and (ii)Services.
Today, we serve more than 40 retail partners representing more than 60,000 locations through our product and service departments.
On October 2018, we completed the implementation of HBH shopises LLC (
"HBH" and such acquisitions ("HBH Acquisition ")
A developer and manufacturer of professional pet food and supplements.
Through HBH, we manufacture and distribute proprietary health products of over 230 SKUs for dogs and cats, mainly under our vetiq, Betsy farmsandghtibles product line.
Our portfolio covers a wide range of veterinary areas
Rx class drugs and leading OTC drugs as well as other health and health products.
We provide our customers with comprehensive category management solutions and sell products under multiple brands to solve channel problems
We quickly develop, manufacture and introduce innovative new products to retailers and consumers.
Our current portfolio and pipeline of future products are developed internally
3 tables for house experts and animals from Contentshealth R & D experts.
In addition, we specialize in market analysis, product development, packaging, marketing, industry licensing and management of the Environmental Protection Agency (“EPA”)
And the Food and Drug Administration (“FDA”)
These internal and external resources allow us to expand our portfolio of proprietary value.
Brand product and development Next
A generation version of our existing products.
We believe that our retail expertise and market position make us an attractive partner for scientists and entrepreneurs developing new products in the pet health field.
Combined with our in-house expertise and strategic relationships, we produce several of the best-selling products and general-purpose brands including VetIQ, PetAction Plus, Advecta, PetLock Plus and TruProfen
The development trend of pet industry.
In 2018, about 53 years. 5% of total U. S.
Families with a dog or a cat account for 50% of the total number of American families. S.
According to the fact of packaging, the family in 2008.
Pet-owned demographic trends and changes in pet attitudes support our continued growth in the following ways: Pet humanization: according to the fact of packaging, in the United States, it is estimated that, 90% of dog owners and 86% of cat owners treat pets as family members.
In addition, in 2018, 93% of dog owners and 91% of cat owners agreed that their pets had a positive impact on their mental health, 92% of dog owners and 85% of cat owners say their pets have a positive impact on their health.
As pets are increasingly seen as partners, friends and family members, pet owners act like "pet parents" and are strongly inclined to spend disposable income in all economic cycles to meet all pet needs.
Pets have become a top economic priority.
Consumers are paying more and more attention to pet health: consumers are showing greater interest in improving pet health, so they are increasing their spending on veterinary care and buying the most effective vet --
Pet supplies and supplies.
Pet owners at all population and income levels are keen to buy leading veterinarians
A August 2018 survey also found that 48% of dogs and 43% of cat owners had a pet aged 7 or older.
Increase in pet age and the occurrence of pet diseases: longer pet life, therefore, increased medical needs.
In 2017, 56% of dogs and 60% of cats were reported to be overweight, and in 2017, it was reported that about 75% of older dogs had heart disease.
Growing market size and consumer spending: pet spending in the United States has grown steadily every year since 1994, with Americans spending about $90.
In 2018, they had 1 billion pets.
According to the fact of packaging, the general United StatesS.
The pet market is expected to reach $109.
In 2023, the compound growth rate was 7 billion and 4.
0% from 2017 to 2023.
Strong growth in pet products.
According to the fact of the package, the Americans spent $90.
Pet products and services spent 1 billion per cent in 2018, about three times as much as $2001. 5 billion. U. S.
Pet drug sales for dogs and cats grew from $5 to $5.
It was estimated at $8 billion in 2011.
It was $6 billion in 2017, estimated at $10.
5 billion according to the packing facts, by 2020.
In addition, our innovative pet foods also compete in the US market. S.
The cat and dog market has been growing every year since 2012.
According to the fact of packaging, the United StatesS.
The market for cats and dogs is estimated to have grown to $6.
It was $4 billion in 2017, estimated at $8.
By 2021, retail sales accounted for 6%, and the compound growth rate between 2017 and 2021 was.
Growth in buying pet drugs from retail channels.
We believe that the market for pet drugs, health and health products in retail channels may exceed the growth rate of the wider pet industry.
Pet owners are increasingly buying veterinary-grade pet products from retail channels, as it is estimated that the mass market share in the United StatesS.
The pet medication industry grew from 12% in 2011 to 20% in 2017.
We believe that as more and more consumers take advantage of the convenience of local retail stores and realize that retail channels can save a lot of costs, the migration will continue and our product penetration rate in the retail sector is also increasing.
In addition, a considerable number of pet owners did not seek pet care for various reasons.
Quality products will help release demand and provide customers with the leading treatment they want at the price they can afford.
In addition, we believe that our acquisition of VIP has placed us in a unique position in providing veterinary services within retail channels and continue to benefit from this channel expansion.
4 ContentsOur business strategy table there are great opportunities to increase our brand awareness, increase our net sales and profitability, and provide shareholder value by implementing the following plans: improve consumer awareness of retail channel products.
We are a well-known category creator of the pet health, health and drug market, with strong penetration of retail channels and high visibility of retailers.
We have a wide range of retail networks, including the top retail networks in the United States. S.
Retailers, we are increasingly focused on delivering exceptional value to these retailers and building consumer awareness for more pet owners to use the products we distribute.
As retailers continue to see the value our proprietary products bring to their profits and help them compete with other OTC channels, when pet owners learn about our proprietary value --
Branded products offer the same active ingredients as leading brands at a lower price, and we believe our share in the overall pet Rx and OTC drugs and the health and health products market will continue to grow.
Increase the number of products available to existing retailers.
We do business with most of the leading companies in the United States. S.
Retailers of our core products.
We believe our net sales will continue to grow as we expand the number of products available to each retailer.
We also plan to go through our-
In addition, due to the growth of our service sector, we believe that we have the ability to expand our business in leading retailers.
Provide veterinary services with our retail partners.
Through our services we are now involved in the veterinary services industry, which is expected to grow from $28.
Between $5 billion and $36 in 2018.
According to the fact of packaging, in 2023 was 8 billion, the compound annual growth rate was 5. 3%.
Our 3,400 community clinics and health centers hosted by retailers in 39 states provide a comprehensive set of services, including diagnostic tests, vaccinations, prescription drugs, microchips and health checks.
We believe that we have the ability to expand these products within our existing retail footprint, which will provide additional sources of revenue, as well as drive pet parent traffic to our retail partners through our retail partners, to purchase pet medicines and health products to expand sales of our products through our retail partners.
In addition, we opened 20 VetIQ Veterinary Service clinics among retail partners in 2018 and are expected to open 1,000 health centers by 2023.
We believe our health center will help us solve the problem of $10.
In 2018, billions of veterinary markets were underserved, including $7.
According to L. 40E. K.
Consultation and $2.
According to management estimates, revenue from related products generated by such services is 6 billion per cent.
In December 31, 2018 we had 1,452 employees.
Our employees do not have any union or any collective bargaining arrangements with our employment.
We have never experienced a stoppage or strike due to labor disputes.
We believe we have a good relationship with our employees.
In addition, we have regular contracts with veterinarians to staff our community clinics and health centers.
As of December 31, 2018, we used about 1,800 contract veterinarians.
Seasonality while many of our products are on sale throughout the year, we do experience seasonality, with increased demand for flea and tick products in the first half, both in spring and summer.
In addition, we may encounter net sales fluctuations related to retail customer inventory management strategies.
Veterinary Practice is affected by seasonal fluctuations.
In particular, the demand for veterinary services is much higher in warmer months, as fleas, ticks, in these months, mosquitoes and products and services sold to prevent or treat diseases related to these insects.
Through our product department, we are the manufacturer and distributor of pet medicine and health products.
Our products focus on the proprietary value of innovation.
Brand products and leading third
Contentsparty brand product table for 5 dogs and cats, including pet Rx drugs, OTC drugs and health products.
We mainly provide and supply these products to customers in the United States.
Rx drug treatment includes heart worm prevention, arthritis, thyroid, diabetes and pain treatment, antibiotics and other special drugs, all of which require a veterinary prescription. Weco-
Develop and build our own proprietary value
Brand products and good distribution
Third in the known lead
Party brand medicine
Our proprietary value
Branded Rx drugs allow consumers to care for pets with the same quality as branded drugs at a lower cost.
At the moment, our proprietary value-
Brand version ofHeartgard®In addition, it can prevent dogs from contracting heart worms.
Our proprietary value-
Brand version of Rimadyl®Treating arthritis in dogs
We plan to develop and bring proprietary value to our retail customers-
Brand versions of other popular pet Rx drugs are currently only available at high prices in brand versions.
We have also sold more than 340 of the most popular pet Rx drugs to retailers in a variety of forms, which were previously provided primarily through veterinary channels.
These retailers then sell these pet Rx drugs to pet owners with prescriptions.
We obtain these pet Rx drugs directly from the manufacturer or authorized distributor.
A few at the top-
The sellingRx drugs we distribute include Rimadyl. ®Heart zone®Plus Vetmedin®.
OTC drugs and OTC drugs supplied to us for sale are mainly composed of flea and tick-controlled products, which are available in various forms for consumers to choose from, such as spot (topical)
Treat, chew food and collar.
We sell more than 400 of our most popular leading OTC SKUs to retail channels
Brand and value
Brand drugs mainly composed of flea and tick-controlled drugs.
We obtain OTC drugs directly from the manufacturer or authorized distributor.
Health & Health Products our Health & Health Products include special care and other pet products such as dental care and nutritional supplements (
Including hip and joint, vitamins, skin and coat products).
With the completion of the HBH acquisition in 2018, we have expanded our manufacturing capabilities.
We manufacture and distribute over 230 sku's proprietary health products for dogs and cats, mainly under our vetiq, Betsy farmsandghtibles product line.
Specific products of this category include dental treatment, such as dental treatment;
Nutritional supplements such as our root grass products, skin and fur chewing, vitamin chewing, and camouflage drugs to help pets with the treatment of pills;
And treat treats such as ourBetsy Farmsdog snacks andDelightiblescat.
Product innovation we offer our retail customers a broad portfolio of pet medicine and health products, including a range of products we develop, manufacture and distribute.
In order to continue to develop our pet Rx drugs, OTC drugs and other health and health products, we are constantly investing in R & D.
What we use is
To expand our proprietary value, our party consultants and animal health R & D experts-
Brand portfolio and development Next
A generation version of our current pet products.
In addition, we take advantage of our strengths to become an attractive partner for external R & D researchers and entrepreneurs to develop new products and technologies in the strategic pet health and health field.
We believe that these scientists and entrepreneurs seek our partnerships in innovative products because of our experience in content proprietary value
Brand Manufacturing and relationships with key retail channel contacts.
The process in which we evaluate partnerships with any external R & D opportunity includes the execution of our own internal R & D review, testing and quality control procedures.
Channels for pet Rx drugs, OTC drugs and other health and health products traditional industry sales channels include sales through veterinary, retail channels
Mainly depends on the products involved.
Historically, pet Rx, flea and tick drugs have been sold through veterinary offices, to a lesser extent, electronicscommerce.
We focus on producing these products and our proprietary value --
Brand products directly provided to consumers through retail stores provide consumers with the opportunity to obtain these products at lower prices and more convenient locations.
Our retail sales are mainly focused on
Retail channels :(i)
Food, drug and mass market sales (e. g.
Wal-Mart, Target and Kroger); (ii)club stores (e. g.
Sam Club, Costco Wholesale and BJ Wholesale Club); (iii)
Pet stores (e. g.
PetSmart, Petco and independent pet stores); (iv)e-commerce; and (v)
In 2018, business increased by more than 402% compared to 2017.
The company will continue to develop e-commerce.
By supporting its retail partner's channel strategy and working with leading online retailers, the business is aligned with the overall market growth of the channel.
We believe that we are a key player in the growth in sales of retail channels for pet medicines.
In 2018, customers of 99% and 98% and 2017 network sales were generated between customers in the United States and Canada, respectively, and the rest came from abroad in various periods.
Our customers are mainly national super store chains and national pet super store chains such as wholesale of Walmart, Sam Club, Costco, PetSmart, Petco, Kroger, Target and BJ
We serve these customers nationwide.
Our biggest retail customers are Wal-Mart and Sam's Club, which account for 18% and 6% of our net sales in 2018 and 30% and 16% of our net sales in 2017, respectively.
In addition, Anda company(“Anda”)
Selling our products to pharmacies accounted for 10% of our net sales in 2018 and 15% in 2017.
Anda only buys products that are actively sold through retailers.
No other customer accounted for we 2018 net sales of 10% or 2017 above.
In each of our top customers, we sell to several departments represented by different buying groups, such as pharmacies, snacks and pet supplies.
In addition, we have established a strong and lasting relationship with pharmacy customers by promoting our product breadth and expertise, excellent customer service and support.
Pharmacy customers have higher barriers to entry than other retail customers because they are a highly regulated part of the retail channel.
We believe that due to such regulations, our pharmacy customers appreciate our focus on integrating our system with their system, including docking delivery schedules and traceability, which is from any large pharmacy retailer
In addition, we try to continuously strengthen our pharmacy relationship by providing various values
Increased the service of pharmacies.
These services may include computer programs, training opportunities, and web services.
Based on customer support.
Finally, we believe that maintaining our level of customer service is essential to maintaining and expanding our relationship with key customers. Ourin-
Houstomer care representative attends ongoing training programs under the supervision of our training manager.
These training courses include various topics such as product knowledge, computer usage, and customer service skills.
Our customer service representative responds to customer inquiries related to products, order status, price and shipping in a timely manner.
We believe that our customer service representative is a valuable source of customer satisfaction feedback.
Supply chain value table-
Our suppliers provide branded products for our proprietary value
Brand products have unique importance.
We believe there is enough capacity to include active drug ingredients (“API”)For our value.
Added products, including contract manufacturing organizations around the world.
Our proprietary value
Brand products are currently produced by our factory in Daytona Beach and Springville, Florida, Utah, and a network of manufacturing facilities owned and operated by US and European contract manufacturing partners.
We expect that the combined capabilities of our facilities and the facilities of our contracted manufacturing partners will meet our projected needs for proprietary value --
Foreseeable future brand products.
Distributed products we purchase brands and other products from various sources in the US and Europe, including certain manufacturers and franchisees that we distribute but do not manufacture.
We believe that building a strong relationship with suppliers will ensure that retail customers order a sufficient number of products and enable us to provide more and better product information.
In order to achieve an efficient implementation of Rx drug products in the United States, we work with our distribution partner Anda to leverage the drug distribution channels we have established.
We have entered a five.
Annual Contract With Anda, which is automatically renewed for two consecutive years.
For most products, we-
House fulfillment and distribution operations manage the entire supply chain, starting with an order, continuing through order processing, and then completing the product and shipping it to the customer.
All customer orders are processed by our customer service team.
We stock our products at our distribution centers in Daytona Beach, Florida and Springville, Utah, and fill in most customer orders.
We also use the third one.
Party warehouse provider that meets our small order.
We ship the product using a normal carrier.
For products sold to local and regional pet specialty retailers, we work with our distribution partner Phillips pet food & Supplies (“Phillips”)
It is one of the largest independent pet store dealers in the country.
Phillips buys our products directly and resells them to independent pet professional retailers.
We believe that the safety and quality of our products are essential.
We have developed, implemented and implemented a strong product safety and quality plan.
From raw material sourcing to finished products, we have established critical control points throughout our supply chain to ensure compliance with our quality plan.
Our food safety program at our Utah plant is the place of origin for our pet food, which is subject to the Global Food Safety Initiative benchmark and is certified for safety quality food Level 2.
To reach this eligibility level, our Utah plant has been built in accordance with specific food safety regulations and allows the right airflow to prevent cross-cutting
Pollution and so on.
This qualification level also requires us to have certain standard operating procedures in places where safety, quality and food specifications are standardized, and to hold regular training seminars for manufacturing employees, and save the report file proving compliance with such standard operating procedures.
In addition, our safety and quality programs include strict guidelines for incoming materials, ingredients, processing, packaging and finished products.
As part of our focus on safety and quality, we have implemented batch and batch traceability controls throughout our manufacturing network, including in our manufacturing plants, this control is implemented in our enterprise resource planning system.
These controls enable us to track and connect the raw8 table of discreet, inbound content material components with the final finished product through the manufacturing process, enabling us to maintain and control all finished batch details, and quickly obtain the details of process manufacturing.
At the Florida factory, our Rx and OTC drugs are stored there for distribution, and we maintain a license for wholesale dealers of veterinary prescription drugs with Florida's commercial and professional regulatory authorities, this is the same government entity that manages human drug distribution facilities.
Regarding our maintenance of the permit, Florida conducted a random inspection of our facilities.
To pass these checks, we must demonstrate safety compliance with the highest standards, including maintaining correct plant temperature and environmental controls.
As mentioned above, we use contract manufacturers to produce some of our proprietary values
To ensure product quality, consistency and safety standards, we actively monitor the operation of each contract manufacturer through the above standard operating procedures and facility audits.
All of our contract manufacturing facilities must have standard operating procedures for quality control.
We require our contract manufacturing facilities to remain third.
Through our own quality system and safety audit, and obtain fda-
Regulatory products that comply with FDA's good manufacturing practices. Third-
Although the regulator may not agree with the assessment, Party A certification provides an independent and external assessment that the product and/or process complies with applicable safety regulations and standards.
In addition, our quality control team reviews all aspects of our supply chain to ensure that ingredients, finished products and manufacturing processes meet our strict safety and quality requirements and before the product is used, all our ingredients are strictly tested.
Any consumer can call our customer service hotline where we train staff reps.
Any calls reporting adverse events related to our products will be further handled by our third parties
Party supplier, SafetyCall via ownon-
We file quarterly in accordance with EPA specifications to report any adverse events related to our flea and tick products.
Marketing and advertising our marketing strategy focuses primarily on raising awareness and education among pet owners about our various brands and products.
In order to achieve this goal, we will TV, digital marketing (e. g.
Digital coupons, display ads, pay-per-click, email)
Social media marketing
Store displays and promotions.
Our marketing messages emphasize quality and cost.
Our products save our customers cost, for example, our proprietary value
Brand flea and tick products containing the same active ingredients as leading brands, with lower prices.
Competition in the pet health care industry is fierce.
In our product field, we are in product quality, product availability, quality, adaptability, loyalty and trust, product variety and composition, product packaging and design, shelf space, word of mouth and brand, price and promotion efforts.
We compete directly and indirectly with manufacturers and distributors of pet medicines and health products as well as online distributors as well as veterinarians.
We directly face competition from companies that distribute a variety of pet medications and pet health products to traditional retailers such as Bayer, central garden and Hartz pet (Unicharm Corp. ), Mars, Inc. (“Mars”)
Meridian Animal Health Center of NestleA. (“Nestlè”)
Perrigo Company, Promika LLC, Tevra brand and J. M.
Smucker Company (“Smucker”)
Most of them are bigger than us and have more financial resources.
Similarly, we are facing fierce competition from manufacturers selling pet drugs and pet health products to electronics
Commercial and other retailers, as well as veterinarians, compete directly with our retailers to provide consumers with pet fleas, tick worms and other pet health products.
Our retail customers compete with online retailers and veterinarians for the sale of Rx and OTC pet drugs as well as other health and health products.
Many pet owners may prefer the convenience of purchasing pet medications or other 9 catalog products during veterinary visits.
In order to effectively compete with veterinarians, we and retail partners must continue to promote the availability of products to pet owners at competitive prices, services and savings provided by purchasing pet medicines and other health products in retail stores.
In our field of service, we compete directly with veterinarians.
The main competitors of our veterinary clinics in most markets are individual practitioners or small, regional
In addition, some national companies, such as Banfield Pet Hospital, VCA Animal Hospital or Petco, are developing or have developed a network of veterinary clinics in the market we currently operate.
We believe that our intellectual property rights are valuable and contribute to the success of our business.
Our main trademarks include "PetIQ", "VetIQ", "Advecta", "PetLock", "heart shield plus", "TruProfen", "Beiqi farm", "PetAction, "Minties", "Villa," and "Delightibles ". All of this took part in the United States. S.
Patent and Trademark Office.
We also have many other trademark registrations and pending applications in the United States. S.
Canada and Europe, for the core product name of our brand.
Our trademark is the asset to consolidate our brand.
Brand and consumer awareness of our products.
Current registration of these trademarks in the United StatesS.
The foreign country is valid for a different period of time and may renew on a regular basis, provided that we comply with all applicable renewal requirements as registered owners or our licensee, if applicable, including, if necessary, continue to use trademarks relating to the goods or services identified in the applicable registration.
In addition to trademark protection, we have many URL names, including www. vetiq. com, www. advecta. com, www. delightibles. com and www. mintiestreats.
This is very important for the successful implementation of our marketing and advertising strategies.
We also have patents and pending patent applications for products, formulations and packaging that we believe are important to our business.
We rely on and carefully protect non-patented proprietary technologies, formulations and formulations, continuous innovation and other trade secrets to develop and maintain our competitive position.
Contract manufacturers with us, ingredients and packaging suppliers and third-
In the United States, we have to comply with a wide range of laws and regulations. S.
Other places designed to protect the health and safety of the public, natural resources and the environment.
Our business in the United StatesS.
Regulated by the FDA, the EPA, the Florida Department of Health and the US Department of Agriculture and other federal, state, local and foreign authorities on manufacturing, processing, packaging, storage, distribution, advertising, labeling and export of our products, including drug and food safety standards.
All Rx animal drugs are required to obtain FDA approval through a new animal drug application or, in the case of a non-patented Rx animal drug, through an abbreviated new animal drug application (“ANADA”).
Our two proprietary values
Under ANADAs submitted to FDA by a third party, brand product TruProfen and heart shield Plus have been approved by FDA.
We have entered into agreements with these third parties that hold approval ANADAs for private labels or proprietary values-
However, such brand products under ANADAs, third parties holding ANADAs are ultimately liable to comply with regulatory obligations related to these products.
In addition, our foreign subsidies are subject to the laws of the United Kingdom, the Republic of Ireland and the European Union, as well as provincial and local regulations.
Under various regulations and regulations, these bodies and authorities, among other things ,(i)
Establish quality and safety standards ,(ii)
Supervise our marketing, advertising and sales to consumersiii)
Control the import and export of our products.
In some cases, certain institutions must not only approve our products, but also review the manufacturing processes and facilities used to produce them before they are available in the United States and elsewhere.
In particular, some of our pet drug products require FDA approval before marketing.
Bring this FDA to market
FDA must approve new animal drug applications, or NADA, supported by data from animal safety and effectiveness studies that fully demonstrate the safety and effectiveness of the product in target animals, to achieve the desired indications;
Or, in the case of a generic version of a previously approved reference --
Listed pet drugs, FDA and ANADA, supported by data, among 10 other things, demonstrate that the proposed generic drug has the same concentration as the reference
Listed products are bioequivalent to the reference listed products.
After approval, manufacturers need to collect adverse event reports and submit them to the FDA on a regular basis.
Some of the products we distribute are sold in accordance with the approval of ANADA held by third parties with whom we have contracted to distribute these ANADA --
Approved products under our own label.
We comply with labor laws, safety and health regulations and other laws, including those enacted by the EPA and the National Labor Relations Commission.
Our business, as well as our contract manufacturers, ingredients and packaging suppliers and third-
Subject to various laws and regulations related to workers' health and safety matters and environmental and natural resource protection, including the supply and use of pesticides, discharge and discharge to the environment, and the treatment, storage and disposal of materials and waste.
We monitor changes in these laws and believe that we are materially compliant with applicable laws and regulations.
However, there is no guarantee that significant costs and liabilities will not arise in the future, such as due to changes in the law or the discovery of conditions currently unknown.
Certain states have laws, regulations and regulations that require veterinary clinics to be fully compliant with the following requirements
Own or majority-
Owned by licensed veterinarians, not all owned companies
Own or majority-
Licensed veterinarians do not provide or do not act as providers of veterinary health care.
In these states and provinces, we provide management and other administrative services for veterinary practice rather than having or providing such care.
In some cases, in addition to providing management and administrative services, we can rent out veterinary facilities and equipment to the veterinary department.
While we have organized our business to comply with our understanding of each state and province veterinary law in which we operate, the legal precedents and regulatory guidance explained vary from jurisdiction to jurisdiction, often with little, nor has it been fully developed.
In addition, all states that we operate have various registration licenses and/or may be required.
To meet these requirements, we have registered each of our facilities with the appropriate government agencies and appointed a licensed vet to act on behalf of each facility when required.
All veterinarians who practice at our animal health center need to maintain a valid national practice permit.
Information about our business
A Delaware company, incorporated in February 2016 with the aim of completing our IPO with no commercial activity or transaction until July 20, 2017.
PetIQ is a holding company, founded in 2012, and is the sole managing member of Delaware LLC, Holco.
PetIQ Holding Co is the only member limited liability company (“Opco”)
Idaho LLC and our predecessor, for financial reporting purposes, do not have any operations and assets other than the equity of Opco.
We are registered in Delaware and are currently a Delaware company.
Our main executive office is located at 923
Bridgeway square, Eagle, Idaho 83616.
Our phone number is 208. 939-8900.
The address of our company's website ispetiq.
Our investor relations website is located.
The content of our website is not intended to be included by reference to the Annual Report of Form 10-
K or any other report or document we submit to SEC, any reference to our website is only an inactive text reference.
Annual Report on Form 10-
K, annual agency statement and related agency cards are available on our website at the same time as they are mailed to shareholders.
Our Quarterly Report on Form 10
Q: Periodic Report on Form 8
K and the amendments to the reports we submit or provide under section 13 (a)or 15(d)
Securities Trading Act of 1934 as amended (
, After being submitted electronically or provided to SEC, it is available free of charge through our website.
Our website also provides access to reports submitted by our directors, executive officers and certain important shareholders under section 16 of the Transaction Act.
In addition, the general code of ethics and charter of our Board of Directors Committee can be found on our website directory 11 as well as other shareholder communications.
Information contained in our website or accessible through our website does not form part of this report, nor is it incorporated into this report by reference.
Project 1A-Risk Factors business, operational results and financial position may be significantly adversely affected by a number of factors, including the following: risks related to our business and industry we may develop our business by acquiring or investing in new or complementary businesses, facilities, technologies or products, or through strategic alliances, the failure to manage acquisitions, investments or strategic alliances, or the failure to integrate them with our existing business, can have a significant adverse impact on us.
From time to time, we may consider opportunities to acquire or invest in new or complementary businesses, facilities, technologies or products, or establish strategic alliances that may enhance our capabilities, expand our manufacturing network, complement our existing products, or expand the breadth of our market.
Potential and completed acquisitions and investments, as well as other strategic alliances, involve a number of risks, including: the integration of Purchased business, facilities, technology or product issues;
Issues of maintaining uniform standards, procedures, controls and policies;
Unexpected costs associated with acquisition, investment or strategic alliances;
Shift the attention of management from our existing business;
Existing business relationships with suppliers, contract manufacturers and retail customers are adversely affected;
Risks associated with entering new markets with limited or inexperienced experience;
The potential loss of key employees of the acquisition enterprise;
Increased legal and accounting compliance costs.
We do not know whether we are able to determine the acquisition or strategic relationship that we consider appropriate and whether we are able to successfully complete any such transaction on favourable terms, or are we able to successfully integrate any acquired business, facility, our business or retain the technology or products of any key personnel, supplier or customer.
Our ability to grow successfully through strategic transactions depends on our ability to identify, negotiate, complete and integrate the right target business, facilities, technology and products, and access to any necessary financing.
These efforts can take a lot of time.
Consumption can disrupt the business we are doing and prevent management from focusing on our operations.
If we are unable to effectively integrate the business, facilities, technologies and products of any acquisition, our business, operational results and financial position may be materially adversely affected.
Completed acquisitions may result in an increase and/or increase in Other intangible assets on our balance sheet.
We need to test Goodwill and other intangible assets every year to determine if an impairment has occurred.
If the test performed indicates that the damage has occurred, we need to record a non-
The difference between the book value of goodwill or other intangible assets and the implied fair value of goodwill or the fair value of other intangible assets during the determined period is subject to a cash Impairment fee.
We determine that there is no impairment in 2018, 2017 and 2016;
However, we cannot accurately predict the amount and time of any impairment of assets.
If the value of goodwill or other intangible assets is damaged, it may have a significant adverse impact on our financial position and the results of our operations.
A large part of our net sales depend on a relatively limited number of customers.
Our two largest retail customers Wal-Mart and Sam's Club accounted for 18% and 6% of net sales in 2018, and 30% and 16% of net sales in 2017, respectively, net sales in 2016 were 33% and 21%, respectively.
During this period, no other retail customers accounted for 10% or more of our net sales.
In addition, Anda, which sells our products to pharmacies, accounted for 10% of our net sales in 2018 and 2017 and 15% of our net sales in 2016.
If we lose any of our key customers, if any of our key customers reduce the number of orders, or if any of our key customers integrate orders, reduce their store footprint and/or 12 catalogues. To gain greater market power, our business, financial position and operational results can be significantly adversely affected.
If any of our major customers encounter any financial or operational difficulties or generate less traffic, we may be adversely affected by the same.
Plus, we don't usually get into long-
Sign regular contracts with our retail customers.
Therefore, we rely on the continued consumer demand for our products and our market position in all purchase orders.
Our customers are sophisticated and have the ability to replace our proprietary value brands with a variety of other supply options if we don't actively compete for their business.
If our retail customers change their pricing, profit expectations, or business terms (
Including fees such as collection of warehouses)
, Change their business strategy, reduce the number of brands or product lines they carry, and reduce their advertising or promotional activities due to industry integration or other reasons, or the shelf space that they assign to our products, or the larger shelf space for other products, our net sales may decline, our business, financial position and results of operations can be significantly adversely affected.
We may not be able to successfully implement our growth strategy in a timely or fundamental manner.
Our future success depends largely on our ability to implement growth strategies, including introducing products and expanding new markets to attract new consumers to our brands and subsidiaries.
Brand, improve the layout of our products in retail customer stores and expand our distribution and online sales through our retail partners.
In addition, our growth strategy includes expanding and improving the profitability of our veterinary mobile clinics and health centers.
Among other things, our ability to implement this growth strategy depends on our ability to develop new proprietary values
Expansion of brand products and product lines that attract consumers;
Continue to compete effectively in our industry;
Increase our brand and son
Get brand recognition by effectively implementing our marketing strategy and advertising plan;
Maintain and, if necessary, raise our high standards of product quality, safety and integrity;
Expand and maintain brands and subsidiariesbrand loyalty;
In the stores of our retail customers, ensure the safety of shelf space and health center space;
Improve profitability in our mobile clinics or health centers;
Reach distribution and other strategic arrangements with traditional retailers and other potential distributors of our products.
We may not be able to successfully implement our growth strategy, and we may need to change our strategy in order to maintain our growth.
If we do not implement our growth strategy, or if we invest our resources in a growth strategy that ultimately proves unsuccessful, our business, financial position and operational results may be materially adversely affected
We may not be successful in opening a new retail health center, which may adversely affect our growth. One of the key means to achieve our growth strategy is to open new retail clinics, including health centers and operate these products on a profitable basis.
Since the VIP acquisition, we have opened 25 new health centers among our retail partners, and we plan to open another 80 health centers in 2019.
Our ability to open a new retail clinic depends on many factors, many of which are beyond our control, including our ability to: identify available and suitable retail partners;
An acceptable lease or host arrangement term is reached;
Hire, train and retail clinics and health centres skilled veterinary and skilled staff required to work;
Obtain the required permits, permits and regulatory approvals in a timely and acceptable cost;
13 content sheets effectively address any changes in local, state and federal laws and regulations that adversely affect our ability to open new health centers or clinics;
And control the construction and other start-up costs of opening health centers and clinics.
There is no guarantee that there will be a sufficient number of suitable websites or hosts in the ideal area or under conditions that we can accept to achieve our growth plan.
If we are unable to open a new health center, or if the opening time is greatly delayed, our revenue or revenue growth and our business may be significantly adversely affected, as we expected, part of our growth comes from new places.
As part of our long-term cooperation
With a long-term growth strategy, we may enter a geographic market where we have little or no previous history.
The challenges of entering a new market include (i)
Difficulties in hiring experienced personnel ,(ii)
Not familiar with the local real estate market and population statistics ,(iii)
Consumers are not familiar with our brand. iv)
Competitive and economic conditions, as well as discretionary spending patterns that are different from our existing markets and are more difficult to predict or meet.
In addition, it may take longer for our health centers opened in new markets to reach the expected sales and profit levels on a consistent basis, and there may be higher construction, occupancy and operating costs for the health centers we have opened in our existing market, thus affecting our overall profitability.
Failure to recognize or address these challenges may adversely affect the success of any new health center.
If we continue to grow rapidly, we may not be able to manage our growth effectively.
The rapid growth of our history has raised huge demand for our management and our operational and financial resources, if that demand continues.
Our organizational structure may become more complex as we add more staff, and we may need more resources to develop and continue to improve our operations, management and financial controls.
If we are not able to manage our growth effectively, our business, financial position and results of operations may be significantly adversely affected.
We currently purchase our distributed Rx and OTC drugs from manufacturers and franchisees.
We can't guarantee the supply of drugs in advance.
The established price for most of our products.
We do not currently produce the vast majority of branded products we distribute, and our supply of products depends on certain manufacturers and franchisees.
We cannot guarantee that we will be able to purchase enough Rx and OTC drugs from manufacturers and franchisees to meet the needs of our customers or that we will be able to purchase them at competitive prices.
Since these drugs account for a large part of our net sales, our failure to meet customer orders for these drugs may adversely affect our net sales.
If, in order to guarantee adequate supply, we have to pay a higher price for these drugs, we cannot guarantee that we will be able to deliver to our customers any increase in the price we pay for these drugs.
Manufacturers may also decide to compete further with us by pursuing or increasing their efforts in direct marketing and sales of products.
These manufacturers can sell their products at a lower price and maintain a higher gross margin for the sale of products than we do.
In this case, retailers have the option to purchase Rx and OTC drugs directly from these manufacturers.
In addition, if the manufacturers of these Rx and OTC drugs take action to prohibit our licensed dealers from fully selling them to us, or to provide for the price at which our authorized dealers sell them to us, or the price at which our retail customers sell the drug to the end consumer, our financial position and operating results may be materially adversely affected.
We operate in a highly competitive industry and if we cannot compete effectively, we may lose market share or experience a loss of profits.
Competition in pet health industry is fierce.
We have convenience in product and component quality, product availability, adaptability, brand awareness, loyalty and trust, product variety and innovation, product packaging and design, shelf space, reputation, price, promotion efforts.
We compete directly and indirectly with manufacturers and distributors of pet health and health products, including online distributors and veterinarians.
We face direct competition from companies that distribute various pet medicines and pet health products to traditional retailers such as Perrigo, Unicharm and central garden and pet companies, all of which are larger than us, and there are 14 tables of finance for larger content resources.
We also face competition from other pet health and health products categories from companies like Nestle, Mars and Smucker, all of which are larger than us and have greater financial resources.
Although we are not competing with a wide range of human drug dealers today, we cannot guarantee that they will not enter the market in the future.
These dealers, McKesson Corporation, AmerisourceBergen and basic health care, Inc.
We have more financial resources than we do now.
Due to their resources and scale, these competitors may identify and adapt to changes in consumer preferences more quickly than we do.
They may also be more successful in marketing and selling products, being able to better raise prices to reflect cost pressures, and being able to better increase promotions, this can affect us and the entire pet health and health industry.
If these or other competitive pressures cause our products to lose market share or decline in profit margins, our business, financial position and operational results may be materially adversely affected.
We are faced with huge competition from veterinarians and may not be able to compete profitably with them.
We compete directly with veterinarians for the sale of pet medicines and other health and health products.
Veterinarians have a competitive advantage over us as many pet owners may find it more convenient or better to buy these products directly from veterinarians when visiting the office.
In addition, we now operate veterinary clinics and manage a large number of veterinarians as employees and independent contractors and now compete directly with veterinarians to provide veterinary services.
In order to effectively compete with veterinarians in the future, we may need to pay additional fees for marketing, promotions and other incentives, which may lead to lower operating profit margins and adversely affect operational results.
Veterinarians refuse to prescribe, or try/try to stop pet owners from buying pets from retailers and pharmacies, which can lead to a decline in our net sales, and may have a significant adverse impact on our financial position and operational results.
Since we started our procedure, some veterinarians have refused to provide or simply refuse to provide a copy of their pet's prescription to pet owners, or to authorize it to a pharmacy outside, so, under national law, effectively prevent external pharmacies from filling out such prescriptions.
Customers and consumers also tell us that veterinarians are trying to prevent pet owners from buying from retail channels on certain occasions.
If the number of veterinarians who refuse to authorize prescriptions should increase, or if veterinarians succeed in preventing pet owners from buying from outside retailers and pharmacies, our net sales may decline, our financial position and operational results may be significantly adversely affected.
Any damage to our reputation or brand or subsidiary
The brand may have a significant adverse effect on our business, financial position and operational results.
Maintaining, developing and expanding our reputation among consumers, retail customers and suppliers is critical to our success.
Our brand and son
Brands may be affected if our marketing plan or product plan is not successful.
The importance of our brands and subsidiaries
If competitors offer more formula products similar to the ones we make, the brand may be reduced.
In addition, our brand and son
Due to real or perceived quality issues, or if the consumer thinks we are not real in marketing and advertising, even if this perception is inaccurate, the brand may be negatively affected.
Product contamination, failure to maintain high standards of product quality, safety and integrity, including raw materials and ingredients obtained from suppliers, or allegations of product quality problems, labeling errors or contamination, even if our contract manufacturing partner or raw material supplier is untrue or caused, the demand for our products may be reduced or production and delivery may be interrupted.
We maintain guidelines and procedures to ensure the quality, safety and integrity of our products.
However, we may not be able to detect or prevent product and/or ingredient quality issues, labeling errors or contamination, especially in cases of fraud or attempts to cover up or cover up deviations from our guidelines and procedures.
If any of our products are not suitable for consumption, causing injury or labeling errors, we may have to make a product recall and/or take responsibility.
Damage our reputation or our brand or son
For these or other reasons, the loss of confidence in our products by brands or consumers may lead to a decrease in demand for our products, and our business, financial position and operational results may be significantly adversely affected
Our growth and business depend on trends that may change, and our historical growth may not represent our future growth.
The growth of our business mainly depends on the continuous transformation of consumers from veterinary purchasing pet health products to purchasing such products through traditional retail channels, growth of pet health and health products Table 15 content the popularity of the market and pet ownership, the shift from traditional veterinarians to mobile clinics and health centers, and the overall economic situation.
These trends may not continue or change.